A blog by Luke Akehurst about politics, elections, and the Labour Party - With subtitles for the Hard of Left. Just for the record: all the views expressed here are entirely personal and do not necessarily represent the positions of any organisations I am a member of.

Sunday, March 25, 2007

New Labour and Redistribution

An interesting quote from the Business section of today's Observer:

"the IFS's calculations show that during Brown's decade in Number 11 the poor have been the clear winners, with billions of pounds channelled to them through the tax credit system. Redistribution may be a political dirty word, but Labour has done plenty of it."

On the Institute of Fiscal Studies Website you can find all the supporting data for this:

http://www.ifs.org.uk/budgets/budget2007/distribution.ppt#14

One of the slides shows the the effect of the tax and benefit system on net income since Labour took power in 1997:

Poorest 10% of the population - net income up over 12%
second poorest 10% - net income up over 11%
third poorest 10% - net income up about 7%
fourth poorest 10% - net income up over 4%
fifth poorest 10% - net income up nearly 2%
fifth richest 10% - no real change
fourth richest 10% - net income down about 1%
third richest 10% - net income down over 2%
second richest 10% - net income down about 3.5%
richest 10% - net income down about 5%

The specific groups gaining most over the last ten years are:

Pensioner couples - net income up about 5%
Single pensioners - net income up about 10%
Couple with kids not earning - net income up about 15%
Working lone parent - net income up about 12%
Non-working lone parent - net income up about 15%

The IFS concludes on this Budget:

" •Sensible tax reforms with revenue recycled to minimise losers
•Higher-rate tax-payers unaffected, 65+s paying tax gain, hard to generalise about others
•Tax credit rises for low-income families generally exceed income tax losses
•Around a fifth lose, two-fifths gain, two-fifths largely unaffected
•As usual, low-income families with children gain, but still much to do to hit 2010 child poverty target
•Overall impression of Brown’s record unaffected
•Highly redistributive, especially to families with children and pensioners"

10 Comments:

Blogger donpaskini said...

This is all good, but the changes aren't (as I understand it) changes in net income, but the effect of the tax and benefit system on net income. The top 10% of earners haven't got poorer under Labour, as they've more than made back what they've lost through tax and benefit changes.

One thing this shows is that substantially reducing inequality while maintaining the kind of economic growth that we've seen over the past ten years is very difficult.

4:23 pm, March 25, 2007

 
Anonymous Mary Wimbury said...

Interesting.

Having just been canvassing the only person who complained about the budget then admitted he'd never voted Labour in his life.

4:27 pm, March 25, 2007

 
Blogger Luke Akehurst said...

Don

I've changed the post to make that clearer.

I guess the alternative to what we've had (everyone including the poorest getting richer but a bit less equal) could be everyone being more equal but everyone including the poorest being poorer.

Although equality is one of my key goals I would not pursue it at the expense of the actual raw standard of living of the poorest in society - which to my mind is more important and is what we have focussed on tackling.

4:32 pm, March 25, 2007

 
Blogger donpaskini said...

I agree with that - recessions can help reduce inequality, but that doesn't mean that it would have been better if Brown had spent the last ten years doing an impression of Norman Lamont, with Ed Balls playing the role of his adviser David Cameron.

But the challenge of combining growth with reducing inequality (which must be two of our absolute priorities as a Labour government) is clearly extremely hard - something for us to try to crack over the next ten years in power.

4:47 pm, March 25, 2007

 
Blogger Dave said...

Richest 10% - cut in income 5%? Gut instinct tells me that just cannot be right ...

It just doesn't sit with my experience of what has happened in the City over the last decade.

And for the avoidance of doubt, yes, I am one of the top decile.

4:56 pm, March 25, 2007

 
Blogger Luke Akehurst said...

Dave - as Don has pointed out, the + and minus figures in the IFS charts are about effect of tex and benefit - not overall change in income, which has gone up for everyone because the economy has grown.

6:45 pm, March 25, 2007

 
Blogger Hughes Views said...

The experience of my parents-in-law, who worked solidly for about fifty years on sub minimum wages, illustrates the good that Gordon has done. With Pension Credit and council tax relief there real income in retirement went up by a about 25%. They must be typical of about 2m of the least well off pensioners. Unfortunately this group isn't very vocal so don't produce many headlines.

It's hard to convince some theoreticians allegedly on the left that this 'doing good by stealth' really is making a difference to millions of lives or that Pension or Family Credits are a better use of scarce resources than, for example, a general rise in state pensions would be. And, as Don says, in our tax-averse culture none of this is easy...

6:59 pm, March 25, 2007

 
Blogger Hughes Views said...

for 'there' read 'their' - sorry

7:00 pm, March 25, 2007

 
Blogger el Tom said...

Aye, indeed Dan. The next step must be to get to grips with net income. Socialism isn't just aobut what the state can do.

8:52 pm, March 25, 2007

 
Anonymous Anonymous said...

Luke said ...
"Although equality is one of my key goals I would not pursue it at the expense of the actual raw standard of living of the poorest in society - which to my mind is more important and is what we have focussed on tackling."

Eh? I've read and re-read this statement several times and can't make sense of it. Please explain.

8:12 pm, March 27, 2007

 

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