How much more money should a banker be allowed to spend than an idler on benefits? – Telegraph Blogs

Wednesday 27 May 2015 | Blog Feed | All feeds

Tim Worstall



Spending power under the microscope


Be it libraries, swimming pools or playing fields, relatively small things can have a huge impact on inequality.

Clearly, this is true: libraries reduce the inequality of access to books to almost nothing. Public swimming pools improve access to swimming pools and so on. But sadly, when we measure inequality, we don't include these reductions in our calculations. We look purely at monetary income, after taxes and benefits, and then conclude that the UK is in the grip of some massive plague of inequality that will murder us all in our beds. But if we argue that the provision of public services reduces inequality then shouldn't we want to know what impact that spending has made?

Not least because if we don't, we end up with dull consumption gap statistics (that's how much money you can spend in comparison to others) as the TUC has provided here.

The effect of taxes and benefits is to reduce an original income disparity of 29.6 to 1 to a final income ratio of 6.3.

This shows that the average rich person (top 10 per cent of the population) can spend six times more money than the average poor person (the bottom 10 per cent).

Which brings us to the interesting question. What is too much inequality? You can argue it either way, but I wouldn't regard a consumption gap of six times between the idler on benefits and the Stakhanovite working all hours in the City as excessive. So I have this question for those to the Left of me (yes, that's almost everyone): what should this consumption gap be? Why is six times too high and why is your number better?

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