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Follow The Money: How much does Britain cost?
What is the truth about Britain's finances?
Paul Johnson and the enormously respected Institute for Fiscal Studies aim to hold Government to account - without which politicians will get away with their half-truths, elisions and dubious claims.
This is a forensic examination - by the man best placed to do so - of the £1 trillion it now costs to run the United Kingdom's economy. To follow the money. To provide an explanation, of where that money comes from and where it goes to, how that has changed and how it needs to change.
Government decisions determine the welfare of the poor and the elderly, the state of the health service, the effectiveness of our children's education, and how prepared we are for the whether that is a pandemic or global warming. As a society, we are a reflection of what the government spends.
Johnson looks at what happened following the financial crisis of 2008-09 and the austerity years that followed. He examines the way that the government tackled the economy during Covid - when the UK budget shot up to over a trillion for the first time - and he analyses prospects for our future as we grapple with looming recession and the cost of living crisis.
Paul Johnson and the enormously respected Institute for Fiscal Studies aim to hold Government to account - without which politicians will get away with their half-truths, elisions and dubious claims.
This is a forensic examination - by the man best placed to do so - of the £1 trillion it now costs to run the United Kingdom's economy. To follow the money. To provide an explanation, of where that money comes from and where it goes to, how that has changed and how it needs to change.
Government decisions determine the welfare of the poor and the elderly, the state of the health service, the effectiveness of our children's education, and how prepared we are for the whether that is a pandemic or global warming. As a society, we are a reflection of what the government spends.
Johnson looks at what happened following the financial crisis of 2008-09 and the austerity years that followed. He examines the way that the government tackled the economy during Covid - when the UK budget shot up to over a trillion for the first time - and he analyses prospects for our future as we grapple with looming recession and the cost of living crisis.
313 pages, Hardcover
First published February 26, 2023
About the author
Paul Johnson
416 books16 followersLibrarian Note: There are more than one author in the Goodreads database with this name.
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Displaying 1 - 30 of 52 reviews
March 16, 2023
I bought this after reading Larry Elliot's review in The Observer. Elliot's review said the book was a bit dry and lacking in anecdotes. Although it does lack anecdotes, it certainly isn't dry. But I did find it a tad more basic than I was expecting. I'm sure when the book was commissioned Johnson and his publisher wanted to appeal to as broad a range of people as possible. Which meant keeping things simple and jargon-free. Especially given the number of statistics that had to be included. And for that they should be congratulated. State pensions and local government spending aren't the easiest things to write comprehensibly and entertainingly about. And given the amount covered in the book it would've been impossible to have gone into much greater detail without producing something three times longer. But it is very much a beginner's guide. And it isn't without it's generalisations. Nevertheless, an excellent starting point.
January 2, 2024
I was given this for Christmas after having requesting it. I was not disappointed. I have been reading, listening & watching Paul Johnson for many years. He is one of our foremost economic commentators. He has worked in the upper reaches of the civil service & then in the think tank world mainly for the IFS now as its Director (The Institute of Financial Affairs). With this background he is handily placed to opine on the UK's big picture from an economic & financial standpoint. This book examines at all aspects of fiscal policy: how the government raises revenue through tax and what it spends it on. The aim of it is to provide – as the author puts it – an explanation of where the money comes from, where it goes to, how that has changed over time and how it needs to change in the future. It succeeds in my opinion admirably. It also written in an easily comprehensible style making it accessible to the general reader.
June 11, 2023
This book is not a light 280 pages, but oh is it so worth it. I'd encourage everyone in the UK to read this asap, given everyone (over 18) has the right to vote and thus implicitly express an opinion on fiscal socioeconomic policy that impacts us all. This book is hard hitting but it is stuffed with factual and important information. 🔢
It sets out a clear case that we need swift and substantial changes to areas of our tax system that are inherently unfair and regressive. Council tax and stamp duty are an absurd mess. National insurance is terribly flawed. VAT is also too complex. Corporation, capital gains and inheritance taxes could also do with reform and/or a clearer and consistent long-term direction with fewer ridiculous loopholes. 🔀
On the spending side, again more long-term and consistent direction is needed: Education and social care is woefully underfunded. Attempts at levelling up poorer regions are laughable. The NHS too, which is great in theory but isn't all as great in practice (and probably suffers from exactly the pedestal that it's placed on), has been hampered significantly by the current government's attempts at improvement (that have arguably made things worse). Iron out issues to improve Universal Credit, but let's not change the whole welfare system again. 🏥💷
Finally, it's great to see a well-deserved shout-out to Steve Webb for revamping the state pension and introducing DC freedom of choice; but there's still work to be done on UK pensions. Let's be more frank that DB members have it really good (and indeed better than was probably originally intended), and think about ways to improve the new DC world we live in for the current workforce generation. Higher default DC contributions? Is CDC the answer? And is there more that we can do with existing DB assets? I could posture on these all day (let me know if you fancy a coffee or beer 😉), but at the very least the status quo is surely not enough.
We should, and must, demand more from both ourselves and our government. We cannot have repeated policy changes and/or reports to suggest improvements that end up as non-starters. We face huge challenges from climate change 🌡️☀️☔⛈️🌪️, an ageing population, and recent weak economic growth, to name but three, but we can still create a better path and prospects for the future.
It sets out a clear case that we need swift and substantial changes to areas of our tax system that are inherently unfair and regressive. Council tax and stamp duty are an absurd mess. National insurance is terribly flawed. VAT is also too complex. Corporation, capital gains and inheritance taxes could also do with reform and/or a clearer and consistent long-term direction with fewer ridiculous loopholes. 🔀
On the spending side, again more long-term and consistent direction is needed: Education and social care is woefully underfunded. Attempts at levelling up poorer regions are laughable. The NHS too, which is great in theory but isn't all as great in practice (and probably suffers from exactly the pedestal that it's placed on), has been hampered significantly by the current government's attempts at improvement (that have arguably made things worse). Iron out issues to improve Universal Credit, but let's not change the whole welfare system again. 🏥💷
Finally, it's great to see a well-deserved shout-out to Steve Webb for revamping the state pension and introducing DC freedom of choice; but there's still work to be done on UK pensions. Let's be more frank that DB members have it really good (and indeed better than was probably originally intended), and think about ways to improve the new DC world we live in for the current workforce generation. Higher default DC contributions? Is CDC the answer? And is there more that we can do with existing DB assets? I could posture on these all day (let me know if you fancy a coffee or beer 😉), but at the very least the status quo is surely not enough.
We should, and must, demand more from both ourselves and our government. We cannot have repeated policy changes and/or reports to suggest improvements that end up as non-starters. We face huge challenges from climate change 🌡️☀️☔⛈️🌪️, an ageing population, and recent weak economic growth, to name but three, but we can still create a better path and prospects for the future.
February 7, 2024
Author Paul Johnson is, of course, the much-respected Director of the Institute for Fiscal Studies (IFS) which seeks to hold the government to account on matters of tax and spend. This is a fascinating and very readable account of the taxes we pay and how the government spends them – you will not be surprised to hear Johnson is unimpressed by much of our tax and spend system. Without straying into the political, he takes the reader through where and how the government takes money from us and the inconsistencies, contradictions, and accidents of tax policies. He then goes on to look are various areas of government spending: from health, welfare, local government, pensions and more. Boring stuff you might think, but Johnson is a very shrewd, informed and personable guide and makes it all interesting and highly readable.
This book is essential reading for anyone interested in better understanding our national discourse. It is a book about tax and spend, but of course much more about the governance of our nation and it is clear that not is all as it should be. The Times in its review (quoted at the front of my copy) simply says ‘buy it, read it and weep’.
This book is essential reading for anyone interested in better understanding our national discourse. It is a book about tax and spend, but of course much more about the governance of our nation and it is clear that not is all as it should be. The Times in its review (quoted at the front of my copy) simply says ‘buy it, read it and weep’.
April 13, 2023
The book comes highly recommended, it's a huge achievement and should be mandatory reading for anyone interested in politics, or the broader issue of financing and running the country.
The astonishing thing about a book that is largely down from data that anyone can download free from the Internet is that it's so informational and such a revelation at times - about matters which affect us all like tax, duties, pensions, education, health, welfare and local government. Of course, Paul Johnson has spent his entire career immersed in government via the civil service, and as a senior economist, so has a wealth of experience to draw on. Johnson seems to have endless anecdotes about both politicians or drawn from his own life, which add to the narrative.
I especially liked that Follow The Money didn't bang any particular political party drum or economic approach. Every government has made mistakes, or gone down the wrong path at times. Some of those are ideological but more often it's for other reasons. If you want to cherry-pick things that Labour or the Tories have done badly from the book though there are plenty of examples!
You may be tempted to write this off as the fluffy work of economic models but it's not. It's about the actual money that Britain collects and then spends on itself, starting with the biggest items and working down the list. It first looks at income, then expenditure. Both subjects are fascinating, not least because we live in a country that is centuries old, and has operated continuously throughout that time despite all the things happening in the nation, as well as in the wider world. Consequently, we have a bizarre hodgepodge of a financial system that is radically different in many ways from what you would come up with if you had to invent the United Kingdom from scratch.
There's so much in the country that is wrong, and the whole process of chopping and changing leaders and ministers has caused chaos on occasion, not to mention our political cycle which discourages long-term planning. The tendency to backtrack to the status quo, with slight fudges, bedevils our country as well.
What next? A second reading I think. But I hope Follow the Money doesn't end here. Just like governments, it would be good to see a new edition every 5 years.
The astonishing thing about a book that is largely down from data that anyone can download free from the Internet is that it's so informational and such a revelation at times - about matters which affect us all like tax, duties, pensions, education, health, welfare and local government. Of course, Paul Johnson has spent his entire career immersed in government via the civil service, and as a senior economist, so has a wealth of experience to draw on. Johnson seems to have endless anecdotes about both politicians or drawn from his own life, which add to the narrative.
I especially liked that Follow The Money didn't bang any particular political party drum or economic approach. Every government has made mistakes, or gone down the wrong path at times. Some of those are ideological but more often it's for other reasons. If you want to cherry-pick things that Labour or the Tories have done badly from the book though there are plenty of examples!
You may be tempted to write this off as the fluffy work of economic models but it's not. It's about the actual money that Britain collects and then spends on itself, starting with the biggest items and working down the list. It first looks at income, then expenditure. Both subjects are fascinating, not least because we live in a country that is centuries old, and has operated continuously throughout that time despite all the things happening in the nation, as well as in the wider world. Consequently, we have a bizarre hodgepodge of a financial system that is radically different in many ways from what you would come up with if you had to invent the United Kingdom from scratch.
There's so much in the country that is wrong, and the whole process of chopping and changing leaders and ministers has caused chaos on occasion, not to mention our political cycle which discourages long-term planning. The tendency to backtrack to the status quo, with slight fudges, bedevils our country as well.
What next? A second reading I think. But I hope Follow the Money doesn't end here. Just like governments, it would be good to see a new edition every 5 years.
April 14, 2024
This was such an insightful book, it gave me a better scope on the politics of the UK at large. Very well written that I, as someone who has read next to no economics, found it easy to read and engaging!
June 2, 2023
Fascinating insight in to the inner workings of the UK government finances and how the government runs the country. What sounds like a very dry topic has been brought to life with the way it has been written, easy to understand & very engaging.
One interesting statistic quoted (among many in the book) is that 90% of income tax is paid by the top 30% of earners. So increasing taxes on the rich is not always a sensible move to make, if it makes them move out of the UK. Definitely a fine line to tread
One interesting statistic quoted (among many in the book) is that 90% of income tax is paid by the top 30% of earners. So increasing taxes on the rich is not always a sensible move to make, if it makes them move out of the UK. Definitely a fine line to tread
June 29, 2023
This book wasn't exactly what I thought it was going to be, but it was still pretty good. I really wanted an epistemically humble survey of British fiscal policy, with Johnson pointing out what (almost) everyone agreed on, and where he was giving his own take, like a university lecture. Instead, this book was a bit of a polemic, meaning you need to have a decent grasp of each of the many topics covered in order to know what to take a gospel. Nonetheless, it was fairly comprehensive (maybe too comprehensive at times) and gave the IFS (orthodox) view.
On the substance, it was interesting that each time Johnson gets into why things aren't as he thinks they should be, it is usually some combination of politics, status quo bias, or governance failures. This seems right, and the diagnosis is the marker of someone who has been on the scene for a while (i.e., it is the difference between asking what the right policy would be, and asking why the policy hasn't already been fixed).
On the substance, it was interesting that each time Johnson gets into why things aren't as he thinks they should be, it is usually some combination of politics, status quo bias, or governance failures. This seems right, and the diagnosis is the marker of someone who has been on the scene for a while (i.e., it is the difference between asking what the right policy would be, and asking why the policy hasn't already been fixed).
February 6, 2024
4.75/5
Really good. The first two chapters cover how the state gets most of its money. The rest of the book covers the biggest expenses for the government and how that money is spent. The topics included are welfare/benefits, pensions, old age care, healthcare/NHS, education, and local councils+devolution. The book is well written, accessible imo and provides plenty of information.
The biggest area that isn't covered is defence and after that it goes down to the relatively (considering the scale of government spending), topics like the foreign aid budget.
Overall if you are British and have any interest in politics I'd say this is worth reading.
Really good. The first two chapters cover how the state gets most of its money. The rest of the book covers the biggest expenses for the government and how that money is spent. The topics included are welfare/benefits, pensions, old age care, healthcare/NHS, education, and local councils+devolution. The book is well written, accessible imo and provides plenty of information.
The biggest area that isn't covered is defence and after that it goes down to the relatively (considering the scale of government spending), topics like the foreign aid budget.
Overall if you are British and have any interest in politics I'd say this is worth reading.
June 17, 2023
10/10 - fantastic description of modern Britain and its flaws
April 1, 2023
Excellent.
February 4, 2024
About as bang up-to-date as it is possible to get in book form. Who would have thought a book primarily about tax could be as interesting as this is. And it really is a bit of an eye-opener confirming what we UK residents have experienced.
Paul Johnson works for the Institute of Fiscal Studies and has previously worked for the Treasury and Ministry of Education. He is first and foremost an economist. He is down to earth, straight and believable and has a way of saying things which de-complicate them. Economists, lawyers and politicians appear to have a monopoly on gobbledygook but Johnson cuts right through it.
Politicians are generally speaking either spineless idiots (with an increasing number of lawyers that see themselves as politicos) or self-serving cowards. Tax policy is riddled with holes. There is no political will to reform tax policy. To do so comprehensively requires longer than one term in Parliament. Suggesting that tax should rise is political suicide at the ballot box. Similarly suggesting that the well off should bear a heavier tax burden than the less well-off is like asking turkeys to vote for Christmas. People who make these decisions are all members of the well off. Therefore Inequality, or if you like the Conservative buzz-word of 'Levelling Up' is never going to be seriously dealt with. Everyone bears the burden of bad tax. We are all complicit because at heart we are all conservative (small c) and inertia rules. WE like to know what we know and not keep changing. We kick up when things change. We vote people out (or like to think we do). So if politicians are to blame for an unwillingness to reform tax policy then the demos is as much to blame for wielding the sword of choice and refusing to accept that the system is not static but dynamic - particularly if you accept that this dynamic system is defined by OUR choices. Complexity in the tax system does not make for equality - just more ways for avoidance. If Income tax is complicated the case is doubly so for Corporation tax and VAT is a lawyers playground to make money over disputed clauses. The bottom line is that Government spending appears to have little sense of strategy. This is made very plain when discussing the NHS. We all treasure the NHS. But we need to be aware of Organisational Narcissism. It doesn't do a very good job of keeping us alive. Its records on tackling cancer, cardio-vascular disease and ageing are poor. And it requires by far the greatest amount of government finance and at an increasing alarming rate.
A lot of what Johnson says and implies really comes down to VALUE; how we value individuals in our society and what kind of society we want. We now have a society that is ageing, and although we have more people than ever in work, many of those jobs are bullshit jobs paid at minimum rate. We have lost a large proportion of skilled and craft-jobs. Enjoyment in work and quality of work has decreased. We also have the highest ever levels of inequality between the rich and poor and a redefinition of the poor who are now predominantly working and parents. Housing supply and demand at affordable prices is in crisis. The young are increasingly funding the old. There is a government department dedicated to Levelling Up - Department for Levelling Up, Housing & Communities. But the reality is that very few people know or believe in what it does or believe that the department itself believes in the task allotted to it. Investment incentives awarded to the provinces are really about making it easier for London. HS2 showed that up in clear light. Rather than decreasing the journey times from the North to London, the money could have been better spent funding inter-connectivity between cities in the North. Furthermore HS2 has been eroded and cutback continuously since its proposal. Meanwhile, coastal communities, East Anglia and places not in the North or the South East are left to get on with it the best they can. It appears that the South West, where I reside is set to become the Air B 'n' B and Rest and Recreation centre for the South East giving rise to a low pay seasonal job economy with an ageing population and few prospects for the young.
Whether another change in government will introduce the political will to tackle some of these problems expertly identified by Johnson is very much open to debate. Starmer's policies all seem like Tory-Lite. Added to the decisions required and identified throughout the book is the existential problem of climate change. Raising the time frame to 2050 for UK Net Zero has in some ways benefitted the community, but the encouraging halving of carbon emissions in 20 years has been attained through the easier initiatives which have not particularly challenged individuals to change. The next processes in achieving Net Zero will impact individuals economically and procedurally and as such there needs to be a willingness from government to help communities and invoke strategy. What is needed is political willingness and bravery that has so far been shown to be markedly absent. One would like to be optimistic but the reality and experience has shown that we more often shoot ourselves in the foot rather than hitting targets.
This is a thoroughly worthwhile and readable book that should be made compulsory reading for all Members of Parliament.
Paul Johnson works for the Institute of Fiscal Studies and has previously worked for the Treasury and Ministry of Education. He is first and foremost an economist. He is down to earth, straight and believable and has a way of saying things which de-complicate them. Economists, lawyers and politicians appear to have a monopoly on gobbledygook but Johnson cuts right through it.
Politicians are generally speaking either spineless idiots (with an increasing number of lawyers that see themselves as politicos) or self-serving cowards. Tax policy is riddled with holes. There is no political will to reform tax policy. To do so comprehensively requires longer than one term in Parliament. Suggesting that tax should rise is political suicide at the ballot box. Similarly suggesting that the well off should bear a heavier tax burden than the less well-off is like asking turkeys to vote for Christmas. People who make these decisions are all members of the well off. Therefore Inequality, or if you like the Conservative buzz-word of 'Levelling Up' is never going to be seriously dealt with. Everyone bears the burden of bad tax. We are all complicit because at heart we are all conservative (small c) and inertia rules. WE like to know what we know and not keep changing. We kick up when things change. We vote people out (or like to think we do). So if politicians are to blame for an unwillingness to reform tax policy then the demos is as much to blame for wielding the sword of choice and refusing to accept that the system is not static but dynamic - particularly if you accept that this dynamic system is defined by OUR choices. Complexity in the tax system does not make for equality - just more ways for avoidance. If Income tax is complicated the case is doubly so for Corporation tax and VAT is a lawyers playground to make money over disputed clauses. The bottom line is that Government spending appears to have little sense of strategy. This is made very plain when discussing the NHS. We all treasure the NHS. But we need to be aware of Organisational Narcissism. It doesn't do a very good job of keeping us alive. Its records on tackling cancer, cardio-vascular disease and ageing are poor. And it requires by far the greatest amount of government finance and at an increasing alarming rate.
A lot of what Johnson says and implies really comes down to VALUE; how we value individuals in our society and what kind of society we want. We now have a society that is ageing, and although we have more people than ever in work, many of those jobs are bullshit jobs paid at minimum rate. We have lost a large proportion of skilled and craft-jobs. Enjoyment in work and quality of work has decreased. We also have the highest ever levels of inequality between the rich and poor and a redefinition of the poor who are now predominantly working and parents. Housing supply and demand at affordable prices is in crisis. The young are increasingly funding the old. There is a government department dedicated to Levelling Up - Department for Levelling Up, Housing & Communities. But the reality is that very few people know or believe in what it does or believe that the department itself believes in the task allotted to it. Investment incentives awarded to the provinces are really about making it easier for London. HS2 showed that up in clear light. Rather than decreasing the journey times from the North to London, the money could have been better spent funding inter-connectivity between cities in the North. Furthermore HS2 has been eroded and cutback continuously since its proposal. Meanwhile, coastal communities, East Anglia and places not in the North or the South East are left to get on with it the best they can. It appears that the South West, where I reside is set to become the Air B 'n' B and Rest and Recreation centre for the South East giving rise to a low pay seasonal job economy with an ageing population and few prospects for the young.
Whether another change in government will introduce the political will to tackle some of these problems expertly identified by Johnson is very much open to debate. Starmer's policies all seem like Tory-Lite. Added to the decisions required and identified throughout the book is the existential problem of climate change. Raising the time frame to 2050 for UK Net Zero has in some ways benefitted the community, but the encouraging halving of carbon emissions in 20 years has been attained through the easier initiatives which have not particularly challenged individuals to change. The next processes in achieving Net Zero will impact individuals economically and procedurally and as such there needs to be a willingness from government to help communities and invoke strategy. What is needed is political willingness and bravery that has so far been shown to be markedly absent. One would like to be optimistic but the reality and experience has shown that we more often shoot ourselves in the foot rather than hitting targets.
This is a thoroughly worthwhile and readable book that should be made compulsory reading for all Members of Parliament.
September 4, 2023
This is a book to rave about, but not unconditionally. It sets out to describe the public sector in figures - how much is raised from what and how much is spent on what. In doing that, it works really well.
It provides a clear explanation of the main sources of tax income, split between the various forms of tax, along with a variety of other income sources. What I particularly liked was the sense of scale that it brought to the analysis. For example, income tax brings into the Exchequer about 34 times more than inheritance tax. Or VAT brings in about 10 times capital gains tax. I see this as an important comparator when talking vaguely about tax policy.
The same form of approach is taken to the expenditure side. It threw up a number of surprising conclusions for me. For example, expenditure on working age benefits and credits is broadly the same as the state retirement pension. That suggests to me that the old canard about young workers funding the lifestyles of old pensioners is not entirely based upon fact. Taxpayers are also funding those of working age.
The book also allows us to link together income and expenditure in a fairly useful way. For example, national insurance receipts very nearly equal the spending on the health service. I find that a useful piece of information because the NI system was originally supposed to fund the NHS. The obvious implication is that if we want to raise the funding for the NHS, we will need to raise NI levels.
However, this is a step too far for the book. It takes pains to describe what is and to steer clear of what ought to be. I see this as a weakness because it suggests that we live in the best of all possible worlds. This is a view widely touted by the UK Civil Service, but it is far from the mark. After all, politics is all about shifting priorities in spending and income. The book provides some good source information to fuel these discussions, without actually stating the preferences of the author.
For example, there are those who might say that inheritance tax only raising 1/34th of income tax is wrong. They might argue that inheritances from rich people to their heirs ought to raise a larger amount of income. The numbers suggest that even if the inheritance tax take was doubled, after allowing for avoidance and mitigation schemes, it would only allow, for example, a 12% increase in the schools budget. Not to be sneezed at, but not a significant amount, either.
The book is an historical account of income and spending in 2022-23. In setting it out, it highlights the strengths of the Treasury approach, but also it's pitfalls as well. The account is not forward looking, other than vague reference to future events, such as increasing number of Boomers retiring. There is a sense of where we have been, but not much sense of where we are heading. This allows for some misleading conclusions to arise. One large impending budget item that the author has missed is the cost of servicing the public debt. In some forecasts, debt servicing in two or three years time will be larger than the defence budget.
Equally, the author assumes that the current structure may not change. We might ask, however, how sustainable the structure might be with ever increasing amounts of debt being added to the existing pile? There is little to help that conversation in this book.
All in all, there is much to commend this book. It has its drawbacks, but it is very useful in what it does. The author writes in a clear and accessible style. He avoids jargon and takes pains to explain the concepts as clearly as possible. As an introduction to the finances of the UK public sector, there is much to commend in this book.
It provides a clear explanation of the main sources of tax income, split between the various forms of tax, along with a variety of other income sources. What I particularly liked was the sense of scale that it brought to the analysis. For example, income tax brings into the Exchequer about 34 times more than inheritance tax. Or VAT brings in about 10 times capital gains tax. I see this as an important comparator when talking vaguely about tax policy.
The same form of approach is taken to the expenditure side. It threw up a number of surprising conclusions for me. For example, expenditure on working age benefits and credits is broadly the same as the state retirement pension. That suggests to me that the old canard about young workers funding the lifestyles of old pensioners is not entirely based upon fact. Taxpayers are also funding those of working age.
The book also allows us to link together income and expenditure in a fairly useful way. For example, national insurance receipts very nearly equal the spending on the health service. I find that a useful piece of information because the NI system was originally supposed to fund the NHS. The obvious implication is that if we want to raise the funding for the NHS, we will need to raise NI levels.
However, this is a step too far for the book. It takes pains to describe what is and to steer clear of what ought to be. I see this as a weakness because it suggests that we live in the best of all possible worlds. This is a view widely touted by the UK Civil Service, but it is far from the mark. After all, politics is all about shifting priorities in spending and income. The book provides some good source information to fuel these discussions, without actually stating the preferences of the author.
For example, there are those who might say that inheritance tax only raising 1/34th of income tax is wrong. They might argue that inheritances from rich people to their heirs ought to raise a larger amount of income. The numbers suggest that even if the inheritance tax take was doubled, after allowing for avoidance and mitigation schemes, it would only allow, for example, a 12% increase in the schools budget. Not to be sneezed at, but not a significant amount, either.
The book is an historical account of income and spending in 2022-23. In setting it out, it highlights the strengths of the Treasury approach, but also it's pitfalls as well. The account is not forward looking, other than vague reference to future events, such as increasing number of Boomers retiring. There is a sense of where we have been, but not much sense of where we are heading. This allows for some misleading conclusions to arise. One large impending budget item that the author has missed is the cost of servicing the public debt. In some forecasts, debt servicing in two or three years time will be larger than the defence budget.
Equally, the author assumes that the current structure may not change. We might ask, however, how sustainable the structure might be with ever increasing amounts of debt being added to the existing pile? There is little to help that conversation in this book.
All in all, there is much to commend this book. It has its drawbacks, but it is very useful in what it does. The author writes in a clear and accessible style. He avoids jargon and takes pains to explain the concepts as clearly as possible. As an introduction to the finances of the UK public sector, there is much to commend in this book.
January 27, 2024
National treasurer: How much does the UK cost? £1.18 trillion a year is the short answer. Is it money well spent? Not always, according to Paul Johnson, an economist by trade, but not one without an awareness of the fallibility of his profession, or a certain dry sense of humour. He’s all over Peston and Laura K (not literally) so one wonders what new he has to say. Quite a lot, actually, and fairly accessibly too. This is one of a triumvirate of books (along with Chris Bryant’s and Ian Dunt’s) that have recently highlighted the state of us, and Johnson’s is not only the most broadscreen, covering health, education, skills and the wider economy, but also the most comprehensive, analysing not only what is wrong and how to fix but also who needs to do what. The director of the Institute of Fiscal Studies doesn’t spare the health service, education providers, politicians (of course) and even his fellow economists - but he also points the finger at us, the public, for our economic illiteracy, unwillingness to engage with difficult choices, and our desire for Scandi-style public services at US rates of tax. Feeling a bit told off, but nevertheless understanding a bit better how VAT works and why a marginal tax rate of 98% might not be a good idea for increasing revenue however tempting it is to bash the rich with sticks. And he does remind us that, whatever we may be feeling about recent events, we still live in a country that (sort of) works, and that’s better than the majority of the world population. But it’s not a given, and we need to do more to keep it that way. In election year, this may not be a bad manifesto.
April 15, 2024
This is a terrific book by the long time writer and authority on economics and how it works.
Paul Johnson explains in crystal clear terms not only how the economy of the UK works, how political rather than economic decisions have brought us to the position of considerable difficulty that we face on a number of fronts and also what could be done to improve the national infrastructure, education, the health service , the provision of social care and just how we can manage the changing age demographic in the UK and the problems it presents.
It's not going to be easy though and this is the main reason why politicians have shied away from resolving these problems but this book in a measured and non partisan approach makes a number of complicated issues much easier to understand and does so without a tone of frustration creeping in which would be wholly understandable.
Long term decisions are required to put our country's finances on an even keel, 15 years of economic stagnation have hurt those least able to cope with income being worth less now than in 2008 and a shrinking pot of money for the government to spend on vital issues.
It's complicated but this book explains just why we cannot carry on as we have done since 2010
Paul Johnson explains in crystal clear terms not only how the economy of the UK works, how political rather than economic decisions have brought us to the position of considerable difficulty that we face on a number of fronts and also what could be done to improve the national infrastructure, education, the health service , the provision of social care and just how we can manage the changing age demographic in the UK and the problems it presents.
It's not going to be easy though and this is the main reason why politicians have shied away from resolving these problems but this book in a measured and non partisan approach makes a number of complicated issues much easier to understand and does so without a tone of frustration creeping in which would be wholly understandable.
Long term decisions are required to put our country's finances on an even keel, 15 years of economic stagnation have hurt those least able to cope with income being worth less now than in 2008 and a shrinking pot of money for the government to spend on vital issues.
It's complicated but this book explains just why we cannot carry on as we have done since 2010
April 2, 2024
Very insightful and thought provoking.
It changed my thinking slightly on the NHS, especially as the data suggests it is performing so poorly in comparison to similar nations and models. It is a useless exercise to compare it to the US health care system.
It also opened my eyes to the inequalities of systems such as council tax, which is still based on house valuations from 1991. The funding model for devolution in Scotland is also not functioning as was originally designed.
My biased ears listened a bit more intently to the section on education funding. With a budget of £50bn a year, and with the pandemic giving evidence that children are at least 6 months behind, shouldn’t that be reflected in government spending? Alongside further evidence that recruitment and retention of staff is wilting due to real terms cuts to pay across the public sector.
And where do we go next when defence spending needs to rise, but it has been the thing cut gradually over the past few decades to allow for rises in other areas? Especially as an aging population and climate change should be dictating all fiscal policy.
It changed my thinking slightly on the NHS, especially as the data suggests it is performing so poorly in comparison to similar nations and models. It is a useless exercise to compare it to the US health care system.
It also opened my eyes to the inequalities of systems such as council tax, which is still based on house valuations from 1991. The funding model for devolution in Scotland is also not functioning as was originally designed.
My biased ears listened a bit more intently to the section on education funding. With a budget of £50bn a year, and with the pandemic giving evidence that children are at least 6 months behind, shouldn’t that be reflected in government spending? Alongside further evidence that recruitment and retention of staff is wilting due to real terms cuts to pay across the public sector.
And where do we go next when defence spending needs to rise, but it has been the thing cut gradually over the past few decades to allow for rises in other areas? Especially as an aging population and climate change should be dictating all fiscal policy.
This entire review has been hidden because of spoilers.
January 2, 2024
A book I regret buying as it focuses so much on the recent past with little analysis of long-term trends. Furthermore, as much as much as I like Paul Johnson, there is very little context. Only at the conclusion does he then say in fact Britain is actually fairly well functioning, prosperous e.c.t.
1. Rule number one – nothing is for ever – be it high inflation, strong growth, stable politics.
2. Remember that inflation was at 7% before the Ukraine invasion demonstrating how monetary policy was so slow in adapting to Ukraine.
3. William Pitt was the first Prime Minister to introduce income tax, which now contributes around 25% of total tax intake. 25% of high earners in the UK are born abroad. They chose to be here, and are not forced.
4. VAT is an excellent tax badly executed. There are too many exemptions (like with so many UK taxes) including on energy. A better policy would be to charge VAT on everything (including on energy bills) and then distribute the proceeds to the poorest in society. The wealthiest tend to use the most energy so it would also be very progressive.
5. More energy is spent creating national policies than implementing them. So true at both a national level and much like the City of London.
6. The NHS is pretty average. While it ranks highly in accessibility, it is pretty average at achieving the one outcome that really matters, the patient’s wellbeing. Survival rates for cancer, lung disease is pretty much middle of the G7 pack. The more that we treat the NHS like a religion, the worst that it performs, something Matthew Syed noted in his book, and the chairman of the PIF, Yasir Al-Remayyan noted when talking about taking the emotion out of investing, and decision making at Newcastle.
7. An education system obsessed with qualification and not enough on skills, both soft and hard has really let Britain down. Just closing the basis numerously and maths skills would boost productivity by over 5%. The strange thing is that life term earnings between graduates and non-graduates was £240,000 over a lifetime which accounts for the fact the most graduates already come from better off families.
8. Council tax – which is actually a form of wealth tax as it is based on a property values – has not seen its bands updated since 1991. As property prices have gone up more in London and the South East, it is essentially a tax cut for the richest in society.
9. England remains one of the most centralised states in the world in relation to money and decision making.
10. If the Treasury was popular it would be doing something wrong however young, often incredibly arrogant individuals tell ministers from other departments what to do. Furthermore, as highlighted before by the Economist, civil servants are viewed as successful if they manage to quash spending plans.
11. An ageing population is an issue as it increases the working to retired ratio – however it also helps the other way in reducing the young to working ratio which is also quite expensive.
1. Rule number one – nothing is for ever – be it high inflation, strong growth, stable politics.
2. Remember that inflation was at 7% before the Ukraine invasion demonstrating how monetary policy was so slow in adapting to Ukraine.
3. William Pitt was the first Prime Minister to introduce income tax, which now contributes around 25% of total tax intake. 25% of high earners in the UK are born abroad. They chose to be here, and are not forced.
4. VAT is an excellent tax badly executed. There are too many exemptions (like with so many UK taxes) including on energy. A better policy would be to charge VAT on everything (including on energy bills) and then distribute the proceeds to the poorest in society. The wealthiest tend to use the most energy so it would also be very progressive.
5. More energy is spent creating national policies than implementing them. So true at both a national level and much like the City of London.
6. The NHS is pretty average. While it ranks highly in accessibility, it is pretty average at achieving the one outcome that really matters, the patient’s wellbeing. Survival rates for cancer, lung disease is pretty much middle of the G7 pack. The more that we treat the NHS like a religion, the worst that it performs, something Matthew Syed noted in his book, and the chairman of the PIF, Yasir Al-Remayyan noted when talking about taking the emotion out of investing, and decision making at Newcastle.
7. An education system obsessed with qualification and not enough on skills, both soft and hard has really let Britain down. Just closing the basis numerously and maths skills would boost productivity by over 5%. The strange thing is that life term earnings between graduates and non-graduates was £240,000 over a lifetime which accounts for the fact the most graduates already come from better off families.
8. Council tax – which is actually a form of wealth tax as it is based on a property values – has not seen its bands updated since 1991. As property prices have gone up more in London and the South East, it is essentially a tax cut for the richest in society.
9. England remains one of the most centralised states in the world in relation to money and decision making.
10. If the Treasury was popular it would be doing something wrong however young, often incredibly arrogant individuals tell ministers from other departments what to do. Furthermore, as highlighted before by the Economist, civil servants are viewed as successful if they manage to quash spending plans.
11. An ageing population is an issue as it increases the working to retired ratio – however it also helps the other way in reducing the young to working ratio which is also quite expensive.
This entire review has been hidden because of spoilers.
June 1, 2023
Brilliant overview of how the various wings of the British state are financed and how some of the weird and complicated taxes we have (NICS, SDLT etc) are distortive.
Johnson doesn't pull his punches and makes it clear that successive governments have made poor decisions that have made us poorer over the long term.
Beyond his decent recommendations at the end of the book he doesn't make specific fiscal recommendations, I suspect because he wants himself and the IFS to be seen as reasonably impartial.
However my impression from the book is that he believes taxes (likely income + VAT) should increase in order to pay for investments in education, health and infrastructure.
A good read for anyone interested in politics or economics, and would make a fantastic primer for A-level students.
Johnson doesn't pull his punches and makes it clear that successive governments have made poor decisions that have made us poorer over the long term.
Beyond his decent recommendations at the end of the book he doesn't make specific fiscal recommendations, I suspect because he wants himself and the IFS to be seen as reasonably impartial.
However my impression from the book is that he believes taxes (likely income + VAT) should increase in order to pay for investments in education, health and infrastructure.
A good read for anyone interested in politics or economics, and would make a fantastic primer for A-level students.
July 13, 2023
If you’re reading this, you’ll probably know what the IFS house view is on pretty much everything. And the good news is that this book delivers on what you’d expect - lots of planning reform, some comically hard tax changes (taxing self-employed people more, council tax revaluation, replacing fuel duty), local government reform…all the greatest hits.
It’s well-written and covers a lot in under 300, readable pages. But you come away not really knowing what bits of the vast subject matter the author thinks are most important to achieve, or why (other than an unsurprising preference for macroeconomic stability). Maybe that’s OK - and as a précis of lots of ideas, the book works. But it feels like there’s something more interesting within the book that it would have been good to see explored more thoroughly.
It’s well-written and covers a lot in under 300, readable pages. But you come away not really knowing what bits of the vast subject matter the author thinks are most important to achieve, or why (other than an unsurprising preference for macroeconomic stability). Maybe that’s OK - and as a précis of lots of ideas, the book works. But it feels like there’s something more interesting within the book that it would have been good to see explored more thoroughly.
March 2, 2024
Really glad to see issues related to HE, TVET and the skills gap hit the mainstream in Paul Johnson's 'Follow the Money'.
**How does our "absurdly narrow" post-school curriculum lead to 1 in 10 students lacking basic literacy and numeracy skills?
**How does the taxpayer subsidise humanities courses to the detriment of more economically valuable technical and scientific qualifications?
**Why does an ever changing FE/TVET landscape (BTECS... T-Levels... The Advanced British Standard...) leave thousands of young people out of pocket and disadvantaged?
**Why is it that a degree classifications arms race leads to poorer students being worse off?
An excellent chapter in an excellent read.
**How does our "absurdly narrow" post-school curriculum lead to 1 in 10 students lacking basic literacy and numeracy skills?
**How does the taxpayer subsidise humanities courses to the detriment of more economically valuable technical and scientific qualifications?
**Why does an ever changing FE/TVET landscape (BTECS... T-Levels... The Advanced British Standard...) leave thousands of young people out of pocket and disadvantaged?
**Why is it that a degree classifications arms race leads to poorer students being worse off?
An excellent chapter in an excellent read.
May 23, 2023
A very important book which should be compulsory reading for MPs and local councillors. Paul Johnson's analysis of the sources and uses of public finance is informative, reliable (he has worked at the Treasury and knows his stuff) and very readable for a topic which some might consider dry. The duty of government is to manage public finance in a way that is as far as possible fair to all but incompetence, political posturing and refusal to take advice from experts hampers sound decision-making, which is difficult enough in times of great uncertainty. He concludes with some very sensible recommendations which should be seriously considered by any government, regardless of political ideology.
Read
August 27, 2023It took me a few weeks to read this, which I’ll attribute to not being very familiar with the topic. As you might expect from the blurb, it’s an exploration of how the economy is handled (or not, I suppose) by the State, set in relatively recent historical context. The author expresses his ideas in a straightforward manner, but after each chapter I found myself having to go off and reflect before starting on the next one. I guess that’s a good thing :) Johnson clearly has strong views on solutions to the problems/issues he highlights, and I’ll keep an eye out for how those might manifest in the real-world setting.
October 19, 2023
This is a very accessible read for this uninformed reader that shines a light on the real challenges and choices facing UK governments on how to fund the state. The overwhelming message I have taken from this excellent book is that it is depressingly difficult for governments to make good long term choices without risking alienating the general public, and it is more depressing that successive governments have failed to maintain and invest in our essential infrastructure, education and health. And as for managing the economy with an ageing population and with climate change net zero requirements it makes for very uncomfortable reading.
April 15, 2023
Where does the money go is a question that I have had for ever. How can one of the richest countries in the world have no money for essential services and be almost bankrupt? And whenever I have asked the question, I have never seen an explanation that remotely answers the question - until this book.
It is readable, through, surprisingly comprehensive and wonderfully brief. You do not need to be an economist or a financial expert. It is written in plain English. And it gives the answer. If you have the same question that I did, then this is definitely the book for you.
It is readable, through, surprisingly comprehensive and wonderfully brief. You do not need to be an economist or a financial expert. It is written in plain English. And it gives the answer. If you have the same question that I did, then this is definitely the book for you.
July 1, 2023
Excellent, thorough and chsllenging
This book is well written by someone who knows what they are talking about and is able to share that knowledge in a clear manner. It lays bare the current situation we are in across a range of highly important areas of life by explaining both how and why we arrived at this point. Having done so the writer sets out the choices we now face.
Whilst there is much to be concerned about there is hope for the future if the arguments put forward in this excellent book are followed.
This book is well written by someone who knows what they are talking about and is able to share that knowledge in a clear manner. It lays bare the current situation we are in across a range of highly important areas of life by explaining both how and why we arrived at this point. Having done so the writer sets out the choices we now face.
Whilst there is much to be concerned about there is hope for the future if the arguments put forward in this excellent book are followed.
April 4, 2024
An authoritative piece of work, based on PJ’s broad career as an economist inside Whitehall but also at the IFS and elsewhere. He acknowledges the detailed and extensive work by his IFS colleagues. His main theme is how government revenues are raised from taxation and how they are spent/misspent. The tax system is unfair and illogical, having been cobbled together as a series of difficult-to-reverse accidents. Local authorities are underfunded, social care costs are a nightmare and the NHS is only average. It needs more management, not less. A very good analysis.
April 11, 2023
A nice account of how the UK government is funded and how it spends money. Perhaps it leans a bit far to the technocratic in its suggestions, but it also shows how difficult it is for both Left and Right to overturn financial norms politically. Really the overriding message is that there's little hope of anything changing for the long-term good until things get so bad that such change is the only thing to do. Such is life.
July 10, 2023
Essential reading
Starts with the facts: the amounts raised by the various taxes and duties, and the costs of the various aspects of public expenditure. Analyses them for effective on their aims and the wider social and environmental effects. And outlines ways forward. All very easy to read. Except that it does enrage the reader about the perverse and self-defeating nature of so many of our fiscal tools, and the drivel spouted by many politicians and the popular press.
Starts with the facts: the amounts raised by the various taxes and duties, and the costs of the various aspects of public expenditure. Analyses them for effective on their aims and the wider social and environmental effects. And outlines ways forward. All very easy to read. Except that it does enrage the reader about the perverse and self-defeating nature of so many of our fiscal tools, and the drivel spouted by many politicians and the popular press.
November 20, 2023
Found the first half explaining the tax system fascinating (not a sentence I ever imagined I'd write). But Johnson spends the rest of the book explaining the flaws in the British government and these points are neither new nor enlightening. Every single problem seems to have one answer: higher taxes.
Felt like I learned some valuable knowledge but at the expense of being stuck with a centrist dad complaining about the Tories for too long.
Felt like I learned some valuable knowledge but at the expense of being stuck with a centrist dad complaining about the Tories for too long.
October 30, 2023
This book changed my mind about a number of things - how to change the NHS - what to do about social care and pensions (and both are important to the former) and also affirmed the importance of building and governance. I think I will be referring to this book for some time to come especially when scrutinising politicians’ promises.
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