Where Does It Go? – UK Money Blog £

One aspect of the 2009 budget was a initiative to make people pay their taxes more by threatening to “name and shame” them on the HMSC website.

The budget report states:

Legislation will be introduced, to be bought into effect by Treasury Order, enabling HM Revenue & Customs to publish the names and details of individuals and companies who are penalised for deliberate defaults on or after 1 April 2010 leading to a loss of tax of more than £25,000.

What could be better disincentive for an upright British gentleman businessman, dependent on his reputation, than to avoid having his name splashed across a virtual “naughty step”?

This could be a nod to the public outrage over pensions and such like, angry at the notion of rich bankers suspected of playing the system and so avoiding paying their fair share of tax. This is in addition to a pretty much purely symbolic of adding a 50% tax bracket on the £150,000 bracket – a move that will only bring in £1billion worth of income, small fry compared with the huge sums of ever increasing debt the UK faces for the next 10 years.

The “name and shame” scheme has already been tried in Ireland to good effect, improving tax revenues.

Why not just tie them to the village green stocks and supply free rotten tomatoes to the public – such a move I’m sure would add 10 points to their opinion polls overnight!

Read it for yourself at the hm-treasury website – this is where YOUR money is being spent, you have a right to know where!

Financial Statement and Budget Report

* Chapter A (PDF 307KB)
* Chapter B (PDF 488KB)
* Chapter C (PDF 436KB)
* Lists of abbreviations, charts and tables (PDF 49KB)

Carrying on with our series on where does your money go, lets use those figures from the post – How Much Money The Average UK Family pays in tax

That post concluded, after income tax and all the other tax such as VAT the average family pays £201.34 in tax. Bear in mind this is last years figures, now we own half the banks our public debt is a lot higher – we’ll cover that next.

But how much has been spent already? From the Guardian money wall-chart we can get a rough idea.

Of our money given in tax in 2007/2008:

• 18% to the Dept of Health
• 10.3% to Education
• 23.3% to work and pensions
• 21.3% for benefits
• 5% for debt interest – this is obviously going to be a lot higher in 2008/2009
• 6% to the Ministry of Defence
• 3% for transport policy
• 5% for Scotland
• 2.5% for Wales
• 1% for Northern Ireland
• 3.6% for Universities
• 3% for Tax Credits
• 1% to decommissioning Nuclear Waste
• 0.5% for Iraq/Afganistan Wars
• 1% to Policing

Using these figures, an average family earning £32,799 a year contributes, each week:

• £36 to the NHS
• £21 for our schools
• £47 for the OAP’s
• £43 for those on benefits
• £10 on the public debt interest
• £12 for the Army, Navy and Airforce
• £6 for the roads and rail
• £10 for Scotland
• £5 for Wales
• £2 for Northern Ireland
• £7.25 for Universities
• £6 for tax credits
• £2 storing nuclear waste
• £1 the Iraq/Afghanistan wars
• £2 for the police

Thanks to Burning Our Money who put me on to the Guardian chart showing how our taxes are spent by the Government – the full pdf can be seen here.

I’ll be pouring over this chart and looking to use it as a road map for investigation in coming up posts.

The name of the site is Where Does It Go, so here is a some information on where your money goes in regards to tax.

According to a BBC survey in November 2007, the average income for a family with 1.9 kids is £32,779, or £630 a week.

Assuming 22% tax (20% in 2008) this equates to a family paying £126 income tax a week.

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But we’re not only taxed on income, we’re taxed on our outgoings as well via VAT – using the VAT calculator I took some rough figures from the above graph to give a back of the envelope guestimate on how much we pay out in tax indirectly through spending.

We currently pay 0% tax on:

• food
• books, newspapers and magazines
• children’s clothes

And a reduced rate of 10% on:

• reduced rate
• fuel power
• energy saving
• residential conversions

Everything else is at standard 17.5%.

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As can be seen from the above BBC chart, the average spend per week for family – £601.20. Broken down I included how much we can expect to pay in tax for each area:

• Food – £60 – No tax
• Alcoholic drinks/ cigarettes – £15 – Tax: £1.50 (Source)
• Clothing – £35 – children’s clothes no tax; assume adults get £20 taxed at 17.5% – Tax: £2.50
• House fuel – £45 – Tax: £2.25
• Household goods – £40 – Tax:£5.00
• Health – £5 – Tax:£0.85
• Transport – £80 – Fuel tax of 80% (Source) – Assume petrol is £40 – Tax:£30
• Communication – £15 – Tax: £2.62
• Recreation – £80 – Tax: £14
• Education – £20, Assume they are books – No Tax
• Restaurants/hotels – £45 – Tax: £7.87
• Misc goods – £50 – Tax: £8.75
• Other – Mortgage interest, holidays, fines, licences – £105 – assume no tax

TOTAL: £75.34
TOTAL INCLUDING INCOME TAX: £201.34

I have tried to err on the side of caution in assigning rough figures, if you have suggestions for modifying this please let me know.

In conclusion: 31% of your money goes straight back to the government. How do YOU want it spent?

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Resources:

Learn more on VAT here
VAT calculator

Carrying on with Darling-Brown’s measures to aid the voters before the next election, the Government announced measures to give free insulation to the poorest families, and half price for every one else.  This actually sounds like a great idea, and is another bit of evidence showing the credit crunch may be bad for the banks but actually good long term for the planet, seeing as this move comes in the same week as oil prices dip under $100 a barrel due to falling world demand.  The BBC story is found here.

This won’t do much to lessen the blow for families short term however, with all UK fuel companies putting up prices in preparation for increased winter demand. Its estimated electricity bills are going to go up by £500 a year by 2010, an extra £10 a week. With inflation currently at 4.4% everyone in the UK is finding themselves with less money in their pocket.

Why did the inflation leap so much?  Its the consequence of UK banks flooding more cash into the bank system in April where an extra £50billion was pumped into the system.  Every note that is printed means the rest are worth less.

Some say money is the price we pay for civilization, but does that mean it has to be fiat money system?  The £ used to be pegged to the price of gold, one Troy pound was equal to one pound note.  In 1844 the Bank of England was made the only bank that was allowed to issue banknotes, with exception for the Scottish banks. At the beginning, pound notes were only printed when there was a surplus in the Bank of England of gold to back it up. This did mean higher interest rates to keep the gold standard supply.

The gold standard was abandoned just before the First World War, which virtually crippled the UK, only exasperated by the Second World War. The UK entered decades of decline, only halted by the discovery of North Sea oil.  Now we employ a fiat money system borrowing is easier, but are we better off?