A waking thought

One of my refrains is the need to educate the public about public finances. The need to promote the understanding that public services are not free goods and need to be paid for out of taxation. That if you want a decent health service, you have to pay a decent amount of tax, at European, rather than at US levels. In which connection, Bing, as well as Bard like chat, turns up reference 1 below, from which I have lifted the snap above - in which the UK appears twice, low for now, high for soon. The US appearing once, even lower. Nevertheless, the UK is presently in the lower half of the chart, lower than I had thought, along with the US, perhaps reflecting 13 years of Tory rule.

The IFS is, to my mind, a respectable operation, and one can trust the chart. On the other hand, the numbers at reference 2 look rather different, perhaps because they seem to be about direct taxes on income rather than tax in general as a proportion of the total. A reminder that comparisons of this sort are difficult.

But waking up this morning, I was reminded of a different take on this. Generally speaking, people do not like paying tax. Some people go to considerable lengths to avoid contributing in this way. Against this background, the (UK) Treasury tends to manage government spending as a matter of sharing out a tax pot of fixed size. When we need a new battleship, it does not say 'we had better raise income tax by a couple of pennies in the pound to pay for it', it says 'what can we cut, what can we do without, in order to free up some money for the battleship'.

There is some flexibility in that the Treasury can borrow money against the security of future tax revenue. So we can have the battleship on the never-never as we used to say when I was young, money trees not having been invented at that time.

There is still more flexibility in that the Treasury keeps some money aside, not allocated up-front, which can be used to cover unexpected expenditures. Perhaps the shells we are sending to the Ukraine are paid for in this way.

But in the round, the Treasury balances the books, keeps expenditure within the limits set by the tax rates of the day. Changing those rates is a serious matter requiring serious political input. Not to be undertaken lightly.

PS: the money tree sometimes takes the form of expecting there to be growth. When the economy grows, the tax take grows with it, without needing to fiddle with the tax rates, without anybody getting hurt. Which would be more helpful if the UK was better at growth. And then there is another refrain of mine, to the effect that we need to wean ourselves off growth. Growth is destroying the planet. Time for breakfast.

References

Reference 1: https://ifs.org.uk/taxlab/taxlab-key-questions/how-do-uk-tax-revenues-compare-internationally.

Reference 2: https://www.theguardian.com/money/2017/may/27/tax-britons-pay-europe-australia-us.