In her early campaigning days as Conservative leader, Mrs Thatcher had the gift of being able to relate the national economy to the domestic finances of ordinary voters. The battle against inflation commenced with her and her shopping basket, nattering away with voters over the cheese counter. It is a skill which David Cameron needs rapidly to discover. Now, as in the 1970s, a political leader who doesn’t understand the personal finances of ordinary people is going to be in deep peril.
Four years ago, realising my income was going to fall, and with a little time on my hands, I started doing something I had never bothered to do before — and during the previous decade had never felt I needed to do: I started adding up every penny I had spent over the previous year. At the time, I found that for every pound I was spending, I was paying 77 pence in income taxes and council tax. Over the past 12 months for every pound I have spent I have paid 85 pence in income taxes and council tax. But of course, a slice of the money I spend also goes in tax, in the form of VAT, fuel duty and excise duty. I am not such a Scrooge that I keep a copy of the receipt every time I buy something, and thus am unable to work out exactly how much I paid in spending taxes, but my bank statements show that I have spent £45,288 (excluding pension contributions and other investments), and paid £38,342 in income tax, national insurance and council tax. On the assumption that about a fifth of my expenditure was on food, newspapers and other zero-rated goods, I spent approximately £7,590 in VAT, £1,040 in road fuel duty (1,800 litres at 58 pence per litre), £250 in road tax and £360 in alcohol duties (the duty accounting for about half the cost of a £7 bottle of wine).
So, taking that into account, I have spent only £36,048 on myself and my family — but paid £47,582 in tax. In other words, I am spending significantly more on the government than I am spending on myself; and the gap is getting bigger and bigger. This, then, is the story of my personal finances since the beginning of the economic crisis: I have reacted by cutting my expenditure, not just in real terms but in absolute terms. But my tax bill has gone up. I have battled against the headwind of inflation to get my bills down. The Chancellor, in spite of his regular spiel about ‘austerity’ and ‘cuts’, has failed utterly to do the same. If my taxes were going to pay off debt, I would swallow the pill and feel happy, but they are not: they are going in extra expenditure. In 2008/9 the government chomped its way through £631 billion. In the next financial year the Treasury estimates that total public expenditure will be £720 billion. In Whitehall the great public spending party goes on unabated.
I do not have an insight into everyone’s private finances, but it is a reasonable assumption in politics that if you are thinking something, there are probably a large number of people thinking exactly the same thing, namely: if I can keep control of my spending, why can’t the government? The attempt by Labour and the unions to portray George Osborne as a slasher has ended up protecting him from the reality: that he has frittered money left, right and centre every bit as much as did Gordon Brown.
I suspect I am far from the only person who feels that where there have been cuts, a disproportionate number of them have landed directly on my doorstep. The changes in child benefit will take £1,750 out my pocket this year and the rise in tuition fees a further £6,000. More will have to be trimmed from the rest of my budget.
Politically, that wouldn’t matter if I felt that public servants were similarly drawing in their horns. Yet every time I open a paper there is yet another sign of outrageous extravagance.
I have a vague recollection of the Chancellor imposing a supposed public sector pay freeze and warning every public sector organisation that it would need a very good reason indeed if it wanted to pay one of its staff more than the Prime Minister. And yet Osborne himself has appointed a new Governor of the Bank of England who will be paid three times that of his predecessor — a total package of £874,000. Fleet Street’s business editors seemed almost united in thinking that Mark Carney’s appointment was a good thing, but I suspect the public will be inclined to view it as more akin to what the FA does before every World Cup: appoint a manager on a record salary — several times higher than any other country pays — in the wide-eyed belief that ‘you get what you pay for’. And then we get knocked out in the quarter finals again.
Even when public salaries have been cut, it all seems to go drastically wrong and ends up costing the taxpayer more. We never heard the end of the trumpeting when the BBC appointed George Entwistle on a salary less then his predecessor was paid. Then he resigns in disgrace after a few months with a year’s payoff, which isn’t even in his contract.
As with public salaries, as with benefits for out-of-work Romanians, as with the legal aid bill for terror suspects who don’t want to be deported, as with high-speed rail lines, as with Olympic opening ceremonies: whenever it comes to spending on anything other than me and my family, the state’s wallet seems to be wide open. The New Year firework display finally did it for me: post Olympics, there seems to have developed the theory that no spending is too extravagant or too frivolous if somebody, somewhere is cheered up by it. The government — or the Mayor in that case — is behaving like one of those compulsive shoppers who wakes up to find the kitty is empty, the bills are piling up and she has just lost her job; but then goes out and buys a new outfit on her last working credit card to try to cheer herself up.
If you think I am inspired by some extremist anti-government ideology you are very wide of the mark. I just happen to have looked through my bank statements and started to wonder why the government can’t do what I, and an awful lot of other people, have managed to do over the past few years: trim a little here and there, do without the foreign holiday, shop around for bargains and generally get my spending down without sleeping in a tent and ceasing to eat. If, to adapt a former Tory campaigning slogan, others are thinking what I’m thinking, then the government has a very big political problem.
This article first appeared in the print edition of The Spectator magazine, dated 12 January 2013