Celebrate Tax Freedom Day, May 14 2009
But you'll still have 42 days hard labour to fill Brown's borrowing hole
Tax Freedom Day 2009, the day in the year when the average Brit has earned enough to pay his tax bill, is tomorrow, May 14. That's the earliest date since 1973.
But according to the Adam Smith Institute, who calculate the UK's Tax Freedom Day every year, there is little cause for celebration. If you factor in government borrowing Tax Freedom Day does not come until June 25 – the latest date since 1984.
More worryingly, the gap between these two Tax Freedom Day measures – one representing taxes collected, the other how much the government actually spends – is now 42 days. That's higher than it was at its previous peak in 1975, and may represent the widest gap revenue and expenditure since the Second World War.
The Institute's director, Dr Eamonn Butler, commented:
"Put simply, the government is now living further beyond its means than it did even in the dark days of the 1970s. We might not be paying for it this year, but Brown's borrowing binge is going to mean higher taxes for all of us in the years to come."
For more information please contact:
Dr Eamonn Butler or Tom Clougherty on 020 7222 4995
Notes for editors:
For Release: SATURDAY 2 MAY 00:01
But you'll have to work until June 25 to pay off Brown's borrowing binge.
Tax Freedom Day, the day in the year when the average Briton has earned enough to pay his annual tax bill, will fall on 14 May this year, according to independent think-tank the Adam Smith Institute. This means that for 135 days of the year, every penny earned by the average UK resident will have been taken to support government expenditures.
This is the earliest Tax Freedom Day since 1973 – on the face of it, good news for taxpayers. But there is a downside: the traditional Tax Freedom Day measure only reflects the money actually raised by the government in taxes, not the full amount it spends. If the government deficit is factored in, Tax Freedom Day does not come until 25 June (the worst figure since 1984).
This gap between Tax Freedom Day based on actual revenues and Tax Freedom Day based on government spending is now the widest it has been since the early 1970s – and possibly since World War II.
According to Gabriel Stein, Chief Economist at Lombard Street Research who calculates Tax Freedom Day every year, the figures indicate a bleak future for British taxpayers:
"Running up deficits can be described as a form of deferred taxation. The effect will be that when the economy recovers – as it will eventually do – the UK tax burden is likely to rise much faster than would otherwise have been the case and Tax Freedom Day is likely to creep later and later in the year."
Moreover, the reason that Tax Freedom Day will arrive so early in 2009 is not so much that the tax burden has been dramatically reduced – although the temporary reduction in VAT is certainly significant – as it is that tax revenues have collapsed due to the sharp downturn in the economy. Dr Eamonn Butler, the director of the Adam Smith Institute, commented:
"It's nice to see Tax Freedom Day come early, but our research doesn't leave me optimistic. Under Gordon Brown's stewardship of the economy, the government's annual deficit went from near-balance in 1998 to more than 3% in 2007. And that was when the UK economy was growing strongly. Now the Chancellor is forecasting a 13.3% deficit. Young people have the right to feel very angry, because they'll be carrying the burden of these mistakes for years to come."
Notes for editors:
For Immediate Release
When you read the fine print of the G20 agreement, it shouts 'heroic hypocrisy, unreliable sums, weak promises, meaningless language and self-serving commitments' according to the City financial analyst Miles Saltiel in a briefing paper for the Adam Smith Institute.
According to the paper:
"The G20 leaders are more concerned about their domestic problems than their international responsibilities. They turned up in London for a photo opportunity. Their talks convey a sense that there is little they can do to change events. And they are right. Eventually, the world economy will trade its own way out of the current confusion, as it always does."
G20 – Less Than Meets the Eye is published by the Adam Smith Institute, 23 Great Smith Street, London, SW1P 3BL. It can be downloaded for free at http://www.adamsmith.org/images/stories/less-than-meets-the-eye.pdf
FOR RELEASE: Monday 13 April 00:01
MPs' generous expenses, index-linked pensions and second-home allowances give them a multi-millionaire lifestyle that their constituents could scarcely dream of, shock figures reveal today.
The effective income of the average MP is £319,165 – nearly 18 times the pay of the average voter, according to Bournemouth University tax expert Richard Teather, who has also produced a 'fat-cat ranking' for each of our Westminster representatives.
In his report, for the independent think-tank the Adam Smith Institute, Teather takes MPs' basic salaries – ranging from£64,766 for backbenchers to £194,000 for the Prime Minister – and adds in their pension rights, another £17,357 for backbenchers, up to £52,059 for Gordon Brown.
But what is the value of all those expenses claims – from barbecues to bathplugs – that the rest of us would never have a hope of getting through our employers, never mind Her Majesty's Revenue and Customs? Teather says that to pocket what the average MP claims in expenses, free of tax and National Insurance, the rest of us would have to earn £228,215.
It all amounts to a total pay package worth £319,165 – and that is just the average. Welsh Secretary Paul Murphy tops the league table with a package of pay, pensions, and expenses worth £423,932 a year. That is more than 28 times the average income of his Torfaen constituents.
On the best interest rate currently available – 1.83% from Birmingham Midshires, you would need over £23 million (£23,165,683) to get an income matching Paul Murphy's annual £423,932. You would need over £17 million (£17,440,710) to earn in interest what the average MP earns from Westminster.
The Fattest and Leanest Cats
The top ten fat cats are all Labour MPs, including Hazel Blears, Jack Straw, David Miliband and Geoff Hoon – recently embroiled in the 'three homes' row –their total income boosted by their ministerial salaries.
Eight out of the leanest ten MPs are Conservatives, including Malcolm Rifkind, John Redwood and Sir Nicholas Winterton – perhaps now chastised after taking £66,000 in expenses for 'rent' on a home owned by his family trust.
The MP who cleans up most from expenses is Ann Keen (Labour, Brentford & Isleworth), whose £167,306 expense claims are worth a staggering £283,569 before tax and National Insurance.
The Keen family is remarkable. Ann's husband Alan Keen is also an MP, with a salary and expenses package worth £330,272, and her sister Sylvia Heal is an MP as well, with a package worth £338,294. That is more than £1m (£1,071,617 in fact) between the three of them.
The Regional Fat Cats
Welsh MPs are the fattest regional cats, with earnings equivalent to £323,068 – over 20 times the pay of their constituents.
The leanest are MPs from London, at £308,881 or nearly 15 times the pay of their constituents – but that is because many London MPs live too near to Westminster to claim a second-home allowance.
Along with the £1,000 fireplaces and £550 sinks, MPs' expenses also include the costs of assistants. Teather who is the Adam Smith Institute's Senior Tax Fellow, defends the inclusion of these staff costs in the figures, pointing out that MPs routinely employ family members to boost their household income.
The most blatant was Derek Conway, who claimed for his full-time student son, but the Institute asks whether even Jacqui Smith would pay a non-relation £40,000 a year for the administrative help that her husband provides. The rest of us are challenged by HMRC when we employ relatives, and have to show that their job justifies the pay. But MPs' affairs are dealt with by a special HMRC office in Cardiff, which seems to exempt MPs from this sort of scrutiny.
In addition, much of the work of MPs' assistants involves campaigning for their re-election. Critics of the Parliamentary expenses system see this as corrupt as those MPs who claim their full expenses allowance and then make large donations to their local Party – in effect, a taxpayer subsidy to their political grouping and their general election campaign.
Adam Smith Institute Director, Dr Eamonn Butler, says the figures confirm the claim of his new book, The Rotten State of Britain, that MPs have "conspired in an organized and systematic scam against the public". Richard Teather's figures show just how extensive that scam really is. Dr Butler commented:
"MPs are always embarrassed to raise their salaries, so they decided to take 'stealth salary' instead, as expenses. They organized their affairs to get the maximum benefit – making their sister's spare room their 'main residence' or charging 20p a mile for cycling to Westminster – never imagining for a moment that their expense chits would ever see the light of day.
"How wrong they were. And it is not just the huge range of goods and chattels that they've been claiming for, but the huge scale of the scam that appals their voters. To live like an MP, anyone else would have to be a multi-millionaire."
Parliamentary Fatcats 2009 by Richard Teather, with an introduction by Eamonn Butler: http://www.adamsmith.org/parliamentary-fatcats-2009/
Monday 30 March
The G20 won't solve the financial crisis because it is blaming the wrong things and coming up with the wrong solutions, a leading financial think-tank says today (Monday 30 March). Writing for the Adam Smith Institute, senior financial analyst Miles Saltiel says that the crisis was not caused by the bonus culture or too little regulation, and is not going to be cured by more regulation or big economic stimulus packages.
Saltiel, of capital analysts Fourth Phoenix and with twenty years' experience in the financial sector, says that the popular 'causes' of the crash – over-complex financial products, bank deregulation, excessive risk-taking driven by large bonuses – don't stand up to scrutiny.
Instead, the blame should fall on inept monetary policy, political social engineering that forced the banks into risky mortgages, regulation that forced mergers and created banks too big to fail, and the failure of the Basel banking rules.
Director of the Adam Smith Institute, Dr Eamonn Butler, said: "Unless the politicians understand what really caused the crisis – and what didn't – they will be applying the wrong cures based on the wrong diagnosis. And that's going to make the world economy even sicker."
Click here to download a PDF of What Went Wrong? An Agenda for the G20
The Adam Smith Institute (ASI) has been ranked as the No.10 think tank outside the US in a major new study for Foreign Policy magazine, making it the highest-placed domestic policy think tank in the UK. The ASI was also listed at No.5 in the 'Top 5 International Economic Policy Think Tanks' category.
The 'Think Tank Index' – which is based on a worldwide survey of hundreds of scholars and experts – is published in full in the January/February issue of Foreign Policy. It was compiled by James McGann, Assistant Director of the International Relations Program and Director of the Think Tanks and Civil Societies Program at the University of Pennsylvania.
Dr Eamonn Butler, the Director of the ASI, said, "Naturally we are delighted to feature in the top 10 of such an authoritative international study, and to be considered one of the five leading economic think tanks in the world – despite having a much smaller budget than many of our competitors. We put it down to many years of solid effort to produce timely, well-researched and practical policies, an eye to cost-effectiveness, and the continuing loyalty of our many supporters among the general public."
Top Non-US Think Tanks
1 - Chatham House
2 - International Institute for Strategic Studies
3 - Stockholm International Peace Research Institute
4 - Overseas Development Institute
5 - Centre for European Policy Studies
6 - Transparency International
7 - German Council on Foreign Relations
8 - German Institute for International and Security Affairs
8 - French Institute of International Relations
10 - Adam Smith Institute
Top 5 International Economic Policy Think Tanks
1 - Brookings Institution
2 - Peterson Institute for International Economics
3 - Fraser Institute
4 - National Bureau of Economic Research
5 - Adam Smith Institute
Notes to Editors
The full survey results and accompanying article are available here
24 November 2008
The Adam Smith Institute (ASI) has today called on Alistair Darling to substantially raise the personal income tax allowance in today's pre-budget report. Author Tom Clougherty advocates a personal allowance of £12,000 – which is roughly equivalent to the minimum wage, or half the average wage.
As well as stimulating the economy by giving people more disposable income to spend and invest, raising the personal allowance to £12,000 would strengthen incentives to work, help to eliminate the 'benefits trap' and make low-paid jobs more economic – greatly increasing opportunities for the unemployed.
If the higher rate threshold were kept at its current level, rather than raised in line with the personal allowance, this policy would cost the Exchequer just £18.9bn in lost revenue.
The authors argue that such a sum could easily be offset by cutting government waste, and urge against further government borrowing, noting that the taxpayer already spends more than £30bn a year servicing government debt:
In the face of a recession, every business and household in the country is looking to find economies and make savings. There is no reason why government, with an annual budget in excess of £600bn, should be any different.
Tom Clougherty, the ASI's policy director, added:
Tax cuts are not a silver bullet, but there they are the most powerful, pro-growth policy tool that the government has available to them. The government is right to want to cut taxes: they should start by putting more money back in people's pockets, and this means radically increasing the personal allowance.
The full briefing paper can be downloaded for free at <http://www.adamsmith.org/images/pdf/personal-allowance-briefing.pdf>
Notes for Editors
WHY ALISTAIR DARLING SHOULD RAISE THE PERSONAL ALLOWANCE is published by the Adam Smith Institute, 23 Great Smith Street, London SW1P 3BL.
Monday 2 June
Tax Freedom Day – the day in the year when we stop working for the government and start working for ourselves – is June 2 this year.
That means that for 155 days of the year, every penny earned by the average UK resident was taken to support government expenditures.
When Gordon Brown became chancellor in 1997, Tax Freedom Day was May 26 – a whole week earlier.
Unfortunately, the true picture could be even worse than these figures suggest. Last year Tax Freedom Day actually came three days later than forecast, because the economy grew more slowly than the government expected. The signs are that 2008 could be no different.
And if government borrowing is included, Tax Freedom Day does not come until June 14.
Government spending will reach £600bn in 2008. That's £10,000 for every man, woman and child in the UK – and twice as much as when Gordon Brown became Chancellor.
If Gordon Brown had only raised public spending in line with inflation, he could have abolished income tax, corporation tax, capital gains tax and inheritance tax by now – leaving the taxpayer some £200bn better off.
Dr Eamonn Butler, the director of the Adam Smith Institute, said:
"The Treasury loathes Tax Freedom Day because they don't want people to be able to picture just how much tax they pay. They prefer to use stealth taxes and an ever more complicated tax code to hide the reality from taxpayers. The value of Tax Freedom Day is that it pulls the wool from people's eyes."