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.

Tuesday, June 22, 2010

Budget "fairness"

If I've read this graph from the Treasury budget book correctly, the bottom 10% of the population by income are more negatively affected by the Budget as a percentage of their net income than any of the successive seven income deciles:



I expect redistribution away from the poorest from the Tories. It's why they exist. How the Lib Dems can vote for this after years of lecturing us that they were to our left is beyond me.

Even if you believe that it makes economic sense to cut the deficit this fast - which clearly I don't as I still think we need to be pump-priming our way to growth for another year - the combination of tax and spending changes could have been adjusted to put more of the burden of deficit reduction on the better off and less on the poorest - particularly by raising other taxes rather than VAT.

21 Comments:

Blogger Merseymike said...

Agree completely. Its really a very predictable Tory budget. Exactly what you would have expected from them, which demonstrates that either the LD's have no influence or that those close to power are essentially the same neo-liberal thinkers

Given that some of this is diametrically opposite to what they have claimed to believe over the years, one can only conclude that they are a principle-free zone

3:59 pm, June 22, 2010

 
Anonymous Anonymous said...

You read it incorrectly. 5 other icnome groups including the richest 10% have a bigger net negative impact of 1.5-2.0%. So admit you are wrong.

The Conservative's do not exist to make people poor - slanderous. Parties may have different means to an end but everyone agrees with having a prosperous, safe country. Why can you not admit the Tories are not evil? It could easily be said that Labour exists to bankrupt the nation as it happened in 1979 and in 2010. Of course Labour don`t set out to do that but I am not being mean unlike you.

Merseymike - so a predicatable Tory budget includes index linking pensions to wages, increasing the personal allowance by 16% and taking a million out of paying income tax. Keeping the exemptions from VAT for food, childrens clothese etc?

Labour said in March they would cut spending by 44 billion, but would not specify until after the election (dishonest politics). So they would have cut, why are you saying it is only the Tories who cut?

4:48 pm, June 22, 2010

 
Blogger Luke Akehurst said...

This comment has been removed by the author.

5:10 pm, June 22, 2010

 
Blogger Merseymike said...

Of course the Tories don't believe in equality, for goodness sake. The outcome of their policies will be to make people poorer

5:24 pm, June 22, 2010

 
Blogger Luke Akehurst said...

No you've read it incorrectly - the black line with squares on it shows the net impact - better than for the bottom decile for all but the two highest deciles.

I can accept the Tories aspire to a more prosperous, safe country (though their policies won't deliver one) but they don't aspire to a more equal one. Ultimately they are a class based party that exists to defend the interests of capital.

The Tories haven't specified what they'll cut yet either - that will come in October - they've just gone £17 billion of cuts a year further than Labour would have done if I've read the budget book correctly.

I don't think they are personally evil but I think the effect of some of these decisions is morally indefensible and economically dumb. It's exactly the sort of policies that caused the misery of the 1930s and 1980s.

5:33 pm, June 22, 2010

 
Anonymous Anonymous said...

I do think that the budget deficit should be cut more slowly and that the wealthiest should pay.

However, it cannot be denied that Gordon Brown fully accepted the idea of cuts. He also helped cause the deficit in the first place by increasing military spending by around 10% in real terms and blowing £20 billion on the wars in Afghanistan and Iraq.

He also cut Corporation Tax from 33% to 28% thus opening the door for the Conservatives to cut it even further--to 24%. In adddition, he cut Capital Gains Tax to just 18% which helped encourage tax evasion as people claimed that income was really a capital gain. He resisted ending the tax-free staus of the 'non-doms'and refused to do anything about corporations and the wealthy
avoiding tax.

Brown also introduced a 10p tax rate to help the lowest paid but then abolished it in order to cut the standard rate and thus outflank the Conservatives on the right. In doing this he was supported at the time by the vast majority of Labour MPs.

There is plenty of blame to go round for the current sorry situation.

5:35 pm, June 22, 2010

 
Anonymous Anonymous said...

Another link to the charts - clearly showing that the poorest 10% are not hit the hardest - as you incorrectly suggested.
http://conservativehome.blogs.com/thetorydiary/2010/06/the-chart-that-shows-wealthier-britons-shoulder-most-of-the-burden-of-repaying-labours-debts.html

The richest have a big direct tax hit. You should applaud. Child poverty will not increase in the next two years. You should applaud. Pension linked to wages and no more 75p yearly increases. You should applaud.

5:50 pm, June 22, 2010

 
Anonymous Anonymous said...

Merseymike - noticed you didn`t answer the question. Is it a typical Conservative budget that includes index linking pensions to wages, increasing the personal allowance by 16% and taking a million out of paying income tax. Keeping the exemptions from VAT for food, childrens clothese etc?

Facts dear boy, please reply.

5:51 pm, June 22, 2010

 
Anonymous Matty said...

Dishonest Tory shower here. Luke is absolutely right. The poorest 10% will be worse off than the next 60%. The rich can well afford to pay 2% more tax, the poorest are already on the breadline.

As for keeping the exemptions from VAT for food, childrens clothese etc? you mean we're supposed to celebrate the status quo here. I wonder if the Treasury charts show the effect of uprating benefits in line with the CPI not the RPI (a Tory stealth cut)

6:28 pm, June 22, 2010

 
Anonymous Anonymous said...

Matty - just look at the graph. The poorest 10% are not hit the hardest. Everyone is hit - we are all in this together.

The lowest paid public sector workers get a pay rise, reduced income tax through increased allowance and VAT has increased a little which shops can cover for. 2.5% extar on some products is hardly massive, just like cutting VAT to 15% was not a great stimulus when Darling did it.

Anyway you cxannot criticise for two reasons :

1) Labour created this massive deficit - yes there was a recession but nobody else has a ongoing 12% deficit.
2) Labour said they would halve the deficit - what would they have cut??

8:33 pm, June 22, 2010

 
Anonymous Rich said...

Luke you are 100% correct. VAT increase is a tax on the poor. And not only that it's likely to put people off big purchases next year. Not to mention the cost of implementing these changes into our accounts.

I really can't understand the lib dems this really is a complete joke and people didn't vote this. Anyone with a child with a family income of 40,000 will be £150 worse off and that's without factoring in the VAT increase.

And a pay freeze on public sector when the banks once again are paying huge bonuses. I really hope the unions respond to this agressively and start the process for planning a series of strikes.

10:01 pm, June 22, 2010

 
Anonymous Rich said...

The graph fails to take into account that any cut in income will hurt the poor more than tax increases for the rich. Britains poor are on the breadline and are facing inflation and falling waged.

I can't believe I trusted clegg.

10:06 pm, June 22, 2010

 
Anonymous Matty said...

The BBC News has just confirmed Luke's analysis. In fact, some economists say it's even worse and that the Treasury graph underestimates the effects of VAT raises on the poorest.

And let's not forget the recession is the cause of the deficit and the cause of the recession was the financial crisis.

10:26 pm, June 22, 2010

 
Blogger tory boys never grow up said...

Yes you've read it correctly - but it is worth noting that the impact would be even more distorted if you removed the impact of the tax changes announced in our budgets which are also included in the table ( itrust someone at Victoris St will produce the same table showing just the impact of the Condem budget pdq). And that is before taking account of the impact of the expenditure cuts which are of a far greater quantum that the tax/tax credit changes, which are bound to hit the poor hardest. As they say leopards never change their spots. The LibDems should be ashamed of both this and their abandonment of Keynesianism. Beevridge and Keynes will be turning in their graves tonight.

PS equal % changes in net income do not mean that there is a sharing of the pain of the tax increases - A 1% cut in net income hurts those in the bottom decile a lot more than those in the top decile.

10:54 pm, June 22, 2010

 
Blogger tony flaig bignews said...

Labour have systematically shafted the working people, poured money to big industry and lazy welfare scroungers, printed money, lorded it up, viewed working people as Bigots.

Just how would labour have dealt with this crisis, well the answer is they didn't try, and this is why your in the wilderness.

Conservatives and Liberals had no choice, as one outgoing minister put it the moneys all gone.

Labour abandoned us bigots got cosy with big business, the rest is history just like Labour who couldn't give a flying toss for working people

2:31 am, June 23, 2010

 
Anonymous Anonymous said...

A rail track ass hole talks about scroungers, that is brilliant.

9:25 am, June 23, 2010

 
Anonymous Rich said...

Tony, the money hasn't gone. Yes things are in a mess but that's thanks to the bailout which the Tories backed 100%.

What the Tories are doing is using the press which they virtually own now and paint a picture that simply isn't true. They are using the doom and gloom to sell us cuts that are simply unfair and not necessary.

You talk about benefit scroungers but the reality is that an unemployed individual gets just £56.00 per week. Out of this they have to pay for utilities and food. Please consider that this person may have lost their job due to the recession and over a working lifetime contributed thousands of pounds to the welfare system.

The Tories use extremes as examples and yes these should be stopped but freezing benefits doesn't resolve this. There are few jobs about ands lots of people have lost jobs, homes and family the Tories want to hurt the vulnerable.

11:10 pm, June 23, 2010

 
Anonymous Ed said...

"And let's not forget the recession is the cause of the deficit and the cause of the recession was the financial crisis."

No, the deficit was cause by "no more boom and bust Brown" believing his own nonsense and spending recklessly in the good years.

The recession has made the deficit unsustainable, but if Brown had recognised the reality that all market economies suffer recessions and prepared for one rather than pretending he'd abolished the economic cycle would wouldn't be in this mess.

Instead over TEN YEARS, he spent more than he gathered in taxes.

5:19 pm, June 24, 2010

 
Blogger Merseymike said...

I don't reply to anonymous writers - identify yourself

10:10 pm, June 24, 2010

 
Blogger southhackneypunter said...

The IFS has prepared good analysis of the Emergency Budget and especially on welfare reform (http://www.ifs.org.uk/budgets/budgetjune2010/brewer.pdf).

Sadly the greatest social impact is likely to be the removal of 10% housing benefit from social tenants after one year on JSA (effectively 20% as their benefits will rise by CPI but social rents will rise by the higher RPI); the other restrictions on local housing allowance and room size for those on benefits (the majority of whom are low paid workers) will mean central city areas become impossible for them to rent and longer journeys to work with higher travel costs.

I'm sure those millionaires benefiting from the cut in corporation tax will suffer even worse though.

6:35 am, June 25, 2010

 
Blogger southhackneypunter said...

This comment has been removed by the author.

6:35 am, June 25, 2010

 

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