Briefing Paper: The Destination of the Defence Pound
In defence acquisition, the tax revenue implications of a given choice are frequently overlooked. Given that the government, including the Ministry of Defence, is committed to reducing the budget deficit a function of spending and revenue this issue is highly pertinent.
Using an actual contract and an explicit accounting method, this paper finds that the tax revenues are significant; they can yield to the Exchequer over a third of the value of the contract. This figure is of obvious procurement policy significance at a time when there is such concern with the governments budget deficit.
Using a CIMA approach, a clear methodology and explicit assumption, the study tracks the tax revenues associated with an actual £1 million contract, and concludes that the government could get back over 28 per cent in income tax and national insurance payments alone.
The paper also suggests if the UK spends a third of its defence budget on off-the-shelf foreign systems, as outlined in the Green Paper on Equipment, Support and Technology, the Treasury would lose about £1 billion in revenue, which could have a negative effect on government revenues and thus the public sector deficit.
Nemo me impune lacesset,
|"The chief aim of all government is to preserve the freedom of the citizen. His control over his person, his property, his movements, his business, his desires should be restrained only so far as the public welfare imperatively demands. The world is in more danger of being governed too much than too little.
It is the teaching of all history that liberty can only be preserved in small areas. Local self-government is, therefore, indispensable to liberty. A centralized and distant bureaucracy is the worst of all tyranny.
Taxation can justly be levied for no purpose other than to provide revenue for the support of the government. To tax one person, class or section to provide revenue for the benefit of another is none the less robbery because done under the form of law and called taxation."
John W. Davis, Democratic Presidential Candidate, 1924. Davis was one of the greatest trial and appellate lawyers in US history. He also served as the US Ambassador to the UK.