The TPA has extended the concept of Tax Freedom Day, long championed by the Adam Smith Institute and now an established part of the political calendar (in 2007 it fell on 1 June) and can now provide an estimate of the Cost of Government Day. This is the date in the calendar year on which the average person has earned enough gross income to pay off his or her share of government spending and regulation.
The result for 2007 is as follows:
- The average person must work for 204 days of the year to pay off his or her share of government spending and regulation.
- The Cost of Government Day in 2007 is 23 July.
The Cost of Government Day calculation is done in two parts:
1. According to the OECD, total government expenditure will be 44.9 per cent of GDP this year. This means that for 2007:
- The average person must work for 164 days of the year to pay off his or her share of government spending.
- The average person was free of the cost of government spending in 2007 on 13 June.
2. The Better Regulation Task Force (now the Better Regulation Executive), which is sponsored by the Government, has estimated that the cost of government regulation is between 10 and 12 per cent of GDP. Taking a mid point of 11 per cent means that for 2007:
- The average person must work a further 40 days of the year to pay off his or her share of government regulation.
- The average person must work from 13 June to 23 July just to pay off the cost of government regulation.
The Cost of Government Day is an important concept to develop as it captures the hidden costs of government, which encompass far more than stealth taxes:
- Under Gordon Brown, government spending has for a number of years been higher than government receipts. The resultant government borrowing will have to be paid off by taxpayers eventually – the future bill is being accrued this year.
- The cost of government regulation on the economy is even murkier, but it will eventually fall on taxpayers in the form of lower wages, higher prices and fewer jobs.
Cost of Government Day has been getting later in recent years and falls later in the year than in many other OECD countries:
- In 2000, the Cost of Government day fell on 26 June, almost a full month earlier than this year’s date.
- The Cost of Government Day in 17 OECD countries falls earlier than in Britain in 2007.