CommentPlus: pick of the papers

The ten must-read pieces from this morning's papers.

1. Why Britain should vote No in next year's AV referendum (Daily Telegraph)

The Alternative Vote system is obscure, unfair and expensive, says Lord Reid.

2. There won't be a bailout for the earth (Independent)

The world's governments are gathering in Cancun with no momentum to stop climate change, warns Johann Hari.

3. Red Ed should pass the baton to Green Ed (Times) (£)

Green Ed would be on strong ground, talking about what he knows and running on his record, says Philip Collins.

Read the CommentPlus summary.

4. Capitalism can save the planet (Financial Times)

Elsewhere, Philip Stephens says that self-interest, not altruism, is needed to fight climate change. Economic incentives are replacing the big stick of international direction.

5. Bank bonuses unbound (Guardian)

Despite coalition pledges to make the City pay its fair share, Osborne has let bankers off the hook, says Chuka Umunna.

Read the CommentPlus summary.

6. High-speed rail will be a scar across the heart of England (Daily Telegraph)

Even if we could afford it, a new train line would be a lunatic idea, says Peter Oborne.

7. Assets matter just as much as debt (Financial Times)

Borrowing is no sin, provided we use the funds productively, argues Martin Wolf.

8. If Cameron's wellbeing is seats on trains, affording a ticket comes first (Guardian)

Money may not be everything, writes Martin Kettle. But fairness and wellbeing are both made much harder when it is being taken away.

Read the CommentPlus summary.

9. Would Mr Gove's soldiers do any better in the classroom? (Daily Mail)

Servicemen would struggle to control a class full of bolshie British schoolchildren, says Tom Utley.

10. Everything else is being cut, so why not student numbers? (Independent)

Rather than wait for the market to cut student numbers, universities should take the initiative, writes Mary Dejevsky.

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Taxation without benefits: how our tax system increases inequality

We often hear the progressive income tax used as a proxy for all tax when it actually accounts for just over a quarter of the tax take.

Tax may not be the burning issue on everyone’s minds over the next month, but the Panama Papers leak has proven that the thorny issues of who pays what, and what level of tax is fair, are ones that are never too far away from the public consciousness.

One of the most important annual publications on tax is the Office for National Statistics’ Effects of Taxes and Benefits on Household Income. Published today, it shows, among other things, the proportion of income paid in tax by people at different points on the income spectrum. This may sound like the natural domain of the data nerd, but it actually tells us some rather interesting facts about our system of taxes and benefits.

First, the good news. Our much maligned welfare system is in fact a beacon of progressiveness, drastically reducing the level of income inequality we see in this country. In fact, overall, taxes and benefits are quite substantially redistributive. Without them, the income of the richest 20 per cent of households would be 14 times higher than the poorest 20 per cent. With them, that gap falls to only four times.

The benefit system as a whole decreases the Gini coefficient, the most frequently used measure of inequality, by 14 percentage points. For anyone who sees taxes and benefits as a key component in reducing economic inequality, or boosting the incomes of the poorest, or, frankly, tackling social injustice, this is rather welcome news.

But now for the bad news.

While our welfare system is undoubtedly progressive, the same cannot be said of our tax system when looked at in isolation. The poorest face a disproportionately heavy tax burden compared to the richest, paying 47 per cent of their income in tax, compared to just 34 per cent for the richest. Last year (2013/14) this difference was 45 per cent – 35 per cent, and the year before (2012/13) the gap was 43 per cent – 35 per cent. So while the proportion of income paid in tax has fallen slightly for the richest, it has increased for the poorest.

While some taxes like income tax are substantially progressive, those such as VAT and Council Tax are not. Even after adjusting for rebates and Council Tax Benefit, the poorest 10 per cent pay 7.1 per cent of their income in council tax while the richest 10 per cent pay only 1.5 per cent.

Should this matter, if our system of benefits continues to narrow the gap between rich and poor? Well, yes, not least because that system is under severe pressure from further cuts. But there are other good reasons to focus on the tax system in isolation from the benefit system.

Polling by Ipsos MORI has shown that the public believes that the tax system by itself reduces inequality, and it is often spoken of by politicians as if that is the case. We often hear the progressive income tax used as a proxy for all tax, for example, when it actually accounts for just over a quarter of the tax take.

Understanding why the tax system does not by itself reduce inequality is therefore important for both thinking about how tax revenues could be better raised, and for understanding the importance of the benefit system in narrowing the gap between the richest and the poorest.

John Hood is Acting Director of the Equality Trust