Day 4932: You Can Prove Anything With Statistics Part Deux

Thursday:

This time it’s Tom Clarke writing in the Gruaniad to assert:

“How the Tories chose to hit the poor”

http://www.theguardian.com/commentisfree/2014/jul/02/tories-poor-george-osborne-inequality-conservatives

(and just look at all those buzzwords in that URL!)

“George Osborne claims to have cut inequality,” adds the sub-editor. “But look behind the figures and it's clear the Conservatives can't take any credit.”

To summarize: the existing data points do not agree with his thesis so he says that they don't count and makes up what next year's figures will say instead.

It seems Iain Drunken Swerve isn’t the only one for whom denial is a preferred tactic.


The implications of the piece are that the CHOICES of the Coalition are bad ones, and therefore that any beneficial outcome is accidental. To come to that conclusion it is necessary to downplay, ignore or indeed run away and hide from the contribution of the Liberal Democrats to Coalition policy.


Inequality, measured by the Office for National Statistics figures for 2011/12, FELL in the UK under the Coalition, and the new 2012/13 figures show that fall has not reversed.

As Lib Dem Voice reports, the Institute for Fiscal Studies have commented that inequality is now lower than since before Tony Blair brought Labour back into government in 1997.

This is a fact.

A startling one but indisputably a fact. Startling not just because this is the first fall in inequality for nearly three decades, but also because it is unique among Western nations.

Is this a beneficial outcome?

What has happened has happened in the worst way. I – and I think most Liberals – would prefer to reduce inequality by raising everyone up, not grinding the richest down. Making the rich pay, that’s Labour’s way. In this recession, everyone has had to take a hit, including hitting some of the least well off, but proportionately the better off you were the more you’ve been asked to pay – from each according to their means, as it were. And it must gall Labour and the left that this Coalition has been more socialist than the socialists ever were.

But if, as Labour do, you subscribe to the “Spirit Level” thesis that more equal societies are happier, healthier and better then you would have to say this is a beneficial outcome. Even if you don’t subscribe, you would have to accept that the cost of the Crash had to be borne by someone, and these figures show that the better-off have shouldered their share of the burden. Those better able to pay have paid and as a result there has been a slight rebalancing of income after tax and benefits.

So is this just by accident or does it down to the choices we have made in government?

It is not difficult to see how it’s happened. Salaries were frozen or even reduced, whereas, at the insistence of the Liberal Democrats, benefits continued to be increased*, and with a triple lock pensions – more than half the Social Security budget – were and still are increased by even more.

(*Full disclosure: for the period covered by these figures, benefits were increased in line with inflation. For 2013/14 benefits were still increased, but we could not stop George Osborn capping many increases, but not pensions, at 1% – a cut in real spending power as it is below the rate of inflation. Because pensions increase by more than inflation, the impact of this is uncertain, but it does, of course, form the basis of Mr Clarke’s speculation that inequality will rise again in next year’s official figures.)

Add to that the effect of the flagship Liberal Democrat tax policy of raising the personal allowance, a tax cut directly aimed at the less well-off earners.

And the Liberal Democrats also required, in the price for Coalition, that Capital Gains Tax – a tax largely paid by the well-off – be increased from Labour’s inequality-creating low level of 18% to a more reasonable 28%.

Furthermore, the Lib Dems would not let Master Gideon reduce the top rate of tax from 50% to the 40% rate that it was under Labour.

Remember when Labour raised the top rate to 50p… for a MONTH. The Coalition because of the Liberal Democrats has a rate of 45% that is still higher than under any budget presented by Gordon Brown.

Remember when Labour DOUBLED the tax paid by those in the lowest band, and how Mr Balls still wants to reintroduce the 10p starting rate? The Coalition because of the Liberal Democrats gave those people a ZERO starting rate and took them out of paying income tax altogether!

You can see the theme here: Labour under Mr Blair and Mr Brown – who, if you recall, were in the words of Mr Peter “Prince of Darkness” Mandelson: “intensely relaxed about people getting filthy rich” – saw inequality rise like a rocket. The Coalition, because of Liberal Democrats’ fair tax policies, has seen a remarkable fall.

For that fall in inequality to come about because “the Tories chose to hit the poor” IS. NOT. POSSIBLE.


Remember Labour’s COMPLICITY in the Great Crash of the Twenty-Nothings. It wasn’t ALL down to a few “rogue bankers”. I’ve written before of how Labour’s “borrow and spend” economic policy buoyed the bubble, how their “let the good times roll (on tick)” philosophy cheered on many millions of small borrowers to risk more than they could afford on the (fictitious) promise of a never-ending supply of cheap money lent from China – how often did Gordon Brown say “no more boom and bust”? What did he think he was encouraging people to do?

Remember how Labour were taking bungs and favours from everyone from Bernie Eccleston to Rupert Murdoch. They were deeply entwined with the really filthy rich.

Remember the facts of what Labour really DID, not the fairy story of good times that they want you to believe in.

Labour, even when they nationalised a bank or two, were only ever socialist by accident; we have achieved this by design.

In this crash (which, whatever the causes, you have to admit happened on Labour’s watch) everyone has done worse. But Liberal Democrat choices have made good on the Chancellor’s promises of being “all in this together”.

And that’s important to us because we CARE about a Fairer Society as well as a Stronger Economy.

The impression from his article is that Mr Clarke appears not to care that Labour never really cared at all.

"…so when the truth finally outs, what will be the response?"

Practically an admission there that he doesn't know that either. So he’s just making that answer up too. Not necessarily an unreasonable prognostication – Mr Drunken Swerve has form – but still not in fact fact.

The 2013/14 data – when it comes out next year – may (or may not!) undermine the Chancellor's current statement, but at least Mater Gideon is basing his words on the facts as they are known now. Mr Clarke and the Graun are not.

And the confirmation bias of 450 below the line CiFers nodding and saying “he’s right you know” does not count as supporting evidence.

Mr Clarke touches their G (for Grauniad) spot again by referring to the 2008 crash as “Lehman Brothers' implosion” pinning the blame on the bank and definitely not the profligacy of any governments that might have supposedly had oversight of the economy at the time.

And again we have the lazy accusation against the Coalition of “a government that has lurched to the right”.

Then there is this:

"This week's data only takes us up to this point, the financial year that began in April 2012"

This is such a weirdly constructed sentence that I have to wonder if it's deliberate. If you are talking about the point that the data takes us to, then surely it only makes sense to talk about the *end* of that Financial Year, so April 2013.

By using 2012 (whether by accident or design) it conveys the impression that the data is even more out of date and only covers maybe a year or so when the Coalition were in charge, rather than 60% of the current Parliament.

If you are going to criticize the use of statistics by others, then you must take the greatest care that no distortion creeps into your own version – that he has failed to do so critically undermines his argument.

I realize Mr Clarke has a book to sell – it’s actually advertised right there in the article (or “advertising feature” as these things used to be called) and "oops I have no evidence" doesn't help with that, but really this is just hiding from the facts.

Inequality has fallen. This is not because the Tories chose to hit the poor. It’s because the Liberal Democrats chose to defend the poorest-off where we could and to raise fair taxes from the rich.

Day 4916: You Can Prove Anything With Statistics

Tuesday:

(Warning: Contains Maths!)

I've seen a couple of people linking to this story: "British public wrongly believe rich pay most in tax, new research shows".


It claims that most people want a tax system that is fairer (good) but that they are wrong to think it's fair now (bad!).

Of course, this is a piece in the Grauniad cherry-picking from a report for The Equality Trust cherry-picking data from the Office for National Statistics and before you can say "confirmation bias" it's proved to the Internets that the Evul Condums are Evul.

Except, of course, it's not true.

Obviously, there's the usual exaggeration by some Graun sub-editor in the headline: we've lost the nuance of "as a proportion of their income". Of course the rich pay most in tax. 35% of more is obviously more. The question is do they pay a higher SHARE (we'll not even get into SHOULD they pay a higher share; we'll take that as read).

Then there's the point that the Equality Trust's research is actually a poll into public perceptions, NOT research into the effects of the tax system.

Just because they're a charity doesn't mean that we should not be cautious of this sort of polling – it's very similar to the sort of puff piece that marketing teams place in papers all the time, you know the sort of thing: "90% of housewives say sunny days are nicer says poll for insert name of suntan lotion retailer here". It's about getting their name in print – i.e. advertising.

Another point that's interesting is that the ONS data excludes Capital Gains Tax and Inheritance Tax, which amount to about eight billion quid between them, not a lot in the grand scheme of things – about 2% of all taxes, but more than cigarette duty which the figures do include – and these are taxes that tend to impact the higher earner more. But the report's methodology does say they specifically do mention Capital Gains Tax when asking poll respondents to think about the taxes that they pay. So you're asking people to remember a tax paid mainly by the better-off that you then exclude from your calculations.

In addition, the ONS figures show that most households benefit "in kind" mainly from state-provided schools and health service equivalent to about seven-and-a-half thousand pounds (which again is less for the top earners, I'd guess because of higher take-up of private schools and health insurance by those able to afford it). The Equality Trust report does not include this benefit in the "total of benefits and income" which they use to compute the tax rates. You may say "fair enough" (and I'd probably agree), but it is still a bit dodgy to ignore SOME of the ONS data you claim to be using.

And there's the very serious fact that the figures are based on EARNINGS, rather than WEALTH. Earnings at least demonstrate some work being done. It may not be entirely USEFUL work, but at least it's being done, whereas wealth, particularly when tied up in land, is more often a dead weight or leads to rentiering.

But, if we move past all of that there is still this BIG problem: the central assertion that the public believe that the tax system is fairer – and that they would like it to be fairer still (nicely coinciding with the aims of the Equality Trust, of course, but fair enough) – and that this belief is WRONG.

This rests on the claim that the tax system actually isn't fair. In fact, the report says in these words:

"The UK’s tax distribution is not only less progressive than the public’s perceived and preferred distribution, it is actually regressive when comparing the richest and poorest 10%"

This is, at best, in error and more than likely actually deceitful.

A regressive system would take money from the less well-off (in this example the lowest 10%) and transfer it to the better-off (i.e. here the top-earning 10%).

And that is very clearly NOT what is happening.

Why not? Because the way they have sliced the data is to compare income INCLUDING BENEFITS against taxes paid.


Here's now the report puts it:

10% of households with lowest income:
Total Income and Benefits: £10,253
Total Direct and Indirect Tax: £4,424
Income after taxes: £5,830
Effective tax rate: 43%

10% of households with highest income:
Total Income and Benefits: £101,291
Total Direct and Indirect Tax: £35,627
Income after taxes: £65,664
Effective tax rate: 35%

Cue shock and outrage!

But let's cut that data up a slightly different way:

10% of households with lowest income:
Total Income: £3,835
Total Benefits less Direct and Indirect Tax: £1,994
Income after tax and benefits: £5,830
Effective tax rate: -52% (yes, that's a negative tax rate of MINUS 52%)

10% of households with highest income:
Total Income and Benefits: £101,291
Total Direct and Indirect Tax: £33,424
Income after tax and benefits: £65,664
Effective tax rate: 34%

Clearly there is a net cost to the top 10% and a net benefit to the bottom 10%. Actually, all the lower four deciles (or 40% of households) receive more in benefits than they pay out in taxes.

The combined tax/benefit rates for all deciles are as follows:

Bottom: RECEIVE 52% (receiving more than paying)
2nd: RECEIVE 49%
3rd: RECEIVE 26%
4th: RECEIVE 13%
5th: PAY 9% (paying more tax than receiving benefit)
6th: PAY 15%
7th: PAY 24%
8th: PAY 30%
9th: PAY 33%
Top: PAY 34%

On that basis the tax and benefit system is pretty positively progressive.

Far from being wrong because the system is unfair, the public hugely underestimate how much the least-well-off are helped. (And probably just as vastly underestimate just how little the least-well-off get paid!)

Does this just mean we're playing with numbers matter? Does it just mean you pays your money and takes your choice? As Obi-Wan Kenobi puts it: "it all depends on a certain point of view". I don't think it does.

To ignore the fact that benefits are a part of the government's effect on household incomes is absurd; worse, it distorts the picture entirely. It suggests that the lowest-earning households actually pay more in tax than they earn altogether, which is clearly impossible.

It matters that statistics are used to tell a story that is true. And by abusing the ONS's numbers this report doesn't just discredit their own version – they discredit mine. People will just go (as my title suggests) "ugh, maths means nothing". Far too many CiF commentators are ready to leap to their own prejudices that Evul Condums are Evul and they pick the numbers that support that story.

(And there's enough "maths blindness" in the world as it is, without deliberately reinforcing it.)

As a Liberal I am anyway naturally wary of putting a society that is "more equal" ahead of a society that has more freedom.

I want to lift people out of poverty so that they are free to live their life the way they want; I care less about how much they earn after that, so long as it's a fair return for their work.

I do think that the tax system does need to be a lot simpler and clearer – it would be fairer if it were easier to understand what tax you pay.

And if we are to balance the government's budget then – like Cap'n Clegg – I say that it's right to ask the better-off to be first to contribute. I'm just not sold on raising taxes – particularly not to punitive levels – as a "good" in themselves. There MAY be something in "The Spirit Level" idea that more equal societies are healthier ones, but I find they (too) pick their evidence to agree with their case.

If we deplore – and we do – Tory (and Labour) ministers pushing the lie that "scroungers" and "benefit fraud" are bankrupting the economy, then we must equally deplore the reverse when I'll have to label them broadly "the left" say that the government are ripping off the poor to pay to the rich. We should not endorse wrong figures from either end of the spectrum.

It is GOOD that the public want and endorse a fair, progressive tax system. Lying to them about it will only induce more apathy and KIPpery. Let's not.

PS:

I encourage you to check sources:

The Equality Trust's report [pdf]
and
The Office of National Statistics data