The Institute of Fiscal Studies has commissioned Sir Angus Deaton to lead a review of growing inequality in the UK https://www.ifs.org.uk/inequality/
The press have got very excited about this, and rightly so – what could be more exciting than a 2 year study mixing economics with epidemiology?
Just think of the graphs!
For those who don’t remember Sir Angus Deaton he isn’t the former presenter of HIGNFY, but the Nobel Prize winning economist who often works with his wife Prof Ann Case. Their work spans the fields of Economics and Epimedieology.
I’ve written about his work on life expectancy in the USA before:
The scope of the IFS Review is very broad:
“To give a sense of the breadth and ambition of the project, the themes to be covered here will include: which inequalities matter and why they matter; people’s attitudes towards inequality; their experiences of inequality; the political economy of inequality; the history of inequality; trends in economic inequalities; intergenerational inequalities; health inequalities; geographical inequalities; gender; race and ethnicity; immigration; early child development; education systems; families; social mobility; trade and globalisation; productivity, growth and innovation; labour markets; tax policy; and welfare policy” https://www.ifs.org.uk/inequality/about-the-review/our-approach/
This seems like a good moment to revisit 2 ideas that the review will look at – the geography of inequality and differences in life expectancy.
There is a new iteration of the Regional GDP/GVA dataset which shows how wealth is changing across different parts of the UK
These are the latest numbers for 2017 and growth is slow across most of the UK, with the exception of London. Even the South East show less than 2% growth.
This is just follows a longer term trend since the credit crunch:
London and the South East were growing faster than the rest of the UK before the credit crunch, and London has definitely grown faster since, but it is the dreadful rates of growth in places like the North East and Yorkshire and Humber that stand out. In these places the economy is stagnating significantly.
We can look at some other factors – growth since the EU referendum:
This is just a straight forward comparison of the 2 years before the referendum with the 2 years afterwards. London is actually growing faster than it was thanks to all of that QE. The economic slow down since the referendum is hitting the places that were hit hardest after the credit crunch and making regional differences worse.
GVA as a concept is similar to GDP, however it excludes the redistributive effects of tax and benefits. It show the impact of production and wealth creation, which is very similar to GDP but not exactly the same. These are chained value series which adjust for inflation.
To get an idea of how much these 2 numbers differ we can compare these 2 graphs from the IFS report:
This is a graph showing the top 1% of richest people in the UK’s share of national income:
It looks like the rich are getting richer regardless of how the economy grows. This picture, however, changes hugely when you factor in the impact of tax and benefits on incomes:
This shows an incredibly egalitarian picture (although I think the IFS have excluded the outliers of rich and poor to create this graph). Government policies such as Tax Credits have had a very significant redistributive impact.
Truly this is a triumph for socialism.
This starts to explain why the Cameron government found it so hard to cut spending. As they reduced overall Government spending the economy slowed down, particularly in places like the North East. As the economy slowed spending on benefits went up, wiping out most if not all of the cuts in Government spending. Cameron and Osborne tried to cut benefits payments, but only really succeeded in increasing poverty while still missing their fiscal targets.
We can start and look at the areas in the UK with the lowest GVA/GDP per capita:
And the highest
The slowest growing:
And the fastest growing:
The big differences leap out between urban and rural, fast growing and slow growing, old industry and new industry.
We can compare this data with life expectancy. In this case I have used life expectancy aged 65. These are the places with the shortest life expectancy for woman:
A much more familiar list of mostly urban areas
And the same data for men:
You might have spotted the far right hand column which shows the change between 14-16 and 15-17. Some parts of the UK are starting to experience a fall in life expectancy:
|North East Derbyshire||Females||20.8||20.3||-0.5|
|Hinckley and Bosworth||Females||22.1||21.6||-0.4|
|Brighton and Hove||Females||21.3||20.9||-0.4|
|Telford and Wrekin||Females||20.3||19.9||-0.4|
|King’s Lynn and West Norfolk||Females||21.9||21.6||-0.4|
|Isle of Wight||Females||21.7||21.4||-0.3|
Sorry the table formatting is a bit wonky, there were so many places I wanted to highlight with falling female life expectancy that it was hard to cram them all in
This is the same data for men:
We might as well see the areas with the fastest growing life expectancy:
What this shows us is that the intersection of wealth and life expectancy is complex. It is easy to spot areas with low GVA which are low because of a lot of retired people. It is also easier to spot areas which have a fast increasing male life expectancy because they are former industrial areas which start from a very poor baseline.
But the list of areas with significantly declining life expectancy includes some very affluent areas like St Albans, which would suggest that this isn’t just about poverty, but about life style too.
A cycnic would ask the obvious question? Do we really care about inequality?
I would rather live in a society where no-one is poor and no-one is hungry but someone has a gold hat, and a society where no-one has a gold hat, but some people are poor and hungry.
I was brought up with the view that socialist politics that are rooted in working class communities concern themselves with tackling poverty, while socialist politics rooted in middle class neurosis concerns itself with tackling inequality
But in this case we can look to the USA and see that the combination of economic decline and declining life expectancy in non-college graduate, non-hispanic white populations has reached shocking levels.
We can see in the data above that we are starting to develop the same patterns of inequality of income and life expectancy that the USA is, although in the UK the picture is more complex.
Maybe we should get ready for the rise of a UK Trump articulating the grievances of non-college graduate white UK voters?