Saturday, March 17, 2012

What is the Conservative Party for? The cui bono test


Can anyone think of anything the Tories have done in this parliament (economically, I mean) that has not been about financially benefiting the rich and/or big business (i.e. their backers), typically with the result that the resulting financial burdens are loaded onto those lower down the economic scale? I can't.

I thought I'd discovered an example a couple of days ago when I heard that the Government were helping first time buyers with an assisted deposit scheme. "Finally" I thought, "Some evidence that the Tories are not only interested in helping out their rich mates. I am after all being cynical in suspecting the Tories are only about the rich and big business." But of course it turns out the scheme is only for those buying new build homes. It's actually a way of helping out the construction industry, and was probably suggested by industry lobbyists.

Can anyone reassure me by coming up with a significant economic policy introduced by this Government that was not about trying to help the rich and big business, often to the financial detriment of the rest of us? NHS reform, students loans and HE reform, pensions, tax, child benefit, removing national pay scales for teachers, etc. etc. Sadly, I can't think of a single example.

If we apply the cui bono test to this Government, I find it hard to avoid the conclusion that, behind the window dressing, the Conservative Party is really little more than an organization for redistributing wealth to the benefit of the wealthy. I don't want to think that, for various reasons, not least because it makes many of my Tory-voting friends mugs. I can still be a liberal lefty even if it's not true. But it does seem to me to be true - so by all means go ahead and correct me...

POSTSCRIPT

Take the plan to flog off the roads announced yesterday. This is presented as being about getting Britain the infrastructure it desperately needs. But cui bono? Who benefits? The big companies who'll buy the roads up, of course. Who else?

The roads still have to be paid for (someone has still got to pay for the improvements), but the wealthy will now pay very much less than they would via a progressive system of taxation. Those down the income scale will now be paying more, with the poorest having to paying the highest proportion of their income. Either that, or else they must abandon the decent roads to wealthier folk.

40 comments:

Anonymous said...

Gay marriage.

Martin said...

I work in recruitment and the new AWR regulations seem only to favour the workers. The regulations are that, after 12 working weeks, a temporary agency worker must get paid the same amount as a worker hired directly by the client who is doing the same job. And this does indeed sometimes help the worker. The bad side? Only large businesses can afford to increase the wages to meet AWR standards.

Adzcliff said...

Hmmm...

Far be it for me to criticise an expert in rational thought - and I'm certainly no Tory-lover - but wonder if we should be skeptical of this line of thought.

"But of course it turns out the scheme is only for those buying new build homes. It's actually a way of helping out the construction industry, and was probably suggested by industry lobbyists."

Could this be an example of top-down conspiratorial thinking? I.e. Wherever we see a pay-off to the dark-forces - and sometimes this won't be obvious - assume that dark-forces are the prime movers (I'm sure others could put it more succinctly)?

It's just I've come across this sort of thinking with various conspiracy-minded friends of mine:

Question: NHS - qui bono?
Answer: Big Pharma.
Conclusion: Heath services exist in the interests of Big Pharma (patient outcomes are secondary)

Question: Pearl Harbour - qui bono? Answer: US Weapons industry.
Conclusion: Pearl Harbour implemented in interests weapons and associated lobbies (emancipation from fascism was secondary).

I think it's entirely plausible stamp duty concessions to first-time buyers was to stimulate the construction industry, but just think we need to be on guard for qui bono questions leading automatically to causal answers?

Anyway...

Tony Lloyd said...

The large increase in the tax allowance and the increase in the threshold at which both the employee and the employer pay National Insurance.

The increase in the NI threshold meant, even with the increase in the rate, up to around £10 ph less was paid by both employer and employee.

The tax changes together meant that people on lower wages were paying less in tax, even factoring in increases in VAT.

Now these are Lib Dem policies. And the AWR regulations are a European initiative (hooray for the EU!). But they are things the government has done that, specifically, helps the poorer in our society at the expense of those better off.

Martin, the AWR regulations only apply when there is a comparator salary, ie the business you are selling into already employs people doing the same job. If AWR is an issue it must be because they are paying the temp less. The business can, obviously, "afford" to pay the AWR rate, because they are doing so already. However they are selling you this sob story to cover the fact that they are exploiting the economic vulnerability of those with no secure employment in order to rip them off in their hourly rate.

(Probably not the best thing to tell any client kicking off about AWR, though)

Martin said...

Good point Tony.

Tim Stephenson said...

Stephen, It seems ironic to me that you should be saying this just as David Cameron is promoting one of the most enlightened liberal social changes in my lifetime, the introduction of gay marriage. As a Liberal Democrat I recognise that our people in government have significantly influenced this policy, yet for a Conservative Prime Minister to be pushing this highly socially progressive agenda in the face of significant conservative opposition from the churches seems truly astonishing. The conservative religious establishment correctly recognise that this re-definition of what constitutes the normative conservative position on homosexuality will fundamentally weaken their authority in the public mind. I think Cameron's courage in taking this position is testament to his strong leadership and moral character which contrasts sharply with the current Labour Party opposition. I think that the Lib Dem / Conservative coalition is the best government of my lifetime.

Tim Stephenson said...

Having re-read what you asked I now realise that you asked about economic policy. What about the coalition policy of taking the low paid out of income tax (a policy that comes from the Liberal Democrats)? I don't understand why you are so against increasing economic activity as a solution to our economic woes (through encouraging new build homes). What solutions are the Labour Party promoting to improve our society?

Stephen Law said...

Adzcliff has a point - and it had occurred to me. However, if there's never a benefit that isn't also a benefit to the rich/big business, and it's clear it's targeted in such a way as not to provide the benefit to lower incomes otherwise, as in this example, surely I am still justified in drawing the conclusion that I do.

As for the raising threshold before you pay tax by £1k, isn't this, in effect, just a handout of £200 to those on 20% tax, and £500 to those who pay 50% tax? I.e. the more you earn, the more you get.

Moreover, haven't those lower down the tax scale then had that small tax advantage then more than wiped out by other changes to the tax system, incl child tax credit, which costs many of then over 1k a year? Those on over 40K a year are almost entirely unaffected by changes to child tax credit, as they are not eligible.

If we look at the tax take overall, those who have taken the hit or lower and middle income families, with the better off better off, and spectacularly so once the 50% band is cut.

Tony Lloyd said...

They've done the personal allowance quite cleverly, so that it doesn't benefit those better off.

The earnings before you pay tax went up, but the earnings before you start to pay 40% went down: basically clawing back any benefit in tax allowances for higher earners.

They also removed personal allowances for those above £110k, so none of a higher earner's income is tax free.

So it's a hand out to those on 20% tax, none to those (well into) 40% tax and a tax increase for those £110k plus.

The 50% tax rate removal is dodgy, but smacks to me less of conspiracy and more like the AWR business. People paying 50% come up with all sorts of sob-stories about how it's negatively affecting the economy by removing "incentives" (as if anyone refused an opportunity to make an extra £50k that they would have snatched up were it £60k).

The credulous government then believe them. Of course governments will have greater tendency to believe those they like rather those they don't, but it's more credulity than conspiracy.

Doesn't the "credulous" theory have more explanatory power than the "Cui Bono" theory? Eg the credulous theory explains the last government's relations to the police. The police would like to hassle people and bang people up without trial. The police say that they need powers of search and lengthy pre-charge detention periods to combat terrorism. Bingo! Search powers and lengthy pre-charge detention periods, all used for things totally unrelated to terrorism.

Ray said...

Immigration Cap

Glenn Vowles said...

Any political party that equates economic growth [as currently defined] with progress is generally favouring the rich and big business. Unfairness and inequality are inherent in our socio-economic system with its strong goals of profit, amassing money and financial assets, competition, relatively free markets, corporatism...Change must ome though because this system cannot be sustained - though its not clear what can/will replace it.

Stephen Law said...

Tony

Thanks for the correction on the new tax threshold. Mind you the point remains that, when you look not at details but tax take as a whole, once things like child tax credit changes are taken into account (which was an important mechanism of redistribution under Labour), those on very high incomes have benefited, and the middle and lower incomes have lost out. That's to say, there has been redistribution of wealth towards the wealthy. And this is even before cuts to benefits etc. are taken into account.

As to the suggestion that the Tories are just credulous - that can't explain it, can it? There are arguments for and against all these changes. Why are they only credulous re the arguments that benefit their rich, not the poor?

Stephen Law said...

The previous Government, fallible though it was, did at least seem to operate according to principles of fairness (that were constantly being undermined, of course). This Government seems never to do anything economically that isn't to the perceived advantage of the rich/big business, and usually to the detriment of the rest of us.

Or so it seems to me. Am I in a political Intellectual Black Hole, are are they really the self-serving, morally bankrupt arseholes they seem to me to be?

Glenn Vowles said...

If the previous government operated according to principles of fairness how come the richest 10% are now 100 times richer than the poorest. This is not something that has just happened!

http://www.guardian.co.uk/society/2010/jan/27/unequal-britain-report

Tony Lloyd said...

Hi Stephen

Well you did just ask for one example! I'm not going to claim that on balance the Tories are good.

But neither are they all entirely evil, at least no more evil than the Labour party.

When I see Cameron, I see a decent man. A decent man who is also a trust fund kiddie with absolutely no idea whatsoever about living life without millions in the bank.
Osborne, I'm not sure of. "Arsehole", obviously, but does he have the brain power to be "morally bankrupt"?

I'm sure there are clearer cut examples (why do the names "Gove" and "Lansley" spring to mind?). There are also some dangerously stupid people in the party ("Warsi").

But then there are plenty of those in the Labour party. ("Straw", "Blunket", "Harman" and, for stupidity "Abbott") Towards the end Blair was almost the definition of "morally bankrupt arsehole" (War, complicity in torture, detention without trial)

Stephen Law said...

Hi Tony. I do not believe Cameron is a decent man.

True, Blair was not to be trusted but at least the Labour party did not always act economically to benefit just the rich and big business. Soemtimes they did. Sometimes they didn't. This lot always do, without exception.

Take the plan to flog off the roads announced today. Who benefits? The big companies who'll buy them. Who else?

The roads still have to be paid for, of course, but the wealthy will now pay very much less than they used to via a progressive system of taxation. Those down the income scale will now be paying more, with the poorest having to paying the highest proportion of their income, or else leaving the the decent roads to wealthier folk.

Glenn, the rich got richer under the last government too. But less. Labour at least put on a brake. The brake has now been removed. Expect inequalities to accelerate dramatically.

I still see no significant reason to doubt that, on economics, the Tory party is essentially just a mechanism for redistributing wealth in the direction of the rich and big business.

The tax threshold change may be some small counterexample to that thesis, but hardly a significant one given that that small handout was then taken away with the other hand, and then some.

Anonymous said...

http://www.bbc.co.uk/news/business-17437361

wombat said...

"I still see no significant reason to doubt that, on economics, the Tory party is essentially just a mechanism for redistributing wealth in the direction of the rich and big business."

All of the major UK parties have and continue to pursue redistributive tax and spending policies in favour of the least wealthy. Where they (perhaps) differ is in how much and which particular groups benefit and lose out by this. Taxing the rich less than another party might is not the same as redistributing wealth in the direction of the rich.

(No comment on what motivates Tory policy or whether it is either just or effective, simply that I believe the original statement is flawed or requires some qualification.)

The Fog Horn said...

God was volcanic activity.

http://ohmyvolcano.blogspot.com

Please do something about it.

Cai said...

Seems unlikely to me that *everyone* in the Conservative party is a self-serving asshole. But as a whole, that's sure how it looks from here.

Stephen Law said...

Obviously we continue to have a progressive tax system. What I mean, Wombat, is that it is now rather less so.

Indeed, it seems to me that, when we consider their changes to the previous tax/benefit/etc system, pretty much everything the Tories have done economically has been about redistributing wealth and economic advantage towards the wealthy. More or less all the moves they have made - and there have been some very dramatic examples - have been in that direction.

It's hard to think of any counter-examples, other, perhaps, than of a very piffling sort (though even a piffling example [higher tax threshold] provides them with great PR and window dressing).

wombat said...

"..rather less so"

Agreed. But being less redistributive in one direction is not the same as being redistributive in the other direction is it?

Unless you have some sort of re-definition where allowing any distribution resulting in a state other strict equality counts as re-distribution. Maybe re-distribution is simply privation of equality?

Have the Thomists finally won?

Anonymous said...

This chart shows the impact of today's budget on people by income group:

http://conservativehome.blogs.com/.a/6a00d83451b31c69e20167640fb5da970b-pi

Stephen Law said...

Anonymous - are you presenting that chart with a straight face? There are lies, damn lies, statistics, and then graphs on conservativehome.

Perhaps you will now supply the average incomes of the bottom and top deciles, so we can see how tax take has changes as a percentage of income?

Stephen Law said...

Wombat - the tax system continues to be redistributive but less so. I am not talking about the tax system but the Tories whose changes to taxes and benefits etc. have the effect of redistributing the tax burden and benefits to the the advantage of the wealthy. If you don't like calling that redistribution (and I am not sure why you should), it matters not, as the point remains that making such changes is what they are doing.

wombat said...

OK so you're talking about redistributing the ongoing level of wealth redistribution via tax and benefits. I wont quibble with that.

... Except that the original post referred to the actual wealth. Implying that they were actually giving money to the rich and taking from the poor.

Which might be what they would like to do or are building up the courage to do but which strictly they have not yet done as far as I can tell. Do you have any evidence that they have?

You may well have made a good case that this is so for the insane road scheme. i.e. if the companies bidding (and benefiting) are nothing more than the corporate vehicles of Tory cronies but changes to the tax/benefits system still don't seem to qualify on that count.

Anonymous said...

From a brief look on the internet I could only find the average incomes for 07/08 here:

http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

bottom 10% - £8,240
top 10% - £44,900

Assuming that the current figures are roughly the same, we find that these are the percentage losses that the top and bottom make following this budget.

bottom 10% - 2.43%
top 10% - 3.79%

Stephen Law said...

Hi anonymous. Those are not the average incomes, they are the decile points - i.e. the points at which you move into the next decile. Anyone on over 44,900 is in the top decile. Anyone under 8,240 is in the bottom. They are not the averages for the deciles.

Someone in 44,900 is not going to be 1,800 worse off. 1,800 is the average loss for the whole decile.

Maybe you are not aware, but as we approach the last percentile - the last one percent - income shoots up like a rocket. The final 1% are quite literally off the graph in many cases. This distorts the average for the top decile enormously, and thus the average tax gain/loss.

Last year the averages were 7,919 and 70,747. This gives the true figure:

Bottom 10% -3.15%
Top 10% -2.54%

The bottom ten percent are indeed now significantly worse off compared to top 10%.

But even this hides the really significant data, because it's that top 1% that the Tories care about most. Someone on 44k is hardly "rich". Only the top 1% are rich. Only they are affected by the change to the top tax band. And that top 1% are now spectacularly better off.

Even though even the poorest lose out more than the rich, the biggest losers are those in the middle range - the top 1% being very much better off, with big tax reductions, not tax increases.

This all confirms what I said.

Notice how extraordinarily misleading that graph is. Who would put out a graph like that? And why?

http://www.bbc.co.uk/news/uk-politics-13633966

Stephen Law said...

ah right, perhaps the chart was spotted here...

http://conservativehome.blogs.com/thetorydiary/2012/03/the-chart-that-proves-ed-miliband-is-wrong-about-this-budget-the-budget-hits-the-wealthy-most.html

wombat said...

So the stats show that the Tories care most about the top 1%. But _why_ do they care? As a newspaper commentator pointed out yesterday w.r.t. cutting the top rate of tax there's most likely no votes in it for them so why do they do it?

Cui bono? the top 1% - probably. The Tory Party - very unlikely.

Is this stupidity, a simple self destructive urge or something more sinister?

Stephen Law said...

Hi Wombat

The Tory party is there to benefit big business and the top 1% - that's their main reason d'etre. Those groups are the financial backers of the party. Votes are merely required to gain power so the party can then benefit those groups. The party will benefit those groups as much as it can - up to the point where they become unelectable (but, with The Daily Mail and Telegraph on board and a captive BBC, they can get away with a lot - and they are calculating they can get away with this cut to the top rate).

It was not always so. I think Margaret Thatcher was genuinely driven by principle. Selling off council homes, for example, was not a policy aimed at benefiting big business and the top 1%.

This lot are different. I didn't agree with Thatcher but I could recognise she was driven by principle and argument (if sometimes bad argument). What's driving this lot is something much darker.

Stephen Law said...

raison d'etre I meant!

wombat said...

I assumed you were using the Franglais spell checker.

FWIW I think the reality is even worse. i.e the Tory party is just a part of the politics industry. It is not particularly loyal to it's backers, staying in power so it can benefit them. It is trying simply to stay in power as an end in itself. Attracting money from rich backers is simply a way of paying the rent.

Oliver said...

I think its appalling that anyone surviving on around £8k a year can be proportionally worse off this year than someone in the top 10%.

This government is clearly not serious about improving the standard of living of people in this country and raising the poorest in our (big) society out of poverty.

What does -3.15% mean for someone on £8k? Choice between eating/heating, not being able to buy your kids shoes that fit. I'm not being melodramatic when you think about how little £8k is. This government's policies are exacerbating the 'pinch' of the recession which is mainly felt by the poorest to begin with.

Contrary to popular belief the poorest 10% are not all benefit cheats spending their money on booze, fags and Sky TV.

Comparatively, whats the -2.54% on the income of someone on £45k? One less ivory backscratcher - ho ho ho...

Not to be facetious, at worse it probably just means a slight revaluation of priorities. "Perhaps we won't go on a second holiday this year" or "perhaps we will budget and save up a bit more."

Closing the gap between rich and poor doesn't necessarily mean taxing the shit of the top 0.01% or doing all those things that will 'disincentivise' economic growth and innovation - rather it just means rebalancing the economy to support the millions of people in this country who don't work in financial services.

What it boils down to is whether we want to make the bottom 10% of this country better or worse off in the future.

Anonymous said...

Apologies for getting confused about average incomes, I was trying to comment in a hurry.

But we can all make mistakes in this area, can't we. For example, your figures are not average incomes, they are disposable incomes. And they are disposable incomes before tax and benefits are taken into account.

The BBC page gives average disposable income, and then it shows how much tax such people contribute and then the average amount they benefit from the spending of these taxes.

In order to see how well off people are on average one needs to sum the top and bottom lines.

This gives:

bottom 10% - 16,858
top 10% - 43,526

(These figures take into account the fact that the bottom 10% are more likely to get free bus travel, free prescription etc.)

This means that as a percentage this budget has had an impact on the two groups of:

bottom 10% - 1.17%
top 10% - 3.9%

I'm not sure why you're so worried about the source of the graph. I linked to conservative home, but the graph is copied straight from the treasury's budget report.

Stephen Law said...

You may be right that we've both used the wrong figures. However, that's rather beside the point. The point is, the graph still does not contradict what I said in the blog post. For the rich are not those on £43K a year. They are those on e.g. £1million a year who have just received a tax break sufficient to buy them in one year a new Porsche. Those further down all take a loss, to differing extents (and I am not at all surprised if those on £43K take more of a percentage loss than those on £20K - that's no counter-example to my thesis).

As to the graph you linked, it does not contradict my thesis. But of course it very much *looks* like it does. Which is why you linked to it. And why it was posted on conservativehome.

A graph that only reveals figures for deciles entirely obliterates the advantages just received by the rich. Indeed, it creates the false impression that the rich are taking the biggest hit. Posting such a graph in response to what I said above, then, is either foolish, or deliberately deceptive.

The real mystery is why so many of those on 43K or indeed less vote Tory. Not only is what the Tories are doing deeply unfair, it's even unfair to them!

Anonymous said...

But where is your evidence that the rich are better off as a result of this budget?

They benefit from one element - the cut in higher rate from 50p to 45p (one should also bear in mind that labour only introduced this at the end of their time in office, and they said that it would be temporary).

There are also other elements to the budget, such as the new tax on sales of houses worth over £2million, that higher rate tax payers pay a higher proportion of their income at 40% and various closing of tax loopholes.

Why do you think that the rich are benefiting over all?

In any case, you might think that the best way to help those on low incomes is not to just tax the rich and give it to the poor. A better way is to get the economy growing again and to create jobs, and better jobs.

I think the 50p rate is bad for encouraging investment in the UK, and that benefits everyone.

Although I think the best element of the budget was to lower corporate tax.

Anonymous said...

As to Stephen's point that it is strange why people earning £43,000 or less vote Tory. Not everyone is entirely focused on economics they may like what they are doing in education, defense, health etc. Or perhaps see them as a better alternative to the other 2 main parties.

Stephen Law said...

P.S. Institute for Fiscal Studies says raising of personal allowances gives the bottom third nothing, the middle only a little, while the main gainers are the richest third. Universal credit will wipe out most of that little gain by the middle.

Stephen Law said...

re. previous Here's the explanation:
http://www.guardian.co.uk/business/economics-blog/2012/mar/09/budget-2012-personal-tax-allowance-unfair

So again, even when it comes to the much trumpeted lowering of the personal threshold to help the less well off, who really benefits?