There have in recent times been shrill voices across the right wing of the UK saying that the claims that I, and others, have made that inequality is rising were wrong because ONS data did not show it.
Now I know I am a day late in saying this, but that all changed yesterday. In their briefing on The Effects of Taxes and Benefits on Household Income, 2012/13, issued yesterday, the ONS showed that in 2012/13 the UK Gini coefficient - the most common indicator of inequality - rose sharply in that year:
That is worrying. So is this graph:
From 1984 onwards - exactly the year when top rates of UK income tax were cut from 60% to 40% - the richest in the UK have got steadily richer at the expense of all others. That reversed slightly in the current recession, but now the trend is resuming. Very worryingly, the bottom 20% are now getting worse off at what likes like the strongest trend rate ever. That is a new phenomena.
And then there is this (from the Guardian, using this data):
What these two graphs in combination say is that redistribution happens, undoubtedly, but only because of the impact of the benefits system. Those benefits are under attack. That will very clearly, and deliberately, continue to increase inequality.
That is the wrong direction of travel for this society because there are far too many people in absolute poverty in the Uk and for too many more in relative poverty.
That is what motivates my work, and it is now unambiguously clear that that policies of this government have made this situation worse. There's much still to do then. We need to change this direction of travel. The proposals I make here all have that purpose in mind.
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The top rate of income tax was cut in 1988 not 1984.
I should not work from memory
Must be getting old
Whillan’s confirms you are right
Good and important points, Richard. Worth noting, though, that cutting top rate of tax led to steep increase in average household disposable income, highly imperfectly distributed to be sure, but even so.
One big picture question is whether one can maintain increases in disposable income whilst raising top rate of tax. Another, of course is whether increasing top rate increases yield. Decreasing relative poverty only useful if it doesn’t increase absolute poverty.
The extra yield from high earning households need not all come from income tax rate
Broaden base e.g. NIC
And increase rates on other taxes e.g. Cgt and iht
Certainly wealth (in contrast with income) is much undertaxed. Lots of scope there – subject to golden rule on yield.
I think a report by the Joseph Rowntree Trust (last year) anticipated this , indicating that ‘income forestalling’ would probably show up in the gini coefficient.
The idea that poverty is being reduced while energy costs, food costs, housing costs, enactment of benefit sanctions and zero hours contracts all rise is, of course, risible.
I was not accusing the ONS of mis-stating stats
I was accusing the government of manipulating unemployment
Respectfully, not the same thing at all
I saw this post pop up on my search of today’s articles. Thought I would quibble a bit.
The post’s title is “Inequality is rising. That’s the fact. Now we need to change that.” The trouble is, that’s not a fact, it’s an interpretation, and a bad one at that. Can we stop saying that things which aren’t facts are facts?
Referring to the top graph, income inequality in the U.K. (as measured by the Gini) rose from 32.3% in 2011/12 to 33.2% in 2012/13. That’s fine. That’s a fact. But that doesn’t mean that “Inequality is rising” is a fact; that is an interpretation. Anyone looking at the graph can see that inequality has been flat and decreased slightly in the last two dozen years. In fact, the underlying data of the graph (which I got by going to the report Murphy links) has the Gini peaking in 1990 at 36.8%, and in only three of the last 23 years since then has it been lower than the 2012/13 figure of 33.2%. So if he qualified his statement by saying “inequality rose, as measured by the Gini coefficient by the ONS, in the last annual measurement,” he could then say “that’s the fact” (and I won’t even quibble with him that the Gini isn’t perfect, among other things). But a better interpretation, when viewed in the perspective of the long-term trend, is that income inequality has been slightly falling in the U.K.
He also says that “From 1984 onwards — exactly the year when top rates of UK income tax were cut from 60% to 40% — the richest in the UK have got steadily richer at the expense of all others. That reversed slightly in the current recession, but now the trend is resuming.”
I don’t see how the richest got steadily richer “at the expense of all others”. From 1984 onwards all quintiles increased their income. Although it is typical for redistributionists to say that one person’s gain is another person’s loss (which is silly enough), all quintiles gained here.
Finally, he concludes by saying “That is what motivates my work, and it is now unambiguously clear that that [sic] policies of this government have made this situation worse.”
Sorry, but “this government” (I assume he means Cameron’s, not the U.K. generally) has not made the situation worse, if he’d only look at the inequality statistics he cites. The Gini for the three years before Cameron came in were 34.2, 34.3, and 33.2. The Gini since (starting with 2010/11) have been 33.7, 32.3, and 33.2, on the whole lower, though arguably flat (if one measures the last year before Cameron with the latest year). Maybe the true motivation for his work is antipathy to Cameron and the Conservative/Lib-Dem coalition.
Quibble if you wish
My interpretation is you’re wrong
As always Richard.
A well thought out, well constructed criticism of your mangled use of statistics is responded to by you saying “I’m right you’re wrong”.
You say you aren’t suited to politics, yet you’d make such a good back-bench braying yah-boo MP. Any time someone says anything that contradicts what you have said, you never argue back, you just ignore their argument and shout at them until they go away.
Hard to argue with such absurd commentary
Especially when the the previous commentator ignored the numerical data that the income of the top 20% rose and median and bottom 20% incomes fell
But why let facts bother you?
In 2003, it was a man fasting for economic rights that drew me into the world of social innovation. I invited him to stay in the UK where we delivered a proposal to tackle inequality.
It would warn of the risk of uprisings as a consequence of failing to redistribute wealth. With hindsight, I don’t think government had any idea what we were talking about.
The impact of poverty in North Carolina had been felt earlier. Senator John Edwards called for a law on predatory lending and a living wage.
Today, what we called for has resurfaced under the label of pre-distribution yet is seems those advocating it haven’t got a clue when it comes to taking action.
http://www.p-ced.com/1/node/76
Question, Richard. When so much wealth is hidden for tax purposes, can we be sure that gini statistics like this can be trusted to reflect the truth accurately amongst the highest deciles?
Emphatically not – a point TJN and Piketty make
“Question, Richard. When so much wealth is hidden for tax purposes, can we be sure that gini statistics like this can be trusted to reflect the truth accurately amongst the highest deciles?”
Not to mention that the cash-in-hand black economy amongst those whose official income would obviously be recorded as being much lower, so that the truth of the lower deciles might also be miss-represented.
Might be. Could be. Who knows?
But for Richard it will always be the statistics he doesn’t like that he considers suspect and any statistict he does like is ‘obviously’ right.
Riseable.
Shall we be realistic here?
The cash in hand economy is significant – but has been estimated by academics to increase inequality because the biggest abuse is by those already with reasonable and even good incomes
If the shadow economy is taken into account inequality gets worse
Shall we deal with the evidence rather than play the man?
Thank you, Richard, I suspected as much, but was prompted to ask by the above ‘quibbling’