Your personal public spending

Numerous bloggers have taken up the challenge to answer my question, do you value the £10,000 of public spending which is your average share of the total? How would you like your share spent?

It is time to look a bit more at what we all get for our money. Some of you have been critical of the idea that some part of your £10,000 should go to the neighbours. In practise most of the tax paid by people in good jobs goes to other people. We have a very progressive system, which gives quite large sums to people out of work (income related benefits, social housing etc)by taking larger sums from those in well paid work.

Our system of public spending includes three types of spending. There is expenditure on current publilc services which we all enjoy – we all use the roads, have our rubbish collected, are under the umbrella of the common defence, live with the same police force and seek to comply with the same Revenue, Customs, and criminal justice system. We all pay according to our means for these items of current spending which are incurred every year on our behalf equally.

There is then public spending on public services which we may need at some times of our lives but tend not to need when we are in work and earning. The state makes provision for the young and the elderly. We pay for the young and the elderly, partly because we are decent, and partly because we have been young ourselves and hope one day to be elderly. Public spending insures us by time shifting our payments in and our receipts out of the system.

The third type of public spending is spending for the greater good, spending on others which we would never experience for ourselves. Most people contribute to social housing but will never themselves live in a subsidised house. We all contribute to overseas aid.

In each case the debate on public spending poses three questions.

1.Is too much of the given service being provided? Do we fight more wars than we need do? Do we need so many regulatory systems?

2. Is the service being supplied in an efficent and cost effective way?

3. Could we pay for it in a different way?

We have spent a lot of time on this site discussing 1 and 2 about various services. Today I want briefly to touch on 3.

Some of the servcies in Category one like rubbish collection, lesiure facilities, public entertainments and sports could be paid for more by user charges and less by direct local and national taxation. We pay for our daily bread and water by direct user charging based on what we consume. More current public services could be charged in this way. We would then pay for what we needed and not for what the public sector wanted to supply and charge.

Some of the services in Category Two could be based more firmly on the insurance or loan principle. Students now pay for their university courses from loan money which they repay only if and when they are successful in finding well paid employment. The state pension is based loosely on the insurance pricniple, where you pay in over your working life in order to gain entitlement to a pension on retirement. These are two current ways in which the state helps you time shift between spending money and paying money in. This Insurance principle could be extended, to reward the prudent and to help the state balance its books.

There will always be causes and people deserving of our financial support which will not be able to repay one day. Civil government is about making good judgements about which and how much. I woudl appreciate your thoughts on whether and how we should also strengthen the insurance principle and the pay for what you receive principle in more public service areas.


  1. Mike G
    August 24, 2010


    Your £10000 question is unanswerable. The whole point of taxation and public expenditure is that there is no relationship whatsoever between what you pay and what you get. None, nix, zero.

    The interesting thing is that people expect such a relationship – "I've paid my taxes and want my helathcare / schooling / transport network"

    I'm afraid it is all about getting as much as you can while paying as little as possible. What a dismal morality.

    Public cash is real people's hard work, laundered by the system into a pork barrel.


  2. H W Tsudnim
    August 24, 2010

    Before answering I would highly recommend "The Welfare State We're In" by James Bartholomew. The question starts to answer itself with this background information. P.S. it is a "page-turner" not a dry dull book!

  3. waramess
    August 24, 2010

    If I was not as familiar with your views as I am I might thing this was an old political ruse to capture the argument.

    If I am paying £10,000 a year it is far too much and I would spend the first £5,000 in giving myself a tax rebate.

    Then we might have a look at the question again after the dust has settled

  4. London Calling
    August 24, 2010

    You seem to have glossed over the "Overseas Aid" which "we all pay". The public is quite capable of deciding for itself which overseas aid needs they would wish to contribute to – witness private giving for Haiti or Pakistan. Why do we need an army of civil servants riding around the globe as DFID do, handing out our money without our consent? Privatise Charity.

  5. David in Kent
    August 24, 2010

    I liked your analysis as it showed how the link between tax and spending is weak, weakening and should be stronger.
    The so-called graduate tax to pay for university is an example. It would be one thing if the extra tax that graduates were lumbered with were to go straight to universities to support the current generation of students. Actually however most of it would be submerged in general taxation and the universities would see very little of it.
    That's the case for the current student fees and it would be even more the case with a new tax. It's just an excuse to raise some more tax.

  6. William
    August 24, 2010

    Easy, let me keep the £10k that I pay out, and I could be doing alot better! Of course those who choose politics for a career would need to actually do some work, that might cause a few problems.

  7. Jon Taylor
    August 24, 2010

    On benefits
    Why is it not possible to grade benefits according to need and then control and alter through time ?
    Start with a Single benefit for not working.
    Then if made redundant – you get a % of your last salary / wage for 6 to 8 months
    – that avoids endless interviews, hurdles and hassle to get money to live
    – you've paid in .. so now, you receive back
    – no jobcentre plus grilling about what you have been doing, so saves signifiucant costs
    – overwhelming majority of people made redundant will find a job within a short time

  8. jon taylor
    August 24, 2010

    After 6 / 8 months
    Review situation
    shift to a lower benefit
    tied into training
    weekly meets with the department paying the chq
    housing element of payment squeezed
    offer assistance with relocation
    flexible income scheme
    After 2 years
    move to daily meetings with department paying cheques
    controlled income – food stamps idea
    squeeze payments further – so well under min wage

    do not expand any benefit due to changed circumstances
    – ie if a person has childdren / additional children

    basically be very generous at the start – which would save significant expenditure on admin staff which are not needed for newly redundant people
    then get tighter as time persists

    tie this in with a starting tax threshold of £15k
    allow joint partners to claim 50% of their partners threshold — on a joint tax payment
    Scrap tax credits
    Scrap Child Tax Credits
    Scrap Child benefit
    And a single state payment pegged off the minimum wage and age adjusted

    1. Alan Jutson
      August 24, 2010


      What a refreshing and alternative idea to the existing system, which is in administration overload, complicated, and thus expensive.

      Bit of carrot and a bit of stick.

  9. Vanessa
    August 24, 2010

    You say we all live under the same police force. But there is one law for some and another for the rest of us. I was under the impression that it was illegal for us ordinary English to marry our first cousins but this seems to have been swept away for (others-ed) living here. The television programme last night made for horrifying watching which is why there WAS a law prohibiting this union. Also I do not agree with Aid for some countries but would promote Trade as a better way of helping them out of their poverty but of course the EU puts up so many barriers and tarrifs that it is impossible to create a sympathetic environment to trade with some countries. Forget the fact that OUR food bills are one third overpriced because of the EU tarrifs slapped on everything we buy from them. What a level playing field!

  10. StrongholdBarricades
    August 24, 2010

    Can I add, as I said in the feedback to my own MP's research:

    Please just make it transparent and accountable.

    So when say, my GP makes a mess they are personally liable, the transparent will ensure that all spending is scrutinised.

  11. forthurst
    August 24, 2010

    The third category of course includes spending on people who have deliberately put themselves into this category by either avoiding work on various grounds or by entering this country from the third world. Some in this category, often with professional assistance paid for by us, are able to stay without legitimate grounds and live in expensive houses in areas we ourselves cannot afford.

    I have every sympathy for our own working class; those who fight our wars, perform the essential tasks that we ourselves would prefer not to do without possibly the resources to make provision for all their needs. I have prectically no sympathy for people I regard as members of a foreign invasion force who are intent on filling up our country and making it less safe for us; as far as I am concerned the government could engage in economic warfare to discourage them from remaining here rather than the contrary.

  12. gordon-bennett
    August 24, 2010

    I wouldn't want to have rubbish collection as a service the user pays for directly, like gas and water. Think of the health consequences from people who don't bother or just fly tip.

  13. TimC
    August 24, 2010

    I favour a substantial slice of 'what I pay' going to what you can term 'a personal account'. This would be invested to produce me a pension at a level of risk I found comfortable but I would also be able to draw on it and spend it during periods of unemployment and to pay for medical treatment with it. Of course I would recognise that the more I drew the less there would be left to top up my basic pension!

  14. Mike Stallard
    August 24, 2010

    OK, I'll come out of the closet, I'm a Catholic.
    The whole point of the Good Samaritan story, it seems to me, is that the Good Samaritan did it himself. It wasn't the priest or the Levite that did it. It was him.
    I strongly hesitate when I hear the word "Vulnerable". That means, to me, that someone else is doing the bit that I ought to be doing myself.
    And (see above) there are an awful lot of people muscling in on our money to pretend to do the job for us, very, very inefficiently indeed.
    That is why I take a very extreme radical view on this whole subject. Too many very greedy posers.

  15. Electro-Kevin
    August 24, 2010

    Quite large sums given to people out of work ? Are you kidding ???

    The other side of my family. Two teenage girls who have deliberately got themselves pregnant. Both have got beautiful new two-bed houses, car, fags, mobile phone, furniture, baby stuff … the lot.

    A similar story with neighbours here. This kind of thing must be prolific. And nothing has changed under the 'Tory' govt. Instead the people supporting the unsupportable are about to be spanked for parking their cars at work.

    Message to the youth. Forget GCSEs and A levels. Just drop your knickers and you'll get a lifestyle that your working contemporaries couldn't possibly dream of.

    Contact me if you want details.

  16. Iain Gill
    August 24, 2010

    not convinced your model is the full picture

    in particular it assumes everyone stays in one country throughout their life

    in these days of many folk coming from abroad to live here, and many brits moving abroad, both for interim periods and indefinitely, then the models you describe need to be adapted to fit these realities

    only when these dimensions of the issues are taken into account can some level of fairness be achieved

    at the moment the UK system is heavily unfair to large groups of people who move countries, and the greater public who fund UK services, in ways which do not make sense when looked at in the round

  17. Alan Wheatley
    August 24, 2010

    The insurance principle has a fundamental flaw – you can not reply on the insurer. To give two examples: (1) the change in the way the state pension is indexed resulting lower benefits; (2) Gordon Brown's introduction of taxation on dividend income in pension funds resulting in a smaller pension.

    In both cases the benefit as advertised when payments were being made was not as good as the benefit subsequently received. And, of course, being the government who did the dirty there is nothing you can do about it.

    Unfortunately I can not see how we can get away entirely from the insurance principle, but it is definitely not the complete answer.

  18. Alan Wheatley
    August 24, 2010

    You can organise your own "insurance", at least to some extent. Remember it is NET income that is important.

    So as an example take housing in retirement. If by the time you retire you own your own home outright then you do not have the cost of a mortgage. Further, if while earning you make sure you house is in excellent repair you can minimise those cost at a time when there is less money to pay for them. Also, running costs can be minimised by ensuring you have an efficient heating and good insulation.

    So, while earning, investment in capital projects will give a long term pay back through reduced current expenditure, and better NET income when no longer earning.

  19. Bill
    August 24, 2010

    I think we sometimes forget that we use the welfare system to buy off political radicalisation. If we fail to provide welfare for the poor and the unemployed, the disadvantaged and the marginalised, we create the ideal conditions for emergence of political demagogues and bloody revolt. In short, what the welfare system does is to mute protest and stop the emergence of neo-Nazi or neo-Marxist political thugs.

  20. Lola
    August 24, 2010

    I doubt that any bit of 'the State' achieves anything like 50% efficiency. Plus it already does twice as much as it should. So cut taxes to a level that funds a State 1/4 of the size of the current and one and then work out what it actually 'needs' to do. That is stuff that we, the citizens, cannot do for ourselves and each other. Pretty well that ends up at Defence and policing plus some major infratstructure. I will concede for the State a role as insurer and lender of last resort, but not for any form of intentional or socially engineered redistribution – it never ever works, except as the most efficient method yet deined to destroy wealth.

  21. Brian Tomkinson
    August 24, 2010

    Regarding the insurance principle, I don't think we want another "Ponzi scheme" like National Insurance, where there is no fund. Why is it it illegal for individuals to operate such a scheme but ok for governments? I know, because governments make the laws … one law for us and another for them.

  22. English Pensioner
    August 24, 2010

    If we have insurance based benefits, would I be given a "no-claims" bonus as I never once claimed unemployment benefit during my entire working life?

  23. john east
    August 24, 2010

    John, you have been somewhat remiss in failing to mention the fourth reason for public spending which so characterised the previous administration. The creation of non-jobs for political purposes. These include jobs for the boys (and girls) in hundreds of questionable quangoes up and down the land, jobs created, particularly in labour strongholds like S. Wales and the North East, to buy votes and to hide unemployment. Also let's not forget the thousands of non-jobs in town halls (diversity co-ordinators etc., etc.) created purely to further a social engineering agenda.

    Clearly target and strip away much of this ephemeral expenditure, which might account for several hundred thousand of the extra public service jobs created over the last thirteen years, and the austerity measures might not be nearly as damaging to the coalition as they will be if the public service mandarins themselves are allowed to contribute to cut decisions. I hope I'm not being overly cynical, but there must be a lot of vested interests in the Civil Service who would desire to cut front line services first to maximise public resistance to the coming austerity programme.

  24. Mark Wadsworth
    August 24, 2010

    Yup, re item 3 user charges is the way forward.

    Having slimmed down the state to a sensible size*, how about getting rid of as many as taxes as possible … and just having user charges, including a user charge on the value of what the state provides, starting with a user charge on the value of the state protecting your exclusive possession of land?

    * The state can only profitably provide core functions, universal benefits and low-cost mass insurance, which is all good stuff.

  25. Paul
    August 24, 2010

    This is slightly off the point, but is something I think worth saying.

    I was disappointed to see you describe our tax system as 'progressive.' That's a word socialists use to describe their views largely because it sets free market policies as the opposite – regressive – with all its negative connotations.

    I make no judgement as to whether socialism or the free market is more likely to deliver improvements to society, but the repeated use of the word 'progressive' is an obstacle to an open debate in the minds of the public.

  26. Richard Hobbs
    August 24, 2010

    Dear Mr Redwood
    In your comments you said
    “The state pension is based loosely on the insurance principle, where you pay in over your working life in order to gain entitlement to a pension on retirement.”
    This is true, of course, but I have to point out that ‘loosely’ is the operative word. Successive UK Governments have treated pensioners differently depending upon where they live. Those who have retired to certain countries such as Canada, Australia & South Africa have their pensions frozen from the date of issue, leaving many, as they get older, into dire straights. This is not defensible as UK pensioners who live in UK itself, or other countries such as USA, EU States and others, all receive yearly uprating – yet all have paid into the same pot.

    I am not trying to stray from your basic discussion but do this it worth mentioning that the entitlement to pension is different depending upon where you are.

  27. simple soul
    August 24, 2010

    Defence is where we are likely to make the biggest mistake. We should be invulnerable within a radius of about 1,000 miles. (Prickly hedgehog policy.) We shouldn't throw away trump cards like Trident, aircraft carriers, and jets. Our 25,000 troops should come home from Germany and not be used in "little wars."

    As for the rest of public expenditure, we should aim to get nearer the Victorian low tax economy, with taxes at about 10% of GNP, which served us well for a long time. The main step towards this is cutting out transfer payments, i.e. robbing Peter to pay Paul.

  28. P. Turner
    August 25, 2010

    The last Labour Government introduced the idea of artificially low interest rates which have dealt very unfairly with savers, particularly those who have or had savings in Government schemes, example Cash ISAs. I had hoped that a Conservative/Coalition government would remedy this position. There is no sign of this happening. How, then, is this government going to encourage saving? Bear in mind that many pensioners need a return on their savings if they are to maintain a reasonable standard of living. At present their savings just contract.

  29. Angrysaver
    August 25, 2010

    What can we do about the old chestnut of the two identically paid families one of which spends every penny as they get it whilst the other saves money for a rainy day? At retirement age both get the same state pension and anyone with an extra pension is taxed on it. There is no penalty for profligacy. The person who has paid in full NI contributions gets the same pension as the person who has never worked but has been credited with the same contributions.
    How about making the state old age pension completely free from tax calculations and so the thrifty would have a full tax allowance against any extra pension they had saved for. There is little incentive for people to save and look after themselves when they see those that don't receiving the same level of pension.

  30. StevenL
    August 25, 2010

    I'd just buy a great big turnip.

  31. Steve
    August 25, 2010

    Inflation is the greatest evil in my opinion. We could end Socialism forever if we admitted this awful tax on the poorest. A class by themselves are making a lot of money from inflation and unfortunately I can't see them giving up control.That is the tradgedy of Conservatism,not being consistent in preaching freedom and practicing it. (Again inflation to me means increasing the base money supply and hence diluting the purchasing power of money already in circulation). Prices fell thoughout much of the nineteenth century and they would again if a Gold Standard was adopted.Then the old could look forward to a retirement when their savings would be worth more in terms of purchasing power.The income tax is theft,it presupposes that the Government owns a person's labour,get rid of it.All taxes should be consumption based which allows some freedom through the exercise of choice. Those in the know have made a pact with the Devil and he's not known for keeping a bargain.

  32. rose
    August 25, 2010

    We could have stayed a small liberal Christian nation, with our population falling naturally and living standards rising. Or become an impersonal multinational conglomeration like the USA, with population and poverty rising.

    The former, Nordic type can support an advanced and progressive welfare state if everyone is brought up in the same matriarchal protestant ethos of work, family, and charity. But once you depart from this monoculture, people are bound to exploit the safety net to the greater detriment, or fall into crime, and others won't want to pay for people they not related to in any way. Cynicism sets in, and ultimately decadence and corruption.

    Hong Kong was not a welfare state while administered from the UK because it was understood that with great numbers of people coming in, that wouldn't work. Instead, its very low taxes made it the wonder of the world.

    So either have a low tax free for all, or an exclusive progressive welfare state, but don't try and do both at once. There are merits and demerits in both ways, and it may be that an independant Scotland will be able to choose which she takes.

  33. Robert Pay
    August 25, 2010

    I sometimes feel that the real aim of public sector services is to provide employment rather than services – hence the Guardianesque array of non-job titles that litter the recruitment pages and the staggering number of 6-figure salaries. What I would like to know is what proprtion of our money goes on retired state sector workers – the better paid of whom should, in my view, be responsible for largely funding their own retirement like the rest of us! It is hard to find simple charts of where the money goes…

  34. monty Slocombe
    August 25, 2010

    Each service (i.e. health) has a budget which must be adhered to. The government supplies this money and is the organization which has the easiest way of collecting astronomical sums of money by means of tax. The goose may be plucked continuously, as long as it does not die. A business in the private sector would thrive in such an environment.

    How is it then that we have such an enormous debt (£28,000 for everyone in the country I read) ? Shouldn't the government be run like a business ? Perhaps the services should come under the auspices of the Trades Description Act like all other providers of "Services" and the government under the same rules of bancruptcy as private concerns. Would polititians be capable of handling a household budget I wonder ?

  35. Simon
    August 26, 2010

    I always understood the insurance principle to be the losses of the few being spread accross the many .

    In my opinion this works very well for the payment of healthcare .

    Saving for old age and a pension are not the same thing . A pension is an insurance policy against living longer than your savings will last you .

    Compelling people to buy an annuity with 75% of the lump sum is wrong , especially in cases where that 75% is more than the poverty income level .

  36. Bazman
    August 29, 2010

    Subsides to the private sector in the form of the minimum income needs addressing. Why should the state pay people benefits when they have a job?

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