Published Percentages of Tax Income and Expenditure

We often hear politicians talk about spending percentages of GDP, or millions, even hundreds of millions of pounds of our taxes on particular initiatives or projects, but we rarely have an opportunity to see this in context.

Given that the total budget available is limited, at least without additional taxes, any new or "additional" spend requires a balancing reduction in expenses elsewhere, or an increase in the annual deficit (i.e. how much more the government has to borrow to fund its expenses).

As an example, £220m for new police recruits might be a good headline, but it means little if we don't know (a) whether that is an annual commitment, or a one off pot; (b) what is not being paid for in order to fund it; (c) whether this is additional police funding, or a reallocation; and (d) whether this will provide the best outcome in the related area for the amount that is being spent.

In order to understand some of this more clearly, we need to have a better understanding of how tax receipts of over £1 trillion p.a. are allocated.

Overview of our suggested reforms

Current Situation

You can see in the two pie charts below how much income comes from each form of taxation, and how the spending of that income is weighted.

It may be a surprise to many to see how little income is generated from IHT (<1%) given its political sensitivity, equally the fact that Corporation Tax raises only a little over one fifth of Income Tax and NICs may be unexpected.

Where it gets really interesting is the Expenses chart, where we can see that we spend less on Educational support (i.e. primary and secondary schools, universities and students, adult learning, vocational courses, OFSTED) at 9% than we spend on servicing national debt (11%).

We spend more on state pensions (12%) than we do on all other benefits combined (10%), and more on National Defence (5%) than we do Public Order & Safety at 4% (i.e. police, prisons, courts, probation, legal aid).

The weighting of these categories might not be "wrong", but shouldn't we have an understanding of how our tax money is being prioritised? And when 1% of expenditure equates to £11.6bn, suddenly the "generosity" of government allocating an additional £10m (0.0009%) to a service shows how little additional priority it is actually being given.

Criticisms

As noted, the way our tax money is currently raised and spent is not what we are questioning here, it is more the lack of transparency and communication of how different areas of spend are prioritised. This leaves people confused by promises of "additional" and "significant" investment, when the amounts involved are neither.

Many people identify the NHS as their number one priority, and this is reflected in it being the highest share of spend at almost 20%, but is that more than twice as important to most people (and to society) as education?

A robust and well equipped National Defence is also important to many, but is that more important than an effective policing and justice function?

Why, when there is currently severe pressure on social housing, and when unhoused families and individuals are effectively prevented from fully participating in society, do we only spend 2% of our budget on supporting them?

Without the information being widely available, people cannot ask these questions and understand the impact of proposed policies.

Compiling the pie charts below was harder than it should have been, and probably includes some errors as the information is not clearly shared anywhere or in a consistent format.

Proposals

We propose that:

the OBR and the BBC should be entrusted as the two authorised sources of all such information, to be presented in a neutral format, updated annually and available online through their main websites.
the pie chart format below should be consistently applied, to both expenses and income and from year to year.
each section/category of the expenses pie chart should have a further split showing how that section is then split into the main categories of expenditure for that section (e.g. Public Order and Safety to be split into Policing, Judiciary, Prisons, Legal Aid, etc.,).
when election manifestoes are published or new policies proposed by government, the expected impact of any policies on the % spend related to that category must be shown.
all parties must use the same formats and splits used in the analysis published by the OBR / BBC so that there is consistency and comparability.
over time, as the methodology becomes embedded in the political process, we would want to look at adding some minimum and/or maximum % shares of spend by category to the Protected Policy register, so that new governments cannot drastically alter established allocations of spend.

Impact

We believe that our proposals will very much increase transparency and understanding of context in politics and political debate.

Having one consistent source of data that all parties have to reconcile their policies to will allow for better understanding of policy proposals, and greater accountability of governing parties.

The information should not create additional work or bureaucracy, and while the detail may not be of interest to many voters, it will hopefully shape some debates and media reporting along more constructive and evidence based lines of argument.

Government Income 2024/25 (projected)

£1.14 trillion total

Government Expenses 2022/23

£1.16 trillion total