June 22, 2010 Leave a comment
George Osborne and the Treasury today insisted that “The top income decile [consult graph 1 here for further explanation] sees the largest absolute losses, while, on average, the bottom three income deciles experience the lowest losses”.
However, ignoring for a second the fact that VAT always hits the lowest paid in society what Osborne has forgotten is proportion and scale. If figure A earns £200 a week and the government decides to take £10 more of that away, while figure B earns £2000 a week, and the government decides to take from him the same, figure A feels more of a pinch in spite of the fact that both have contributed the same.
Now, of course, this is not a literal picture of what the government are doing at the moment, but certainly the illustration holds true, that though the top income decile will see the largest amount of money taken from them on their pay packets, this is because they are earning more. This does not represent an equal distribution of the “pinch” when you consider that those on the bottom end of the income decile, though not contributing as much in income (as they don’t earn as much as those on the top decile) do feel more of a pinch by the raise in VAT, freeze on public sector pay and freeze on benefits.
It doesn’t follow that since figure A has less on his income statement than last year, that figure A is feeling the pinch more than figure B, in fact the opposite is true. This does not represent everyone taking an equal hit, and so should be opposed en masse.