Wednesday, January 27, 2010

Politics Of Envy - Latest



Never mind about them - it's the poor we need to sort out

For this morning's edition of BBC R4 Today, there was only one possible lead story: a new report on inequality commissioned by Commissar Harperson (but paid for by us). And to give you a flavour, here's how the BBC's print edition (aka the Grun) headlines it:
"A detailed and startling analysis of how unequal Britain has become offers a snapshot of an increasingly divided nation where the richest 10% of the population are more than 100 times as wealthy as the poorest 10% of society...

...Much of it will make uncomfortable reading for the Labour government, although the report indicates that considerable responsibility lies with the Tories, who presided over the dramatic divisions of the 1980s and early 1990s."
Ah, yes, back to the old favourites - wealth as the embodiment of capitalist exploitation, and the Tories are evil. But at least the report has some nice charts.

Let's kick off with this one, which shows weekly net incomes (ie after the deduction of direct taxes, and the addition of cash benefits) as they are distributed across the UK's 25 million households (actually, these are "equivalised" households containing a commissariat standardised 2 adults and no children - see chart footnote - but don't let that distract you from the big picture):


As we can see, the top 1% of households (aka the 99th percentile) have a weekly net income of at least £2 grand (£104 grand pa). The top 10% (aka the 90th percentile) are on at least £806 pw (£42 grand pa). In contrast, the bottom 10% (aka the 10th percentile) are on £191 pw or less (£9,900 pa) - remembering of course, these are notional 2 adult households (the single adult equivalent would be £6,650).

Still with this? OK, the gap between the incomes of the top 10% and the bottom 10% is one of the most widely used measures of income inequality deployed by the poverty lobby: it is known as the 90:10 ratio. And from the chart we can see that it's currently standing at 4.2 to 1 - ie £806 pw is 4.2 times £191 pw.

What should we make of that? The report has no doubt:
"[This represents] high levels of inequality by comparison with those in the UK a generation ago, when, for instance, the ratio... was just over 3 to 1... most of this increase occurred during the 1980s."
The 1980s - it's That Evil Woman again, the one who destroyed the workers paradise we all enjoyed so much during the 70s.

Just in case you missed it, pre-Thatcher Britain had become the sick man of Europe. Our growth rate lagged far behind everyone else's and the economy had stagnated. And a key reason was that successive governments had taxed and regulated high earners to buggery, totally undermining enterprise and effort. We were equalised in poverty and national decline.

The report continues:
"A similar gain in the shares of those with the highest incomes occurred in other English-speaking countries in the 1980s and 1990s, but not in continental Europe. Earnings and income inequality in the UK are now high in international terms, compared with other industrialised countries."
Weeellll.... that's often said, but the facts are rather less clearcut. Here are the latest OECD stats on that 90:10 ratio:



Yup, there's the UK on 4.2 all right (in red). But it's right next to the overall OECD average, which in Tyler's book is not "high in international terms compared with other industrialised countries".

So to recap, the fact that measured income inequality has increased since the 1970s simply tells us we wanted to progress from our wrecked Austin Allegro economy. And on this widely used 90:10 measure, inequality in Britain today is bang in line with the OECD average, neither better nor worse.

So does this report actually tell us anything useful?

Yes. It reminds us that we have an appalling problem in our state education factories. As we've blogged many many times, they are failing large numbers of our children, especially those at the bottom. Here's a very striking chart from the report, showing points scored at GCSE (5 grade C's - the absolute rock bottom minimum "pass" - is equivalent to a points score of 200):


That long tail of failure is a shocking indictment of Labour's equalising education policies - especially when you factor in a suitable adjustment for their dumbed down exam system, and the fact that this chart is based on total GCSE scores (ie not restricted to those whose A-C GCSEs include Maths and English).

Whatever Hattie and the BBC may say, we simply cannot afford a return to politics-of-envy style taxes and income policies. Especially in current circumstances, they are a recipe for national penury. If we are serious about helping those at the bottom - and Tyler is - by far the most important thing we need to fix is our woeful state education system.

This is now down to Cam. As we've said many times, on Day One he must tell Gove to get on with the school reforms pdq. And when the unions threaten to strike, and when the BBC and the Grun start screaming, Cam will have to be Tough Tough Tough.

School choice and vouchers - whatever label they go by - are totally non-negotiable.

PS I've just seen Reverend Easton's sermon based on this report. Apparently, equal societies are happier societies - a fact so well known, his Reverence didn't feel the need to offer any evidence (see previous BOM posts on so-called happiness economics eg here and here). Which reminds me, I really must find out why the suicide rate in Sweden is twice what it is here. I guess it must be all that pickled fish. Or maybe they've actually all been murdered by those white supremacists who caused such grief for Wallander in the last series. And come to that, how come everyone in Wallander is so miserable all the time? I mean, it's a great TV series, and Ken is superb, but it's Sweden FFS! Equality central! You'd think they could lighten up a bit. Maybe Rev Easton should go over and give them a couple of sermons.

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