Pay-as-you-go government

IN A court in Highbury, north London, a resigned-looking 59-year-old with a thick beard and alcohol on his breath pleads guilty to assault. The judge hands down a fine of £65 ($100), but waives the offender’s obligation to contribute to prosecution costs: his weekly disposable income is just £40 in welfare payments, after he pays the rent in the supervised hostel where he lives. But the judge has no discretion over a “criminal courts surcharge” of £150, an innovation introduced in April. Had the man pleaded not guilty and then been convicted, the charge would have risen to £520, or £1,000 had the crime been a more serious offence. The Ministry of Justice expects the new charge to bring in up to £85m a year.

Strapped for funds, central government departments and local councils are scrabbling to find new ways to balance their books. Ministries outside the departments for health and education have seen their budgets cut by an average of nearly one-quarter since 2010–11. Local councils have seen 37% of their central government funding disappear. And that is just the beginning: departments have been asked to find further savings of up to 40%, as part of a spending review due in November.

To plug the funding gap, departments are digging into the pockets of their customers. The Home Office, which will receive £1 billion less from the Treasury this year than last, is planning to make money from immigrants. It costs the Home Office around £600 to issue a visa for settling a dependant, but it now charges £2,141 for the service. A recent round of increases in visa fees is expected to earn the department a handy additional £90m a year. Since April, immigrants from outside Europe have also had to pay a new £200 “NHS surcharge”, regardless of whether they end up using the National Health Service.

The Ministry of Justice, which has seen its budget cut by 34% in real terms since 2010–11, has been particularly enterprising. As well as the criminal courts surcharge, it has introduced a £250 fee for taking a case to an employment tribunal, rising to £950 if the claim proceeds to a hearing. In July the government announced it was considering plans to cover as much as one-quarter of the cost of running some tribunal courts with fees levied on the courts’ users. It has also raised charges for services such as getting divorced (which went up to £550, from £410) and evicting a tenant (now £355, up from £280).

Local councils have been similarly innovative in their charges. Getting old is getting expensive: councils squeezed 4.4% more in fees out of social-care users over the four years from 2009–10. Even dying isn’t cheap: income from cemetery, cremation and mortuary services went up by 11.4% in the same period, according to the Institute for Fiscal Studies, a think-tank. Eight out of ten local authorities expect to raise charges further. Fees for services such as green waste collection are creeping in; hours of free parking are shortening; leisure centres are getting more expensive.

Charges can be an efficient way of rationing public services. London’s congestion charge, an £11.50 levy on cars entering the city centre, prevents its streets from getting clogged. Parking charges force people to vacate sought-after spaces. After Newcastle introduced a small fee for its municipal rat-catching service in 2014, the number of call-outs dropped by 35%, which the council put down to residents dealing with the problem themselves by “clearing out their sheds” (others say there are simply more rats about). Local authorities rightly balk at cutting spending on social services while subsidising bars’ licensing applications to the tune of £170m a year.

Taxing decisions

But some of the so-called charges are much more like taxes. Technocrats at the Office for National Statistics classify a charge as a payment related to the use, and cost, of a service. If a charge is above cost, or separate from the person’s use of a service, then it is a tax. That leaves the Home Office’s pricey visas and NHS surcharge looking uncomfortably tax-like.

The distinction matters. Voters get more exercised by taxes, which tend to be announced in the annual budget, whereas new charges slip through departmental bills without the same fiscal fanfare. Diplomats are exempt from taxes, but not from charges. This has led to an amusing squabble over the London congestion charge: the city says that foreign embassies owe it £90m in fees and fines over the charge—which the embassies insist is a tax (in 2006 the American ambassador was branded a “chiselling little crook” over his refusal to pay by the then-mayor, Ken Livingstone).

The court fees have sparked concerns about access to justice. In June the government launched a review into charges for employment tribunals, after figures showed that the number of sex-discrimination cases fell by 83% after the charges were introduced in 2013. So far there has been no drastic improvement in the success rates of such cases, suggesting that the fees are putting off genuine victims rather than merely time-wasters. Officials say cases can take several years to resolve, so an improvement may yet emerge.

The criminal courts charge has infuriated lawyers. “In criminal cases, no defendant is ever a volunteer...people don’t receive a service—they are forced to be here,” says Robert Kaim, a defence lawyer. More than 30 magistrates have resigned over the new charge. The Magistrates Association says its members report that more defendants are pleading guilty, to avoid the higher fees. The charge could even be self-defeating, if missed payments bung up the courts—not unlikely, given that many offenders are poor and chaotic.

Back in Highbury, the convict is ordered to pay his charges in fortnightly instalments of £10, to which he nods quiet assent. Missing them could mean further appearances—and, perhaps, further income for the government.