MP letter on the Income Equality issue

John Penrose MP

Thank you for your letter of 8th July about wealth inequality and social cohesion.   It is good that you, and indeed David Cameron, are minded to accept the evidence for the social benefit of more equality.  I have been following the debate, having read both the Saunders critique and Christopher Snowdon’s “Delusion” book.

You mention that social mobility causes people’s earnings to change during our lives.  However, Wilkinson & Pickett’s methodology, by looking at whole nations’ inequality and outcomes, will absorb those individual movements. Some move up, some down, and these errors are cancelled out by the sheer weight of numbers. The data is crude, and many factors come in to play, which is why most of the graphs have such a wide scatter. It might be that we can generate more refined indices that will take account of other factors (e.g. per capita income), and that equality effects will become more (or even less) apparent as a result of this.

Health, celebrity, success, and many other measures are indeed in play, but income was chosen, quite reasonably, by W&P because it is measurable, and the data are available to work with.  The are looking at a macro level, not at individual outcomes.

The Snowdon book is interesting, and raises some challenging points, but I would see them, where sustained, as refinements and adjustments to W&P’s thesis. I remain convinced that if the Coalition wishes to create a Big Society, it needs to ensure that the gap between rich and poor is narrowed, rather than widened.

For instance, it would be wise for the Government to balance its clampdown on benefit fraud (£1 bn p.a, 0.7% of the benefit budget, and some of this due to clerical error) by clamping down also on tax evasion, which is worth £15 bn a year.

Kind regards