“You should be, but you should be even more shocked that when it comes to wealth the difference is 100x.”

But it isn’t. The recent report which said that was the most barbarously compiled piece of policy based evidence making of recent times.

Think this through for a moment. When we look at income inequality we quite rightly include the things we do to redistribute that income. We look at post tax and post benefit income.

However, when they looked at wealth inequality they deliberately did not include such.

As an example, private pension plans were included as wealth. The State pension was not. Private housing was included as wealth but the right to occupy subsidised housing was not (whether social housing or via housing benefit).

These things all have a value and are best valued as an annuity. The State pension for example, has a value of some £75k on the day of retirement (the minimum pension guarantee is higher of course). So it simply isn’t possible for someone to reach 65 years of age and have no wealth….as the report tried to insist.

Now, that 100 to 1 for the 90:10 wealth ratio assumed that the bottom 10% had £8,000 or less in assets, the top £850,000.

But the pension is worth that 75 k, subsidised housing is worth another amount, etc etc.

At one point they tell us about a household in the bottom 10%. They’re getting something like £10k a year in various benefits all added up. £10 k a year is, when valued as an annuity, something like £200k, £300k (depends upon age of course).

So the true 90:10 wealth ratio is under 10:1 and is perhaps more like 5:1.

Because, you see, everyone in the UK has a valuable financial asset. It’s called the welfare state.

But is the relevant definition not utilisable wealth? I.e. you can’t (to my knowledge) ask for your £75k on reaching 65 and invest it how you want, it gets handed out to you as an income in bits (though you can elect for a limited opt-out of NIC payments earlier in the process to invest how you like). Private pensions can (depending on plan) be cashed in, translated into other plans, taken as an annuity or in a lump. Also, surely adding in state pensions would be zero sum because everybody gets one.

Similarly your house on the social has a value, in that it represents a subsidy on an item of expenditure that everyone has. But you can’t exchange that value for anything, or make it bigger. There doesn’t seem to be any reason, on the basis of what you say, not to add up a lifetime’s worth of income and call it wealth, and pretend it all exists at one point in time and is fully accessible and utilisable from the individual’s point of view. In fact what happens is that a lifetime’s worth of income does gradually get added up, and if the income is high enough, some of it is siphoned off to form “wealth”, and it is this wealth that is truly accessible to the individual (unless they actively choose to lock it away).

“But is the relevant definition not utilisable wealth?”

Could be. Having a pension is that. Having a roof over your head is that. We most certainly say that the people without them are poor.

“Also, surely adding in state pensions would be zero sum because everybody gets one.”

No. If I have 8,000 and you have 800,000 then the ratio between us is 100:1.

If I have 83,000 and you have 875,000 then the ratio is more like 10:1.

A key claim in James’s post is that the Lib Dems have not sought to sell their policy of lifting the tax threshold ‘in isolation’.

Here is a report from today’s Guardian on Nick Clegg’s speech to the Lib Dem Spring conference:

‘Speaking with a sore throat…Clegg emphasised the four pledges that constituted the centre of the Lib Dems’ election offer. He repeated the first of these – raising the personal tax threshold to £10,000 – three times to urge activists to use it more on the doorstep. Party aides said it was playing well both in the north of England and the south, appealing to both natural Tory and Labour voters. The other three pledges were £2.5bn extra funding for schooling, reform of Westminster and reform of the City.’

So when it coems to the headline political sales pitch, it would seem that the Lib Dems ARE putting the tax threshold proposal forward in isolation from their wider tax policies.

But aside from that, there is a basic question of justice. Particularly at a time of austerity in the public finances, just who do we want to be benefitting with a tax cut? Even given the other Lib Dem policies it seems odd to want to make a cut that so disproportionately benefits higher income groups in society.

Finally, James says he believes in the idea of a citizens’ income. Well, the closest we have to this is the Child Trust Fund, the first ever policy to ensure that every young person will, as of right, have some resources of their own when they start adult life.

And the Lib Dems want to abolish it.

Stuart, this is what it says on the website:

“As Liberal Democrats we want to radically rebalance the tax system, cutting taxes for people on low and middle incomes which we will pay for by cutting reliefs and closing tax loopholes that benefit the wealthiest. ” (front page in Economy section)

So you see even if Clegg did not mention the taxes on the rich in his speech which would pay for the-

Oh no wait! Sorry, that’s right, he did:

“We’re not talking about tinkering or tweaking. We’re talking about fundamental, substantial and irreversible reform. Under the Liberal Democrats, no-one will pay tax on the first £10,000 they earn. 3.6 million people will be freed from paying tax altogether. Tens of millions more on low and middle incomes will get a tax cut of £700 back in their pockets.

A real change to deliver lasting tax fairness for everyone.The Conservatives may want tax cuts for millionaires. We will deliver tax cuts for millions.

But it has to be paid for. No-one is going to fall for a false promise of a giveaway. So we will make five simple, but substantial changes to pay for this tax cut.

One: Equalising pensions tax relief so top earners no longer get more than everyone else.

Two: Equalising Capital Gains Tax with Income Tax so people who make their money trading shares and properties pay the same rates as everyone else.

Three: An increase in aviation taxes.

Four: A crack down on tax avoidance.

And finally – a new mansion tax on properties worth over £2m. This is one tax even oligarchs and billionaires will not be able to avoid.

You can’t put a mansion in a briefcase and take it to Belize .”

(http://www.libdemvoice.org/nick-cleggs-ldconf-speech-read-it-in-full-here-18348.html)

It seems that opponents of raising the PA are now reduced to denying that the policy actually exists in the form that Clegg claims it does and the party website claims it does in order to maintain their argument. Pathetic.

“Even given the other Lib Dem policies it seems odd to want to make a cut that so disproportionately benefits higher income groups in society. ”

But the top decile of earners actually lose by the LD proposal. Every other earner benefits. Everyone earning over £10k gets the same tax cut. People earning between £6k and £10k get however much tax back that they already pay and become tax-free earners.

“Well, the closest we have to this is the Child Trust Fund”

And the closest that a caveman had to a hair gel dispenser was a woolly mammoth with a cold.

Alix @ 5: your party leader listed the four pledges that will be the sales pitch to the country at the election. Only one of your tax policies is in the list of pledges. This tells us a lot about how the party is presenting the policy to the general voter, who, I suspect, rarely consults the Lib Dem website or bothers to read a Nick Clegg speech in full.

I think this point about the central party message on tax is honest and realistic; hardly ‘pathetic’. Your own comment just comes across as…well, evasive.

And on your point @ 6:

The Horton-Reed report shows that: ‘Overall, around 70 per cent of the cost of the policy goes to those in the richer half of society, and 30 per cent in the bottom.’

This fully vindicates my claim that the policy concentrates its benefits disproportionately at the top end of the income scale.

Lee @ 7: the CTF is indeed hardly a full-blown citizen’s income, but many of those interested in a citizen’s income, e.g., liberals like Sam Brittan, see it as a first step in this direction. And, even at its current modest level, a lot of young people in the years to come will have better lives for having held even a modest financial asset in their early adult life.

Its a universal policy that gives something to everyone at age 18 – unlike the Lib Dem policy of phasing out tuition fees which awards a big extra subsidy only to those entering HE (who also happen to come disproportionately from higher socioeconomic groups – another Lib Dem handout to the upper income deciles to match the one provided by raising the tax threshold).

Stuart, you’re just denying that the policy is what Clegg and the party website says it is. There are four priority areas. One of them is to raise the PA and pay for it by raising taxes on the rich. It’s not two policies, it’s one. That’s what “revenue neutral tax package” means. You choose to deny the latter half on the basis that the Guardian didn’t report it in that article. Even though it appears elsewhere in the speech. Even though it appears on the website. Even though it has been the whole point of the tax cut, from the start. I just don’t know what else to say to such stupidity.

Which bit of what I said is evasive? Mostly I was quoting Clegg and the website.

The 70/30 split is apparently incorrect, according to a commenter on LFF who compared the report’s efforts to ONS figures. However, if what you mean is “the line in the graph goes that way”, that’s because the graph includes people who don’t pay tax, and they cluster towards its lower end. A tax cut is a tax cut. It will only ever be a tax cut. It’s not a benefit. It can only give back what was taken away in the first place.

As I have said, ad-fucking-infinitum, here and elsewhere, if you don’t want a rebalanced tax system, if you’d rather prioritise other things instead, that’s your prerogative to argue for those thing. Others have done that on this website today and yesterday without resorting to either lying about the policy or trying to change the definition of “regressive tax”.

Stuart: Hey, chill out, you like the idea of a one off lump sump, and I prefer the idea of a regular guaranteed income. All I’m saying is that comparing the CTF to a citizens income is disingenuous, and a “step in the right direction” is all well and good unless it’s a million steps away.

But as for this out-of-the-blue HE attack, got to love that you’re running out of arguments on your failing attack on the tax changes, you have to resort to something that no-one has even commented on.

I guess you aren’t too aware about the Lib Dem plans to increase funding for apprenticeships and work experience? Or to encourage kids back in to education to get vocational degrees or foundational degrees? Or improve education funding so that specifically those without supportive (read: richer) families get a better education in the first place.

Or maybe you are and you just cherry pick what you want to highlight, like you’re doing with the tax arguments with Alix, to score cheap points off of only a small part of a parties entire policy set?

Lee @ 10: if comparing a citizen’s income to the CTF is ‘disingenuous’ how do you explain the large academic literature which discusses basic income and basic capital as variants on the same idea: that there is a right to some kind of resource grant as a right of citizenship, no strings attached?

Proponents of basic income often refer back to Tom Paine’s Agrarian Justice as one of the earliest texts advocated an unconditional citizen grant – but of course Paine was arguing for a capital grant, not an income grant. Does this make it ‘disingenuous’ of these basic income proponents to appeal to Paine, or does it, rather, show that there is a commonality of ideas here?

And, yes, I know that your party has other policies on education, which are very worthy. But the fact is you are choosing to spend scarce resources on phasing out tuition fees rather than, say, keeping the CTF. I am entitled to query whether that isn’t a regressive use of resources. (It patently is.)

Alix @ 9: How can I make this clearer? I am not disputing what the policy IS, but making a point about how your party intends to SELL its policies at the election. James argued in his post above that there was something ‘unfair’ about the way the Fabian analysis took the tax threshold policy in isolation. My rejoinder to that is that the party does seem to be selling the policy in isolation to the general voter. That is the clear message that comes out of the ‘four pledges’. Nothing I have said involves denying that your party’s policies are what you say they are: the point, which you have evaded in two or three sets of responses now, is that the party is selective in which policies it emphasises to the voter. Of course, being selective in itself is fine – it has to be done. But then you can’t complain of ‘unfairness’ if the policies you choose selectively to emphasise get treated on their own particular merits – because, after all, that is how you are in practice selling them to the general voter.

“I am not disputing what the policy IS, but making a point about how your party intends to SELL its policies at the election. ”

Oooooh! Are we allowed to do this with other tax policies then?

Like, say, the Robin Hood Tax?

It’s being sold as something that banks and bankers will pay, not us plebs. But the reality is that it will be us plebs that pay it, not banks or bankers.

So phasing out tuition fees is a BAD idea, Stuart White?

@Blanco,

When we consider tuition fees, we must remember that the large majority of the population have never been and never will go to university or enter any higher education institution. The most we have ever had of any cohort entering HE is 43%, and currently only a third of the working-age population have ever had any HE experience. And they will have been, disproportionately, from higher socio-economic classes.

No matter what your stance on tuition fees, that is a fact that has to be faced, and if you approach the debate without that in mind, you’ll be missing a very important issue and one that explains why much of the country doesn’t consider it a priority.

“how do you explain the large academic literature which discusses basic income and basic capital as variants on the same idea”

I don’t intend to, the fact they’re noted as variants on the same idea makes the same point I do, which is that while the principle is the same, the outcome is extremely different with absolutely varying effects on long term financial stability.

You’re simply comparing chalk and cheese if you’re comparing something that is a life long welfare net that will neither break nor envelop you, to something that amounts to pocket change in the lifetime scale of someone’s disposable income.

But you can have the opinion the removal of CTF would be regressive, I think that it depends how idealistically you look at the actual outcomes of the scheme. I guess I just see it as so far beyond being useful in a person’s life unless they are in the sort of environment where they will likely have had their parents saving for them anyway (with bigger sums of money than the government provide) that I can’t with any heart call removing it CTF either regressive or progressive.

I personally see nothing regressive in removing barriers to access to education. Rich people go to university whether it’s free or not, middle income kids that don’t fall under the grace of their parents generosity and poorer kids have a long term financial barrier to consider. If everyone is given no-barriers (except for ability) access to HE then it is the poorer amongst us that gain the most, not the richest. I don’t know about anyone else but I think that every route, from apprenticeships through vocational qualifications to university degrees should be equally available to every young person, certainly more than a £1k cash prize for reaching adulthood.

BTW, Stuart, the Lib Dem’s aren’t “my party” even if I do end up supporting Lib Dems more than most, I don’t belong to any party .

“No matter what your stance on tuition fees, that is a fact that has to be faced, and if you approach the debate without that in mind, you’ll be missing a very important issue and one that explains why much of the country doesn’t consider it a priority.”

Most of the country doesn’t understand the wider effects of having such a large proportion of the country educated to HE standards, as it’s an indirect or invisible effect it’s easier for them to ignore. By all means, let’s keep going the Labour route of shirking financial responsibility for the HE sector while forcing the students themselves to pay more and more for the huge benefit it has on the UK economy while they take less and less out of it on a personal level (in terms of guaranteed salary, etc).

Since we’ve now strayed into the tuition fees debate, Stuart and I had a discussion about this before.

http://www.nextleft.org/2010/02/are-lib-dems-embarassed-by-their-policy.html

I agree with Lee on this, and think that the way to deal with the problem that scrapping tuition fees benefits middle and upper income earners is to extend the principle and give everyone an tuition entitlement equivalent to the costs of three years post-18 education – some might use it when they have just left school, others might use it later in life. Progressive, universal, and might actually do something to help address the skills shortage that the UK suffers from.

This is actually a more social democratic approach than the Child Trust Fund, in that people only benefit if they want education or training (whereas a more liberal approach would be to give them the cash and let them decide what they want to spend it on, whether that is further education, a car or whatever), but I think this is definitely a case where there are wider social benefits of people having more opportunity to study and learn.

Yeah, that’s a very interesting approach don, hadn’t thought about that kind of “entitlement”, makes a lot of sense.

@16

“By all means, let’s keep going the Labour route of shirking financial responsibility for the HE sector while forcing the students themselves to pay more and more for the huge benefit it has on the UK economy while they take less and less out of it on a personal level (in terms of guaranteed salary, etc).”

Point. Missed. Predictably.

What ‘huge benefits’? No need to tell me, I know.

But the point is that people who want tuition fees scrapped – including the LibDems – have consistently failed to make the case in an effective and coherent way.

The problem is you’re acting like the argument that tuition fees are insupportable is self-evident. It is to you. It certainly is *not* self-evident to the public at large, though, because we have tuition fees, and until you start to realise that a much better argument needs making, instead of using it to score political points, the argument will carry on being lost, as it’s been lost for a decade and will be lost for the forseeable future. There’s little point occupying the moral high ground if all it gives you is a really good view of you losing.

In fact, this inability to properly engage with the justifications for tuition fees is the reason why, let’s face it, the argument has probably been lost completely. Fees are here. They’re here to stay.

And the LibDem’s inability to mount a coherent, compelling defence of higher education as a wider public good is part of the reason. If you set yourself up to champion something, and fail to champion it effectively, then you have failed and need to examine why.

I agree with Lee on this, and think that the way to deal with the problem that scrapping tuition fees benefits middle and upper income earners is to extend the principle and give everyone an tuition entitlement equivalent to the costs of three years post-18 education – some might use it when they have just left school, others might use it later in life. Progressive, universal, and might actually do something to help address the skills shortage that the UK suffers from.

Something very much like this was Lib Dem policy at the 2005 General Election. In a quick look at the current policy papers on the Lib Dem website, it seems to have vanished, which is a pity. I think it’s an excellent idea.

“In fact, this inability to properly engage with the justifications for tuition fees is the reason why, let’s face it, the argument has probably been lost completely. Fees are here. They’re here to stay.”

I’m not attempting to justify the policy here, this thread isn’t even about tuition fees it’s about the Fabians misrepresenting the facts. Indeed the tuition fees issue has only come up because one individual has tried to talk about the regressiveness of education costs by cherry picking the tuition fee policy (which you seem happy to follow) without considering the overall effect of other redistribution of public spending throughout a person’s life in other policies.

If you want to have a proper discussion about tuition fees then start a proper discussion, one that takes in to account the wider picture.

Lee, if you don’t want a discussion on tuition fees in this thread, could I suggest you take the following steps in future.

1. Don’t start discussing tuition fees. That, I would suggest, was your first mistake.

2 (very important here). I haven’t actually given my stance on tuition fees (on purpose), but that’s twice you’ve assumed what it is. Don’t – really, don’t – misrepresent people, especially not in a thread where you’re taking people to task for what you consider misrepresentation.

Calm down Ken, easily riled ain’t ya?

1) I’m not discussing tuition fees, I’m making comments about what you’re saying. Specifically my comments so far (that have had tuition fees as a part) have been about how you can’t compare tuition fees to CTF, how you can’t call something regressive when it isn’t, and then finally to you in general comment that I believe that the country doesn’t support tuition fee abolition as much as I believe it should because of the problem of people not understanding the benefits of a service or asset of this country so not forming an opinion. In that sense I was actually agreeing that there has to be better communication about things that the public don’t necessarily see to the public to make them see.

Is it my turn to get all huffy and demand you don’t misrepresent what I’m saying now?

2) I haven’t alluded to your stance once, let alone twice. But you *are* following the cherry picking of a particular policy outside of the relation it has to everything else, otherwise you wouldn’t just be commenting about tuition fees. That’s what is so fun about these online debates, because someone like Stuart can completely skew the discussion with one point of contention that someone like you, Ken, has a particular bee in your bonnet enough to interject over, and suddenly the original discussion is sidelined.

This is precisely what LFF tried to do with their half baked report, and it’s nice to see the tactics continue, whether or not you, Ken, are a willing participant in the diversion or just innocent enabler.

Back to the main point.

James writes: “The fact that raising the tax threshold helps people on higher incomes more than people on low incomes is not, believe it or not, a startling revelation. We know”

I am more interested in what the policy is than how they pitch it. As it happens, I have heard the policy is very often and mostly pitched as helping people on lower incomes more. This is Clegg in The Spectator last week, but I do not think this is isolated: “We’re saying “purely spending cuts”, and for a number of reasons. If you want the economy to grow, you must stimulate demand. Any economist will tell you that the best way to do this is by giving tax breaks to the people who tend to spend more of their money. That is to say people lower down the income scale”.

As to the actual policy content …

Does anyone disagree with the proposition (of James’) that “raising the tax threshold helps people on higher incomes more than people on low incomes” – or can we now take that as common ground?

And would anyone disagree with the proposition that “implementing the overall LibDem manifesto package would decrease income inequality between the top and the middle, while it would increase income income inequality between the bottom and the middle“, or is that something that people would contest as an overall summary of the distributional impact of LibDem policies as a whole?

I admit that I may be missing some other policies not mentioned in this thread. Lots of people have pointed to the package of measures at the top. Are there also significant proposals which help those earning under 7k, carers and those not in work?

If that statement was accepted, there would be arguments for and against that from different points of view. Arguments put in favour include that simplicity; wanting a flatter tax system; justifying on moral grounds the focus on work over non-workers – “it appeals to people who believe in hard work and initiative” (as Clegg says) – and the point that the positive change in people’s absolute position and circumstances matters more than the change in their relative position. All of these argue from different perspectives that distributional income inequality is only one of the measures of what’s fair. But I don’t think anybody outside the libertarian right dismisses income inequality as one important focus of fairness, and I don’t think many people are arguing against the idea that income inequality is about gaps and gradients across society (ie that both bottom-middle, middle-top) matter?

Thanks, Sunder, for refocusing the discussion. I’ll have to pursue my disagreement with the Griffin-Paskini alliance on tuition fees at some other time – though, in a parting comment on this I recommend my article in the latest issue of The British Journal of Politics and International Relations, ‘A Modest Proposal? Basic Capital vs. Higher Education Subsidies’, which any unbiased reader would acknowledge as definitively rebutting all of their arguments. (Or not.) (I can email a copy to anyone who is interested…)

In the meantime, I would like to know what Lib Dems (and Lee, if he is minded) think about your two factual points.

I’m particularly intrigued as to what James himself thinks about them since he is explicitly on the social democratic wing of the Lib Dems and therefore must see the force in particular of your second point about the impact of the overall package on income inequality.

“But I don’t think anybody outside the libertarian right dismisses income inequality as one important focus of fairness, and I don’t think many people are arguing against the idea that income inequality is about gaps and gradients across society (ie that both bottom-middle, middle-top) matter?”

“Anybody” is a very extensive term.

I have a very strong feeling that for the man on the Clapham Omnibus “it’s ridiculous tax the poor, innit, then giv’em money?” is both powerful and about as far as this policy needs explaining.

Stuart

Thanks. Of course, I also note that James personally and the Social Liberal Forum are often arguing for egalitarian policies in internal LibDem debates, as he notes in the initial post with his comments on universal tax credits, basic income and other issues.

I also saw that Social Liberal Forum seem to be trying to clarify what the leader’s position is on “purely spending cuts” to close the deficit, and challenging the idea that this should become the party’s policy.That (rather than the tax policy itself) seems to me the big substantive policy issue which remains open inside the party in the short-term. The initial post here suggested that Clegg’s position is unclear at best. These private briefings that the leader may have misspoken are hard to read, since there has been no public attempt to change or nuance the Spectator interview statement, the emphatic tone and positioning of that struck me as deliberate and planned rather than accidental.

Lee, nothing you’ve written makes sense there. I’m not sure how you got the job of telling other people what they should be discussing, why they’re doing it, or what they think about things, but I suspect it was not through a democratic process of electing you netcop and general online psychologist.

One of the fun things about discussions of this kind is how easily someone can suddenly go a bit fish kettle hatstand and then how funny it is when they try to pretend that they haven’t.

@24 Sunder Katwala
Have you heard of “Utility functions”? An extra £705 is much more valuable to someone on £10k per annum than someone on £100k per annum
The maximum value of this proposal is to those on £10k, i.e. those working a full week for the minimum wage.
These people should not be paying income tax – and getting rid of the hassle of paying tax and keeping accounts is an added benefit (and will reduce the workload of HMRC so they might have time to check things and make fewer stupid mistakes which will again reduce the hassle for honest taxpayers earning more than the minimum wages)
Your complaint is that a policy proposal to help the poor at the expense of the rich helps workers who are fairly poor by more than those who are living solely on benefits. But surely the benefits have been set at a level that New Labour claims to be perfectly correct? The LibDems think that poorer workers should pay less tax. Their proposal will increase inequality between the bottom and the top of the bottom quintile but not between the top slice of that quintile and the middle, so your language is misleading. No-one is going to be worse off except the top decile, the second to ninth deciles will be modestly better off. In relative terms the benefit is greater for those who are poorer, surely a good idea?
Increasing the level of benefits is a separate subject from setting the personal allowance level for income tax. Since when did any Social Services Minister say “Oh, I cannot increase the level of benefits for the chronically sick or disability benefit or … because I have to wait until I can persuade the Chancellor to increase the level of personal allowances by the same amount”?