Staggering rises in energy bills, the highest level of inflation in decades – there’s no shortage of numbers that drive home the stark reality of the current cost of living crisis.
But there’s one that is conspicuous by its absence, and it’s for one of the most valuable things we have. Something that has an enormous impact on our quality of life, that despite its priceless value is wasted to a quite extraordinary degree, directly impacting our ability to navigate our individual financial issues.
What is this precious resource? Time of course. And we estimate that an unbelievable 15 BILLION hours of time is spent every year by UK citizens dealing with administration in their personal lives. At medium hourly wages, that is more than £200bn of time. This tax on our time is a hidden cost of living that needs to be taken seriously and treated as the economic drag that it is.
Around three of those 15 billion hours is from public services, such as taxes, benefits, and healthcare admin. Another four times that is spent on private bills, pensions, debt, services, savings and investments. Of course some of that activity is of value to people, even if not much fun. But an enormous amount is not valuable, but is a waste of this precious asset. In a word, it is ‘sludge’ – hassle and friction.
An everyday example of sludge that many people will recognise is the long application form for Tax-Free Childcare, and the hassle of logging on every time you want to use the account (you have to have a government gateway account before you can have a TFC account). Such hassles help to explain the continued low take up – less than 20% – even though parents stand to gain up to £2,000 a year for each child.
In most countries, time taxes are not measured or taken into account in regulation or policy. An exception is the USA as we were reminded this week by Cass Sunstein, Harvard scholar and Biden Adviser, and author of the book Sludge. This week he has been visiting the UK for the launch of the new El-Erian Institute for Behavioural Economics at Cambridge this Wednesday, as well as stopping by the former No10 ‘Nudge Unit’, the Behavioural Insights Team.
The reason for this different approach across the Atlantic is due to the US Paperwork Reduction Act, first enacted in 1980 and subsequently reinforced by Executive Orders under Presidents Obama and Biden. The existence of this act lays bare the stark reality of these time taxes in clear, verified, real life numbers. The latest figures are that the time required by US Federal Agencies alone add up to 11.4 billion hours, led, perhaps not surprisingly, by tax returns. And that’s just for one arm of government.
Like most countries, the UK has no official estimate. The 15 billion hour number above is based our calculations from a time-budget study by doctoral student Lucie Martin. Far from UK agencies being mandated to examine (and publish) how time consuming their requirements are, UK regulatory Impact Assessments explicitly exclude such costs. The only costs required to be measured are those to business. The time of individual citizens receives no formal consideration at all.
That is mad. ‘Time taxes’ take people away from leisure or work. They put people off doing things that matter to them, such as claiming benefits or sorting out their health. When these activities slide into ‘sludge’, such as subscription traps or incomprehensible cookie permission forms, they actively drive people to choices that are non-optimum. In BIT studies, we have found increases in time lead not only to large drop-off in completion rates, but that people substantially underestimate how big these effects are.
Some of this sludge is truly egregious, such as the way many gambling companies make it extremely easy to open accounts, but near impossible to close them. More subtly, time taxes are particularly damaging to people who have things on their mind, or other things to worry about. Time taxes are ‘mental bandwidth taxes’ too.
Time taxes may not be as obvious as conventional taxes, but they matter. A lot. Governments, and large organisations, should conduct and be required to publish sludge audits. Time taxes need to be cut dramatically and across the board. Time isn’t just money, it’s so much more valuable. This is one kind of tax cut no one will ever object to.