View from the Margins

Politics from a 'Marginal Constituency’ by Andy Reed

The social media storm over the rather shouty (and quite obnoxious) guy in the Question Time audience this week claiming (wrongly) that whilst earning over £80,000 a year he wasn’t in the top 5% of earners.

There were plenty of harsh comments about him and the BBC for letting him make a fool of himself and discovering it was him who was actually telling the porky. Probably to the surprise of many people he is easily well within the top 5% of earners. From the people I have spoken to this week not many had any idea where they stood in the income wealth table!

But I am not surprised. That’s because I am a bit of a policy nerd and learn all these geeky facts. I bore the family to death with useless corrections at the dinner table!

But where do you think you are in the scale of earnings?
(the answer is in the chart below or freely available here on the government website. )

Fortunately the BBC Fact Check service did kick into action after the programme had finished but many questioned why they still led with this clip and why it took so long.

The actual figures are quite damning of the claims made by this guy – even the idea that ‘every doctor earns more than this’ is just plain wrong and wide of the mark. So how did we become such an ignorant nation?

The Facts on Income

A few quick things to take away from this. He is in the top 5%. That may come as a shock to people who earn what they consider reasonable amounts of money. But many below the median wage will of course believe he is of course rich. It’s all about our own experience and circumstances.

And his claim he wasn’t even in the top 50%. Well he would need a salary of just £25k to put him just into the top half!

Lessons to Take Away

There are a few lessons to take away from this episode. First, most of us don’t really often understand the facts and rely on perception. When voters are asked a wide range of questions on the state of the UK on say race, religion, money, unemployment and disability benefits etc they are usually wildly wrong. Their perceptions are not based on fact. This guy is not alone in his ignorance. (I will add the source here!)

What he has done – like so many others in all aspects of life – is create his views and world view from his limited personal experience and the social group/work where he mixes. We all do this. We create our own social and work networks and echo chambers on social media. It happens over time.
When I was an MP I always heard the phrase “all my friends think the same about my views..” all too often as somebody shouted at me like htis guy!. We don’t set out to have a small social circle but over time it self selects. So this guy probably did think there was no way he was in the top 5% because he probably mixes in circles where he is comfortable but regularly meets people earning far more than him. The fact that he thought he wasn’t even in the top 50% shows just how out of touch he was – or simply how bad at statistics he is, but that’s another issue!

In one sense he can be forgiven for some of his indignation. Labour has recently often talked about the Rich and Super Rich in terms of the Billionaires and businesses like Amazon and Google Its rhetoric has possibly been deliberate to make people feel safe that THEIR taxes won’t be affected… but this doesn’t help make the case FOR taxation. It pretends we can have all that we want in public services and somebody else will pay.

As we see from the facts, if you are on average wage then being in the top 5% of earners on a figure of £80,000 does feel out of reach and therefore it sounds so much it seems ‘rich’. This all depends where in the table you sit.

As many have equally pointed out in the comments – and I thought I’d mentioned – we also live in a country of massive regional inequalities. An £80k salary in London will feel very different to somebody living in the Midlands or parts of the North, or Scotland and Wales (all with their own micro variations and inequalities) Having had to live between London and Loughborough for 25 years I know how hard it would have been to live the same lifetsyle in London as Loughborough. A one bedroom flat is worth more than a 4 bedroom house with a garden.

HMRC adjusted ONS average weekly earnings

I have been fortunate in life to have been in the top 10 or 5 % of this table for the much of my life in my 30s-50s. I have always been aware of where I sit on this spectrum and never taken it for granted. I have always been happy to pay my share of tax and often a little bit more to get the level of public services I think we can aspire to as society. But even though I acknowledge this I can’t be described as super rich, compared to many people around meas I have nowhere near their level of salaries, wealth and lifestyles. I can feel quite poor at events I have been invited to. You see once you get into the last 4% or even 1% of earners the super rich are on a different planet. This is all covered well in this article by Torsten Bell

It’s also true that at whatever income level we tend believe just a little bit more would make life comfortable. I need to find and link the research I saw some years ago about us always thinking that whatever income level about another £10k would make life better up to the level of £150k. We always spend up to what we earn so of course we rarely think of ourselves as ‘rich’ because we don’t have lots of spare cash. We spend to the level we become accustomed and mix with people spending similar amounts. We normalise our lifestyles quite quickly.

As Torsten Bell argues there are a super rich that Labour uses in its rhetoric to show who will be impacted by their tax increases, but the bankers, big business and wealthy elite aren’t in the top 5%. They aren’t in the top 1%, these people are probably in the top 0.1% !! As you can see from the table the top 1% are people earning over £160k… to many on £80k not an unobtainable aspiration. Chief Executive of a Local Authority. Top 1%!

Issue for Policy Makers and Politicians

But this is an issue for policy makers and politicians. First of course we need greater levels of education and understanding of the wider society in which we live. I would guess most of the perceptions we have are due to coverage in the media of these issues, so this is going to be a hard nut to crack. I think we have to work on the basis of general levels of ignorance and start from there. I will freely admit I am ignorant of all sorts of policy areas, but I will generally try to find out before forming a view I would share widely. Can we make fact checking easier and more widely available?

Second we have to look beyond income levels. The sort of people Labour are talking about as the super wealthy are not taking £100k+ salaries. To enter the top 5% club by wealth is of a different magnitude and you can only enter that exclusive club you will need housing and savings of over £1m… Although it’s also worth noting that there are 1.6m people in this top 5% income bracket. There are quite a few of them. to tax.

Finally, we have to understand how people perceive and understand higher levels of tax. As commentators have pointed out about shouty man on Question time his tax bill would only go up by pennies. Remember the tax rate even at 45% is only on the amount above £80,000. So on £80,001 salary the guy would only pay an extra 5p! Too many assume it applies to the whole salary. We also know that we live in an aspirational society so even if we are not yet at £80k people hope they will be at some stage. So they worry about tax into the future.

Overall its worth reminding ourselves that the median UK wage is currently £28,677. The number of people earning under £20,000 is (Need to get this official fgure asap!)

Political debate and policy making would be better in this country if everybody remembered this. I am afraid too many policy makers and advisers are in the top 10% and thereby their worldview skews policy responses.

So. Where do you sit?

Where do you sit on this table?

So shouty man has at least opened up a healthy debate on this issue and hopefully its educated a wide range of people to understand where they sit on these tables. Of course where you sit will have different meaning. But I’d love to hear from people about the implications of this. If you are in the top 10% have you ever considered yourself ‘rich’, and would you be willing to pay a little more in tax?

Postscript

This blog looks at perceptions of wealth – whilst the other equation is how much tax we then pay and what levels of public service we expect or demand in return which tied to the Labour manifesto I will try to cover tomorrow!

6 thoughts on “The £80,000 Question

  1. Paul Hanson says:

    Good article, I found the original question quite interesting. As you say it is about perceptions and the circles we might be in. And also the circumstances – this man might have been born and live in a part of London where 80k could still make you feel relatively poor.
    Also with the general mood of austerity most low and middle and maybe upper-middle earners might not feel actually ‘well-off’ – even if other measures show they are…

    I grew up in Greater London/East London (which was much poorer than Central/ West London with evidence of poverty around) – I now live in the Midlands and although salaries in my industry (IT) are much higher in London, I would be a lot less well off if I moved back down there with the much higher expenses of travel, accommodation etc.
    The super rich (eg millionaires/billionaires) have harmed life for the majority (house prices kept rising even when we had the downtown), and we can’t live comfortably around the area where I was born, everyone I know and grew up with has long moved further away.

    Coming back to taxation, I don’t believe it is the time for tax cuts for anyone, we need to improve the services, and if we all contributed an extra penny in the pound for NHS or schools I would be definitely for it.

    1. Excellent point to add to the complexity.. there are sine regional figures int he Stats and the Torsten Bell article I think, because I would agree. My £80k would go a lot further in Loughborough than London (Having tried to live in both at the same time for a generation) My one bedroom flat is worth more than a 5 bedroom house in the Midlands! No competition for quality of life. I will be posting on taxation next… we still pay less than other European countries but expect their levels of Public services…

  2. I am in the top 10% of salaries and have been for some years. Of course, that is based on a UK standard. On a global basis I expect that I am in the top 1%. I believe that to those to whom much is given much is expected.
    One thing that helps to keep me grounded is knowing people who are not in the high tax bracket but are trying to get by on less than the average wage.
    I would be willing to pay higher rates of tax than current UK levels.
    I actually live in Sweden, where the top rate of tax is 57%, and it starts well before £80000. I like living in a more equal society where differences between rich and poor are less apparent.

    1. Thanks. I was going to add something about the global context. I do a talk when I ask if people feel rich and work the room to the point where everybody admits they own something like a book… which puts them in the global top 5%! I am about to do another blog on why Labour seem to insist what they are advocating is socialism whilst most social democrats in Scandinavia would see many of these things as normal. Pay extra tax & get decent public services and equal society. Seems a fair investment to me too!

  3. Hi Andy years ago my father always use to say he’d love to be in the super tax bracket because he would have so much money left over. This was the 60s. Lol. But yes, I would live to be in that position today too.
    Not sure about the similar social circle though. Some of my friends def do not share my views. Although I avoid the most obnoxious people
    Gill

    1. Thanks. In the super tax bracket you have choices… that’s the massive difference! The social circles thing is interesting – as you say we start to avoid.. move away from the more obnoxious ones. It depends where are social circles are generated. In many like church or sports groups we don’t get to choose all our friends but if its too bade we can always move and lose a few friends as you say!

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