Household Disposable Income Down

So says a report from uSwitch:

In 1997, when Labour came to power, people were left with 34.5 per cent of their gross income once they had paid taxes, national insurance, mortgage or rent. Now they are left with 32.6 per cent, says a report by uSwitch, a price comparison website.

It is the latest survey to highlight how millions of households have failed to benefit from the strong economy because of rising taxes and escalating bills. Ernst & Young, the accountants, calculated this year that the average family had £838 left to spend each month, compared to £899 four years ago.

There\’s three things to say about this.

While the average household gross income has climbed over the past decade from £34,796 to £53,835, people have far less of that money to spend each month after they have paid essential bills.

That gross income looks very high indeed for the average household. Might they be talking about the mean rather than the median? Rolling around the back of my mind I have the idea that the median US household income is somewhere in the $40-$50k a year range and I really don\’t think that the UK is richer than the US, nor that (as an alternative explanation) the average UK household is more than twice the size of the average American one.

The second is that they\’re rather confusing two things:

Increases have hit four key areas in the past 10 years. Petrol — often the biggest cost for a family after their housing — has increased by 55 per cent and phone and internet bills have risen 77 per cent as millions more use broadband and mobile phones.

So there\’s a change in the composition of "essential spending" as well as a change in the prices.

Finally, the Treasury is probably correct here:

He said: "As a result of tax and benefit measures introduced by the Government, this year all households will be on average £1,000 a year better off in real terms and families with children will be on average £1,550 a year better off in real terms, compared to 1997."

For the original calculations don\’t seem to (although as I can\’t find the report I can\’t check) include benefits, only tax. But this is untrue:

A Treasury spokesman denied that Government tax policies had eaten into incomes.

Of course the tax policies have eaten into incomes. It\’s the benefit policies that might have amended this, but tax per se must eat into incomes.

But I think the biggest fault is in their headline figure for average household incomes. I really don\’t believe that that is the median. Median individual earnings are £26 k a year aren\’t they? And it is most certainly not true that the average household has two incomes at that median now, is it?

Yesterday\’s Australian Sports Column

Ahem:

THE simple fact is the Wallabies are a better rugby team than England…..

In the space of a few short weeks, England has gone from swaggering to staggering and now, with its last roll of the dice, the best it can come up with to defeat Australia is to pick a pack of bully boys and an endearingly earnest five-eighth who doesn\’t kick heads but goals instead…..

That\’s how it is shaping again tonight, although one senses a historic adjustment in the Wallabies\’ methods. Where in the past they were obliged to use hit-and-run tactics, tonight, boasting a scrum that even rival flanker Lewis Moody concedes may be the strongest Australia has assembled, they will engage England head-on. …..

That\’s not to say that\’s all they will do. There is considerably more to this Australian side than muscle. But the belief within the camp is that beyond the bully boys and Wilkinson, England doesn\’t have much at all…..

Hence, the quickest and most effective way of defeating England is to confront its two great strengths and nullify them.

Sounds simple. And if the Wallabies are anywhere near to achieving their often-stated aim of having the best pack in world rugby, they could indeed do the business tonight with considerable audacity and some alacrity……

Snigger.

 

To Spend is to Tax

Worth remembering that:

We should not be surprised by such profligacy. In 2001 Brown stated that the UK would borrow a total of £28bn between 2001 and 2006. He ended up borrowing £129bn during that period. So his "prediction" was more than £100bn astray.

It\’s not just the tax rises, it\’s also the rise in borrowings: and, even more than that, the rise in promises of future spending (on pensions and the like) which are not being accrued.

Future taxes have gone up by vastly more than current ones have.

Tom Watson Blogging

Re the previous post, I went and read a little of Tom Watson\’s blog. A most interesting comment re the speechwriter of Cameron\’s conference piece (oh, come on, you don\’t think he actually wrote it himself do you?):

His hair was supposed to be “crinkly” like a public school boy’s.

Is this something to do with "nappy headed \’ho\’s"? Or public schoolboys eat their crusts? The effects of too many showers after the rugby? What?

Will Hutton. Seriously Confused.

No, really, very seriously confused.

Labour could even have copied the ultra-capitalist Swiss and introduced a small wealth tax levied annually, including on super-rich foreigners living in Britain who enjoy the right to be considered \’non-domiciled\’ and so excused taxation on British income and assets.

Err, non-doms are not excused taxation on British income and assets. They\’re excused taxation on foreign income which they do not bring into the UK. Getting it 100% the wrong way around is pretty bad for a columnist, don\’t you think?

Rather, the take should be raised and the loopholes closed that let much property to be held offshore.

Now I\’m on slightly shakier ground here but I think that again Will has misunderstood the role of domicile here. Indeed, I think this is part of the very reason that we do distinguish between domicile and residence. So you\’re a UK citizen: you can\’t become a non-dom and still live in the UK. You actually have to give up UK citizenship and bugger off elsewhere. (If I get some of this wrong please do correct me.)

Now, if you are a UK citizen and you do bugger off elsewhere, you don\’t have to prove that you are resident elsewhere in order to show that you are non-resident in the UK. Just being out of the country for the requisite number of days in the tax year is enough.

However, to prove that you are not domiciled in the UK any more you do have to prove that you are domiciled elsewhere. That you\’ve got a new citizenship, that you really do live elsewhere and expect to die elsewhere and be buried there (is, I think, the normal formulation).

Now, any property that you own in your own name in the UK (yes, of course trusts can be used to disguise this) is, if you are non-domiciled and non-resident, not taxed by the UK as part of your estate. The assumption is that the other taxman gets his cut. But if you are non-resident but still domiciled then your UK property is indeed subject to inheritance tax.

As I say, I\’m on slightly shaky ground here as I\’m not a tax expert but that\’s what I think happens. And why would the law have been drawn up in this manner?  Why, so that death duties would apply to the great landed estates of the past. If the 4th Marquess of Chinlessness went off to Monaco in order to flee 98% income tax, that was one thing. But unless he then went on to become Monegasque then his 500,000 acres still faced death duties on his expiry and his heirs would have to sell up the great landed estate. That, I believe, was actually the point of devising the tax system this way.

If you want to change the whole set up about domicile and residency, fine, carry on: I\’m not sure that it really matters all that much either way. But it would be nice to see an admission that there\’s more to it than getting hands on some of The City money. It will also mean not getting hands on  some much older money (although this specific example doesn\’t count now as farmland doesn\’t pay IHT).

Back to Will\’s clear and obvious confusion:

Extraordinarily, inheritance tax is felt to be unfair. There is one good reason for this: more than 70 per cent of the take is paid by people inheriting estates of half a million pounds or less.

A point I have made often: the actual rich don\’t pay it. So what should we do?

Labour, of course, should have seen this coming. It should have protected its position by making the case for inheritance tax morally, socially and economically at the same time as designing the system so that it was much fairer. The eligibility threshold for inheritance tax should have been raised, while simultaneously making the rates sharply progressive.

Not so sure about the progressivity but still, OK; we should raise the threshold.

Which is why the emerging consensus that inheritance tax is unfair and should be reduced, if not abolished, (which Shadow Chancellor George Osborne exploited so successfully last week in his proposal to lift the threshold to £1m) is so odd.

Osborne\’s raised the threshold so that it is indeed only the rich that pay. Those with less than £500,000, what we might in these days of house pricing, call the middle classes, don\’t pay 70% of the take any more.

Excellent, so Osbourne has followed the advice of Anthony Giddens, Third Way Guru.

Yet Will thinks this is a bad idea.

Tell me, is it actually a requirement to be ill informed and contradictory to write on economics and taxation for The Observer? I thought those were afflictions reserved for blogs?

 

 

 

 

 

 

More Interpreters

Nick Cohen\’s column is all about the moral duty owed to those Iraqis who have worked for the British forces in Basra and environs. Good piece too:

Some leaks from the MoD say that asylum will be offered to only the 91 translators currently working with the British army. If true, Brown would be engaging in gesture politics at its most debased. What about interpreters who have retired and gone into hiding? What about the other staff? When even Basra\’s laundry girls have been pulled out of taxis and shot in the head for the crime of working for the army, it is laughable to pretend that a promise to a few interpreters fulfils Britain\’s obligations. Leaving debts of honour to one side, who will work for the armed forces, Foreign Office or Department for International Development in other conflict zones if they see Britain betraying its friends?

Other leaks say that hundreds will be rescued. Let\’s hope the spinners are being honest. On Tuesday, there\’s a meeting in the Commons organised by Richard Beeston of the Times, who has led the media campaign for these Iraqis, and Dan Hardie, a territorial army doctor who has mobilised the blogosphere. If Brown has the moral compass we hear so much about, he will make it a victory celebration rather than a protest rally.

For more details of the meeting, what to say to your MP tp get them to attend, how to get there yourself perhaps, read this.

The Death of Recorded Music

Interesting piece about the economics of CDs and touring: there\’s a lot more to be said on the subject, of course.

But I will admit to a certain surprise at the surprise that\’s being shown here. OK, technology changes so the way a specific product (in this case, listening to music) is delivered also changes, changing the necessary business model.

Has no one read Schumpter? This is how it\’s supposed to work, isn\’t it?

Ballotting on Grammar Schools

Something that slightly puzzles me here:

Labour is set to reignite the political row over selective education by making it easier for disaffected parents to force the closure of their local grammar schools.

Jim Knight, the schools minister, has instructed officials to look at how to simplify the balloting process by which schools can be forced to drop selection under a 1998 law.

Why is there no mention of being able to have a ballot to enforce selection? Is it simply because the article doesn\’t mention it? Or is it not actually possible to ask for such a ballot. And if the latter, why not?

That Postal Strike

Amazing:

More than 100,000 million letters and parcels have already been left undelivered by to the present walkout, but officials at the Communication Workers Union are planning a fresh wave of strikes that threaten to cause constant disruption beyond Christmas.

100,000 million? You mean some 2,000 for every adult in the Kingdom? Impressive, I must say.

On one day, sorting office staff will strike, a union official disclosed. The next day it will be the turn of delivery staff, with drivers walking out the following day and technical and support staff on other days.

So they\’ll cripple the service indefinitely uty only lose one day\’s pay each week each. Clever, in a sense, maximum disruption at the least short term cost to the workers. But I have to admit, I\’m really not sure what they hope to achieve in the long term. The monopoly over delivery has gone hasn\’t it? They\’ll just be building up their own competitors.

A Step Forward and Then Two Back

Amanda Marcotte:

They have figured out what feminists have been noting for a long time—that the gap between men and women economically is now more a gap between mothers and everyone else.

It\’s not just feminists who have been saying this of couse, economists have been shouting it from the rooftops as well. Why, even I have been known to make the point a time or two. The gender pay gap is an issue of childbirth and child rearing, not a result of direct discrimination against women. Still good news that this important point is gaining traction on the wilder shores of the feminist blogosphere. That\’s the step forward.

But it’s also true that this is evidence that we need federally subsidized day care, more worker protections for working mothers, better maternal leave (and maybe even mandatory paternal leave), more flex time at work, and less social stigma on motherhood.

And that\’s the two steps back. For what is the mechanism by which child birth and child rearing create the gender pay gap? Why, it\’s because mothers of children are more expensive to employ. Because maternal leave costs money, because worker protections cost money, because flex time costs money. (Mandatory paternal leave would also cost money, which would convert the current gender pay gap into a parental pay gap.)

So the solution offered to the perceived inequity of economic income and freedom is to restrict said economic freedom and depress such incomes?

Perhaps slightly more thought is required here?

 

 

Geeky Economics Request

I see in Wikipedia the following:

Ricardo became interested in economics after reading Adam Smith\’s The Wealth of Nations in 1799 on a vacation to the English resort of Bath. This was Ricardo\’s first contact with economics. He wrote his first economics article at age 37 and within another ten years he reached the height of his fame.

Ricardo\’s work with the stock exchange made him quite wealthy, which allowed him to retire from business in 1814 at the age of 42. He then purchased and moved to Gatcombe Park, an estate in Gloucestershire.

Gatcombe Park is of course where the Princess Royal lives now. But other than that, does anyone know the address in Bath where Ricardo first read Smith?

Being a Bathonian and, as is well, known, something of an economics geek, I\’d love to find out. Any ideas? Any ideas about how to even find out?

Good News: Sorta

So the Govt has indeed changed its mind:

Iraqi interpreters and other key support staff who have risked their lives to work for Britain are to be allowed to settle in the United Kingdom, The Times has learnt.

Hundreds of interpreters and their families are to be given assistance to leave Iraq, where they live under fear of death squads because they collaborated with British forces. Those wishing to remain in Iraq or relocate to neighbouring countries will be helped to resettle.

After a two-month campaign by The Times, Gordon Brown is set to announce that interpreters who have worked for the British Government for 12 months will be given the opportunity of asylum in Britain.

The offer also applies retrospectively to interpreters who worked for the Government but have ceased to do so. Government sources have disclosed that a few hundred vital support staff would also be helped, although they declined to give details.

The question is, will this cover everyone at risk? And how will it operate bureaucratically? Still need to know more of the details.