Beautiful data, frightening conclusions

by Viv Cole on September 15, 2014

As someone who enjoys reducing information overload and making complex topics more meaningful and accessible, I’ve enjoyed browsing my way through two coffee table books which show the power of infographics: David McCandless’ Information is beautiful and Simon Rogers’ Facts are sacred. The way that data has been put together and presented is genuinely inspiring. There are so many ways to present data in a better way than most habitually do.

In a week where Scottish independence dominates the headlines, we continue to see large numbers bandied around about the possible good or bad consequences for different parts of the UK and its economy. The numbers involved are so large that the vast majority of people can’t fully understand them, especially when out of context. I’m not too proud to say these numbers don’t mean much to me most of the time.

Based on the knowledge and confidence imparted by a few of the charts in the books, I thought I’d see what I could find out about underlying UK finances in the time it takes to drink a cup of tea.

In the UK Budget 2014/15 central government spending was forecast to be £648b. This represents an annual spend per head of £10,109 (UK population 64.1m). One of the Government’s many challenges is that to balance the books it needs an average of tax per head £16,922 from the £40.4m people who are aged 16-64. As Income Tax typically represents 26.1% of the Government’s tax take, this implies an average £4,400 in Income Tax. Whilst I’ve made a few challengeable assumptions or simplifications along the way, this implies that people of working age need to earn an average of £32,000 in order to fund the Government’s current program of expenditure (ONS data suggests UK average earnings are ~£26,884).

In the Budget, the Government’s required addition to borrowing was £84b, funding an overspend of 13% for the year. I have no problem with a Government overspending in some years if this is balanced over the economic cycle, however it seems bizarre that we have ended up in a place where debt interest of £53b eclipses the defence budget of £38b. The challenge is how to bridge this overspend gap of 13% (and then repay the capital portion of the debt). The solutions presumably involve a mix of increasing employment, increasing the value that employees add (and hence get paid), retiring later and reducing long term Government spend.

In the past decade, I can’t remember any politician who has presented the UK’s financial reality in a way that people can understand. Maybe it’s been easier to continue to cherry pick statistics, blame other parties and claim that the hard cuts have already been made. Meanwhile Government borrowing has increased and increased.

In our parent’s generation, deference was the accepted approach to politicians where there was cross-party consensus – and look where that got us to…If we replace that with cynicism and withdrawal from debate, that gives them permission to carry on. As data is available in ever more accessible formats, I’d encourage you to hold politicians to account in whatever ways you can.

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