John O’Connell: Lobbying, and an unacknowledged problem – namely, groups funded by the taxpayer that lobby for even more

16 Apr

John O’Connell is Chief Executive of the Taxpayer’s Alliance.

Whenever a new lobbying scandal emerges, the forgotten victim tends to be the taxpayer. A well-heeled special interest is usually after a subsidy, higher government spending or a bespoke tax break. The current episode is no different: at its heart lies a proposed solution to late payments within the NHS that could have cost taxpayers’ money.

Alongside taxpayers, small business loses out. Most can barely get hold of their local councillors, but taxpayer-funded groups and large companies can meet ministers and senior civil servants. Think of the business rates bill for the publican who served you your first post-lockdown pint on Monday; then think of the big companies that can secure meetings with HMRC to discuss their tax bills.

So lobbying has become synonymous with pleas from the well-connected for politicians and bureaucrats to reach even further into taxpayers’ pockets. Matt Ridley wrote about this in a column for The Times way back in 2013: “In Westminster the interests of spenders are represented by phalanxes of ministers, MPs, peers, lobbyists and journalists. The interest of the taxpayers is represented by a couple of lonely Treasury ministers and a few small voices such as the Taxpayers’ Alliance: it is an unequal battle.”

Indeed, we at the TPA spend pretty much every day attempting to fend off endless demands for more public cash. And while the requests of big business rightly get a lot of attention, there is a pretty broad spectrum of groups working hard to have more of your money. Many of the most prolific offenders are funded by taxpayers’ money themselves, using cash given to them by the Government (or councils, quangos etc) and access to senior people to lobby for even more money to be spent on their cause.

Many from the “social justice” wing of the campaigning world evidence this. The Runnymede Trust received significant amounts of cash from UK Research & Innovation over the five years up to 2020. At the same time, it has regularly made political interventions. The left-wing think tank the New Economics Foundation, which has actively campaigned for more public spending, received £127,715 the following year. Public sector organisations themselves lobby for even more cash, such as HS2 Ltd.

You’ll hear less about these groups in the noisy debate on lobbying. Prosaically, it’s because many groups engaging in lobbying are seen as “acceptable” or “nice” – allowed to lobby freely and openly because of the causes they champion. This probably also explains why their pleas for more cash are given relatively unchallenged platforms on broadcast media. If someone dares to point out that we spend too much money already, and that we ought to show restraint in order to keep taxes low, the Twitter mob descends.

Policy-making benefits from external contributions. Politicians and mandarins should of course be encouraged to learn from practitioners and hear from those who may be adversely impacted by their decisions. So there is a very real danger that a knee-jerk reaction to the Greensill affair will miss the mark. For instance, the focus on David Cameron is entirely understandable and reasonable – he’s the former prime minister – but solutions concocted with him too sharply in focus could tie up politicians and miss out mandarins, as pointed out by this site.

Badly thought out rules could see chats with companies registered, but not – for example – those with Fleet Street hacks. And if we let permanently offended and perennially angry Twitter mobs guide the proposals – which unfortunately happens all too often – we could end up cracking down on whomever they deem are “bad” lobbyists but not the (publicly-funded) “good” ones.

Let’s not forget, groups raging a guerrilla war against the taxpayer – dragging the public discourse towards more spending always being the only answer (a view not shared by most voters) – are far more powerful than they like to let on. It suits them just fine to undeservedly perch on the moral high ground and watch the private sector firms take the heat in the battle below, before resuming their taxpayer-funded lobbying unaffected.

So taxpayers need a system which tackles the root cause of the problem; one that says enough is enough to evermore spending pledges. That means fewer grants, streamlined quangos with stricter operational remits, ditching pointless schemes that waste time and money, better and more transparent contracts and ending programmes that have run their course or achieved their objective. Stop giving anyone or any organisation a reason to constantly ask for more cash. After all, we spend our own money better than bureaucrats and politicians.

John O’Connell: Presiding over the biggest tax burden in 70 years is surely a legacy Johnson must be keen to avoid

2 Feb

John O’Connell is the Chief Executive of the Taxpayers’ Alliance.

Boris Johnson is an admirer of Winston Churchill, to put it mildly. Churchill has a wartime legacy that Johnson knows he can’t match, but it’s hardly a secret the Prime Minister himself wishes to be remembered through the ages. He’s now tackling a once-in-a-generation crisis. But there is a little-known achievement of Churchill’s post-war administration which Johnson should try harder to emulate.

New research from the TaxPayers’ Alliance finds that the tax burden now stands at its highest sustained level – based on a five-year average – since 1951, when the UK was still demilitarising after the second world war. This was a level which Churchill was determined to cut, explaining in his election manifesto of that year that “British taxation is higher than in any country outside the Communist world.”

These are different times, but presiding over the biggest tax burden in 70 years is surely a legacy Johnson must be keen to avoid. The tax burden next year will be an estimated 34.2 per cent as a share of GDP. That will be the highest single year score since 1969-70, when a rise in consumption taxes to discourage imports at a time of foreign exchange difficulties saw a one-off spike during the last full year of the second premiership of Harold Wilson. In the first year free of the European Union, we are paying as much tax as we did in the years just before we joined.

Repairing the public finances after the hammerblow of Covid doesn’t have to mean tax increases. The objective for Johnson – and Rishi Sunak, of course – should be to create the conditions for a boom in growth. That means giving the private sector – currently on its knees – the room to stand tall. With that will come investment, growth and jobs.

But official forecasts say that the Prime Minister will be levying taxes at levels likely to be higher than they have been since Clement Attlee. Any tax rises in the March Budget will put that figure even higher.

Traditionally, increasing taxes is the hallmark of Labour prime ministers and this is then countered by their Tory successors. Churchill’s encore administration shaved off 4.5 percentage points from the tax burden following the Attlee years, before Heath arrived in the shadow of Wilson and reduced taxes by another 3.9 percentage points. Margaret Thatcher sliced off another 0.8.

These assumptions can no longer be taken for granted. Since Thatcher departed, when the tax burden was at left at 30.4 per cent, Tory tax cuts have been negligible and the burden has ratcheted up. During Churchill’s post-war government, taxes were lower than they have been under each of the last three Conservative prime ministers. Gordon Brown cut the tax burden more in his three years than they’ve managed in eleven.

Some might now be thinking that the British public, like the oblivious lobster, is unperturbed by continuous tax increases. But we know that Jeremy Corbyn, with his manifesto delivering an extraordinary estimated tax burden of 37.3 per cent, pushed too hard and was rejected by the electorate – twice. And he wouldn’t be the first Labour leader denied office by the prospect of tax rises. Conservatives have almost always bent over backwards to promise that taxes wouldn’t go up under them.

Is it different this time, because of the Conservatives’ new base of voters? This argument can misunderstand the working class: tax cuts can be popular.

Polling from just before the 2019 election told us the new blue collar Conservatives want to see their taxes go down. A cap on council tax rises was supported by more than three quarters of those polled; around six in 10 C2DE voters strongly favoured cutting the basic rate of income tax down to 15p in the pound. About the same number wanted to see employers’ PAYE taxes reduced to encourage businesses to hire more people, with even more (seven in 10) wanting to abolish the BBC licence fee. All of these were compatible with the 2019 Conservative manifesto, and what’s more, were more popular with C2DE voters than their ABC1 counterparts.

With tax bills at around £24,500 per household, and data from the ONS showing the poorest families pay almost half their income in tax, cuts like this wouldn’t go unnoticed. They will certainly be critical to a post-pandemic Britain trying to restore growth and prosperity, as Churchill noted when he said “for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”. With their commitment to opposing tax rises in March, and a renewed focus on fighting council tax rises, the Labour frontbench now understands that taxpayer value could hold the keys to Number 10.

Very soon, there will be a fork in the road out of the pandemic – which way would Churchill go? Johnson should choose that same route.

John O’Connell: To ensure efficient government spending, we need a new Parliamentary Budget Committee

24 Nov

John O’Connell is the Chief Executive of the Taxpayers’ Alliance.

Although the Comprehensive Spending Review will only set out plans for one year, rather than three, it’s still an important moment for the Government. It was of course elected on a Conservative manifesto pledging to spend more money, so no one should be surprised by a big overall boost on Wednesday. All eyes will be on exactly what the Chancellor spends more money on, and where the benefits will accrue.

While there will be a deluge of important data, it will be quite difficult for taxpayers to gauge whether the relationship between spending and outcomes is as efficient as it could be. In one sense, that seems like an unfair barb – after all, spending data is pretty transparent these days. But one thing is missing: government spending plans are not robustly scrutinised for economy and efficiency. That’s why the TaxPayers’ Alliance supports the creation of a new Parliamentary Budget Committee. Parliament could and should play a greater role in focusing government attention on efficient spending.

The detailed reports of the OBR allow taxpayers to assess the big picture. The Treasury Select Committee also does admirable work scrutinising public sector spending in terms of fiscal aggregates. So for example, it may flag up the dire long-term spending implications of continued low productivity growth in the NHS, but it does not scrutinise the causes, or compare performance with alternative healthcare models. It has neither the mandate nor the expertise to conduct such scrutiny. Departmental select committees are preoccupied. The fantastic Public Accounts Committee only looks at spending after it happens, not before.

Far better than stretching the remits and resources of these bodies, we should instead accept the central recommendations of the Leigh-Pugh report and implement a dedicated committee focused on scrutinising the economy, effectiveness and efficiency aspects of future spending plans. Australia and New Zealand already have similar models to examine and take lessons from.

There is always a difficulty in measuring the value of public service outputs provided free at the point of use. But much work has already been done both within Whitehall and outside (for example the Office for National Statistics’ work on public sector productivity). And the committee’s key purpose would be less about coming up with a definitive single measure of overall efficiency, than focussing departmental attention on improving efficiency as part of the routine planning and budgeting process – with a long-term view, in place whoever is in government.

Getting maximum value for every pound of taxpayers’ money is always important, in and of itself. But the imperative is perhaps even greater now. Even before Covid, the pressure on public spending was intensifying. An ageing population meant that spending forecasts were already gloomy. The 2017 Fiscal Sustainability Report from the Office for Budget Responsibility forecast that spending on healthcare would be £88 billion higher, in real terms, by 2066. The same report found that annual spending on the state pension would be 6.9 per cent of GDP by 2070.

Add to that the Conservatives’ manifesto pledges, such as 50,000 more nurses, maintenance of the pension triple lock and 250,000 extra childcare places, which will not come cheap. Then, pile on the enormous sums of money spent in response to the pandemic – the latest OBR estimate is that spending decisions will amount to almost £180 billion. It’s not hard to conclude that we face a serious fiscal crunch.

There is also a dangerous narrative developing, at least in Westminster and media circles. The culture of Covid seems to dictate that enormous sums of money are actually just “rounding errors”.

Well, as for these rounding errors, it was recently reported that the Government may reduce foreign aid spending such that it is 0.5 per cent of national income, down from 0.7 per cent. In pounds and pence, that is a saving of £4 billion. It was called a rounding error by some – but £4 billion is close to the equivalent of a 1p increase or decrease in the basic rate of tax; it is more than a quarter of the police budget; it’s 10 per cent of the tax hikes that the Resolution Foundation seems to have convinced the Government we must have

In other words, it’s a lot of money. What’s more, the logic suggests that we approve every single pet project or scheme that gets enough retweets – what does it matter, they’re all rounding errors.

We know Rishi Sunak is going to spend more money, Covid or no Covid. But for the long-term health of the public finances, our system must ensure that we work to get value for every single pound before it is spent. A Parliamentary Budget Committee can help root out waste before it happens.