Oh, well counted Ritchie!

So, Ritchie tries a calculation:

According to the FT:

Mr Cameron will use his Downing Street press conference to claim that Labour would put up taxes by £3,028 for every working household — a calculation based on a 50:50 split between higher taxes and spending cuts to eliminate a £30bn structural deficit in the next parliament.

I admit I cannot see any logic to this claim.

There are about 65 million people in the UK and about 31 million income tax payers. The average household has, according to the ONS, 2.3 members. So there are about 28.3 million households.

Between them these households have to pay in tax £15 billion extra according to the Conservatives. That is, if that need is correctly stated (which I dispute), £530 a household.

Even over five years it does not come to £3,028 a household.

This claim looks to be very straightforwardly wrong.

Hmm. Well, the number of households isn’t far off. However, he’s forgotten that “working” bit.

Some 16% of the population are pensioners. Not exactly right to call that households but it’ll do. And some 16% of working age households are not working.

28 million households x .84 x.84 gives 20 million to our level of accuracy. Looks like that might actually be an underestimate of the amount each working household has to pay. We get much closer to Cameron’s number if we don’t adjust for pensioners but do for working/non-working households. Or vice versa actually.

28 thoughts on “Oh, well counted Ritchie!”

  1. He’s a blithering idiot.

    Murphy, I know you’re reading this because your ego couldn’t bear not to, so: You’re a blithering idiot.

  2. But…he loves tax. Adores it. Why does he want to only raise £500 per household? Why not trumpet the £3000 figure, or even double it?

    Surely it’s not for tactical selfish reasons – wanting a Labour govt because that opens up all the money taps for grants and jobs?

  3. Rob

    Good point. I wondered why an individual who is so very keen to claim political neutrality should be so very quick to jump in defence of one of those parties. Perhaps some views are more neutral than others.

  4. Murphy states;

    “That is absurd

    That is making up numbers”

    Oh, the irony.

    And as others note, the idea that he is politically neutral is a poor joke. He is desperate for a Labour led government so that he can land himself some cushy job in his much self-advancing Office for Tax Responsibility (which he claims Margaret Hodge strongly supports, despite her not mentioning it in her final screech about tax at the PAC.

  5. The £3,028 claim was idiotic. It suggests a level of accuracy that is unjustified given the level of accuracy of the figures that comprise it.

    Having said that, to criticise an estimate while proposing a ‘correct’ answer that is of the same order of magnitude is vintage Murphybollocks.

  6. I wonder if he will accept the quite valid criticism that his estimated tax gap, which almost every other party suggests is wildly exaggerated, is ‘straightforwardly wrong’ – I think I see a porcine squadron out of the corner of my eye…..

  7. Using Josephine’s figures it comes to £733 (ignoring inflation and debt interest) per working household in the final year of the Parliament. Add add in the cost of financing the increase in debt (£2-3bn under the Tories, probably £6bn under Labour) gives £840 or £1026. Osborne is front-end-loading the cuts so the average will be well above half that. Once you factor in inflation, even at 2% pa, you have to add 4% to the number you first thought of, so it’s quite plausible that putting half the pain of Osborne’s deficit reduction plan onto tax rises would give an average of £3,028. But who thinks Labour really would eliminate the deficit?

  8. But who thinks Labour really would eliminate the deficit?

    Lucy Powell has said that they won’t.

  9. @ PaulB
    It may seem to be such but it is, in fact, specious. It assumes (i) that non-one pays any tax in the last year of the next Parliament; (ii) Cameron is wrong because Labour will increase taxes for households in which no-one is working (iii) that Labour need not pay any interest on the National Debt (iv) that the break-even target on current account should be shifted back one year for Labour but not the Conservatives.
    I haven’t gone into the folly of Gordon Brown’s “iron pyrites” rule that borrows to replace assets as they wear out but IFs seem to believe in it.

  10. Yes, there are about 18 million ‘working’ households. Possibly less.

    No, in this instance Cameron is a typical bloody politician because he is flipping back and forth between annual figures and the cumulative amount over five years, the annual deficit is not £30 bn, it is £100 bn or something. And we know who’s getting it.

    And Ritchie is wrong on this, because whatever happens and whoever wins, the next government will be worse than the present one, which has been the case for decades (John Major excepted).

    And finally no, because even if Labour get in and stick to their word and do the responsible thing (highly unlikely) then in theory, they could get in that extra hypothetical £15 billion by taxing the top few per cent, leaving the ‘average working household’ no worse off.

  11. @ Mark Wadsworth
    I can remember Churchill and Mrs Thatcher, both of whom were immensely better than their predecessors, and Ted Heath who was moderately better. If you think that the Coalition is worse than Brown you must have been asleep in 2007-10.

  12. john77: If you want to get party political about it, let me point out that Osborne’s spending projections are nothing but fantasy, and the projected jump in spending for 2019-20 would be utter folly, if he’s not just lying about his intentions.

  13. Regardless of accuracy or otherwise, Cameron deserves a poke in the eye for counting up all five years. However, Brownites Miliband anad Balls can scarcely complain about that can they?

    Of more interest to me is this: yet again, PR professional Cameron has failed on PR management. This seems to be a recurring theme; the main parties seem to spend so much time stressing about and micro-managing their PR that they have no time left to get it right, or to avoid obvious howlers.

    Is there a word for this apparent obsession-leading-to-incompetence?

  14. @ PaulB
    I wasn’t getting party political about it. I cannot see the point in Osborne’s proposal for deep cuts followed by a jump in spending. I was merely pointing the most blatant bits of stupidity or duplicity in the IFS comment.
    Tim was not defending Cameron’s sleight of hand (or the FT’s misreporting as the case may be) but pointing out that Murphy was “straightforwardly wrong”.

  15. The inconvenient truth

    Isn’t Richard Murphy ALWAYS ‘straightforwardly wrong’, so that can be taken as read in future?

  16. Thanks Luis Enrique, but isn’t it more “normal” these days than “unforgivable”?

    I used to think the electorate should make more of an effort, be better informed, etc, but you don’t need to be Mr Ecks to regard modern politicians as pretty-low grade, thought-free rubbish. I’m sure most of them would be just as happy and/or effective in any of the big parties. Like footballers.

  17. Van Patten I know carries out a ‘nutter watch’ on the Tax Research blog. So I’m sure he’ll have noted Mark Crown’s lovely “mugs in voter-land” dismissal of the electorate for having the temerity not to vote as he instructs.

  18. Ironman

    An instant classic indeed from the man himself:

    ‘Why do I let drivel like this through?

    I must be a very fair person’

    apparently, once again, said without irony…

    I must confess that the election seems to have brought out the crazies over in TRUK, a few that I don’t recognize but luckily on the two posts ‘Where was Tax?’ and ‘£3,028 claim doesn’t add up’ we had substantial contributions from at least 3 of the ‘Big 5’ , Reed, Horrocks and Crown. I have to say, it’s a close run thing between Crown and Dickie for ‘moron of the year’ – The former’s prolific rate of comment make him a formidable contender, despite Dickie’s consistent support of mass murder across many years – as you say, Ironman, I like to think I’m performing a public service……

  19. Well he has got himself in a pickle now. He has said “I haven’t argued for increased tax rates” and when it’s pointed out he has as he says cgt should be the same as income tax he says he also argues for a reduction in vat

    The man is either mental or he literally can’t remember something he blogged a few days ago

  20. john77: re. your specific points. (i) IFS rightly calculated over 4 years, because the budget for the first year of the next parliament has already been set. (iii) and (iv) Osborne’s predictions, based on the fantasy spending cuts he isn’t really going to make, say that debt as a proportion of GDP will fall by 8.2% during 2017-20. Labour has signed up to have debt falling, but it isn’t committed to matching those fantasy numbers. 1% of GDP is about £17bn, so there’s a lot of room there.

  21. @ PaulB
    Labour has stated that over the life of the Parliament, not over the last four years of the Parliament their deficit reductions will be split 50:50 betwen cuts and tax rises. So if they stick to Osborne’s budget for the first year they must squeeze five years of extra taxes into four years *and we get the same answer*.
    I have postulated that debt interest will be far higher under Labour because Osborne’s talk about austerity while tolerating a horrendous deficit has conned investors into buying gilts with a negative real interest rate but Balls won’t get the same willing suspension of disbelief. But that is a minor point. The IFS states that it is excluding debt interest when it calculates by how much Labour needs to raise taxes. That it just plain wrong unless Labour’s economic policy really *is* that it will keep rolling over its PayDay loans while supporting a Coalition government ban on private individuals doing it more than twice.
    On (iv) I am merely reading what IFS said, which in this instance has nothing to do with Osborne’s made-up numbers.
    “However, the target set out in the Charter for Fiscal Responsibility relates to the third year of the forecast horizon. While this is currently 2017–18, by the time of any post-election “emergency” Budget this would relate to 2018–19 (because the current financial year would be 2015–16 not 2014–15).” So IFS is setting Labour a different target year. I think this is called “Shifting the goalposts”.

  22. I think you need to read the bit about debt interest again, because it doesn’t say what you think it says.

    Again, Labour has committed to meeting the CFR, not to matching Osborne’s fantasy budget projections. The CFR specifies a rolling target. You might think that’s daft, but it’s not Labour’s specification.

  23. @ PaulB
    “This second rule means that, after adjusting for the estimated impact of the ups-and-downs of the economic cycle, total revenues should be sufficient to cover all of the government’s current spending: in other words any borrowing should be explained either by temporary weakness in the economy or spending on investment.”
    BUT “The OBR’s forecast is that total public spending, less spending on debt interest, would be cut by £30.5 billion by 2017–18 and that this would be sufficient to deliver a current budget surplus of £16.3 billion.”
    “So on the face of it Labour might need a fiscal tightening of just over £18 billion by 2017–18 (the £35 billion implied by the Budget less the £16.3 billion of overachievement against the fiscal target that Labour would not actually need).”
    Well, maybe it is just badly phrased and excluding the increase in debt interest instead of all debt interest, but it is certainly excluding the increase in debt interest of £5 billion or so.

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