Business

Osborne's tax summary dismissed as propaganda by the TUC

George Osborne Image copyright AP
Image caption The chancellor said he was delivering on a promise made in 2012

An initiative to show millions of taxpayers exactly how their money is spent has been dismissed as 'propaganda' by the TUC.

As promised by the chancellor, George Osborne, in 2012, taxpayers are this week starting to receive letters which detail where their money goes.

The TUC said the letters as "party political propaganda masquerading as neutral information".

But the government said they amounted to "a revolution in transparency".

The letters show that 24.5% of government spending goes on welfare payments.

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Media captionThe first statements showing taxpayers where their money goes are "very misleading", the TUC says.

"The chancellor is relying on the fact that many people think spending called welfare all goes to the unemployed," said the TUC's general secretary, Frances O'Grady.

She said the government was trying to soften the electorate up for further cuts.

'Promise'

The summaries will set out how much tax and National Insurance each person has paid, together with a breakdown of where it was spent - for example welfare, transport, health and education.

"It's about people getting information," Mr Osborne told the BBC.

"This is about people knowing where their money is going and how much tax they're paying.

"I think it is going to help as a country the debate we have about living within our means."


Example of the Annual Tax Summary breakdown

Image copyright HMRC
Image caption Someone earning £45,000 a year will be sent a letter like this from HMRC

But the information being sent out also does not include indirect taxation, like VAT, fuel and alcohol duty.

"Families and pensioners are paying more in higher VAT, but that tax isn't part of these statements," said the shadow exchequer secretary to the Treasury, Shabana Mahmood.

Over the last ten years, the government has shifted more of the tax burden to indirect taxes, like VAT or alcohol duty.

According to Bloomsbury Professional, an accountancy firm, while direct taxes have increased by 38% over that period, indirect taxes have risen by 49%.


Analysis

By Joe Lynam, BBC News Business Correspondent

No other European country gives its taxpayers such a breakdown of how their taxes are being spent.

Australia is the only developed economy that already does so. This chancellor, with his highly-tuned political antennae, will be fully aware of the impact of such statements. He knows that some income taxpayers will resent that a quarter of their taxes go on welfare payments.

He acknowledges it will provoke a debate and one that might benefit his party, which aims to cut welfare spending even further if re-elected in May. Of course the tax summaries do not break down the welfare payments into their constituent parts such as unemployment, child benefit, winter fuel allowance, in-work tax credit etc.

Critics will say that is a deliberate omission.

One further notable element is the single smallest element of your tax bill is Britain's contribution to the EU budget at 0.7%.


There are almost 30 million taxpayers in the UK, and those who do not receive a summary can use HM Revenue & Custom's tax calculator to get similar information, the Treasury said.