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Sometimes I treat myself to brunch in town on Mondays, my day off. This week I was momentarily surprised that the bill was lower than usual: then I remembered ‘eat out to help out’. There were no signs in the café to say that it was participating. This made me think about the effectiveness of this scheme and of tax reliefs more generally.
Here was a real example of what economists call ‘dead weight’, giving somebody a tax break to do what they were going to do anyway. My decision to have brunch that day in that restaurant wasn’t connected with the ‘eat out to help out’ scheme. The few pounds I saved made no real difference to me, but the cumulative effect across the country of all of those small amounts will be massive.
That is not to say that behaviours cannot be influenced. My partner and I have booked a couple of meals out this month that we probably wouldn’t have done had it not been for the scheme. We don’t really need the subsidy but, as it is on offer, we might as well take advantage and do our bit for the economy – perhaps we should see it as our equivalent of the ‘dig for victory’ campaign during the war.
This tiny example neatly encapsulates the issue with any new form of tax incentive: how much relief is a government prepared to ‘waste’ to stimulate the required behaviour?
Next time the figures for the cost of tax reliefs come out I will think about my brunch experience: it certainly helps turn an abstract economic concept into something which I can relate to personally.
