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23 January

The Daily Mail’s tax statistics are an own goal

If half of income tax is paid by 10 per cent of earners, it only goes to show how unequal Britain is.

By Paul Mason

The Daily Mail is outraged that half of all households get more back from the government than they pay in tax. We’ve become a “something for nothing” country, says today’s front page (23 January) – a headline calculated to make steam come out of the ears of everyone who earns more than £62,000.

Dismantle the editorial artifice, however, and the real picture is of vast inequality, tax evasion on an epic scale and the erosion of most channels of redistributing wealth.

The Mail story relies on three entirely different facts. First, that half of all income tax is paid by the top 10 per cent of earners. Second, that in addition to cash benefits poorer households are estimated to receive “benefits in kind” – for example, primary school education or NHS treatment – that are given a cash value. Third, that the number of older people not working has risen due to the aftermath of Covid-19.

From this, it concocts a story that Brits have become a bunch of layabouts, with more than half of all households receiving more in “benefits” than they pay in taxes. The Covid furlough is singled out as causing a sea change in attitudes, with Iain Duncan Smith rolled out to slam the British people for thinking “the government could do it all”.

But if the top 10 per cent pay more income tax than the bottom half put together, that simply shows how poor and unequal Britain has become. According to the Office for National Statistics data the report is based on, for example, one in five households earn below £11,000 a year. When Universal Credit, the state pension, child benefit and other cash benefits are taken into account, that rises to £19,500 (which is the maximum not the average).

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Those poorest households then pay an estimated £2,800 in direct tax and £3,800 through taxes that hammer the poorest hardest, like VAT, tobacco duty and TV licences. But their biggest source of “income” is the NHS and the schools system, which is calculated to hand the poorest households a maximum of £16,000 a year.

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The Mail is outraged that, on these estimates, 36 million people are getting more out than they put in – largely because health spending surged due to Covid-19 while VAT receipts slumped for the same reason.

I would advise Daily Mail readers not to spit out too many cornflakes over this. What it means is, in the short term, the NHS response to a major pandemic worked. Health demand spiked, the supply of healthcare surged, the government spent more than it was taking in tax, and the deficit boomed.

If you’re worried about this, wait until you see what happened at the start of the Second World War! The reason we create and maintain complex, bureaucratic structures like governments is so that we don’t have to face major crises on our own.

But in the longer term, the report the newspaper is quoting shows two stark facts, which shape everything about the society we live in. In the Margaret Thatcher years, Britain’s Gini coefficient – the global standard measure of inequality – surged from 21 per cent to 31 per cent and has stayed roughly around that level ever since. Under David Cameron and Theresa May the Tories eroded the value of state services to ordinary families by slashing public spending – only to see it escalate under Boris Johnson as Covid hit.

In short, we’re living in a highly unequal society, where spending on public services was cut relentlessly, eroding public health and devastating the wages of doctors, teachers and nurses. If you earn above £62,000 and are one of those 10 per cent paying half the bill for the NHS and the schools system, and you want to be angry at something, be angry at that. 

The welfare state, eroded and degraded as it is, is working hard on your behalf to assuage the social catastrophe that the Conservatives have created.

[See also: How to save the NHS]

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