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”
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.