The recent news that Her Majesty’s Revenue and Customs may be failing to collect perhaps £20 billion in tax each year should not surprise. Taxation is a mess. Its intricacies go on forever, and bore the pants off most normal people.
Yet ‘tax justice’ campaigns, which take self-righteous direct action against tax avoiders such as posh people’s store Fortnum & Mason and coffee megacorp Starbucks, are fascinated by tax, and get very heated about it (1). So, too, does Labour. When banks, insurers and non-financial institutions recently deferred their salary bonuses to senior staff so as to take advantage of the lowering of the top rate of income tax from 50 to 45 per cent, Labour spokesmen denounced them – even though the loss to the Exchequer was a paltry £85million. Labour loves to contrast the law-abiding rectitude of honest, middle-class taxpayers with the venal tricks of upper-class bankers, American IT firms and the like. The debate reared its ugly head again yesterday with the announcement that Vodafone had sold its stake in US mobile network Verizon. Labour’s Margaret Hodge demanded that ‘HMRC must begin an absolutely thorough investigation to make sure that UK taxpayers receive the maximum to which they are entitled’.
It’s clear that the British state can’t get a grip on taxation, even if it is able to accrue monies more efficiently than the governments of, say, Italy or Indonesia. But that’s only one side of the issue. The other side of taxation is the spending done by the state. And here things are really out of control.
There’s the £38 billion black hole that Labour left in the finances of the Ministry of Defence. There’s the £7 billion Labour poured away on its mostly abortive introduction of electronic patient records in the NHS, complete with typically risk-averse, impregnable software to guarantee personal privacy.
Yet the Lib-Con coalition’s spending is equally chaotic. Work and pensions secretary Iain Duncan Smith’s ‘universal credit’ system was meant to replace benefits and welfare with simpler arrangements. In reality, it has became so complicated that, as Cabinet Office minister Francis Maude puts it, it is ‘not capable of being implemented sensibly’. The Department for International Development (DfID) has lost relatively small sums around its foreign-aid programmes, but those are still welcome amounts for those receiving them. For example, £480,000 ended up with al-Qaeda’s southern Somali offshoot, al-Shabaab, partly because DfID’s local partners there ‘had no prior warning of the confiscations being carried out’ (2). A further £1.2million from DfID went to aid ‘peacekeeping’ in Sierra Leone, but wound up being spent by the country’s defence minister and his pals. They bought 36 flat-screen tvs and, ironically, hunting rifles.