February 17, 2010
Redistribution and Elections
The other day I wrote a slightly confusing post about New Labour’s vision of social justice, and how an awful lot of weight has been put on the education system as a result.
My contention was that New Labour has been terrified of talking about inequality, and wanted to undertake poverty reduction only if it was compatible with not reeling-in the better off. Yet to keep-up the image and substance of a party committed to social mobility and fairness, the education system was made the centre of New Labour’s strategy, on the lines that high quality educational opportunity could eliminate undeserved social disadvantage.
I think this thesis is broadly correct. But as originally stated, I inadvertently under-played the extent to which Labour has achieved significant poverty gains, and in the process, some worthwhile redistribution. And that it did this alongside education reforms, not through them. Indeed, especial thanks to Giles for drawing my attention to this table from the IFS:
I’m not a statistician (by any means) so I am happy to be informed of anything that blunts my enthusiasm on this point. But I was staggered when I saw this table. It shows a clear – and considerable – gain for the lowest income households (and especially the very poorest), which is attributable to the tax and benefit system under Labour.
When Stuart White at the Fabian Society calls claims that the poor got poorer under labour “risible“, data like this certainly seems to support him.
But why did this come as such a surprise to me? Or in other words, why haven’t Labour been shouting about this from the rooftops?
A few explanations immediately spring to mind:
- Labour are scared of being tarred with the “big government that penalises hard workers by giving their money to the lazy undeserving poor” brush
- Labour are scared that if they make a fuss about the achievements of the tax and benefit system, they’ll be portrayed in the tabloid press as helping scroungers live the life of Riley at taxpayers’ expense
- Labour are scared that middle class voters, who tend to decide swing seats, will think that the poor have been helped at middle class expense (something made worse by the fact people tend to over-estimate their position on the income and wealth scale, potentially leading many to assume they’ve been hurt by Labour policy when they haven’t)
Prior to 2007 it might have seemed obvious that Labour should reason this way. Re-branding the party away from an “Old” Labour, election-losing image meant dropping overt commitments to redistribution, tax-and-spend policies, and “big government” generally.
Yet this is 2010. There is still widespread public anger at banker’s bonuses. The return of inequality to the political agenda surely matters. So does the widespread realisation via the financial crisis that the world is profoundly more unfair than many had assumed. (It turns out that the super-rich don’t always make their money through sheer hardwork in economically productive activities, but can actually be reckless gamblers who ruin everything for ordinary people, and then still expect a massive pay-packet). And furthermore, a majority of voters supported the 50p tax when it was introduced.
So should Labour now start making a song and dance about its redistributive achievements? Probably not. As Don Paskini recently noted at Liberal Conspiracy:
“Support for redistribution from the better off to those who are less well off has dropped markedly. Fewer than two in five (38%) now think the government should redistribute income from the better off to those who are less well off, down from half (51%) in 1994.” *
Bizarrely, this drop seems to be fuelled in part by falling support for redistribution amongst Labour sympathisers.
Which is all a bit of a bummer. One of the relatively few things that this Labour Government seems to have got right, and they have to keep quiet about it because it’s an electoral loser.
Politics, eh?
–
* Then again, Don earlier drew attention to a poll showing “Two-thirds (67%) of respondents say the government should do more to distribute wealth more evenly, while 20% say it should maintain its current level of involvement and only 10% say that it should do less.” That one was done by the BBC/GlobeScan.
I guess the wording of the polls is going to be pretty important, as well as sample-size. Unfortunately, I’m more inclined to put faith in the British Social Attitudes Survey results that Don uses in the more recent post, which showed low support for redistribution.
Tim Worstall said,
February 18, 2010 at 2:53 pm
“I’m not a statistician (by any means) so I am happy to be informed of anything that blunts my enthusiasm on this point.”
I’m no statistician either but here are more things which need to be considered.
1) What has been the income increase of the poor (usefully, we’d like it broken down in exactly the same manner) as a result of straight old economic growth?
2) What has been the consumption increase as a result of technological advance? We know very well that certain things have become much cheaper, some have become slightly cheaper (I think it’s still true that food has fallen in price given the increased eifficiency of the logistics chain via computerisation).
3) How much has the raising of the money to do the redistribution you praise reduced 1) and 2)? We know very well that all taxes have a deadweight effect. We’re also pretty certain that some levels of taxation reduce economic growth as a whole and also the invention and innovation of new technologies.
To give an absurd example of the general logic: we could simply tax all incomes over £50 k a year at 100% and redistribute what we get. In year one this would certainly increase the incomes of the poorest households. Leave aside or a moment all that Laffer stuff: we’re also pretty certain that after a decade economic growth and the creation and adoption (in some ways, the very same things) of new technologies would be lower than they would have been without such a radical redistributionary policy.
While that example is absurd (outside the SWP I don’t think anyone would suggest it) the logic is the same though. What have been the costs on the incomes of the poor from the taxation which enables the redistribution?
I’m entirely happy with the answer “not much”….just trying to point out what we’d like to know whether it is indeed all a good idea.
Paul Sagar said,
February 18, 2010 at 11:56 pm
Yes, I see the logic.
I guess (putting aside Laffer Curve considerations) I’m inclined to say “not much”.
But I agree that sans evidence, it’s an interesting question regarding overall poverty reduction.
Of course, it doesn’t affect arguments about equality: we can probably safely assume that there’d be (even) greater inequality if Labour hadn’t done the above.
But then, I know you don’t care about equality, so I suppose that’s no skin off your nose.
Tim Worstall said,
February 19, 2010 at 7:25 am
“But then, I know you don’t care about equality,”
That’s pretty broad brush there. More accurate to say that I don’t worry particularly about equality of income in outcomes.
Partly because I simply don’t worry about it, partly because I do worry a bit about what the overheads of redistributionary efforts do to average living standards and partly because in come isn’t the important thing anyway, consumption is.
There are certain types of equality I care very much about: before the law for example.
Paul Sagar said,
February 19, 2010 at 9:12 am
Yes, sorry, by “equality” I was referring to “relative equality of wealth and income”.
You wouldn’t be much of a classical liberal if you didn’t believe in other kinds of equality; e.g. before the law, of opportunity etc.
Redistribution and Elections Round II « Bad Conscience said,
February 19, 2010 at 3:44 pm
[...] to have a very solid record on achieving redistribution from rich to poor (though see Tim’s considerations), but couldn’t make a song and dance about this because “redistribution” provokes [...]
links for 2010-02-19 « Rumblegumption said,
February 20, 2010 at 12:35 am
[...] Redistribution and Elections « Bad Conscience [...]
Alex said,
March 15, 2010 at 2:43 am
Actually, I don’t think you can get that from the data. Here are some quotes:
That last assumption seems like it would skew the results.
So basically, this shows that, if you accept the assumptions, then it shows how much better off lower income people are, compared to if the tax/benefit system had been frozen at 1997 levels.
Maybe under 1997 levels, the rich would’ve seen an amazing rise in income, and instead all they got was a great one? And the poor got a slightly larger increase in income than they would’ve done.
As such, these figures tell us nothing about who’s done better from New Labour. Yes, the poor probably have done better than under the Tories, but did any leftist critique of Blair/Brown argue otherwise? The minimum wage, tax credits etc etc. But they had a landslide in 1997. And again in 2001. They could’ve done a lot better than “Not quite as shit as the Conservatives”.
And since the Gini coefficient has increased since 1997, it seems that whatever improvements were made to the tax/benefit system, they didn’t prevent the richest getting richer faster than the poorest.
Oh, and that last bit about the “very rich” comes in to something I was going to say before I looked at the report: namely that income groups are given in deciles. But what about, say, the top 1%?
Now I’m not suggesting that the rich have gone all John Galt on us, but surely this assumption again will skew the results. Who is most likely to have a “behavioural response”? Surely tax havens and such like are relevant here.
One final point I think is that this analysis is looking at people’s incomes. What about wealth?
Equality of What? « Bad Conscience said,
April 7, 2010 at 7:34 am
[...] the Gini Co-efficient measure of income and wealth inequality to grow to new heights, despite underacknowledged and signficant redistributive achievements. The Conservatives have jumped on the equality bandwagon, chastising [...]
Don’t forget where you were when the CSR hit us | Liberal Conspiracy said,
October 19, 2010 at 11:25 pm
[...] laudable efforts to reduce poverty were undertaken – with some considerable successes – socio-economic inequality increased, as the marketisation of everything continued [...]
Thatcher’s Children « Bad Conscience said,
October 20, 2010 at 7:03 am
[...] the economy as a whole. Although laudable efforts to reduce poverty were undertaken – with some considerable successes – socio-economic inequality increased, as the marketisation of everything continued [...]