Charlie Elphicke is a research fellow of the Centre for Policy Studies and Deputy Chairman of the Cities of London and Westminster Conservative Association. In this article he highlights the ever-widening gap between the poorest and the richest under Gordon Brown’s misguided tax and benefits systems.
Remember the legend of Robin Hood? It is a ripping yarn with all the ingredients of a good old fairy tale. A good guy, Robin Hood and a bad guy, the Sherriff of Nottingham do battle. The good guy wins and all ends happily when good King Richard pops up at the end and puts a stop to the unjust taxing of the poor. Everyone lives happily ever after.
Move from medieval times to the present and the new millennium sees a harsher reality. Here is the latter day Sherriff of Nottingham, Gordon Brown, increasing the proportion of taxes paid by poorest, while cutting benefits. Yet he is not sent packing in ignoble disgrace. No, he is about to become the King. Yet it is hard to think of a person less deserving of the crown. For he is the King of Inequality.
Crushing the least well off
Under Brown, the division between the haves and have nots that New Labour promised to cure has not reduced. The richest fifth of the population still earns sixteen times more than the least well off. Official figures released last week show that some 5 million households have earnings of just £81 a week, while the richest fifth of households earn £1,321 a week.
To add insult to injury, the least well off fifth of households pay a higher proportion of their income in tax than any other group. 36.4% of their income goes in tax. Meanwhile, the most well off fifth have an effective tax rate of 35.1%. How can this possibly be justified under any concept of fairness in a decent society? Some might argue that this division would be justified if we lived in a true meritocracy. And yet that avenue is increasingly closed off social mobility has fallen under Gordon Brown. Under Labour if you are born into poverty you are more likely now to live and die in poverty than before.
This would be a disgraceful record for any Government – and responsibility lies at the door of Gordon Brown. For his are the stealth taxes – like Council Tax and fuel duties – which fall hardest on those who can least afford to pay. His is the system of benefits that blunts aspiration and discourages people from striving for success. Take saving for old age. If you save for retirement you will lose out thanks to the way Pension Credit works. You will be rewarded for not taking responsibility, while there is little support for those who seek to take charge.
Not all right jack
Think this doesn’t apply to you? Think you’re all right jack? Think again. The poor may have been crushed by Brown, but the rest of us are not doing so well. The nation’s households have hardly had a pay rise in the last five years. The latest official figures show that household earnings have grown by just £16 in real terms, rising from £600 in 2001/02 to £616 in 2005/06. This amounts to a compound growth rate of around 0.5% a year. Disposable income has grown by just £9 a week in real terms over the same period. Real weekly household disposable income has gone from £491 to £500. This is a compound growth rate of just 0.35% a year. Did I mention housing costs? The cost of running a home rose nearly 50% in the five years to the end of 2006. So after housing costs, we’re all worse off and our real disposable income has fallen quite a lot.
But, you may think, it doesn’t matter since our houses have gone up in value. We’re rich! No not really, unless you plan a future living in a shack, on the street or in the Outer Hebrides, because we all have to live somewhere. More worrying still is that this belief in housing wealth has prompted a doubling of borrowing in the last few years that will all have to be paid back and we will still need to live somewhere when we make the repayments. So things could actually get even more sticky on the money front.
Labour and Brown’s record in Government has been dismal when it comes to our pocket books. The nation deserves a pay rise, the least well off should be paying less in tax and deserve a fairer crack. It’s time for a change and a Government that will make these things happen.