The TaxPayers’ Alliance has today released a new video highlighting how the UK’s taxes on people’s wages are needlessly complex and obscure. Produced with the team from See what you mean, the video highlights how National Insurance is a second income tax in all but name.

Previous YouGov polling for the TPA has shown that many people are not aware of how much tax they actually pay. The video makes clear the real rates of tax people pay when Employee’s National Insurance and Employer’s National Insurance are factored in.

Basic: Employer’s NI 13.8 % + Income Tax 20 % + Employee’s NI 12% = 40.2%
Higher: Employer’s NI 13.8 % + Income Tax 40 % + Employee’s NI 2% = 49%
Additional: Employer’s NI 13.8 % + Income Tax 45 % + Employee’s NI 2% = 53.4 %

(See below for an explanation of the combined rates)

Polling has also shown that most do not understand the impact of Employer’s National Insurance, which effectively reduces their wages.

Last year the TPA set out how to abolish National Insurance by 2017, which would make the tax system simpler and more transparent. At the 2011 Budget, the Chancellor indicated a desire to merge Income Tax and National Insurance, which Mr Osborne said would be a “historic step to simplify our tax system and make it fit for the modern age”. Unfortunately, the Treasury has thus far failed to publish the work of the Office for Tax Simplification on this topic or come up with any solid proposals.

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:

“Taxing the same income three times is a pointless complication which only benefits politicians trying to conceal how much tax people really pay. National Insurance has been nothing more than another Income Tax for years and additional redundant taxes mean higher administrative costs for businesses. The Government can and should merge them into a single tax which would be simpler, fairer and more honest.” 

**Calculations** Employer’s National Insurance is added at the rate of 13.8% on top of gross salary. So if you’re paid another £87.87 of gross salary, the employer has to pay an additional 13.8%, which would be £12.13, That adds up to £100.

We are proud to present the seventh Town Hall Rich List, the Who’s Who of senior local government executives which details the job titles, full remuneration and many of the names of all local council employees whose remuneration exceeds £100,000.

Praised in the past by politicians on both sides of the House of Commons, the Town Hall Rich List remains the definitive guide to senior executive pay in local government, making it a vital tool for taxpayers wanting to judge which authorities are delivering the best value for money.

Since the first edition in 2007, the number of senior staff appearing on the Town Hall Rich List has soared. This is the first time that the TPA has reported a drop in the number on remuneration of more than £100,000, largely because of the considerable number of redundancy packages paid out in 2010-11, which increased total remuneration for that year.  The welcome fact that many councils have made their data more accessible and transparent has also had an effect on this figure.

However, executive pay in many town halls across the UK continues to be insulated from economic reality, despite the urgent need to find savings and the fact that many councils claim that they have insufficient cash to fund frontline services.

The key findings of the research are:

• There were at least 2,525 council employees who received total remuneration in excess of £100,000 in 2011-12, a fall of 11 per cent on the previous year’s 2,839.
• Despite this, 103 councils increased the number of staff who received remuneration in excess of £100,000 in 2011-12.
• Birmingham City Council doubled the number of staff who received remuneration in excess of £100,000 in 2011-12 to 24, the biggest increase of any local authority.
• The figure of 2,525 is almost certainly an underestimate. The opacity of some councils’ accounts makes it impossible to separate teaching staff from council staff. To ensure accuracy, some data which would have shown more council employees receiving £100,000 or more in 2011-12 has been omitted.
• In 2011-12, there were 636 council employees who received remuneration over £150,000.
• Of these, 42 council employees received remuneration in excess of £250,000.
• The council with the most employees in receipt of remuneration over £100,000 in 2011-12 was Camden with 40. There were 38 councils with at least 15employees receiving more than £100,000 in 2011-12.
• The council employee with the largest remuneration package in the UK in 2011-12 was Katherine Kerswell, the Group Managing Director of Kent County Council, who received £589,165. That total included a considerable redundancy package.
• The largest remuneration package excluding larger than usual, one-off payments due to redundancy or retirement was received by John Sharkey, Chief Executive of SEC Ltd, a subsidiary 91 per cent owned by Glasgow City Council. He received£314,553.
• The highest paid council Chief Executive not in receipt of redundancy payments was Derek Myers, Joint Chief Executive of Hammersmith & Fulham andKensington & Chelsea councils, who received £266,911.
• The largest remuneration package in Wales in 2011-12 was received by Jonathan House, Chief Executive of Cardiff City Council, who received £219,159. The council in Wales with the highest number of employees who received remuneration in excess of £100,000 was Carmarthenshire with 12.
• The largest remuneration package in Scotland in 2011-12, was received by Linda Hardie, Executive Director of South Lanarkshire Council who received £543,538. The council in Scotland with the highest number of employees who received remuneration in excess of £100,000 was Glasgow with 27.
• The largest remuneration package in London in 2011-12 was received by R Heaton, Executive Director of Resources at Newham Borough Council, who received £317,137.

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:

“It is good news that the number of senior council staff making more than £100,000 a year is finally falling, although that may only be because many authorities have finished paying eye-watering redundancy bills.

“Sadly, too many local authorities are still increasing the number of highly paid staff on their payroll, some of whom are given hundreds of thousands of pounds in compensation just to move from one public sector job to another. Residents won’t be impressed if their council pleads poverty when it is demanding more and more Council Tax, only then to spend it creating more town hall tycoons.”

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, gave the following reaction to this morning’s Queen’s Speech:

“It is great news that the Government has shelved plans for some of the cumbersome new regulations and expensive spending commitments that were rumoured before this Queen’s Speech.

“Sadly they are still planning enormous increases in the amount of money taken from British families and spent on often wasteful and corrupt foreign aid projects, but at least they are not writing that mistake in law. They are also pressing ahead with their great vanity project, a high speed rail line which is poor value compared to more affordable alternatives, but there is still time to reconsider that white elephant as well.The energy reforms are ambitious but misguided and will do nothing about the draconian targets and stealth taxes that are the real problem for consumers.

“Despite some important progress in this speech, ministers still have a lot of work to do if they really want to ease the enormous pressure on family budgets and create the simpler, fairer and more competitive tax system that they claim to be trying to achieve.”

At the Queen’s Speech on Wednesday, new laws will be proposed for the coming parliamentary year.  Many of the laws reported to be under consideration will have important consequences for taxpayers.

The Government needs to choose. It can either ensure that taxpayers get better value and greater accountability from how their money is spent, or it can enshrine new wasteful spending and onerous regulations in law. We will be following the speech closely and making the case for taxpayer value to be the first priority.

Cutting spending
·  DO: Drop the plan to enshrine the 0.7 per cent aid spending target in law
·  DON’T: Introduce a paving bill for High Speed Rail 2
Reforming taxes
·  DO: Introduce a tax reform bill to abolish National Insurance
·  DON’T: Pile new taxes on already overtaxed homeowners
Protecting taxpayers
·  DO: Give voters the right to recall MPs who have let them down
·  DON’T: Introduce minimum unit pricing for alcohol or plain packaging for tobacco

Cutting spending

DO: Drop the plan to enshrine the 0.7 per cent aid spending target in law
The Government should not set an arbitrary target to spend a certain amount on foreign aid that ignores the changing needs of recipients; whether the money can be spent efficiently and controlled properly; the private generosity of taxpayers giving their own money; and the economic situation in Britain. Our 2009 paper Lost along the way: The cost of the UK’s international development programme showed how DfID was already spending large amounts on programmes where much of the money would not reach frontline projects.

DON’T: Introduce a paving bill for a new high speed rail line
Proposals for a new high speed rail line would mean spending well over a thousand pounds for every family in Britain and do not represent value for money. Many towns would see a worse service under the current plans and the economic case is based on flawed assumptions. Realising ministers’ promises for the effects of the line will create further significant costs for taxpayers. Three key TaxPayers’ Alliance research projects that have studied the likely effects of going ahead with the proposed new line:  High Speed Rail, HS2 Capacity Analysis and The hidden costs of HS2.

Reforming taxes

DO: Introduce a tax reform bill to abolish National Insurance
The Single Income Tax, the final report of the 2020 Tax Commission convened by the TPA with support from the Institute of Directors, called for strategic reforms to create a much simpler, fairer and more competitive tax system. An early step that would ease the administrative burden on employers and make the tax system more transparent and honest would be to abolish National Insurance and merge it with Income Tax. Our recent paper How to abolish National Insurance shows how that can be done.

DON’T: Make home ownership less attractive with new taxes and ever higher stamp duty
The Government must resist calls for new taxes on property. Property taxes are already twice as high – as a share of GDP – in the UK as they are on average in other OECD countries (see page 12 of our Fiscal Factbook). Stamp Duty creates particular problems for first time buyers and growing families (for more detail, see The Single Income Tax, Section 6.2.3).

Matthew Sinclair, Chief Executive of the Taxpayers’ Alliance, said:

“The Government should use the Queen’s Speech as an opportunity to ease the burden on taxpayers struggling to balance their own budgets. To do that, ministers must resist the temptation to introduce eye-catching bills which more often than not involve commitments to spend other people’s money or introduce cumbersome new regulations. Instead they should seize important opportunities to put in place simpler, fairer and more competitive taxes and make sure the politicians spending the money are accountable to the people who pick up the bill.”

We can today reveal that a massive £1.1 billion was paid last year in Business Rates on empty properties, a rise of 19 per cent between 2009-10 and 2011-12.

This is the first time that a figure has been calculated for the amount collected in empty property rates since exemptions for empty commercial and industrial properties were abolished at the 2007 Budget. Prior to 2007, empty industrial properties were exempt from Business Rates and empty commercial properties were subject to extensive reliefs and reductions.

Click here to read the full report including council-by-council data

Now, apart from a short exemption period and extremely limited reliefs, full Business Rates are payable on all empty commercial and industrial properties. With the economic downturn making it increasingly difficult for landlords to find new tenants, this tax has had some devastating effects:

• Some landlords have had to resort to demolishing properties rather than paying the full rates while unable to find new tenants
• Some pensioners who have bought commercial units as a means of supplementing their retirement income are facing economic ruin after being hit by crippling bills for the rates

A number of senior members of the Coalition Government were vocal in their criticism of this tax on empty property while in opposition.

• Business Secretary Vince Cable described taxing an empty property in a recession as “a ludicrous situation, completely counterproductive and economically very damaging”
• Education Secretary Michael Gove said that removing empty property rate relief was “universally recognised as a wicked and ungodly act”
• DfID minister Alan Duncan warned that removing the tax relief for empty property rates was “bringing to a grinding halt any kind of activity for preparing business premises or developing wrecked premises for future use”, noting that “taxing something that generates no revenue does enormous damage”

In government, however, both Coalition parties have failed to address the issue.

The report includes a figure for the amount collected in empty property rates by every council in England, Scotland and Wales over the last three years, with the totals region-by-region as follows:

Click here to read the full report including council-by-council data

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:

“It is extremely unfair that property owners are being hit with enormous Business Rates on properties which are empty, with no rent coming in that they can use to pay the bill.

“There are elderly people who invested in a small commercial or industrial unit in the reasonable expectation that the rent would top up their pension. This new tax is ruining them. The rest of us lose out as the mere threat of having to pay rates on empty properties is discouraging people from putting money into new developments or refurbishing existing properties, which is undermining the prospects for economic growth.

“As the true scale of this ugly tax becomes apparent, Ministers cannot keep ignoring their own rhetoric in opposition and leave it in place.”

We have published our post-Budget briefing this morning, complete with graphical illustrations to complement its analysis of the Chancellor’s announcements.

The key findings are as follows:

TAXES

• The new allowance for Employers’ National Insurance, the cut in Corporation Tax, the freeze in Fuel Duty and cut in Beer Duty are all to be welcomed
• Many of the tax changes are sadly adding to the complexity and instability of the tax system, which the Government has thus far failed to reform and simplify
• In January 2013, the TaxPayers’ Alliance revealed that the Coalition Government had implemented or planned 299 separate tax rises and 119 separate tax cuts since it came to power; after yesterday’s Budget, our preliminary estimate is that at least 413 separate tax rises have already been implemented or are planned before May 2015 compared to just 166 separate tax cuts.

SPENDING

• Government departments have been significantly underspending against their original budget allocations but, crucially, the Chancellor failed to address the continuing overspend against the government’s revenue base
• Relative to our economy and its capacity to bear taxation, government overspending is worse than it appeared when the Coalition came to power
• Despite the substantial shortfall in economic growth and revenue below what had been expected, the Coalition Government has not cut spending below its original trajectory
• Given recent growth performance, the continuing problems in Europe, our broken banks, and high energy prices, the convergence of spending and revenue which the Government predicts may not happen at all
• Without new controls on pay increases, there is a serious risk that public sector pay will not be contained to a 1% rise since the total public sector pay bill has continued to rise over the last three years, despite a supposed pay freeze and a fall in public sector headcount

DEBT

• By 2017-18, even on the OBR’s optimistic forecasts, the Coalition Government will have more than doubled the official national debt it inherited
• According to the Office for National Statistics, the government’s overall liabilities amount to well over £7 trillion, equivalent to five times GDP
• All of the government’s liabilities require servicing, and if we add in pension payments and PFI, total debt servicing is already around £170 billion a year, and is set to increase to £220 billion a year by 2017-18. By then, over 30 per cent of government revenues will be earmarked to service past liabilities rather than to pay for current services

CONTINGENT LIABILITIES

• There are enormous economic risks with the Government’s new £12 billion policy of guaranteeing mortgage loans on a substantial scale through “Help to Buy”, in a manner reminiscent of the arrangements in the United States which are thought to have contributed to the build-up of subprime debt that triggered the financial crisis
• Between “Help to Buy” and the National Loan Guarantee scheme announced in last year’s Budget, nearly 14 per cent is being added to total guarantees
• The Government should be far more open and transparent about the contingent liabilities it is taking on so that such commitments – which take a significant risk with taxpayers’ money – are subject to proper scrutiny

The Chancellor of the Exchequer, George Osborne, announced a number of welcome measures to relieve the tax burden on struggling families in today’s Budget, including:

• Cut in beer duty, and the abolition of the beer duty escalator. A major victory for the MashBeerTax campaign organised by the TaxPayers’ Alliance (TPA), working with other campaigners for lower beer duty.
• Another freeze in fuel duty, following the freeze last year after the TPA FreezeFuelTax campaign.
• An increase in the Personal Allowance.
• A cut in Employers’ National Insurance.
• A cut in Corporation Tax to 20 per cent, which will be passed on to workers in higher wages.

However, the TPA has warned that the Chancellor is still relying too much on complicated measures to help specific industries, rather than making fairer and simpler changes to the overall tax structure.

Reacting to today’s Budget, Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:

“George Osborne has announced welcome relief for people struggling with the high cost of living. The cut in beer tax, the freeze in fuel duty and the higher personal allowance will all ease the pressure on family budgets. Lower Employers’ National Insurance and Corporation Tax will also be passed on to workers in higher wages.”Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board. Simpler, strategic tax reforms that reduce the overall burden would be fairer and do more to produce the stronger economy Britain needs.”

Writing in today’s Daily Telegraph, our Chief Executive, Matthew Sinclair argues that the Government tries its best to hide how much it takes – but the voters deserve the truth.

What is your actual rate of tax? Or, to put it another way, if your employer decided you were worth another £100, how much of that would the Government let you keep?

Ahead of Wednesday’s Budget, the TaxPayers’ Alliance asked YouGov to find out how much people thought those on an income of £25,000 – just below the national average – would be able to take home out of that £100.

Click here to continue reading the full article

Following the results of the YouGov poll we commissioned to survey people’s fiscal knowledge of our tax system and government spending we have put some of the questions online in the form of a quiz. How good is your fiscal knowledge?

Click here to take the test  and see how well you do

The poll coincides with the launch of our new Fiscal Factbook  that seeks to help inform the public about how much of our money government takes – and how it is spent.

• Pre-Budget opinion poll shows the public do not appreciate the true tax burden but still want a better deal
• Publication of new “Fiscal Factbook” to help inform the public about how much of our money government takes – and how it is spent

The headline findings from the YouGov survey commissioned by the TaxPayers’ Alliance are as follows:

• People underestimate the real rate of tax on their income. 52 per cent of the public think that, if they earned £25,000 a year and their employer gave them a pay rise and spent £100 doing so, they would get to keep £70 or more. In fact, they would only get to keep around £60, with just 30 per cent of the public thinking that they would keep £60 or less.
• Fewer than one in seven people realise the Government plans to increase the debt, not reduce it. Three times as many people think that the Government’s plans involve decreasing the national debt (46 per cent), as think they involve increasing the national debt (14 per cent). In reality, the Government’s plans involve increasing the national debt by around £600 billion.
• Most do not understand the impact of Employers’ National Insurance. 34 per cent of the public understand that a hike in Employers’ National Insurance mostly results in lower pay for workers. But 31 per cent thought that it would mean consumers paid lower prices and 10 per cent thought it would result in companies making lower profits
• Most people have no idea how much money the Government is spending on their behalf. 77 per cent answered “don’t know” when asked how much it spends per household. The figure is in fact around £25,000, but only 5 per cent of respondents correctly identified it as £20,000 or more.

Despite those misunderstandings – which suggest that the public do not appreciate the full burden of government spending and taxes – most still believe that taxes and spending are too high, and do not expect the government to be able to afford pensioner benefits at their current level by the time they come to retire:

• Only a tiny proportion want higher taxes and higher government spending. More people believe that alien life forms have visited the earth in UFOs (19 per cent) than think the government spends too little and taxes us too little (12 per cent). 16 per cent said the current balance was about right, while 50 per cent thought the government spends too much and taxes too much – 64 per cent of those who expressed an opinion.
• People accept that the current level of retirement benefits is unsustainable.People are more likely to believe that the moon landings were fake and man has never visited the moon (13 per cent) than under 50s are to believe the government will be able to afford to provide the current levels of state pension and pensioner benefits when they retire (12 per cent).

The Fiscal Factbook is a handy pocket-sized guide to how much the government takes from us in taxes, how that money is then spent and how much we really owe.
The 28-page booklet contains a number of eye-catching graphics to explain a variety startling statistics which every taxpayer should know.

Comment on the polling and release of the Fiscal Factbook, Matthew Sinclair, Chief Executive of TaxPayers’ Alliance, said:

“Politicians have spent decades tinkering with our tax system and making it more and more complicated and opaque.”Far too many people now do not understand how much they are paying and why there is so much pressure on their living standards. But they do understand that the tax burden has got well out of hand. The belief that the Government can or should continue to spend more of our money is now confined to a radical fringe.”Politicians of all parties need to set out strategic reforms to create a much more open and honest tax system that leaves more money in people’s pockets.”

As reported in the Telegraph and the South Yorkshire Times today  the failed South Yorkshire Digital Regional scheme is to be offloaded to the private sector at a cost of £1.3 million to the taxpayer. Doncaster Council took the decision yesterday to transfer ownership of the failed network from four local governments – Doncaster, Rotherham, Sheffield and Barnsley – to the private sector company Bouygue Energy and Services based in France because it is cheaper than shutting down the network completely.

The South Yorkshire Digital Regional scheme was launched in 2009 with the aim of serving 97% of the geographical area with superfast broadband. At a cost of over £100 million made up of taxpayer funded money primarily coming from the European Regional Development Fund along with local and national money, the project has failed to achieve the projected 97% target and has failed to gain significant customer sign-ups.

In a report from Doncaster Council made available ahead of the meeting yesterday the council saw no other way to proceed than to go ahead with re-procurement. It said that scrapping the project would result in having to pay back the EU the money that it already spent on the scheme. Additionally, it would have to renegotiate the terms of the original scheme to account for rolling out superfast broadband to only 80% of the region. The report highlights the following goals for the re-procurement:

· Maintain the original vision for the Digital Region project

· Find new capabilities and expertise from a new operator

· Transfer the risk of operating the network to the private sector

· Cap shareholder liabilities

· Have a new contract in a form that avoid clawback of the European grant used to build the network

· Remain State Aid compliant

· Be cheaper than the alternative – which is closure

What would have been a better alternative? Eighty miles south company called Rutland Telecom  provides non-BT (or non-UK telecommunications incumbent) fibre to the home and fibre to the cabinet broadband. And here is the catch – they need to signup at least 30% of a community in order to build out a network. This means that new networks are built out only if there is a demand for it. Any other business would do the same in the private sector.

In a recent OFCOM report one statistic stood out among all the others with respect to superfast broadband. Of the 67% of the UK that has access to superfast broadband only 7% chooses to take it up. The South Yorkshire Digital Regional scheme would have save a lot of taxpayers’ money if they had obtained pre-enrollment prior to building out the network. Other taxpayer funded superfast network projects should take note and use the South Yorkshire Digital Regional scheme failure as a warning.

Burning Our Money, by former City and Treasury economist Mike Denham, exposes the wasteful spending and poor public sector performance that have left a huge hole in our public finances. Tackling wasteful spending and reforming public services would pave the way for the tax cuts required to revive the economy.

Click here to find Burning Our Money on Amazon.co.uk 

This new book finds shocking levels of waste in the big-ticket items of government expenditure, like the NHS, welfare and education.

How politicians burn our money:

• If our government matched some of the most efficient in the world (Switzerland, Australia, the US and Japan) we could save around £140 billion a year. That’s over £5,000 for every single family.
• The Government is overpaying for its workforce by 40 per cent. That is £56 billion.
• The UK spends five per cent less on healthcare than the richest 20 OECD countries, but we have a 15 per cent shortfall in doctors, a 30 per cent shortfall in hospital beds, and a staggering 60 per cent shortfall in scanners.
• 19 million British households out of a total of 26 million are in receipt of at least one welfare benefit. That is almost three quarters of the UK’s households.
• We’re paying benefits costing nearly £5 billion annually for those on incomes over £100,000.
• Between 1997 and 2010, spending on education increased by over 70 per cent in real terms, with the current Government now spending over £90 billion a year. However, since the PISA study of educational attainment was launched in 1997 the UK has slipped an average of 11 places down the league tables.
• Between 1997 and 2010 spending on police budgets increased by 50 per cent in real terms. However, the number of police officers in England and Wales only increased by 13 per cent.
• British families pay an average of £21,200 each a year to the Government in direct tax payments or indirect payments (via higher prices, lower wages or lower investment returns). This increases to £27,000 when government borrowing is included.

Mike Denham, author of Burning Our Money and TaxPayers’ Alliance Research Fellow, said:

“Politicians are still spending far too much money and our public services are not delivering value. Successive governments have failed to tackle the waste and bureaucracy strangling our economy, and have failed to reform key areas like the NHS and welfare. Decades of evidence shows that simply throwing more money at public services does not improve them. The Government must face up to the gravity of the situation we’re in and map out a plan to cut spending and get more for less.”

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:

“Despite all the talk of austerity, the Government continues to spend nearly half of our national income and is trying to pay for it with ever higher taxes. If we want to deliver the tax cuts that would give families and businesses a badly needed break, the Chancellor has to get a grip on spending. This brilliant book shows him how.”