Paying Osborne’s bills

I now have to spend more on taxes than I do on my family

12 January 2013

In her early campaigning days as Conservative leader, Mrs Thatcher had the gift of being able to relate the national economy to the domestic finances of ordinary voters. The battle against inflation commenced with her and her shopping basket, nattering away with voters over the cheese counter. It is a skill which David Cameron needs rapidly to discover. Now, as in the 1970s, a political leader who doesn’t understand the personal finances of ordinary people is going to be in deep peril.

Four years ago, realising my income was going to fall, and with a little time on my hands, I started doing something I had never bothered to do before — and during the previous decade had never felt I needed to do: I started adding up every penny I had spent over the previous year. At the time, I found that for every pound I was spending, I was paying 77 pence in income taxes and council tax. Over the past 12 months for every pound I have spent I have paid 85 pence in income taxes and council tax. But of course, a slice of the money I spend also goes in tax, in the form of VAT, fuel duty and excise duty. I am not such a Scrooge that I keep a copy of the receipt every time I buy something, and thus am unable to work out exactly how much I paid in spending taxes, but my bank statements show that I have spent £45,288 (excluding pension contributions and other investments), and paid £38,342 in income tax, national insurance and council tax. On the assumption that about a fifth of my expenditure was on food, newspapers and other zero-rated goods, I spent approximately £7,590 in VAT, £1,040 in road fuel duty (1,800 litres at 58 pence per litre), £250 in road tax and £360 in alcohol duties (the duty accounting for about half the cost of a £7 bottle of wine).

So, taking that into account, I have spent only £36,048 on myself and my family — but paid £47,582 in tax. In other words, I am spending significantly more on the government than I am spending on myself; and the gap is getting bigger and bigger. This, then, is the story of my personal finances since the beginning of the economic crisis: I have reacted by cutting my expenditure, not just in real terms but in absolute terms. But my tax bill has gone up. I have battled against the headwind of inflation to get my bills down. The Chancellor, in spite of his regular spiel about ‘austerity’ and ‘cuts’, has failed utterly to do the same. If my taxes were going to pay off debt, I would swallow the pill and feel happy, but they are not: they are going in extra expenditure. In 2008/9 the government chomped its way through £631 billion. In the next financial year the Treasury estimates that total public expenditure will be £720 billion. In Whitehall the great public spending party goes on unabated.

I do not have an insight into everyone’s private finances, but it is a reasonable assumption in politics that if you are thinking something, there are probably a large number of people thinking exactly the same thing, namely: if I can keep control of my spending, why can’t the government? The attempt by Labour and the unions to portray George Osborne as a slasher has ended up protecting him from the reality: that he has frittered money left, right and centre every bit as much as did Gordon Brown.

Claim your gift

I suspect I am far from the only person who feels that where there have been cuts, a disproportionate number of them have landed directly on my doorstep. The changes in child benefit will take £1,750 out my pocket this year and the rise in tuition fees a further £6,000. More will have to be trimmed from the rest of my budget.

Politically, that wouldn’t matter if I felt that public servants were similarly drawing in their horns. Yet every time I open a paper there is yet another sign of outrageous extravagance.

I have a vague recollection of the Chancellor imposing a supposed public sector pay freeze and warning every public sector organisation that it would need a very good reason indeed if it wanted to pay one of its staff more than the Prime Minister. And yet Osborne himself has appointed a new Governor of the Bank of England who will be paid three times that of his predecessor — a total package of £874,000. Fleet Street’s business editors seemed almost united in thinking that Mark Carney’s appointment was a good thing, but I suspect the public will be inclined to view it as more akin to what the FA does before every World Cup: appoint a manager on a record salary — several times higher than any other country pays — in the wide-eyed belief that ‘you get what you pay for’. And then we get knocked out in the quarter finals again.

Even when public salaries have been cut, it all seems to go drastically wrong and ends up costing the taxpayer more. We never heard the end of the trumpeting when the BBC appointed George Entwistle on a salary less then his predecessor was paid. Then he resigns in disgrace after a few months with a year’s payoff, which isn’t even in his contract.

As with public salaries, as with benefits for out-of-work Romanians, as with the legal aid bill for terror suspects who don’t want to be deported, as with high-speed rail lines, as with Olympic opening ceremonies: whenever it comes to spending on anything other than me and my family, the state’s wallet seems to be wide open. The New Year firework display finally did it for me: post Olympics, there seems to have developed the theory that no spending is too extravagant or too frivolous if somebody, somewhere is cheered up by it. The government — or the Mayor in that case — is behaving like one of those compulsive shoppers who wakes up to find the kitty is empty, the bills are piling up and she has just lost her job; but then goes out and buys a new outfit on her last working credit card to try to cheer herself up.

If you think I am inspired by some extremist anti-government ideology you are very wide of the mark. I just happen to have looked through my bank statements and started to wonder why the government can’t do what I, and an awful lot of other people, have managed to do over the past few years: trim a little here and there, do without the foreign holiday, shop around for bargains and generally get my spending down without sleeping in a tent and ceasing to eat. If, to adapt a former Tory campaigning slogan, others are thinking what I’m thinking, then the government has a very big political problem.

Give the perfect gift this Christmas. Buy a subscription for a friend for just £75 and you’ll receive a free gift too. Buy now.

Show comments
  • Dacus

    Out-of-work Romanians are not entitled to any benefits. It is sad that The Spectator is pandering the same lies normally found in The Sun or Daily (Mail and Express).

    • HJ777

      As Romania is part of the EU, Romanians living here are presumably entitled to exactly the same out-of-work benefits as anyone else, are they not?

      • Dacus

        Romanians with fellow Bulgarians are considered second class EU citizens and as a result, they have no right to employment in UK (the restriction ends in 2014). So there are none out-of-work Romanians and no benefits paid to them either. Romanians can work only as a self employed, status that doesn’t give them rights to benefits.
        Romanians are the perfect scapegoat for all immigration problems: they are white and poor so nobody in UK can be accused of racism when pandering lies and insults.

        • HJ777

          OK. Didn’t know that, Thanks.

          Just to clarify though, I’m self-employed so I don’t have any right to JSA, for example. However, that doesn’t exclude my (or rather my family’s) rights to other (non out-of-work) benefits (not that we ever qualify for anything!).

          What is the situation for Romanians and their families living here?

          • Dacus

            As self employed, Romanians have to pay company and income tax like every self employed in UK. The only benefit they are entitled is child benefit if they can prove they are registered self employed and holding a yellow card permit( i.e they are not working illegally cash in hand).They are not entitled to housing benefits, JSA or other benefits.

          • HJ777

            But do their children have to be living here for in order for them to receive child benefit?

            I know that many Poles living and working here claim child benefit even though their children still live with the rest of their family in Poland. This seems extraordinary.

          • Dacus

            I don’t know. Poles have a different status so is wrong to make assumptions.

          • SirMortimerPosh

            The rules need to be changed right now. Romania is full of worthless pick pocketing scum. Since they began arriving here, there has been an exponential rise in pick pocketing. Once they are to be allowed significant benefits, they will come here in swarms and claim all they can, presumably while employing their scabrous women folk to lie on the ground outside supermarkets begging while surrounded by photographs of children. I have seen these creatures all over Europe since they started to arrive here and there will be plenty more once they are legally entitled to come and take our money.

          • Dacus

            So I was correct in stating that The Spectator has sunk as low as The Sun and Daily Mail.
            As for rules, they cannot be changed unless UK leaves the EU.

          • Nicholas K

            You are being obtuse: you seem to know about the transitional period for free movement of labour under EU rules, so surely you know that, again under EU rules, social security benefits are exportable. Some 37,000 children resident in Poland are supported by UK child benefit. Very nice for them, but it can hardly be suggested that such a development was contemplated by the architects of the system.

          • HJ777

            I have just done a little research and it does seem that they are entitled to in-work benefits such as tax credits and also to apply for social housing, housing benefit and council tax credit.

            What they can’t do is to claim for out-of-wrk benefits within the first 12 months.

          • davey12

            Sophistry of our politicians.

            They can claim

          • Daniel Maris

            As a Londoner, I can assure you the housing benefit is the biggie. Many perhaps most will be able to get all their housing costs covered that way, by making false declarations about how much they earn. This isn’t an anti-Romanian point, since such false declarations are the norm among established British self-employed persons. Just an observation that we’ve been conned into believing Romanians currently get no benefits when, if HJ777 is right, the reverse is true.

          • Patricia

            Isn’t selling “Big Issue” meant to be a job for the homeless?

  • Ross Clark

    I suggest that ‘Dacus’ studies the case of Firuta Vasile, which can be done here http://www.telegraph.co.uk/news/uknews/law-and-order/9020377/Romanian-Big-Issue-seller-wins-right-to-housing-benefit.html without reading the Mail, the Sun or the Express. Unless you share the perverse view of the court that selling the Big Issue is a job or a business then you must surely accept that here is at least one out-of-work Romanian receiving rather a large amount of benefits

    • Dacus

      A self employed is not considered out-of-work and has no right to JSA or other work related benefits. This rule is applied to Britons too. Romanians are not allowed to take regular employment in UK so there are none out-of-work Romanians. Can you name the benefits Romanians are entitled in UK, please? And quote the monthly amount a Romanian can receive, too see how large it is.

  • SirMortimerPosh

    Sorry, but just how exactly does a rise in tuition fees take an extra £6000 out of your pocket?

    As far as I know, tuition fees are not paid by parents, but become a notional debt owed by their children to the government and paid by them on a sliding scale beginning when the said offspring have earnings over £21,000 a year. They are even written off once the youngster reaches the age of fifty, SO HOW EXACTLY DOES THIS ISSUE AFFECT YOU?

    • AdemAljo

      Clark may well have decided to pay for the education out of his own pocket, rather than loans, thus if he makes a conscientious decision to pay for the full fees, his expenditure will indeed increase by £6k.

      A bit more context is required before either of our statements can be held as fact.

      • SirMortimerPosh

        In that case, he made a voluntary contribution to government funds. What a fool.

    • http://www.facebook.com/gemma.peter Gemma Peter

      It is a loss to all of us. People who don’t want to go into debt would be put off getting an education that could lead them to benefit all of us. People will no longer take degrees in non-profitable subjects. What if a future Einstein couldn’t afford an education because there’s no profit in theoretical physics? They say you’ve got to speculate to accumulate, well you need to speculate on education to accumulate knowledge.

      • SirMortimerPosh

        Ah! That’s the rub isn’t it? Just exactly how are the rest of us benefited by what you describe as ‘non-profitable subjects’? If you mean having thousands of unemployed and unemployable Media Studies graduates – fine. I’m glad about that. The burgeoning of useless subbjects and ‘ologies’ needs to be stopped. It not ony wastes public money, it betrays the poor young fools who spend three or four years studying and then find they can’t get any kind of graduate level job. How many forensic scientists do you think we need? Ten’s of thousands have graduate level qualifications in it since the CSI TV programme aired on TV. I know a youngster who got a degree in this pursuit and then found that there were only new posts of about a hundred entrants a year. Last I saw of her, she told me she was doing another degree in pharmacy. Her sister was likewise retraining. She had graduated in psychology. Call centres all over the North are staffed by graduates in subjects like Media, Journalism, English, Geography and Religious Studies.

        • http://www.facebook.com/gemma.peter Gemma Peter

          Many of the things we use today were not considered initially profitable. Take for example electricity, it was initially seen as nothing more than a curious natural phenomenon, now we wouldn’t be able to have a modern lifestyle without it. Similarly quantum mechanics initially seen as weird-ass physics now it is helping us design the next generation of computing. You can never tell whether something will be useful in advance so you need to acquire knowledge as broadly as possible. Different educations give different perspectives, more perspectives gives a greater variety of ideas, more ideas mean more chance of a useful one occurring.

          • SirMortimerPosh

            Tens of thousands doing Media Studies at third rate colleges?

            Thousands doing Forensic Science when the Forensic Science Service recruits a handful of new people a year?

            Swathes of people doing Psychology when the opportunities for jobs in the psychological services are few and far between?

            Your argument falls down mainly because you quote pursuits that I would fully approve of. I did not advocate cutting science degrees or engineering, quite the contrary.

  • Frank Hampson

    Some of my best friends are Romanian – trite but true – and they live and work in Romania and invite me there to visit, as I invite them to visit me, they would not dream of travelling to the west for dubious hand outs.

  • StephenW

    Don’t forget that QE means you are being subject to a stealth tax on your savings and pension (because the pension funds are forced to buy low interest bonds).

    Why not move abroad? At least until after the next crash if not permanently. If you own a pre-war property in a good area with a lowish mortgage then keep it and rent it out. The middle classes need to become more aggressive and imaginative in tackling these issues as the state will not change until a crash is brought about by some external event.

    Don’t wait for a crash, plan for it.

  • Teacher

    I agree with nearly all of this. Until recently I was working as a teacher and the squandering of public money (to a prudent person like myself) was painful to watch. Nobody, but nobody, seemed to act with any awareness that money has to come from somewhere and that they had a duty to taxpayers to spend it circumspectly. I feel as if my children, both recent graduates and now paying tax themselves, are in some senses bond-slaves. My husband and I (who keep meticulous accounts of all income, tax and outgoings and have done so for 37 years) were very aware of the likely consequences of the credit, government and banking boom as it was happening and tried to shelter ourselves from the melt-down. But, Ross, you like us, will have to pay the price of all the reckless imprudence – who else has got any money left? It reminds me of that priceless Peter Cook sketch:-

    Wife: What happened to that beautiful thing in our relationship?
    Husband: You spent it.

    Well, they spent it.

  • racyrich

    You forgot to mention insurance premium tax on your car, home and possibly kids’ accommodation insurance. If you did venture abroad by plane you also paid Airport Duty or whatever it’s called. And then there’s your council tax.

    By the way, I assume you work through a service company? So might be reducing your NI, but are also charging VAT which your clients probably can’t reclaim as their business is not VATable. Another 20% surcharge straight to the parasites.

  • http://twitter.com/NimbusDS NimbusDS.com

    I think mindset and psychology is a big factor in how our taxed money is spent. We think in terms of “us” and “the government” – and government thinks in terms of “us” and “the taxpayers”. So we see two disconnected parties, which easily leads us to a false sense of entitlement and money that is spent as if it’s not ours.

    Yes, I believe we can have a truly efficient government system, but that can only work if everyone involved – those claiming services as well as the civil servants – we all have a clear understanding of where the money ultimately comes from – from my or your own pocket.

    • Daniel Maris

      Well I think we need to go one step further, and say that money is meaningless of itself, as we know from the many examples of hyperinflation.

      If you are simply a rentier you’re contributing nothing to the economy. The idea your income should be treated the same as that of someone making cars in Sunderland seems absurd to me.

      I think we need to lift the burden on the income earners – specifically by reducing that as a tax – down to a flat rate 20% and making good the difference through sales, property, inheritance, environmental and other taxes. That will incentivise work.

      We also need to control rents, since we seem incapable of resolving the housing shortage.

  • Patricia

    “As with public salaries, as with benefits for out-of-work Romanians, as with the legal aid bill for terror suspects who don’t want to be deported, as with high-speed rail lines, as with Olympic opening ceremonies: whenever it comes to spending on anything other than me and my family, the state’s wallet seems to be wide open. The New Year firework display finally did it for me: post Olympics, there seems to have developed the theory that no spending is too extravagant or too frivolous if somebody, somewhere is cheered up by it. The government — or the Mayor in that case — is behaving like one of those compulsive shoppers who wakes up to find the kitty is empty, the bills are piling up and she has just lost her job; but then goes out and buys a new outfit on her last working credit card to try to cheer herself up.”
    Spot on Ross. Brilliantly expressed.

    • showmaster

      Cost of NYE display = £1.9m in total.
      If all 250,000 visitors came by tube the extra fare revenues would have been around £1.5M alone besides any other economic benefits gained.

      The economic benefits of “entertainment” are one reason to give thanks for the circuses since we have no effin’ bread.

  • AndrewMcNeilis

    For those interested, the photo is from commercial road adjacent to canary wharf and, I think, sums up our modern times perfectly. Best bit of graffiti in east end

  • Daniel Maris

    Welcome to the post-affluent society courtesy of globalised free trade, mass immigration, and anti-social economics.

    I would make some pertinent points:

    1. GDP is not the same as per capita GDP. The ONS has confirmed publicly that mass immigration has been depressing per capita GDP.

    2. Per capita GDP is not the same as per capita GDP per UK citizen.

    3. “Average” wages can mean anything. The upper 10% of income earners have been enjoying wildly inflated pay rises. Exclude them and the picture is much grimmer.

    4. Income is not the same as disposable income and in London the cost of housing is making a mockery of the concept of a wage or salary. Housing costs can easily eat up 50% of people’s income – just in order to enjoy a very modest decent home.

    5. Welfare is being used to subsidise cheap labour.

  • disqus_XhrF3LnSo2

    Sign this petition to restrict Bulgarian and Romanians from entering the UK:


  • John Sydenham

    Sydenham’s Law: Decreases in the rate of public sector spending are always related to increases in the growth of the private sector and vice versa. This is a law of economics. See http://pol-check.blogspot.co.uk/2013/01/sydenhams-law-of-public-expenditure-and.html for a simple description.

  • bayth

    As the writer still believes he pays ‘road tax’, which was abolished in 1937, I have reason to doubt the veracity of his other claims.
    When he says he is paying increased (presumably university) tuition fees, rather than have his offspring use the student loan system, I have reason to doubt his sanity.

  • showmaster

    “…generally get my spending down without sleeping in a tent and ceasing to eat.”

    My heart bleeds, it really does. Especially after reading of the £80+K income.

    Go try living off the JSA or, better still, DLA and ESA. You really do need to get a life and sort your soul out, Ross. I shall pray for you and if that doesn’t raise your anger and shame levels nothing will.

    PS, If you are drinking over 100 bottles of wine every year you had best arrange a Gamma GT test for thou art a piss-head.

  • Angloafricanaustrian

    Others are indeed thinking what many others are thinking……

    Taxes are paid, by law, largely by hard-working employees or risk-taking entrepreneurs. Their taxes are are largely paid, as rights, in the form of a range of benefits to an ever-growing number of largely undeserving malingerers, in order to placate them and thereby keep a modicum of peace on the streets. While the the tax-payers are under a legal obligation to pay taxes, the recipients are under no legal obligation to work. However, there is a tipping point, the point where the tax-base reaches its limit but the recipients continue to grow in number and in their concept of entitlement. What is logical outcome?
    Social upheaval; riots, but not food riots, plasma screen riots, i pod/phone/pad riots, fashion clothing and footwear riots (designer labels only, please), cigarette and alcohol riots – and burnt-out shops and cars.
    The sooner the problem is tackled, the better. Start with ‘work-fare’ instead of welfare, with suitably experienced and serious job-seekers paid to manage a contribution to society by the malingerers. And reserve inner city public housing, in short supply, for the responsible workers in the essential services – and relocate the serial unemployed to areas where there is less demand for housing.

Can't find your Web ID? Click here