Tuesday, 4 June 2013

A Wealth of Nonsense

At the end of last week, Twitter got very excited over this ONS video on the Wealth of the Wealthiest Households 2008/10; a video that was actually released back in December 2012.

Yes Scotland blogged as follows:

So despite generating more than our fair share of UK wealth, the Westminster system means that we get substantially less than our fair share of the benefit…We are near the top of the league for wealth generation but, according to the Office for National Statistics, we are at the very bottom of the league when that wealth gets shared out. This is a direct result of policies taken forward, year after year, by Westminster. And what it means is that families like yours have lower incomes than they should, higher levels of debt and smaller pensions”.

This line was reiterated in another blog published the following day:

Yesterday we published a video from the Office for National Statistics showing, among other things, the unequal nature of wealth distribution under Westminster, with Scotland sitting at the bottom of the 'wealth distribution' league (while we sit near the top for wealth generation)”.

I’ve got a lot of time for Stephen Noon, the author of these blogs, but on this occasion he’s writing undiluted drivel. Before explaining why, let me make two things very clear: first, the ONS video lays bare an unambiguously disgraceful state of affairs. It is socially unacceptable – and detrimental to long term economic development - that the bottom 50% of households own only 9.9% of total wealth while the top 10% possess 43.8%. Second, wealth inequalities are indeed largely the result of Westminster policies; it is therefore perfectly reasonable for Yes Scotland to draw attention to UK wealth distribution (although it would be nice to hear something of a developed policy agenda for greater redistribution under independence. And, yes, policies like the Council Tax freeze do exacerbate wealth inequality).

What isn’t acceptable is to use the ONS video as the basis for claims about Scotland’s position relative to the UK that simply don’t stack up.

Stephen claims this graph shows Scotland ‘sitting at the bottom of the ‘wealth distribution league’:

It shows no such thing. Rather it shows the share of Scottish households holding sufficient wealth (over £967,000) to make it into the top 10% of the UK’s wealthiest households. Unless they're supportive of upwards redistribution, it's perplexing how anyone can conclude that having a smaller share of the richest households leaves Scotland 'at the very bottom of the wealth distribution league'! The graph provides but a small part of the whole story on ‘wealth distribution’ and it tells us precisely zilch about total wealth owned in Scotland.

What it does imply is that Scotland has a flatter wealth distribution than the other nations and regions of the UK. This is a good thing – although the aspiration should be to make it flatter still. It’s just plain silly to fret about rising wealth inequality and then complain that Scotland has too few rich households.

Stephen then asks ‘And what does it mean in terms of actual money in your pocket?’ The answer is, again...nothing. This ONS work isn’t about ‘money in your pocket’. Rather wealth owned is measured over 4 categories: private pension wealth, net property wealth, financial wealth and physical wealth.

But we do have decent information on ‘actual money in your pocket’. Here’s a graph compiled from the latest regional stats on Gross Household Disposable Income (GHDI):

Scotland’s average GDHI (£15,654) is just below (97.6% of) the GB average of (£16,034) and higher than all the following English regions: North East, North West, Yorkshire and Humber, East Midlands and West Midlands. Wales is only 88.1% of the GB average and that's despite having more rich households.

And we also know that Scotland has relatively low levels of financial debt and a flatter distribution of wages:

ONS research published today on Total Household Wealth by Region and Age Group doesn't make pleasant reading, particularly in terms of generational equity: see relative shares of 25-44 yr olds and 45-64 yr olds living in households with wealth of less than £50,000/more than £500,000.

However, there is nothing remarkable about Scotland’s relative performance. Indeed, the evidence generally confirms Scotland’s flatter distribution of wealth. Scotland has less than GB average of households with children with total wealth of under £50,000. It has relatively more households in the middle wealth brackets and less in the £1m or higher category.

It's good that the shocking levels of economic inequality across the UK are now being discussed as part of the Scottish constitutional debate - hell, we might yet get onto labour market policy! - and it's understandable that Yes regard this as fertile territory. However there's no problem so great that it cant be exaggerated and distorted and any opportunity will be squandered if the assessment of Scotland's relative position is as spurious as that presented in these blogs. Coming on the back of this ludicrous SNP 'research', it's been a bad few days for Yes on the economics of independence. 

Finally, it’s got to be worrying that either campaign can stick analysis of this quality on the front page of their website without generating any critical comment whatsoever in the mainstream media?  

Stephen Boyd - STUC

1 comment:

  1. A brief perusal of this post suggests that an independent Scotland is advocated.
    However, economic justice is necessary for the whole global economy and not just Scotland, England and the EU.
    But Scotland could be in the vanguard of establishing a new economic system architecture and a LVT.