Source > Conquest of the Useless
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Over half of households get more from State than they pay in tax… while top 10% of earners account for 53% of all income tax
The source for this ‘shock’ news is what the Mail describes as “a bombshell report”. I describe it as bad faith stats spinning by one of the top organisations in the bad faith business, the opaquely-funded think tank Civitas, an Institute for Economic Affairs splinter group whose ‘research’ fed into a lot of Vote Leave’s Brexit propaganda.
Search the Daily Mail story and you’ll discover that the word “inequality” does not make a single appearance. But that the top 10% of earners represent 53% of the income tax take is not surprising at all if you consider other data sources.
The latest Office for National Statistics (ONS) figures — which cover April 2018 to March 2020, before the pandemic saw a huge transfer of wealth to the richest in society — stated that the wealthiest 10% of households held 43% of the wealth in Great Britain; by comparison, the bottom 50% held only 9%.
The Resolution Foundation found the richest 10% of households benefited from an average wealth increase of £50,000 during the pandemic, while the poorest 30% gained an average of just £86 per adult in the same period. That report said the wealth gap between the average and the wealthiest 10% of households increased by £44,000 during the crisis, following a £350,000 increase in the gap between 2006-08 and 2016-18. The rich got richer; the poor did not.
But read The Daily Mail front page and you’ll be told that:
MPs said the huge government support provided during the Covid pandemic “changed the psyche” of the country and made people think they “can get something for nothing”.
The two current MPs named in the report are Sir Iain Duncan Smith, architect of Universal Credit and co-founder of the satire-resistant Centre for Social Justice, and the reliably stupid Ben Bradley, but others like Lee “30p Lee” Anderson have hooted and hollered about it on Twitter. Inevitably, Sir John Redwood, Romulan ambassador to Earth, is also quoted:
The Government should take on board the message of this report. We need to encourage more people back into work.
It’s not surprising that a former cabinet minister from the Thatcher and Major eras should be reheating 80s and 90s rhetoric. While unemployment rose in the last period measured by the ONS (September to November 2022) up 0.2 percentage points to 3.7%, the UK has an estimated employment rate of 75.6%. The Civitas report includes retired people in its number of individuals getting more from the state than they put in and muddies the waters around in-work benefits, which are necessary, in part, because some people’s wages are simply too low for them to live on.
Look at this paragraph:
The surge in state ‘dependency’ means the poorest fifth of households receive £17,600 more on average in welfare and non-financial benefits from the State than they pay in tax.
But study the Civitas report and you’ll find “non-financial benefits” include access to the NHS and state schools. An average NHS nurse’s pay is around £34,000 according to the Royal College of Nursing. If that nurse is the only adult in their household that puts them in the 4th quintile for income, which, according to Civitas’ calculations means they receive around £13,469 more in ‘benefits’ than they pay in taxes.
But pick at that ‘benefits’ figure and you’ll see that the think tank has reached the total by adding £8,604 in ‘cash benefits’ to £14,191 in “benefits in kind’. The authors of the report say that benefits in kind include:
… the imputed value of NHS, state education, adult social care, school meals and Healthy Start vouchers (including nursery milk and school milk, universal infant free school meals in England, free school meals for children in primary 1 to 3 in Scotland and the provision of free breakfast to all pupils in maintained primary schools in Wales), and housing and travel subsidies.
Not every individual accesses all those services. If a nurse who is underpaid leaves the NHS for a better-paid job elsewhere or leaves the sector entirely there is a loss of ‘value’ to society. People who don’t pay income tax still have to pay VAT and other indirect taxes, and the poorest are hit harder by them.
In stats published in July 2022, the ONS said the poorest fifth of people paid 22.9% of their income on indirect taxes such as VAT compared to 9.1% for the richest fifth of people in the financial year ending 2021. In that same report, the ONS said that reductions in indirect taxes and increased benefits in kind, largely in response to the pandemic, were the driving factor in the proportion of individuals receiving more in benefits than they paid in taxes rising from 47.5% to 54.2% over the period, the largest annual increase since 1977.
Duncan Smith says in the Mail’s news story that:
Lockdown changed the psyche of the British people. For all those years, we told them you can’t get something for nothing, and all of a sudden they did. The British public thought the Government could do it all — even pay their salaries and they don’t have to work.
This is ideology, not reality. People still had to work — especially people in public services and retail — and millions of self-employed people found that they got nothing for nothing as government assistance was simply not available to them for myriad bureaucratic reasons. Meanwhile, Tory friends and donors got millions of something for less than nothing as they supplied PPE that didn’t work but still had to be stored and disposed of at a cost of more than £10 billion.
When the Mail — controlled by the non-dom Lord Rothermere through ‘tax efficient’ trusts in Jersey and Barbados — writes that…
The report [has] sparked fears the State has become bloated, smothering entrepreneurship and forcing the low paid into a benefits trap… [and that] there is also a growing backlash from many Conservative backbenchers who believe that tax on high earners, the ‘strivers’, is too excessive.
… it is the voice of the rich demanding more treats, favours, and exceptions, while pretending to its pensioner readers that it doesn’t mean them. The 36 million people who “get more from the Government than they pay in tax” includes roughly 12.5 million pensioners. But the Mail’s leader column froths and rages that:
It is scandalous that over half of the population get more in benefits than they pay in tax… Far too many people are indolent and unproductive.
To take this tantrum at face value requires you to ignore the very concept of a redistributive tax system — rich people are meant to pay more tax than poor people, lest guillotine plans start looking appealing again — and pretend that the pandemic did not lead to reduced earnings for many people or that the plague/Brexit combination hasn’t kicked the economy into the deep freeze.
It also assumes — probably rightly — that readers will forget that the entire British media did this exact same story back in August 2019. Fuelled by another think tank report — that time it was from the Institute for Fiscal Studies — the Daily Mail howled:
How nearly HALF British adults pay NO income tax: HMRC data reveals a record 23 million leave 31m to foot bill for running the country
Notice how it was “nearly half” then (43%) and “over half” now (53%) but the same lines came spewing out of the Mail’s grievance machine:
Policy analysts warned of a threat to the 'contributory principle' that citizens have to pay in to the public purse to receive services from the state, and said it meant fewer people pushing for low taxes or value for money from government spending, since they themselves would not be footing the bill. The group of adults who pay no income tax includes the unemployed and home-makers with no earnings, as well as retirees, and anyone who earns less than the tax free allowance.
The same rhetoric was then regurgitated in a monologue by the BBC’s Emma Barnett — a knowing beneficiary of her father’s ‘entrepreneurial’ spirit — on 5Live:
How do you feel when you hear the following? Nearly half of British adults pay no income tax. A record 23 million leave 31 million to foot the bill for running the country. Increases in the personal tax allowance since 2010 mean 43% now live tax-free. A study from the Institute of Fiscal Studies has revealed that the number of UK adults — just to be clear paying no income tax — has leapt to 43%, which is up nearly 10% in little over a decade. The group paying no income tax includes the unemployed, homemakers with no earnings, as well as retirees, and anyone else who earns less than the tax-free allowance. Although, it is important to remember that some in this group do pay other taxes, like VAT, of course, and tax on savings. But the facts still remain that there are fewer adults than ever paying the main tax that props up every public service… … Here’s the question: If you don’t pay as much into those services like schools, should you get as big as say on how those services are run? Of course, it’s more than just income taxes that do fund the NHS; National Insurance, of course, goes in there. But the even bigger question, I suppose, which is one that experts in taxation are concerned by is: whether there is a risk in having fewer and fewer people contributing to this main tax; whether we lose the feeling and the reality that we are all in this together…
Yes, she really did float the idea that the rich being able to buy a greater say in society should be a feature rather than a bug.
Go a little further back and you can find Fraser Nelson arguing in a deleted Spectator piece from 2008 that because the richest “1% of this country pay 23% of all income tax collected” it should “warm the heart of the most redistributionist”. In the same piece, he quoted this line from The West Wing, where Aaron Sorkin used the character Sam Seaborn as a puppet for a whine about his tax bill:
I left Gage Whitney making $400,000 a year, which means I paid twenty-seven times the national average in income tax. I paid my fair share, and the fair share of twenty-six other people. And I'm happy to because that's the only way it's gonna work, and it's in my best interest that everybody be able to go to schools and drive on roads, but I don't get twenty-seven votes on Election Day. The fire department doesn't come to my house twenty-seven times faster and the water doesn't come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let's not call them names while they're doing it, is all I'm saying.
Let’s call them names. Earlier this month, the Public Accounts Committee said that 5% of taxes that should be collected by HMRC simply aren’t; that’s £42 billion from both businesses and individuals that doesn’t make it to the Treasury. We are paying a tax for avoidance and evasion among the rich; we are paying a tax through low wages to those who pay themselves huge salaries and dividends; we are paying a tax in suffering from a broken health service because that richest 10% do have ambulances that come more quickly for them and schools where their children can still enjoy art, music and drama.
To have a paper owned by a hereditary tax avoider tell millions of people who work hard for diminishing rewards that they are indolent makes “let them eat cake”1 sound like the height of empathy. The Daily Mail front page is a spit in the face and a kick in the groin. You can expect the columnists to join in and the broadcasters to rush to have “the debate” about our laziness. They are taxing our intelligence and presuming our patience has an infinite overdraft.
I think Lord Rothermere, Rupert Murdoch and the rest are too confident in the height of their walls and the fierceness of their guard dogs.
1 Yes, I know the phrase is actually “Qu'ils mangent de la brioche” and Marie Antoinette probably/definitely didn’t say it.
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