Another voice: Tax transparency is a good idea, but not a game-changer

George Osborne’s plans for more tax transparency have been widely interpreted as a political masterstroke. People will be horrified to learn the cost of servicing Britain’s national debt, or paying our welfare bill, goes the argument. The move will create downward pressure on public spending, driven by the public itself — a classic example of aligning policy with politics. But what if none of this is true? The logic fits, but the evidence suggests something different altogether.

Experiments with tax receipts in the United States, where the Third Way Institute has been making the running on this, have show that more transparency tends to reinforce people’s beliefs rather than challenge them. The experiments revealed misconceptions about how tax dollars were being spent — but also that opinions rarely changed when people were confronted with the facts. Seeing an itemised tax receipt had very little impact on either whether people felt taxes were too high, or whether government spending was wasteful. Views on whether areas like Medicaid or military spending should be cut back barely changed either.

In Britain, the political consequences of tax transparency may not be as profound as some, including the Chancellor, might hope. People who are already worried about the welfare bill will worry about it even more. Fiscal conservatives, already preoccupied with the state of the public finances, will note that someone on £25,000 pays £363 each year towards the national debt. But pro-Europeans will point out that the same person spends just £28 on the EU and pacifists will argue that £329 on the military is too much. As the researchers in the US put it, ‘we might expect the correct facts presented in a taxpayer receipt to buttress existing partisan or ideological arguments, not to supplant them.’

None of this, of course, means that the policy has no value. In an open, democratic society people deserve to know where their money is being spent. It’s a good idea, just not a political game-changer. Nor does this mean that the Left should breathe easily. Instead, the question ought to be why more proposals like this are not forthcoming from Her Majesty’s Opposition. If you want permission to collect and spend taxes, you must be able to justify the choices you make. The answer is not to rely on closed government and public misinformation, but rather to demonstrate where and how public spending produces public benefit.

Duncan O’Leary is Deputy Director at Demos think tank.