Correction: The multiplier is actually 0.375 not 0.851.*
I don’t want even more of my hard-earned money taken in tax and spent on the unemployed or work-shy. My wages aren’t a bottomless pit for the unemployed. That’s MY MONEY they’re spending.
We’ve all heard things like this being said, maybe we’ve even said something similar ourselves. So just how much of your income tax is spent on unemployment?
I set out to work out the answer.
Government Revenue, Expenditure & Borrowing
In 2012, the total revenue from all forms of taxation and incomes was £591 bn.
(Source: Institute for Fiscal Studies)
Of this, taxation from personal income is shown in the table:
|% of total
Total government expenditure for 2012 was £695 bn.
The government borrowing for 2012 was £103.5 bn.
Borrowing makes up 14.9% of all expenditure, leaving 85.1% of government spending coming from revenue. 37.5% of total expenditure by government is made up of revenue from personal income taxation, which means the remaining income from other revenue is 47.6%
* This produces the personal tax multiplier of
Spending on ‘unemployment’ (which includes all costs associated with unemployment) for 2012 was £8.4 bn. This is 1.2% of all expenditure.
Adjusting for spending from only personal taxation income, just 0.45% from direct tax goes on unemployment.
How much of your income tax is spent on unemployment?
I will use the average salary for this calculation. In 2012, the average salary or income for working was £26,000 per annum.
|Total Tax Paid
So if 1% of the tax you pay goes on unemployment, that means that £26.04 of the average personal income tax paid to the government is spent on unemployment.
Or to put it another way: you spend 7p a day on unemployment.
Considering anyone of us could be made unemployed at any time for any reason, 7p a day for unemployment ‘insurance’ seems a very reasonable cost to pay.
In fact, one of the commenter below makes a very good point about how this also insures us against social unrest too.
Update: The Formula
I thought I would include the formula used in working out the final figures.
t = total personal tax
s = percentage of government spending
p = government spending proportion from tax revenue multiplier =
x = tax paid that goes towards s
So, if one third of government spending is spend on all welfare, I calculate that this is £716.13 for a person on £26,000, or £1.96 per day.