This chart comes from the House of Commons Library.
They, in turn, took it from the Office for National Statistics
What it shows is four versions of the Gini coefficient for the UK:
The Gini coefficient is one of the measures that can be used to estimate inequality in a country. It is a number between zero and one that can also be expressed as a percentage from 0% to 100% that represents income or wealth inequality in a population. Zero represents perfect equality (everyone has the same income), and one represents perfect inequality, meaning one person has everything, and everyone else has nothing.
As is clear, the trend in the UK has been towards growing inequality, but the critical lines here are the darker green dotted and yellow ones. They compare gross and post-tax incomes.
Note that they move together.
Tax does not redistribute income in the UK.
Nor does the benefits system, with benefits income being included in gross income.
I accept there are arguments to be made about original and disposable income, but I am concentrating on non-equivalent incomes here and the impact of tax, and in effect, there is none.
As the House of Commons Library says:
Disposable income is net of direct taxes which are mostly related to income. However, households also pay indirect taxes, for example Value Added Tax (VAT) and duties on alcohol and fuel, based on their expenditure. Poorer households tend to spend a higher proportion of their income in indirect taxes than richer households. Consequently, there is more inequality in ‘post-tax incomes' (net of both direct and indirect taxes) than in disposable incomes.
In summary, we have a tax and benefits system that fails to deliver redistribution of income, let alone wealth, in this country.
We should be hanging our heads in shame.
We really do need to put the measures in the Taxing Wealth Report into effect.
No wonder we are poor as a country. We are letting the poor get poorer:
And since the data is by quintile (20% bands), this does not show by how much the rich are getting richer.
We cannot have a better society unless those with the lowest income have a bigger share of the income of the UK. It is as simple as that. When will they realise that this is the path to growth, if that is what they want, and the path to justice, which they should want, or why are they in office?
Hat tip to George Monbiot, who referred to this in an article.
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And, we might add, when will they realise this is the path away from RefomUK, and other such Trumpery ?
Some commentators loudly report that the top 1% of earners contribute roughly 20–25% of total tax revenue, and the top 5% of earners contribute around 40–45% of total tax revenue. They are somewhat quieter about income after tax:
Top 1%: The average annual income after tax is estimated to be around £200,000 or more.
Top 5%: The average annual income after tax is roughly in the range of £80,000 to £100,000.
Overall National Average: The average annual income after tax for the whole population is approximately £30,000 to £35,000.
I’ve always been of the opinion that it just enforces how inequality is rife in the UK when the argument is made that the few at the top pay a larger proportion of the tax collected.
Agreed
Many commentators make the easy elision from the top 1% of taxpayers having around 15% of the income but paying about 30% of the income tax, forgetting about other sources of annual wealth increase and the impact of other taxes. Income tax is only about 30% of the total tax revenue raised each year. They overlook that many of the most wealthy realise substantial capital gains each year which are taxed at much lower rates than income. Or dividends, also taxed at lower rates. And that other major taxes – national insurance and VAT – are regressive by design. Similarly council tax has a disproportionate impact on the poor.
Even if the total tax burden borne by the top 1% is something like 30% of the total (I doubt it) so what. They can afford it. Who else?
The absolutely disproportionate wealth at the top of the distribution is off the chart. It is estimated that the top 1% in the UK have as much wealth as the bottom 70% all together. Without much progression those groups should be paying similar amounts of tax – which could means the top 1% paying something like 30% or more if they’ve got 30% of the resources.
Thanks. Much to agree with.
As you know, I support all your suggestions in the Taxing Wealth Report.
However, I don’t understand the chart. What is the line “Original income”? (To my eye that is also green so you might want to say “the green DOTTED and yellow lines” in your description.)
Maybe I am just not understanding because I can’t get my head around the fact that tax in the UK does not reduce inequality. I assumed it might not be doing enough but surely it does something… except the data say no. I am confused.
Clive
I have changed the description of the colouyrs in the post.
I will post to explain why this is the case, very soon.
Richard
Thank you for putting a spot light on this.
Politicians say the answer is to grow the economy Growth, Growth, Growth – but what they actually do is grow inequality.
(The council tax is also a very unfair tax, a rubbish tax!)
I am sure all my Brummie compatriots would agree in wishing that their council tax were a rubbish tax!
Indeed! A rubbish tax, with rubbish pay that won’t solve the rubbish!
Regarding Richard’s hat tip to George Monbiot. His article in the Guardian today is well worth a read – particularly if you can follow his links. His reference to Killer Clowns (Johnson, Trump, Bolsanaro, etc.) is spot on.
Thanks
[…] Parry posted this comment on the blog this […]
I read that article by Monbiot this morning too.
Good stuff.
I’ve noticed something recently where I live. Everyone seems to be prepared to talk about it – how shit things are getting. There is of course lots of chaff from online and strong opinions, but the central point is that something is going wrong rather badly. And you can disagree gently and still have a decent conversation. People are worried and I kid you not embarrassed – they want to live in a country that does things properly, does things well.
This sort of thing is the fuel of change, counter-narratives, but no one in politics is interested – for obvious reasons.
I spoke to an ex service man the other day who keeps in touch with a whole range of men in rank still in the line. He told me the feeling in the military is that Stymied wants to commit British troops to Gaza. His opinion was that the British Army wants none of it. He was still recovering with PTSD after being blown out of lightly armoured and never should have been used Snatch Land Rover (used in Ireland) near Kirkuk, Iraq which saw the rest of his crew killed or maimed. He was a Labour man after his Dad, but said that since Blair, the Labour party had turned its back on ordinary people.
Thanks
Poor guy
Regarding Richard’s hat tip to George Monbiot. His article in the Guardian today is well worth a read – particularly if you can follow his links. His reference to Killer Clowns (Johnson, Trump, Bolsanaro, etc.) is spot on.
And then there are (lack of effective) housing policies.
Landlords (not the poorest in the population) can evict on a whim. Poor people have to find another dwelling (needles in haystacks), pay removal and re-establishment costs, manage (probably longer and more more expensive) journeys to work and find new schools for children who will have to establish the entire range of new relationships – form teachers, subject teachers, class mates, neighbours.
Versus …
Large homes, more than one home … and there is the climate/carbon dioxide crisis.
Fair taxation could have a much more significant influence on Beveridge’s “five giants … Want… Disease, Ignorance, Squalor and Idleness”.
I have absolutely no idea why anyone thinks that reduction in inequality is a good idea.
If even half of the ideas in the report cited were put into effect I for one would leave the UK tax system.
Also the potential sums raised are wrong. Cgt is elective – don’t sell the asset = no tax payable. I’ve seen this in action; one of my friends was set to sell a high rise office block in San Francisco and when she heard the tax payable she called the deal off.
Be careful what you wish for ……
You won’t leave
The vast majority of people still trade assets, as Warren Buffet has noted
Politely , go and waste someone else’s time
Quite a few hungry homeless disabled chronically sick people (millions of them) think reducing inequality IS a good idea.
But presumably they dont matter, they aren’t really human beings the same way as you are?
When the rich leave, will they take their office blocks with them?
Douglas presumes no one he knows will ever be dsabled or need state services.
They are from another species he that he does not recognise exists.
Gary Stevenson is the one who talks a lot about wealth distribution. https://www.youtube.com/@garyseconomics/videos
Apparently he’s not keen on Modern Money Theory (I think, because he does not quite understand it).
Please can you organise an interview for your channel (or his).
Trying…
Stevenson is a financial trader. He doesn’t seem to have any problem with how the system operates, just how its proceeds are divided.
That may be true
I wonder if you could find a way to show a graph that compares the UK with other countries for example are more progressive countries such as Finland doing any better. It would also be good to see data going back to the early 19th century to see if it was tax that helped equality in the post war period
I doubt I have time.
Sorry.
Thomas Pikkety “Capital in the 21st century” is good for that sort of comparison but not sure how much he has on Finland. The older data is not always so easy to find. He’s good on France though, going right back abbout 300 years, and quite good on Japan and Korea. He effecctively demolishes the myth that countries like Korea and Japan got rich on free trade and does it with data.