Tax statements from George Osborne to show government spend

Millions of households will get “annual tax statements” from George Osborne from Monday, showing that the biggest chunk of their contribution goes towards welfare. But the Treasury has quietly dropped plans to provide a further breakdown of benefit spending.

The annual tax statements, announced by the chancellor in March 2012, will provide more than 24 million people with a visual illustration of how their taxes are being spent. In examples released by the Treasury, someone earning £30,000 a year will be told that £1,663 of their money goes towards welfare, £1,280 to health, £892 on education, and £822 to state pensions. Just £78 of their salary goes towards overseas aid and £51 to the EU budget.

The letters are being sent – at a cost of £5m – after Osborne signalled he would like to make another £12bn of welfare cuts in the next parliament, which may raise suspicions he is seeking to soften up voters in order to win political support for further reductions in the benefits budget.

However, the breakdown does not make clear that most of the welfare budget goes to pensioners, and sick and disabled people. The Treasury originally planned to show just 3% went towards unemployment benefits while much larger amounts went to children and families, elderly people and those unable to work. A Treasury spokesman said this 2012 version had just been a prototype and after research it was decided to simplify the summaries. A more detailed breakdown was available on the government’s website.

However, Dame Anne Begg, the chair of the Commons work and pensions committee, said it appeared to be part of a trend in the presentation of figures as under the coalition had tried to “make the phrase welfare almost appear as a dirty word”.

“If they are presenting welfare in this statement as one homogeneous figure, it includes a lot of welfare spend that most people in the country agree with.

“My select committee has been very critical of the way the government, usually the DWP, presents its information about welfare, which gives people the impression the bulk of welfare goes to working-age unemployed people when in reality that is a very small proportion. The vast majority of the budget goes to people that includes people with severe disabilities and the poorest pensioners. Generally the public supports welfare going to those people who have the least.”

Shabana Mahmood, the shadow Treasury minister, also pointed out that the statements do not show that “families and pensioners are paying more in higher VAT. Independent figures from the IFS show that by next year families will be £974 a year worse off because of tax and benefit changes since 2010.”

Osborne said it was a revolution in transparency. However, Osborne stressed that the figures were about being more transparent about how people’s money is being used by the government.

“I promised that taxpayers would know much more about how much direct tax they pay and how that money is spent,” he said. “Now we’re delivering on that promise by giving 24m taxpayers a new personal tax summary. It is a revolution in transparency and it will show how hardworking taxpayers have to pay for what governments spend.”

Around eight million taxpayers who complete self-assessment returns will be able to access their tax summary online, while the 16 million PAYE taxpayers who received a tax coding notice from HMRC for 2013 to 2014 will receive their summary in the post over the next seven weeks.Sheila Gilmore, Labour MP for Edinburgh East, who also sits on the Commons work and pensions committee, said annual statements about taxes were “not a bad thing but it matters how you do it.

“To lump all of welfare together, given people’s understandable lack of knowledge about where it goes, is designed to make people think ‘oh, it’s terrible, shocking, far too much’ and presumably endorse whatever further tightening up the government is proposing,” she said.