Reviewed by Canon Mike D Williams
Total UK spending in 2022/23 was £1.8 trillion. It is the sixth largest economy in the world. Yet our public services struggle to meet demand. Where does all the money go?
The purpose of this book is to provide an explanation of where the money comes from, where it goes, how that has changed over time and how it needs to improve. Written by Paul Johnson (no relation to Boris), an economist and director of the highly respected Institute for Fiscal Studies.
Getting the money in is set out in the tax code that runs to a million words. Nearly two thirds of the revenue is raised from three taxes – income tax, VAT and National Insurance contributions. There are some interesting facts included. About a third of the population pay 90% of the income tax. Since the 1980s the UK has a high level of income inequality. The top 10% of adults receive just over 40% of all fiscal income, which is the same amount that goes to the bottom 40%.
Whilst VAT looks straightforward there are plenty of pitfalls. Remember George Osborne proposing to charge VAT on pasties. Is a Jaffa Cake a cake or a biscuit? The answer matters for VAT and had to be resolved in court. There are plenty of other taxes such as corporation tax on companies, fuel duty, stamp duty on buying property, council tax and on the list goes.
What you discover from the two chapters on taxes is that the system is a mess. It needs radical reform but that needs political will and courage. The unpalatable conclusion is that taxes will have to rise over the next decade. The reason why is set out very clearly in the rest of the book.
The big and growing areas of expenditure relate to the ageing population, welfare payments to the working age in poverty, those who are sick and the retired. There is a bit of history for each of the major areas of expenditure setting the current spending in context.
The NHS now accounts for almost a tenth of our entire economy. Paul Johnson, who used to be a civil service economist laments the nonsense that politicians say in their efforts to ‘re-disorganise’ the NHS. The promise to deliver 40 new hospitals is ‘simply untrue’. The plans to reform social care; badly needed but never happens. Education has improved but large problems remain with an unsustainable university system and a large skills gap among school leavers.
The value in this book is the commentary from an expert. It is rather worrying that much of what we have in place today is the result of government inaction or unplanned kneejerk reaction to headline news.
Whilst we are better off, better educated and largely in better health there is much that can be done to improve the state of the nation and its finances. Johnson calls for greater honesty by politicians on the benefits and trade-offs they grapple with. He concludes: “We can, and must, do better”.