I am considerably fairer than you

So George Osborne has decided that he is no longer an advocate for flat taxes, has decided that after thinking about it for a while, he is an uber-moderniser and written an article claiming that his party is now the party of fairness.

Well, woop de doo. John Rentoul points out that from the very beginning the Osborne speech is intellectually dishonest.  But John should realise by now that when the conservatives talk about fairness, that word, to quote the Princess Bride, “does not mean what you think it means”

[youtube=http://www.youtube.com/watch?v=1-b7RmmMJeo]

Reading the conservative briefing document, the intent is clear. First yu make the argument that the poor are not better off with Labour using a selection of impressive sounding but fundamentally flawed statistics. This is then used to assert that Labour approach is not working, which leads then to an assertion that a Conservative policy approach owuld be more effective.

The confection of this argument is almost as impressive as it’s brazenness. To understand it,  you need to understand three things.

First, you need to know that the main story of incomes in Britain over the last decade has been a significant increase in the relative living standards of those in the “lower middle” of the income range, those in the 50th-90th percentage of income.

The graph above shows the real increase in income for each decile of income. What it shows is that all groups have increased their real income levels by more than 10% over the last decade. However, the biggest benefiiciaries have been the wealthiest and the 20-40th poorest, who both have real terms income increases of over 30%.

Second, as I’ve argued before, this increase in incomes is due to the support of tax credits, the increase in employment and the improvement in pensioner poverty. In real terms, therefore, the effect of ten years of Labour government has been to increase the incomes of those who are working but on lower incomes  and pensioners substantially, but not lift the incomes of those who are not in work (and to a lesser extent those on low incomes, working but without children).

Finally, it follows surely that any serious attempt to reduce income inequality would focus on a programme to substantially lift the incomes of the currently workless.

There are two ways of doing this. The first, to throw money at this group n the form of increased benefits paymentts, would be self defeating, as it would just re-introduce the benefits trap.

The other is to increase the chances of this group finding and maintaining work is far more difficult. After all, this has been government policy forthe last decade or so and the groups that remain out of work are the most intractable.

Do the Tories propose anything at all to help with that?

Well, we have their vague commitment to Welfare reform, which they openly acknoweldge marks little or no difference to government policy, except they believe that they’d be able to use it to fund tax cuts, which makes no sense at all.

Beyond that we have :

Tax cuts for married couples, inheritance tax and stamp duty, which will affect only those in work, with an estate over £600,000 or the ability to buy their own home between £125,000 and £250,000. So, by defintion these cornerston Tory policies cannot impact the bottom 10% of income groups who rarely work, never mind have substantial estates or are able to buy their own homes.

Support for voluntary and independent groups. A policy which, while apparently well intentioned, appears to be as detailed and thought through as Boris Johnson’s Human resources strategy. It’s not clear exactly what these voluntary  groups will be allowed to do which they can’t do now, nor what support they will recieve from the state to do it.

The ability to open new schools by anyone. Which, along side a pupil premium to stop schools merely poaching middle class pupils, might, might lead to an improvement in school standards, given enough money. But wouldn’t do so if we followed the conservative policy, which is to pay for it via a massive reduction in spending on new schools buidlings and ignore the dead weight cost of designing in over-capacity in the schools system. All of which would in the end lead to under resourced schools in poorer areas.

None of these policy commitment, (except perhaps, on a good day, differently funded, designed and implemented, the free schools policy) are likely to do anything positive on income inequality.

In fact the most direct changes to the tax system, would make inequality signifiantly worse.

So we have a situation where the problem of “unfairness” Osborne outlines cannot possibly be met by the policy measures set out by the Conservatives.

Osborne squares this circle by redefining “fairness”.

To hime therefore, Fairness itself is simply ensuring  “people are rewarded for their effort and ability” while ensuring equality of oppotunity. This allows Osborne to claim to be “fair” while setting out policy proposals that would in fact increase inequality.

He wants “fairer” taxes, by which he means lower taxes for property owners and millionaires.

He wants “fairer” fiscal rules, by which he means cutting the spending that helps the neediest most.

He wants “fairer” social policy, by which he means giving tax breaks to working married couples.

So for George, being fair means whatever he needs it to mean.

*This outcome also has a little noticed statistical impact. We calculate poverty by working out median income and looking for the numbers under 60% of that figure. The median income is that of the middle point of population, not the “average income”  in order to ensure that changes in the icomes of the super wealthy don’t impact the base on which poverty is judged.

However, in this case, we’ve seen a consistent significant increase in the incomes of those who are most likely to mpact the median, the middle and middle lower groups, That has meant that those who have not benefitted to the same extent are more likely to slip below 60% of median income, as median income has risen relatively quickly.

9 Responses to “I am considerably fairer than you”

  1. Mrs Blogs

    the IFS reckoned Labour’s tax and benefit reforms have been “strongly progressive” (oooh look there’s that progressive word). However, the priority has been toward lower income families with children and pensioners. Clearly this is unfair.

    Reply
  2. Cassilis

    As always Hopi superior blogging to most other places even if the thinking is again subtley flawed… a couple of observations.

    “the biggest beneficiaries have been the wealthiest and the 20-40th poorest, who both have real terms income increases of over 30%… as I’ve argued before, this increase in incomes is due to the support of tax credits, the increase in employment and the improvement in pensioner poverty”

    followed by –

    “There are two ways of doing this (*helping those not referred to above*). The first, to throw money at this group in the form of increased benefits payments, would be self defeating, as it would just re-introduce the benefits trap”

    On the one hand your acknowledging that tax credits play a significant role in the improvements Labour have made to incomes and on the other claiming that any extension of them or benefits increases risk creating a benefits trap – that’s muddled and inconsistent. Arguably the tax credit system itself is a trap no different to the benefits one everyone acknowledges – it artificially augments people’s income.

    Finally your glossing over a very deliberate tension which Osbourne is happily being explicit about:

    “This allows Osborne to claim to be “fair” while setting out policy proposals that would in fact increase inequality.”

    Your entire post is based on the assumption that income equality is a non-negotiable measure of fairness. I suspect you’re a well enough read chap Hopi to know that income equality (Gini co-efficients etc.) is a very contentious measure and it’s perfectly possible (not to mention ethical) to advance a policy agenda which increases inequality but is still fair and moral. You might not agree with it but it’s disingenous to suggest it doesn’t exist.

    Reply
  3. hopisen

    Cass – just to take on your second point. I agree and understand that there are debates about the use of relative poverty as a measue.

    However, since Osborne explicitly sets out to critique labour on the basis that it has “failed” to uplift the income of the very poorest relative to the rest of society, it is fair to point out that the Tory plans would have an incredibly negative impact on income inequality – the very thing Osborne criticise labour over!

    Reply
  4. Cassilis

    Mmmm….

    I think I’ll defer judgement on that – to my knowledge the speech isn’t on-line yet but the Guardian article Osborne wrote certainly doesn’t critique Labour on that basis.

    Reply
  5. hopisen

    when he talks about increases in numbers in severe poverty, thats defined as relative poverty.

    Reply
  6. Andreas Paterson

    Casillis, a point to bear in mind would be that although there is debate over the relative poverty measures. The 60% of median income figure is in the same ballpark as the figures from the JRF study earlier this year.

    I would also argue that income inequality, has it’s own set of undesirable economic consequences. A view I’m happy to elaborate on if you like.

    Reply
  7. Miller 2.0

    “Your entire post is based on the assumption that income equality is a non-negotiable measure of fairness. I suspect you’re a well enough read chap Hopi to know that income equality (Gini co-efficients etc.) is a very contentious measure and it’s perfectly possible (not to mention ethical) to advance a policy agenda which increases inequality but is still fair and moral. You might not agree with it but it’s disingenous to suggest it doesn’t exist.”

    You have to make some pretty big ideological assumptions to believe that equality=fairness or that inequality can=fairness.

    You also need to make some big assumptions when attempting to use ‘equality of opportunity’, because there are big disagreements over what variety represents true equality of opportunity, and secondly which of them, and indeed if any, are represented by contemporary capitalism or given alternative models.

    This is a sweeping matter of political philosophy which, for any intelligent audience, requires wider and deeper elaboration.

    Reply
  8. newmania

    Interesting pots Hopi , it would be helped by some actual figures on your graph . You seem to contradict yourself
    “First, you need to know that the main story of incomes in Britain over the last decade has been a significant increase in the relative living standards of those in the “lower middle” of the income range, those in the 50th-90th percentage of income.”
    …And then you say its everyone else no ?
    Where I disagree either you points or inference …
    1 Stop taking credit for wealth creation which you have held back- Without the 30% increase in government spending we would have enjoyed twice the growth and aid no income tax ( well ok a lot less). The people who you seem to regard as having magically acquired or been given money by New Labour worked for it Capice.? (In ultra competitive conditions as well during the final collapse of post war stability) Labour have lost all touch with this life and region .As a Party they are dead here.
    2“throw money at this group n the form of increased benefits payments “is Labour Policy, why are you ashamed of it Tax credits suffer ongoing chaos of over payment , the market in fake jobs( with no progression and no productive use) , and the sheer unutterable waste of taking people `s money away passing it through expensive bureaucracies and returning it to those deemed by Labour to be worthy..
    3 Benefits trap -There are 90% marginal taxes at low level and add into that the free house which you may well be given in the future obviously there is a benefits trap. You say the Conservative Party have a vague commitment to welfare but every policy that has solidified has been copied( including the despised nudge idea , I notice piloted in Barnet ).IHT , dedicated border policing and latterly Purnell is busy chasing after the Conservative Party welfare to work ideas. You can hardly complain if they choose to keep their powder dry here and there . I think your remark that this has been government policy for the last decade then is what we may call a lie.
    4 The disincentives between the quintiles up to the top are also eye popping . You really would wonder why anyone would bother working at all up to say £40,000 from £10,000.( See ONS on that )
    5You have a tin ear on Inheritance tax despite my kindly assistance.The Labour Party recognized their attempt to grab estates was electoral suicide but you keep saying the same silly thing . People own property this is not evil. The Labour Party were trying to use fiscal drag to remove the life’s’ work of the aspirational having previously decimated the private pension system ( whilst retaining the hated gold plated pensions for public sector favorites that “we “pay for ) .The rate of housing inflation in South was bringing this quickly into view. It cannot be understood without understanding that people have abandoned pensions and have got little from their efforts except their house ( See disincentives in income above)
    6-Tax cuts for married couples – I have explained to you at great and incontrovertible length that there is currently a tax hike for non married couples and, in fact, living in a couple at all despite the demonstrable social disaster that has ensued because of Labour`s dislike of what they see as a dated and patriarchal imposition on some victim or other. How can you simply continue to say the same things ? You know it is not true. Again my advice would be stop lying. As someone who lives in the real world I well know that once you start its all over and the vanishing trust in anything New Labour has to say is no unconnected to this spin disease who you have caught .
    7 Education- well the “results” of the untold tax payers money thrown at this are plain enough,. We have system now where useless teachers paid so much they attract more top graduates than any other profession do very little in gold plated facilities no-one uses( All results slipping down league tables ). The example of entry into the system in Holland show that only a small entry raises the quality of the main whole ( like most markets which is something you would not know ). You have therefore invented a problem in the face of contrary evidence. I am not sure what the point is and denying the location effect opf the failed Comprehensive experiment is tricky when virtually all Labour MP`s tacitly accept it by the employment of tutors a flats in catchments areas and private schooling.

    Where I agree
    Behind all the nonsense there is a fair point though The Conservative case for fairness is somewhat more subtle than the socialist one which is actually a case for equality. Conservatives are more concerned about the end of social mobility (about the time Grammar schools and direct grant schools were finished). More concerned about the disincentives and perversion in the regulated system a and the growth of a workless underclass for whom benefits is a way or life . The Labour Parrty have agreed lattely that their all carrot no stick approach has been a flop by following Conservative thinking which make a bit of nonsense of your argument . I think you are probably right to say that where Osborne implies more redistribution , if he does, he is claiming too much.

    I agree with you
    That the effort to do something about this, will be costly and the claim that taxes will not rise is one that Cameron has been wise not to make . He has admitted to the Party that there will be tax rises. I think you do have a point on redistribution where Labour have been generous with the middling`s money to the less well off and benefits collectors You are not so vague about what is intended as you pretend though

    I agree with you that there is a danger of overreach here

    Good post

    Reply

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