George Osborne informed me on Friday, via my radio, that the cuts are in fact going to be fair, because (I quote, though not verbatim) 'richer people will pay a higher percentage of their income than poorer people'.
OK, let's do a worked example. All the following numbers are, of course, entirely made up (you don't expect me to do proper research, do you? For goodness sake!), but the principles hold. So, take two people, P and R. P earns £10,000 per annum, R earns £100,000. Now assume that the cuts affect P to the tune of two per cent, and R by three per cent. This is what George is calling fair.
So, my calculator informs me that P will take a hit of just £200, while R will be stung for £3,000. What could be fairer than that?
Quite a lot, actually. The problem is that this balance sheet doesn't balance. To make it do so, we need to consider the impact on each of these people. So let's introduce the idea that there's a minimum subsistence level - a breadline, if you like - that applies equally to everyone (the basket of commodities used to calculate the Consumer Price Index, for example), and purely for convenience let's set this at £10,000. To be completely fair, let's give R some credit for achievement and add in an extra bit: three per cent for example. So P's breadline is £10,000 and R's is £13,000.
You can see where I'm going, can't you? When you deduct George's cuts, P is left with £9,800, and R with £97,000, of net income. P is now living £200 below the breadline, while R has £84,000 of discretionary income above the breadline, as opposed to the previous £87,000. Hardship if not penury for P. Slight inconvenience for R.
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