Don

Thanks for the write up. The universalism point is an important one to pick out.

There was a launch event last night – extensively twittered here.
http://twitter.com/nextleft

This is a good point, and similar to one made by Matthew Taylor on Newsnight’s Politics Pen last night. It was suggested to him that Child Tax Credits should be taken away from families earning over £30,000 because it’s waste of money as they don’t need it. He responded that you need to keep the middle classes on side in order to be able to enact truly effective policies.

I think it’s a point I’d tend agree with, but I can’t help thinking it absurd that millionaire sixty year olds with several cars on their driveways get free bus travel while young people from poor council estates have to struggle to get together the several pounds it costs to catch a bus nowadays. There is no way that is social justice.

http://petespolitics.wordpress.com

Perhaps we should separate Child Tax Credits from Child Allowance (or whatever it’s now called). As someone who earns over 30k and has a baby, our family gets the allowance (which is nice, but we could obviously live quite happily without). But I didn’t bother to claim any Tax Credits, as the government online calculator suggested that we’d only get in the order of tens of pounds. So I wonder how many people on incomes similar to mine actually bother to register for Tax Credits?

Which is to say, the current system of means testing actually does seem to do pretty well.

Similarly, one could defend bus passes on the basis that few well-off people actually use them (and I think the cost to the taxpayer is vaguely per use, not per issue); those that do use a bus pass (perhaps in inner cities etc.) are helping to reduce traffic congestion, reducing carbon emissions etc. which is perhaps worth paying for?

Hi Don. I went to the launch last night – I thought it was interesting, though there were three other things to say;

1. There was annoyance from some of the audience that the speakers didn’t talk about gender inequality and race inequality. I am inclined to say that’s an unhelpful position. Those things are being talked about fairly loudly at a fairly high level (gender more than race, perhaps) – if anything more so than general inequality. To talk, in a particular context, about x is not to say that y is unimportant – if we start playing at the inequality olympics I think the message gets muddied and debate restricted. I wouldn’t go to a debate on inequality run by the Fawcett Society and complain that they weren’t talking about class, for example.

2. Apart from, I suppose, the minimum wage, the focus was overwhelmingly on how the government can promote fairness through the tax and benefits system. I suppose that’s fair, it’s the easiest thing to grasp and undoubtedly the area where the government has the easiest access to the biggest levers. However in the context of ‘deserved’ inequality, it’s probably just as important to talk about the initial distribution of reward as the impact the Government has on the final distribution. If the government is, for example, ideologically committed to attracting the world’s rich to live in London, it will affect inequality, even if we might accept that in exchange for economic growth overall. Similarly if the Government supports policies which substantially increase the supply of unskilled labour, it will bid the price of that labour down towards whatever legal minimum is set, or below if enforcement is weak.

3. The speaker from the IPPR talked about equality as being set in the dimensions of opportunity, wealth, power and income. Those are probably the right ones, but I do wonder whether in the current climate we can get away with using income as a proxy for purchasing power. I know I’m a bore on this point, but let’s say the government somehow succeeds in reducing the post-tax income of the wealthy by 10%, and increasing the post-tax income of the poor by 10%. That’s great, but if the cost of home cinema systems, bentleys, yachts and mortgages falls by 15%, and the cost of rent, food, heating and bus passes rises by 15%, then I would argue that it’s not really meaningful to say that inequality has fallen.

- Columnists like Polly Toynbee and Yasmin Alibhai-Brown have been suggesting that the government should remove child benefit and free bus passes for older people from middle class people and make them only available to the poor. This research shows how this is a totally misguided approach – setting the ‘poor’ against the ‘middle’ is entirely the wrong way for people who care about poverty and inequality to go.

There’s also the question of the efficiency of delivering universal benefits compared to means-testing for them.

One thing I noticed in a Guardian report on this was the way in which people surveyed seemed to believe in the notion of the ‘deserving’ and the ‘undeserving’ poor – something neither front bench has bothered to challenge over the last three decades.

“It was suggested to him that Child Tax Credits should be taken away from families earning over £30,000 because it’s waste of money as they don’t need it.”

Those families would argue that they have paid their NI and are therefore entitled to their “insurance”.

Just want to tie your points 2 and 4 together. The middle class (I come from a low-middle to middle-middle family) have no objection to rewarding success. With the “super-rich” even when they’re being rewarded for failure or mediocrity we can still acknowledge that they had done something to reach that position in the first place.

With the “poor” they seem to be rewarded by the state for failure, they have done nothing to gain such rewards except exist. Compare attitudes shown towards the “poor” being given money with those who have simply inherited it over those who ‘earn’ it.

As you say removing bus passes etc will simply push the middle and lower against each, but so would handing out such things to the lower-paid when not made available to all. ‘It’s just positive discrimination – my son has to pay bus fees to attend all those job interviews while those yobs of the estate are gallivanting about for free’.

“Compare attitudes shown towards the “poor” being given money with those who have simply inherited it over those who ‘earn’ it”

Well, according to polling, inheritance tax is (inexplicably) more unpopular than income tax. So apparently the British believe inherited wealth deserves more protection from the Government than earned wealth.

“With the “super-rich” even when they’re being rewarded for failure or mediocrity we can still acknowledge that they had done something to reach that position in the first place.”

There was an interesting session on this at the launch last night, actually, talking about how people don’t want to believe in unfairness if they can help it, and therefore rationalise the richness of the rich by inventing reasons that they deserve it, even when no such reasons exist. It was suggested that the banking crisis and so on have shaken some of this out of people.

Columnists like Polly Toynbee and Yasmin Alibhai-Brown have been suggesting that the government should remove child benefit and free bus passes for older people from middle class people and make them only available to the poor. This research shows how this is a totally misguided approach – setting the ‘poor’ against the ‘middle’ is entirely the wrong way for people who care about poverty and inequality to go.

But when Toynbee et al. say ‘the middle’, they too mean ‘people like me’. The problem here is the conflation of ‘middle class’ (a set of values and habits) and ‘middle income’. Toynbee might be middle class (and even that’s a stretch considering her ancestry) but she’s certainly nowhere near middle income. The problem is that she can’t describe herself as ‘rich’ and talk about taking bus passes away from ‘the rich’, because she doesn’t realise how rich she is compared to 99% of everyone else.

That point aside, I pretty much agree with your other observations and conclusions.

I think the longstanding attachment of the left and the labour movement to universalist forms of welfare has historical routes. The architecture of the modern welfare state was established very much agains the background of the thirties duriing which the hated means test loomed large.

jdc:

I wouldn’t go to a debate on inequality run by the Fawcett Society and complain that they weren’t talking about class, for example.

I see your point – but I’d be tempted to, if only to recognise that class does shape aspects of gender (e.g. in education, employment and life chances).

Hmmm, where to start….

Universality is still generally accepted as being a good idea for benefits of relatively low value as the cost of administering means tested versions can become disproportionate. And as somebody above suggested there is a self limiting aspect in that those better off are less likely to claim because they don’t see it as being worth it. Mind you this effect was probably stronger when you had to queue up at the post office to pick up your Child Benefit.

“Those families would argue that they have paid their NI and are therefore entitled to their “insurance”.”

They would but its worth remembering that National Insurance stops increasing at about £44k pa which limits the moral case for continued entitlement at ever higher incomes. Again for universal benefits there’s a pragmatic side in that it costs a lot to means test. There is an upper earnings limit for entitlement to Tax Credits which I think is about £58k pa so those suggesting £30k are arguing amounts rather than principle.

Unfortunately I think the biggest lesson from this survey is a reminder of some of the less generous aspects of human nature propped up by our ingrained Victorian attitudes. I think there’s also a strong element of ‘Daily Mailism’ where its always you that misses out and is discriminated against while ‘they’ get everything.

jdc:

To my mind inheritance tax falls into the same group as stamp duty – there appears to be no reason for the state to collect it. As to the poll; I’ve earned money and pay tax to maintain the state, I save it and the state collects more tax on it, then I die and try to pass it on to my dependants and the state tries to take yet more from it. Take that and add it to the obvious grief anyone would go through at that time and I’m not at all surprised that it would gain a greater degree of unpopularity “Your father’s died and now we want some money”

And yes we’re a weird rationalising species.

Rob, I think that’s a bit unfair on Polly. She often points out that those who see themselves as “middle income” earners are often earning considerably more than the median wage, and she’s always been pretty honest about being a comparartively high earner herself.

Wow, what a self-serving set of answers! I guess we are all middle class now.

I would suggest not whinging about high pay for the super rich, which (when not due to genuine value added work) is really just an epiphenomenon of some rather deeper inequalities of power generated by the state/corporate system. Instead, look at the ridiculous licenses afforded to corporations (recently banks especially) that allow them to generate ridiculous profits as if they were monopolies. Then abolish them! http://libertarianalliance.wordpress.com/2009/06/17/review-by-sean-gabb-of-kevin-carsons-organization-theory/

On the ‘means testing vs universal’ point, there are a couple of other things which support universalism:

1) means testing is in itself expensive. If the government raises gbp600m through PAYE and gives everyone gbp10, that’s a lot cheaper to administer than raising gbp60m through PAYE and giving gbp10 to a tightly defined group of 6m people. And the difference for the other 54m people is negligible, as they’re getting the tenner to offset their extra tax paid.

2) marginal taxation rates are what truly screw people in the working poor-to-lower-middle income range. if getting a job means you’ll lose [a sizeable proportion of] child benefit, if getting a promotion means you’ll lose free transport, then there’s a massive state-sponsored disincentive to do well.

Citizens’ basic income FTW!

@13 my company makes a sale, we charge VAT on it, we make a profit, it pays tax on it, it pays me money, I pay tax on it, I buy a bottle of gin, the off-license proprietor charges tax on it, he makes a profit, he pays tax on it… etc. That’s how the economy works. And it’s why anyone who objects to IHT on the basis of double-taxation is a fucking cretin.

“On the ‘means testing vs universal’ point, there are a couple of other things which support universalism:”

3) It creates a natural disunity between people that should be united, a dividing line in the sand which causes resentment.

@15 Sean Gabb seems to be arguing that we’d be better off if Big Government hadn’t interfered in the free market to enable companies to build roads, railways and communications networks. Convergence between radical libertoonians and radical greens, who’d'a thunk it?

And it’s why anyone who objects to IHT on the basis of double-taxation is a fucking cretin.

And so on, and so on…

A short Comment is Free piece about this by me, which is mainly a short sketch of a few findings, also noting the universalism point
http://www.guardian.co.uk/commentisfree/2009/jun/23/inequality-unfair-britain-poor

The Guardian’s news report focuses on the persistence of negative stereotypes of the poor
http://www.guardian.co.uk/society/2009/jun/22/benefits-income-poverty-fabian-rowntree

thanks to jdc for interesting comments reacting to the launch too.

Andy@12 is right about what he calls ‘Daily Mailism’ – “where its always you that misses out and is discriminated against while ‘they’ get everything”.

Take these poll findings for this project to see just how widely held a view that is:

For example: Ordinary people in the middle have a really tough time overall, because they work hard, but without the rewards of the rich and without the benefits of the poor
79% agree, 10% disagree (9 neither)

Poor people at the bottom have a really tough time overall, because they work hard but without the rewards of the rich or the middle, and with more stress and anxiety than other groups
59% agree and 24% disagree, (15 neither)

Rich people at the top have a really tough time overall, because they work hard, with more stress and more responsibility than other groups
7% agree and 75% disagree (15 neither)

Chapter 5 of the full report has some interesting detail about how deliberative workshop participants themselves responded when asked to design or amend current benefits
http://www.jrf.org.uk/sites/files/jrf/attitudes-tackling-economic-inequality-full.pdf

One problem with the politics of tackling poverty is a lack of public salience, understanding or support for that.By contrast, when it comes to what is called the ‘politics of envy’ may not be constructive or politically useful- but whatever the problems with that are, they are not rooted in the lack of public support for it!

Part of what the report shows is that digging into that “Daily Mailism” finds it is also complex, founding some egalitarian as well as anti-egalitarian attittudes: particularly that (in a mirror image to what New Labour and the Tory Progs) there is broad public support for tackling inequality at the top, but it is much harder to get support for helping those at the bottom. (The Mail and Express didn’t start attacking city bonuses a year ago, for example). There is overwhelming support for doing more for the ‘middle’ (thought that is shorthand for ‘people like me’, almost regardless of who/where I am). We can all see how these types of attitudes are reflected in political discourse (often in an arid way … hard-working families, etc). One of the implications of the research is that (while these attitudes are often barriers and difficult in many ways) they could also present some untapped opportunities to try to mobilise more progressive responses.

And a large part of the constructive answer has to be (as Don suggests) about forging issues and coalitions between the middle and the bottom, whereas an anti-egalitarian politics (as we have seen in the US and UK … this was the story of the 1980s and of the Bush era in the US) is fundamentally about making cleavages between the middle and the bottom the most salient public issues will see the right win.

Chris Dillow: Shrink the State, a leftist aim.

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2009/04/shrink-the-state-a-leftist-aim.html

There is something mad (but typically Brown) about people earning £30k receiving benefits.

There is something mad (but typically Brown) about people earning £30k receiving benefits.

Yes, but as John b observes above in #16, it’s means testing that costs most of the money (and for that matter, if it concerns you, grows the state).

I used to work for the DSS, in means-tested benefits. I recall seeing some figures on this and while I wouldn’t take them as gospel (they’re out-of-date anrd my memory is not reliable) I seem to remember that staff costs were about two-thirds of budget, i.e. only about 33% of taxpayers’ money actually went to the claimants, where it was supposed to go. Meanwhile when it came to Child Benefit – which is universal – the figure was bizarrely low, something like 2% (as I say, don’t take that as gospel, but it really was incredibly low in comparison).

If you’re actually looking for cost savings, and an absence of the sort of state surveiilance and interference that many peope, say they are, universal benefits are a useful and practical option.

Thanks EJH, that’s an even higher admin cost than I thought. Might dig around some NAO reports and see if there’s anything official been published…

That’s very interesting.

I would prefer to see benefits replaced by high tax threshold or basic income or some such “universal” approach.
Sorry if I was confused, I wasn’t arguing for means testing.

You’ll note that I exprssed my figures carelessly, since in the second instance (Child Benefit) I gave 2% when I should have given 98% (i.e. I gave the amount spent on staff costs, not, as I had done with means-tested benefits, the amount spent on the benefit itself). Anyway, I’m sure people got the point. Means-tested benefit, most of the money goes on staff. Universal benefit, nearly all of it goes to claimants.

Apologies. And as I said, don’t take my figures as read. But as a general point, there are huge advantages involved with universal benefits that should at least be understood and thought about before complaining about apparent absurdities.

“There is something mad (but typically Brown) about people earning £30k receiving benefits.”
It might sound like it, if you call them benefits. If you call them universal entitlements then, no. Even the richest person is entitled to his (it’s a man, isn’t it?) tax-free allowance.

As John B says ‘Basic Citizen’s Income!’

Replaces the tax-free allowance, enables the unemployed to take up work without worrying about how they can pay the bills before the first pay cheque, or getting benefits reinstated should the job not work out (I’ve been there!), etc. Cheaper to administer and everything over that amount is subject to tax. Hits all the right buttons for me!

Benefits are ultimately just a safety net; what people need are real, fulltime jobs, and that involves a radical restricturing of society to one based on manufacturing and agriculture.

Offering women and ethnic minorities a few hours a day tidying the desks of bankers and then topping up their minimum wage with benefits or tax credits isn’t going to reduce inequality.

@28
Shatterface. Spot on.

Shatterface “what people need are real, fulltime jobs, and that involves a radical restricturing of society to one based on manufacturing and agriculture.”

I suppose it depends on your definition of “real” however I would like to point out that there are full-time and even more part-time jobs out there. However most are of the “I’m not doing that” type that as a result get staffed with immigrants leading to the Daily Mailesque ‘taking our jobs’ headlines.

Unless you’re going to force people to work it seems for some to be a case of holding out for a job that pays the most for the least amount of work. Just look at the popularity of “Big Brother” “Britain’s Got Talent” and how such shows are becoming aspirational.

FlipC.

However there is a real debate to be had about how low a minimum wage can be (and in fact the debate has been going on since the minimum wage was brought in amidst cries that the economy was about to collapse and William Hague shouting ‘Armageddon!’).

Along with, like john b rightly (whats goin on) argues @16, the issue of “marginal taxation”.

Of course a lot of it is relative, but I don’t blame certain people for shunning certain “jobs” (emphasis on the speechmarks) defined by absolutely ridiculous wages. Cue wider issues of illegal immigration (the film It’s a Free World by Ken Loach is an excellent take on the issue), gangmasters and related consequences.

Thanks to everyone for comments, this is an excellent discussion.

Since people have mentioned citizens’ basic income, we discussed this a while back https://liberalconspiracy.org/2008/12/28/basic-income-good-in-namibia-bad-in-libertopia/

Essentially, basic income is either about taking from some groups of poor people (particular parents, people in areas with high housing costs and the disabled) to give to others, or about taxing higher earners really quite a lot more to provide for all on a more universal basis. The former is extremely unappealing, the latter might be appealing as a way of building an alliance between middle and lower income earners, but either way there are some people who would lose out in quite a big way from basic income policies, it is not a magic panacea.

On Shatterface’s point – agree on the need for real, full time jobs, but I don’t see why those would be in manufacturing and agriculture (areas which will increasingly need fewer workers due to technological improvements). Instead the growth areas of employment are presumably going to be in things like caring and green technology/adapting to a zero carbon society?

…or the service industry. Don;t forget call centre workers are the 21st century version of the old notion of ‘working classes’.

I can’t remember who suggested capping differentials between the highest and the lowest earners within the same company. Beware: not in a Cuban or Soviet way, but in a way that avoids someone routinely making millions, literally, every year and someone making 8,000 a year in a full-time job.

I know some are going to scream at me for this, but do not forget the wider benefits for society. Here’s three for starters:
a) less need for state and bureaucratic machine to chip in with tax credit or other ways to top up crap wages; b) increased spending power for many meaning that money is in turn ploughed back into the economy, supporting businesses and jobs; c) increased morale and motivation. I will never forget how unmotivated my colleagues and I were when I was working as a waiter back in the pre-minimum wage days. £2-80 an hour that was. In 1997.

“And it’s why anyone who objects to IHT on the basis of double-taxation is a fucking cretin”.

Except that no one choses to die ! In your examples you pay taxes on activities and purchases that are within your control.

I would like to hear a sensible argument that justifies exactly what fucking business it is of the taxman if my parents chose to leave me their house, especially since the alternative is that the council force it’s sale to pay for nursing home fees that people without any assets get for free ??

I would like to hear a sensible argument that justifies exactly what fucking business it is of the taxman if my parents chose to leave me their house

That you, personally, are receiving an item worth several hundred thousand pounds that could
otherwise be converted into tax-free cash…

Can someone please explain to me the difference between fair and unfair inequality? – or at least point me to where its explained?

We were always taught at school that VAT was not a very good tax as it was more of a burden on the poor then the rich because they both pay the same percentage? Is that still true?

More as a proportion of income – yes
More in absolute terms – no

Fair inequality – as in having put considerable time and effort into getting decent job I should enjoy a higher standard of living than someone who hasn’t bothered and sits on their arse all day watching trisha

Unfair inequality – The way that intelligent children whose parents don’t happen to be rich are forced to be educated with the pond life at the local comp, completely destroying their life chances through no fault of their own

Shatter – you hit the nail on the head!

Benefits are ultimately just a safety net; what people need are real, fulltime jobs, and that involves a radical restricturing of society to one based on manufacturing and agriculture.

FlipC, 30 – re-read the bold part of the quote.

Minimum income is the way to go – minimum wage is fine, yet, as an hourly rate it doesn’t matter if you work one hour or 80.

For the poor to be pulled out of poverty what is needed is a focus on them – a real focus from the full range of middle-class, middle-earners and those below them in class and earnings (for want of better terminology).

Yet, I still come back to the sketch with John Cleese, Ronnie Barker and Ronnie Corbett – still very applicable in the UK today.

36 – “We were always taught at school that VAT was not a very good tax as it was more of a burden on the poor then the rich because they both pay the same percentage? Is that still true?”

jdc knows more about this, but the way VAT currently works, it is not more of a burden on the poor, because many essential items are exempt from VAT.

The poorest spend most of their money on rent (no VAT), food (no VAT), clothing their kids (no VAT), health essentials (no VAT), heating and lighting their homes (no VAT cut), and transport to and from their jobs if they have them (no VAT cut).

More discussion in the comments at https://liberalconspiracy.org/2009/04/22/vat-should-be-cut-even-further/

“For the poor to be pulled out of poverty what is needed is a focus on them – a real focus from the full range of middle-class, middle-earners and those below them in class and earnings (for want of better terminology).”

We’ve had this for the last 10 years – in fact, the only people whove seen significant rises in standards of living under nulabour are the very rich and the very poor. Middle classes earnings have risen, but they’ve born a disproportinately high tax burden. By historic standards the middle classes have seen a relative drop in their standards of living – as in they haven’t risen as fast as they did in the 40 ish years since WW2.

People like you will I think only be happy when we have soviet style absolute equality, with the brain surgeon and the dustman earning the same.

“The poorest spend most of their money on rent (no VAT), food (no VAT), clothing their kids (no VAT), health essentials (no VAT), heating and lighting their homes (no VAT cut), and transport to and from their jobs if they have them (no VAT cut).”

So they don’t smoke, drink or buy plasma TVs then ? And takeaway food isn’t VAT exempt.

The Fabian Society and Joseph Rowntree Foundation have just published the findings of research about public attitudes to reducing poverty and inequality.

By conflating poverty and inequality, such research is fundamentally flawed from the outset. They are entirely different issues.

We have a consensus that the state should provide a safety net so that people do not suffer poverty. Where this help is positioned and the mechanism by which it is provided (means testing, citizens income or whatever) can be debated but there is a general consensus that people should not be allowed to starve. There is a consensus that everyone should have access to basic health care according to need. Further, I believe there is probably a consensus that the notion of “relative poverty” should be considered when the level of the safety net is set.

Regarding inequality, there is also a consensus that children should have access to a level of education that will allow them to fulfill their potential and provide them with the opportunity to make the best of their lives. Their is no consensus however that inequality should be eradicated and that there should be universal egalitarianism.

Indeed a logical analysis of how human beings are, how they are motivated and how they function in the world clearly shows that to try to create a society where inequality does not exist is madness- and that to do so results in a great deal of misery. Men and women were not all born or created as equals- every individual has particular, different and unequal abilities and propensities.

Those that pretend otherwise and advocate social and fiscal engineering in a vain attempt to try to level the playing field are the cause of many of our problems, both nationally and internationally.

Hi Will,

The number of jobs in manufacturing and agriculture have been shrinking for years. What kind of ‘radical restructuring’ will create the hundreds of thousands of new jobs in these sectors which pay people enough to be able to live a decent life?

And “For the poor to be pulled out of poverty what is needed is a focus on them – a real focus from the full range of middle-class, middle-earners and those below them in class and earnings (for want of better terminology).”

I thought the implication of the research is that this approach doesn’t attract public support, and that instead we need to focus on things which benefit both middle and lower income people. But I might be misunderstanding what you are arguing for here.

People like you will I think only be happy when we have soviet style absolute equality, with the brain surgeon and the dustman earning the same.

*sighs* – *Looks down at the ground and thinks “Is it worth it?*

Well I guess Its easier (being pious and patronsing) than actually putting together a cogent argument………..

Pagar makes a massively more eloquent exposition of my shorthand.

Hi pagar,

The JRF research does actually agree with your conclusions (and doesn’t conflate poverty and inequality in the way that I might have suggested) – that there is wide support for reducing relative poverty and promoting opportunity but that most people don’t find the arguments in favour of egalitarianism persuasive.

Absolute economic equality is a) impossible and b) probably undesirable anyway. But most people would gain from lower levels of inequality.

Hi, Don

Because of the structure of the class system – and not really knowing which part we are a part of throwing a blanket over the middle-class, working-class may work for the observation.

IF the middle-class and working-class can, through whatever is needed, come together to see the real poverty that is still inherent in UK society – to then focus in getting those people out of that poverty I think would be a start. Like looking at one problem at a time and fixing it rather than leaving the wall un-plastered before moving on to the next job.

The number of jobs in manufacturing and agriculture have been shrinking for years. What kind of ‘radical restructuring’ will create the hundreds of thousands of new jobs in these sectors which pay people enough to be able to live a decent life?

I think that the obvious one is a real green economy. I know people do scoff at that – but it is there for the taking.

You have support industry, manufacturing industry, administration, management and even frigging investment if the government would get their arses out of their chairs! You have cars that can be manufactured and run on batteries – in Canada there is one company converting standard cars to their battery powered ones – I will look for their name, forgot, was on CBC. You have Tesla in Cali – they need 350m bucks to build the factory – where is the stimulus cash for that?

Convert houses to greener technology – OK, I’ll stop there as this will get tediously long – but what I am saying is that the UK has missed these opportunities before and this one is slipping through her fingers, too.

I look at that opportunity and wonder why government hasn’t taken the lead. Hell – invest public funds – shows the money men how profitable it can be and let them buy ready-made companies – you won’t get investment by just giving tuppence off a tax bill.

48 – agree with all of that

@41 the taxation on fags and booze isn’t primarily VAT, and no, the poorest don’t have plasma TVs.

Donpaskini (32): Agree that carework and (potentially) green industries could provide ‘real’ work but unfortunately the former pays atrociously and the latter is rather vaguely defined.

Don -

http://www.electrovaya.com/

As we can only add one link at a time…

@ 50 John B – how do you know that ? How do you know what poor people do or do not have ? Most economists are of the opinion that indirect taxes i.e one which take no account of income, like VAT, by definition fall disproprtionately on lower income groups. If we are gonna get picky then poor people don’t pay their own rent anyway.

But most people would gain from lower levels of inequality.

Hi Don

I thought WE had a consensus for a moment but I’m afraid your last sentence spoiled it.

We agree that

1) People are inherently unequal. (eg I am a less talented footballer than Ronaldo but a more logical thinker than Sally!!!).

2) Absolute economic equality is impossible and undesirable.

The only way to achieve lower levels of inequality is to legislate to redistribute wealth in order to achieve this objective- to indulge in social or fiscal engineering. Not only is this wrong in principle, the impulse to do it is also flawed. Let’s stick for a moment to the football analogy.

English football clubs and the ability of the players who play for them are not equal. The top four clubs have more money and better players the the rest of the Premiership. The Premiership have stronger teams than the other leagues.

It would be possible for the FA to say, this is not fair and to ensure that gate receipts, television money etc be distributed more evenly amongst all clubs. They could also dictate, should they wish to do make things more equal, that Premiership clubs other than the top four got a goal of a start in every game.

The result of doing so would be that the top clubs, having less money and less success, would no longer be able to afford the top players and they would go abroad to play. The standard of football in England would consequently decline overall and fewer people would be interested in watching it. Despite their good intentions, the FA would have succeeded in destroying the success of English football as a whole. Nobody would have benefited.

State intervention to impose lower levels of inequality is similarly doomed to failure.

This seems a bizarre analogy but the Sports Minister recently proposed Government intervention to compel a share out of Champions League earnings among smaller clubs!!!

@ 54

Or you could use the F1 model. Brawn GP making Ferrari and McLaren look stupid – all because of levelling the playing field, as it were.

“The only way to achieve lower levels of inequality is to legislate to redistribute wealth in order to achieve this objective- to indulge in social or fiscal engineering. Not only is this wrong in principle, the impulse to do it is also flawed.”

The principle of redistributing wealth is well established – the debate is about how far to do so (if you are absolutely against this on principle, then that involves getting rid of everything from unemployed benefits to child benefit to income tax to tax credits to social housing to the NHS).

On the football analogy, again, some of the money made by the Premier League and top clubs is redistributed to smaller clubs and the grassroots, so we’re arguing about how much rather than points of principle. And the effects of inequality aren’t as benign as you suggest – already it’s the case that only 4 clubs can win the Premier League and relegation in the Championship and Leagues 1 and 2 is largely a matter of whether a club has to go into administration or not. Would it really be the case that fewer people would watch football if a wider range of clubs could win the Premier League rather than just the big four?

The German League has a lower standard of players, less TV money, less inequality between clubs…and the highest average attendances in Europe (as well as a top division where five different clubs lead the table at different times, and where the championship was not decided until the last day).

The principle of redistributing wealth is well established – the debate is about how far to do so (if you are absolutely against this on principle, then that involves getting rid of everything from unemployed benefits to child benefit to income tax to tax credits to social housing to the NHS).

Once again you are conflating poverty and inequality. We’ve agreed that we should pay to stop the first but you are arguing that we should pay to mitigate the results of the second.

That is what is stultifying in its effect on our economy.

And German football is boring. Am I wrong?

“Once again you are conflating poverty and inequality. We’ve agreed that we should pay to stop the first but you are arguing that we should pay to mitigate the results of the second.”

But by paying to stop poverty, we are paying to reduce inequality – it is very hard to do one without the other.

“And German football is boring. Am I wrong?”

It is a lot more fun (and cheaper) to go and watch and more people do so, and the same four club don’t always finish in the top four. What’s not to like?

“Once again you are conflating poverty and inequality”

And to a degree you’re ignoring that some level of inequality economically also translates in to inequality of opportunity. I don’t think that you need to go anywhere near economic equality to make small moves in inequality that will give everyone the same opportunity and all they need to make a good start to their life.

This

but to take the pagar/don discussion 57@58 about the football analogy, a subject on which I claim a particular interest.

Yes, you could be wrong about German football (though your point about domestic competitiveness in a European/global context is well exemplified by the Bundesliga/Premiership contrast). In this case, there may need to be fair rules (eg on club debt) at a pan-European level to protect the integrity of the game.

The Times May 25, 2009
Bundesliga shows English how to put pleasure before business
Gabriele Marcotti

…. It was a fitting finale to what was arguably the most exciting domestic campaign in Europe. The Bundesliga offered up myriad compelling storylines this year: from tiny Hoffenheim’s impressive rise – and stunning collapse, although they did finish a creditable seventh – to Hertha Berlin’s unlikely title run;from Jürgen Klinsmann’s sacking at Bayern to Magath announcing in April that he would leave Wolfsburg at the end of the season, come what may.

All this against the backdrop of the most free-scoring leading league in Europe – with 2.92 goals per game – and the best-attended. Indeed, in the penultimate week of the season, the Bundesliga averaged 50,959 spectators across its nine matches. To put this in context, only three Barclays Premier League clubs drew as many as 50,000 in any game this season.
http://www.timesonline.co.uk/tol/sport/columnists/gabriele_marcotti/article6355548.ece

And to a degree you’re ignoring that some level of inequality economically also translates in to inequality of opportunity.

Hi Lee

On my original post I said that

“Regarding inequality, there is also a consensus that children should have access to a level of education that will allow them to fulfill their potential and provide them with the opportunity to make the best of their lives.”

What is dispiriting is that, despite large sums of money having been being poured into education, we still seem to be miles away from the objective. Another post perhaps.

Sunder/Don

I am impressed and humbled by your knowledge of the Bundesliga. I know nothing about it and am prepared to accept that I am entirely wrong.

How are you on baseball?

baseball? Is that like rounders?

“What is dispiriting is that, despite large sums of money having been being poured into education, we still seem to be miles away from the objective. Another post perhaps.”

Apologies, I did miss that and take back my previous comment, I’m glad you agree with the idea of at least some headway in to inequality…I’m assuming you also see that whatever Labour’s abysmal record on furthering education that if money was able to be spent properly that it would be wise to do so.

To return to the VAT issue: VAT is payable on fuel, albeit at a lower rate; adult clothing (bear in mind that most teenagers wear adult-size clothing); all appliances and white goods (why shouldn’t low earners have televisions, fridges and ovens?); all sweets, savoury snacks, ice cream and lots of drinks (including fruit juices and smoothies); tampons, sanitary towels and postnatal items; car seats; alcohol, tobacco and petrol.

You could argue, of course, that some of these things aren’t essential – but why should people on low incomes be reduced to living only on what is absolutely essential? That’s one definition of relative poverty.

I wouldn’t have a problem with VAT if it were charged only on genuine luxuries. But a cursory glance at the above list shows that it’s charged on plenty of essentials (clothes, tampons, fridges, car seats) and lots of things that are necessary for a reasonable standard of living.

Excellent post –

And I especially like Sunder’s comments — the reason the third way as envsioned by Clinton and Blair worked was they touched upon the challenges as well as the aspirations of the middle class.

Sunder – excellent points

@53,64 – the point is not that VAT isn’t charged on anything on which low-income groups spend, the point is that although sales taxes classically, in basic economics textbooks (most of which are not written specifically with reference to the UK) disadvantage low-income groups, the *actual* incidence in the UK, based on what actual people actually spend, is concentrated on mid-income groups. They do massively under-impact high earners.

(also, smoothies essential for a reasonable standard of living? I know that wasn’t your core point, but seriously…)

Thanks to Don especially, and everyone else, for a very interesting, engaged discussion about this.

Pagar – Thanks. Can’t help on baseball. A bit of a blindspot on US sports: a world unto themselves.

There is an editorial in Wednesday’s Guardian about this research

Inequality: ends and means
http://www.guardian.co.uk/commentisfree/2009/jun/24/tax-credits-inequality-fabian

“The minimum wage gives some control over rewards at the bottom end; new thought must be given to how pressure can be applied on pre-tax pay at the top end too. Procurement, industrial support and, above all, example are ways in which ministers could have an effect”.

@Claude (31): The definition of “ridiculous wages” is – the salary offered being below that which *anyone* would accept to perform the task required. If someone is prepared to do it for that amount it isn’t ridiculous.

@WIll (38): Putting bits in bold doesn’t negate the point that even if we shifted to that type of society there will still be a perceived hierarchy – the person managing fertiliser spreading will be ‘less’ than the person sitting in an office counting strawberries. To put it another way if you were paid more to shovel shit would you raise your child to do the same or would you aim for them to earn less counting strawberries? One job has potential growth prospects the other doesn’t. So still with the ‘I ain’t doing that’ attitude.

At the moment these comments seem to be focussed on income and ignoring social pressure which has to be taken into account in any discussion on inequality. Until society perceives the refuse collector as being as socially important as the brain surgeon regardless of the wage there’s never going to be equality.

@66 – thanks for that. Isn’t that self-reinforcing? If things like fuel are more expensive because of the VAT levied on them, people on low incomes are going to further out of their way to avoid them than are people with more discretionary spending. (And no, smoothies aren’t necessary for a reasonable standard of living, but plenty of other things on that list are – like I said: fridges, tampons, clothes, fuel.)

Matt, we can argue from theory and first principles all we want about VAT and what poor people do/don’t should/shouldn’t have. Or we could cheat, and use facts such as the ones contained in the Family Expenditure / Expenditure and Food Surveys. Those show what Dan pointed out that they show.

I don’t think anyone is saying the poorest shouldn’t have TVs, but if they have TVs worth £200 (or less, I got mine for £175 on ebay and I’m not poor in any meaningful way) and those substantially better off have TVs worth £1500, then the richer people pay 7.5 times more VAT on that item, which is a lot more progressive than many other taxes, and a cut would be less progressive than simply raising the tax-free income allowance and related benefits.

As for VAT on tampons, car seats, fruit juice, and so on, welcome to the European Union. I am probably in a minority of one on this website in thinking we should ignore them and do as we see fit with our own tax system, but there we are – our membership of the EU and adherence to its rules are an accepted fact of political life, it seems futile to complain about the consequences of that if nobody is prepared to look at the cause.

@69. You can’t separate “socially valued” from income, in fact income reflects the value which society (rightly or wrongly) puts on different occupations. No one is saying that bin men aren’t important, in fact most of the time my refuse collector is actually more important than a brain surgeon because I need the former on a weekly basis and the latter not at all. However if I needed an operation the brain surgeon would have a higher value because he can potentially save my life, something I, nor most other people can do, whereas the bin man can only empty my bins, which I could do myself.

@72: What you seem to be suggesting is that it’s society deems it okay to pay larger sums of money to people who can perform tasks that you can’t rather than to those who perform tasks you are simply unwilling to do and that this is how we set the hierarchy.

So if there was job which required certain skills and thus had a smaller pool of applicants that everyone applied for, compared to an unskilled job with a large pool of applicants that no-one wanted to do; it’s ‘right’ that the former should have a higher salary than the later because anyone could do the unskilled job they just don’t want to?

So who got to define which skills earn the big bucks

I would say it has become defined by a fairly complex interaction of the inherent value put on certain things e.g doctors are highly paid because they save life, which we value highly, although interstingly doctors are not that highly paid in all cultures; and the wealth an occupation creates e.g being a hedge fund manager is not difficult but generates wealth and is therefore highly rewarded by those who have or seek wealth.

Alteranatively: The highly paid professions tend to be those which historically served the interests of the wealthy and were therefore opportunistically able to charge high fees (eg lawyers, accountants, bankers) because their clients were wealthy and expeted to pay hightly for their services. Over time they create entry barriers (qualifications, regulations, etc) to protect their position and it gradually becomes socially accepted that barristers are “worth” more than plumbers and so on.

Quite where the £80 an hour plumber fits into that I’m not sure.