New Labour's desperate confusion
This effort from Ivan Lewis highlights the intellectual confusion New Labour has fallen into. He says the government should
help the hard-working middle classes with large mortgage commitments who are neither rich nor poor; the people who work long hours for their two holidays a year, leisure club membership, meals out with family and friends and ability to buy their children nice things.
This, he says, might entail “enhanced government support for mortgages, a stamp duty holiday and higher taxes for the highest earners.”
I’ve got five beefs here.
1. The misuse of the word “middle class”. The IFS has pointed out that the median income for a couple with no children is around £28,800 a year. Strictly speaking, this is a middle class income; half of us get more, half less. I fear, however, that Lewis has a much higher income in mind. What he’s doing here is trying to justify a helping hand for the rich; remember, even an income of £60,000 a year puts a family with two children into the top-third of the income distribution.
2. Infantilization. Why should people in the top half of the income distribution get especial help? Whatever happened to the idea that the purpose of redistribution was to either help people who had fallen on hard times (sickness or unemployment) or were unable to help themselves, such as the long-term ill or unskilled? Lewis seems to think everyone has a childlike need for help.
3. Inconsistency. Back in 1999, Gordon Brown abolished mortgage tax relief, saying:
I’ve got five beefs here.
1. The misuse of the word “middle class”. The IFS has pointed out that the median income for a couple with no children is around £28,800 a year. Strictly speaking, this is a middle class income; half of us get more, half less. I fear, however, that Lewis has a much higher income in mind. What he’s doing here is trying to justify a helping hand for the rich; remember, even an income of £60,000 a year puts a family with two children into the top-third of the income distribution.
2. Infantilization. Why should people in the top half of the income distribution get especial help? Whatever happened to the idea that the purpose of redistribution was to either help people who had fallen on hard times (sickness or unemployment) or were unable to help themselves, such as the long-term ill or unskilled? Lewis seems to think everyone has a childlike need for help.
3. Inconsistency. Back in 1999, Gordon Brown abolished mortgage tax relief, saying:
The change will remove a distortion in the housing market and make the tax system fairer.
Why was he wrong then?
4. The ignorance of maths. The Treasury reckons a higher tax on mega-incomes would raise around £3.5bn; this is consistent with the figures in table 1 of this pdf, if we ignore adverse Laffer curve effects. But as Tim says, this is chickenfeed, especially if it’s going to be handed out to people on quite high incomes; it’s £1.70 a week to everyone in the bottom two-thirds of the income distribution, even if it could be redistributed without any leaky bucket.
5. The cod radicalism. A higher tax on higher earners is mere pseudo-radicalism. What would be more radical - as well as correct - is an attack upon the very functions that the rich perform, because the fact is that many of the super-rich should be technically redundant. Do we really need high-paid chief executives when co-operatively run businesses might be just as efficient? Wouldn’t a simplification of the legal system (especially relating to tax) be an efficient way to reduce demand for high-paid lawyers? And shouldn’t we point out that hedge fund managers earn poor returns for their clients for doing nothing very special?
A genuinely radical party would pose these questions. But of course, New Labour, which has sucked up to the rich throughout it’s existence, is in no position to do so. The result is that we get a desperate, directionless effort to do anything that will grab a few favourable headlines.
4. The ignorance of maths. The Treasury reckons a higher tax on mega-incomes would raise around £3.5bn; this is consistent with the figures in table 1 of this pdf, if we ignore adverse Laffer curve effects. But as Tim says, this is chickenfeed, especially if it’s going to be handed out to people on quite high incomes; it’s £1.70 a week to everyone in the bottom two-thirds of the income distribution, even if it could be redistributed without any leaky bucket.
5. The cod radicalism. A higher tax on higher earners is mere pseudo-radicalism. What would be more radical - as well as correct - is an attack upon the very functions that the rich perform, because the fact is that many of the super-rich should be technically redundant. Do we really need high-paid chief executives when co-operatively run businesses might be just as efficient? Wouldn’t a simplification of the legal system (especially relating to tax) be an efficient way to reduce demand for high-paid lawyers? And shouldn’t we point out that hedge fund managers earn poor returns for their clients for doing nothing very special?
A genuinely radical party would pose these questions. But of course, New Labour, which has sucked up to the rich throughout it’s existence, is in no position to do so. The result is that we get a desperate, directionless effort to do anything that will grab a few favourable headlines.
"the purpose of redistribution was to either help people who had fallen on hard times (sickness or unemployment) or were unable to help themselves, such as the long-term ill or unskilled?" If that really were the purpose, rather than just the purported purpose, few of us would much object to it. But your real difficulty is your call for "radicalism" since that is most unlikely to arise from people from a socialist tradition, whose every instinct is permeated with 19th century misunderstandings and resentments.
Posted by: dearieme | August 18, 2008 at 12:57 PM
Although I agree with you on the issue of 'middle income' being far lower than commentators think, he did use the term 'middle class', which has a different meaning.
Posted by: Matthew | August 18, 2008 at 02:10 PM
"A genuinely radical party would pose these questions. But of course, New Labour, which has sucked up to the rich throughout it’s existence, is in no position to do so."
Forgive me for saying so, but, time for a new workers' party ...
Posted by: a very public sociologist | August 18, 2008 at 08:31 PM