We ARE all in this together, after all

Britain has become a more equal society, according to the Institute for Fiscal Studies, in important research published three weeks ago, on 15 June, which went almost entirely unreported.

It showed that post-tax incomes fell sharply in the first year of the coalition Government (April 2010 to April 2011). That part was widely reported (Daily Mail: “Biggest drop in our incomes in 50 years”). But higher incomes fell more than lower incomes, resulting in a markedly more equal distribution. Of national print newspapers, only The Daily Telegraph reported this finding, although it did not carry the headline, “George Osborne, egalitarian.”

I cannot understand why the Conservatives and Liberal Democrats have not made more of this. The figures, an IFS re-crunch of official data, are in fact a tribute to the success of Labour Government policy, reflecting tax and benefit changes made by Alistair Darling. But they suggest that the coalition started with a more favourable trend that runs counter to popular assumptions.

The findings apply across the income distribution, and include the richest one per cent, although that might partly reflect avoidance of the new 50p top rate of income tax.

But the study is a classic example of the “prism media” theory. It runs so counter to the prevailing assumptions – the rich get richer, the poor bear the brunt of the financial crisis – that it has been neither reported nor discussed. The IFS spends quite a lot of time in the report saying “we don’t know” what is happening since April 2011, but the evidence suggests that until then the rich bore the brunt and that poverty was declining.* But that simply cannot be seen through the prism of the media.

Hence there is much more coverage of Danny Dorling’s out-of-date and anti-Labour interpretation, which says that income is now more unequal than at any time since 1940 (the IFS says recent highs, before the most recent fall, were the highest since 1961). Dorling glosses over the Great Thatcher Decade of Division, about which some people have written whole books, which is when inequality markedly increased in Britain. Dorling says, “Since 1979 these inequalities have risen dramatically and continue to rise.” No, they rose dramatically and then stayed more or less the same, rising slightly and unevenly but nothing like they did in the Thatcher period.

And Dorling’s assertion that, “as each year passes … the richest one per cent get richer still” is now flatly contradicted by the IFS data.

*Poverty in modern rich countries has to be measured on a relative scale. Once people have enough to eat, what matters is how well-off you are in relation to others, or the extent to which the poor can afford things that others take for granted.

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• MrVeryAngry

  Ah, I see you problem. Economic ignorance. One, speculators perform a valuable function in the exchange economy, they take out the slack by providing liquidity – a sort of insurance, ot hedge. Two, bankers are as people no more greedy that you or I. But like you and I they respond rationally to distorting signals made by failed regulators and politicians. In the present case such daftnesses as the Basel banking capital accords and the entiurely useless FSMA2000 and its bastard child the Failed FSA proto nationalised banking by regulations and egged on the debt expansionism that drove Browns false boom. Three by any measure the UK is over-indebted and getting more so. Four, I grant you that the current lot are completely useless, but that is marginally better than the last lot that were and remain totally and absolutely catastrophically incompetent. The last lot just helped themselves to other peoples wealth to buy votes. Tell me, how come Blair and Mandleson can become so wealthly whilst discharing public service?