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Does earning £70,000 make you rich?

Yes, but it might not buy you a good policy.

How much money do you have in your bank account right now? Do you feel that the situation would be improved or worsened if you earned £70,000 a year? To most, the answer will be the former. After all, the average salary for full-time workers in the UK is £27,600. And the average household income is lower than that. So you’re unlikely to know what it feels like to earn £70k, but you imagine it feels pretty damn comfortable.

This is the feeling Labour is relying on when saying it wants to increase taxes on the rich, with shadow chancellor John McDonnell defining “the rich” as those earning “above £70,00 0 to £80,000 a year”.

His parameters proved controversial. Unsurprising really, given most people paid to judge these things are disproportionately well-off (journalism is dominated by the middle-class and privately-educated). Even if you’re not earning that salary yourself, you are more likely to know someone else who is, or have parents who do or did, if you’re from a privileged background.

A few arguments against McDonnell’s assertion have a point (that assets and inherited wealth tell a better story of someone’s circumstances than their salary, for example), but most are laughably out-of-touch. Ask your average voter if they think £70k is a lot of money and they would say yes.

My colleague Stephen dug out a passage from Talking to a Brick Wall: How New Labour Stopped Listening to the Voter and Why We Need a New Politics, a book written by Deborah Mattinson of public attitudes surveyor BritainThinks, which shows this:

The general picture is that salaries hovering above the average are seen as high. Yes, the focus group described is from 1994, but £50k back then (which translates into around £90k now, according to the Bank of England) was seen as “very well off”. 

But what the extract also tells us is that you can’t make popular taxation policy off the back of this. It would be “greedy”, “old-fashioned”, “for the poor” and “not for me”:

This is clear from more recent polling. YouGov polling from 2014 suggests voters back redistribution of wealth in theory, but as soon as you translate that into taxes on the rich, you lose their support. Indeed, 44 per cent to 38 per cent opposed the suggestion of a top rate of tax of 80 per cent in the year before the last general election, and there is consistently a majority in support of inheritance tax being reduced.

After Jeremy Corbyn mooted an earnings cap, YouGov found a 13-point lead for those who think a maximum salary is a bad idea.

You can talk about inequality all you like and people will nod and agree and feel hard-done-by and in need of some more cash, but making popular policy off the back of that sentiment is tough.

It is easier to sell tax rises to fund public services – YouGov found majority support for raising income tax or national insurance to help the NHS in January – than tax rises on the better-off simply for being better-off. Perhaps because everyone hopes one day to be better-off and not “punished” for it.

Just ask Ed Miliband. The former Labour leader's manifesto and philosophy focused on fixing inequality. Polling suggested his mansion tax proposal was fairly popular, but it turned out the electorate – generally unlikely to own a mansion – didn’t like the idea of it in the end. This rejection was what led to constant cries of “aspiration” from wannabe Labour leaders in 2015.

McDonnell is right in his opinion that voters see £70k as well-off, but wrong for trying to eke a tax rise out of it. Labour will benefit far more from their positive policies to help the lower-paid – such as their £10 minimum wage and universal free school meals, which are popular – than making arbitrary rules about how much their voters are allowed to earn.

 

 

Anoosh Chakelian is senior writer at the New Statesman.

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How tribunal fees silenced low-paid workers: “it was more than I earned in a month”

The government was forced to scrap them after losing a Supreme Court case.

How much of a barrier were employment tribunal fees to low-paid workers? Ask Elaine Janes. “Bringing up six children, I didn’t have £20 spare. Every penny was spent on my children – £250 to me would have been a lot of money. My priorities would have been keeping a roof over my head.”

That fee – £250 – is what the government has been charging a woman who wants to challenge their employer, as Janes did, to pay them the same as men of a similar skills category. As for the £950 to pay for the actual hearing? “That’s probably more than I earned a month.”

Janes did go to a tribunal, but only because she was supported by Unison, her trade union. She has won her claim, although the final compensation is still being worked out. But it’s not just about the money. “It’s about justice, really,” she says. “I think everybody should be paid equally. I don’t see why a man who is doing the equivalent job to what I was doing should earn two to three times more than I was.” She believes that by setting a fee of £950, the government “wouldn’t have even begun to understand” how much it disempowered low-paid workers.

She has a point. The Taylor Review on working practices noted the sharp decline in tribunal cases after fees were introduced in 2013, and that the claimant could pay £1,200 upfront in fees, only to have their case dismissed on a technical point of their employment status. “We believe that this is unfair,” the report said. It added: "There can be no doubt that the introduction of fees has resulted in a significant reduction in the number of cases brought."

Now, the government has been forced to concede. On Wednesday, the Supreme Court ruled in favour of Unison’s argument that the government acted unlawfully in introducing the fees. The judges said fees were set so high, they had “a deterrent effect upon discrimination claims” and put off more genuine cases than the flimsy claims the government was trying to deter.

Shortly after the judgement, the Ministry of Justice said it would stop charging employment tribunal fees immediately and refund those who had paid. This bill could amount to £27m, according to Unison estimates. 

As for Janes, she hopes low-paid workers will feel more confident to challenge unfair work practices. “For people in the future it is good news,” she says. “It gives everybody the chance to make that claim.” 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.