06 June 2010

The Tories Will Abolish Poverty

How stupid of me to be surprised when the Tories said they would match Labour's promise to abolish child poverty by 2020.

Labour were struggling to meet this target despite redistributing over £100bn through the tax and benefit system to the poorest 20% over the last 13 years - New Labour were the most redistributive government on record (yes, even more than Attlee's government). But after the accumulated wealth of 18 years of Thatcherism and Blair's reluctance to tax the rich, inequality continued to grow.

You see, Labour were trying achieve the target without cheating.  They made the mistake of sticking to internationally agreed definitions that poverty - defined as an income of less than 60% of the median income.  The Tories will redistribute nothing to the poorest and yet still abolish poverty.

Silly, Labour! The Tories are going to abolish poverty with a stroke of Frank Field's pen. How silly of me to forget that the Tories were the party that hid 5 million unemployed in every scheme they could find. With the right-wing press helping them out, the Tories can get away with fiddling figures out of existence, Labour could only dream of doing the same - they would get shot down by Mail outrage within days.

So, here we are with a miserly minimum wage of just £5.83 an hour, a full time salary of just £11,400 per year compared to the median of £24,000 - around 45% of the median. So even working full time does not get you out of poverty - some minimum eh? Well at least there is a minimum wage. Will it ever pass £6 under the Con-Dems, yet alone the £7 that Labour promised in their manifesto or the £7.60 needed for a living wage - even that is still less than £15,000.

For most people on much more, it is difficult to imagine these sums, so I have a quick guide to help. As a general rule I worked out that £20,000 a year gives you £20 a day disposable income, £30,000 - £30 and so on. This general rule works quite well between £20,000 and £100,000. Below £20,000 it breaks down a bit as at 11,000 you would have less than £11 a day to live on (not much different to benefit levels so not surprising people prefer the dole) and above £100,000 it starts to get much more than £100 a day. I worked this out by subtracting income taxes, approximate accomodation costs, council tax and utility bills, leaving the disposable income left for everything else - clothes, food, travel, holidays, leisure etc. I allowed a factor of 2.7 for utility and council tax bills (max CT can only be 2.7 times min CT) between £20,000 and £100,000. For example, someone on £20,000 a year pays approximately £5,000 in tax and NI, £6,000 on accomodation and £3,000 on council tax and utility bills, leaving £6,000 disposable income or around £20 a day. On £100,000, its £34,000 tax and NI, £18,000 accom, and 6,000 CT and utility, leaving £42,000 or around £115 a day. Notice how a gross salary 5 times as much, can pay 7 times the amount of income taxes, 2.7 times utility and property taxes, yet still have a disposable income 6 times as much. This is why we need progressive taxation if we are to reduce this gap.

You see, the Tories are not happy with the current way of measuring poverty because it factors inequality into the equation. The Tories don't like this despite the overwhelming evidence that inequality itself causes social problems etc. Despite their protestations that they are now progressive and want to reduce inequality in itself, they don't seem to have much confidence of doing so when they don't want to include it in measuring poverty. Strange - this is like giving up the ghost from the start - it is pretty clear that the Tories expect inequality to grow, but hey if you have a mobile and a TV you can't be poor, right? So, we'll measure that instead and say we have solved the problem - the Sun and the Mail will back us.

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