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  1. Business
  2. Economics
20 March 2012updated 26 Sep 2015 8:02pm

Tax transparency is a political masterstroke by Osborne

The annual statements will increase support for the Chancellor’s cuts.

By George Eaton

Like Gordon Brown before him, George Osborne is a highly political chancellor. Whenever possible, his measures are designed to meet both economic and electoral imperatives (as well as being Chancellor, he remains the Tories’ chief electoral strategist).

Today’s announcement that taxpayers will be given an annual breakdown of how their money is spent by the government is a particularly striking example. As the Telegraph reports, Osborne believes that the transparent statements will lead to “greater public acceptance of the need to reduce taxes and government spending”. One government source is quoted as saying that “when people see how much they pay towards welfare, the argument about whether to cap benefits will be brought into sharp relief”.

Osborne is likely right. Someone on £25,000 (just below the median wage of £26,000), for instance, will learn that they contribute £1,901 a year to welfare (including pensions), £363 to national debt repayment and £113 to “recreation, religion and culture”. After casting their eyes over those figures, few will be inclined to hand over more of their money to the state.

But the transparent statements will also bust some of the tabloids’ favourite myths. That £25K earner will also discover that he spends just £28 on the EU and £57 on overseas aid, far less than the Mail and the Express’s hyperbolic headlines suggest.

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All the same, it’s hard not to see this as a measure that will advance the cause of small-staters. No wonder Stewart Wood, one of Ed Miliband’s top advisers, has already (rightly) suggested that taxpayers should also receive a statement detailing how they benefit from public spending.

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