One week ago today, on Wednesday 22 November 2017, the Chancellor, Philip Hammond, gave a budget speech that was designed to confuse and distract. It was peppered with claims for which the opposite was actually the case. These were inserted to annoy wonks who have an understanding of statistics and to mislead everyone else. For instance, in his speech, Hammond claimed that in the UK ‘today, income inequality is at its lowest level in 30 years.’

Now, it is true that there is one very bad measure of income inequality that can be used to defend that statement. It is the measure that ignores the entire incomes of the best-off tenth, and the worst-off tenth of the population. It is the measure I used as the first graph in my most recent book to illustrate how in recent years the government has used smoke and mirrors, assuming nobody will uncover the truth and question their statements about inequality.

Fig. 1: UK household income inequality, quintile ratio 1977-2016, 1% take 1977-2012

Fig. 1: UK household income inequality, quintile ratio 1977-2016, 1% take 1977-2012

It is the ratio of the median incomes of the highest and lowest quintiles, shown by the blue bars in the chart above. The red line illustrates why saying that inequality is at its lowest level for 30 years is so misleading, unless you do not consider the best-off 1%, or even best-off 10% (and worst off 10%) as part of society. The red line shows the share of the total income taken each year by the best-off 1%.

So, why would a Chancellor and his advisors place such a claim so brazenly in a budget speech? The answer is that they would like attention drawn to it. They are not stupid. They must know it will be questioned. This is called misdirection. What they really don’t want attention drawn to is what was most important about the speech – everything that was not in it – all the sins of omission. This article is about one of those sins.

Almost inaudible praise
Universities are mentioned just twice by the Chancellor. Once, when they are somewhat slighted in relation to the ‘commercial development labs of our great companies’ and second, in how Hammond aims to capitalise on ‘the global reputations of our two most famous universities’. For those as old as Philip Hammond and me, this is reminiscent of a joke in the 1970s series ‘Yes Minister’. The Minister in question worries that ‘we must do something for the universities’ and his permanent secretary, Sir Humphrey, replies soothingly ‘of course minister, both of them’.

It is sad when national budgets become a mixture of half-truths and bad jokes. What the Budget should have announced was the beginning of the end of tuition fees and student loans, or at least a significant change to them. But Philip Hammond and his colleagues appear to like the student loan system as it is, with November’s budget giving only small hints and little tangible evidence of the promised “major review” that government hinted at this summer amounting to much in reality.

Tinkering won’t work
Returning to the Budget, Philip Hammond is often portrayed as a boring person – ‘spreadsheet Phil’ or an ‘economic Eyeore’. At least Hammond did not announce new cuts to university budgets for government spending (with the two-year freeze on fees already known), but he also doesn’t like talking about student loans, or tuition fees – as is evident from his budget speech.

Nothing was mentioned in the Budget about student loans. In fact, students were not mentioned at all other than that Hammond wants a few extra computer science teachers in schools, at some point in the unspecified future. In the small print of the Budget’s supporting documents there is a promise to stop charging graduates more than they actually owe once they have paid the loan off – due to the currently archaic and faulty system – but that was known about before the Budget.

Opposition to student loans is growing. The system allows rich families to pay many billions of pounds less tax overall. This is as compared to what the rich pay in more equitable countries, where such loans do not exist and where university tuition fees are either very low or not charged at all. By contrast, the richest students in England do not use the current student loans system at all. The existing system is also defended most loudly by some of the wealthiest and best-paid people in our society.

read more