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Skewing statistics: Booze, money and sex

Policy-based evidence making at its finest

Internet Security Threat Report 2014

It isn't just booze and sex though: the Marmot Review on health inequality contained a similar howler. Their brief was to look at the confluence of income inequality and health inequality in the UK. Now you and I, bright people and fair-minded as we are, would start from the assumption that poverty contributes to health inequality. We would also note that ill health itself will contribute to poverty. Being struck down with a chronic illness during your supposedly working years is going to reduce your earnings - this seems pretty obvious. So one of the things that we would be trying to do would be to tease out the effects of each cause. To what extent is health inequality caused by income inequality and to what extent does health inequality contribute to income inequality?

Marmot and mates simply looked at health inequality and assumed all was caused by income inequality. This could be, if we were willing to make such heinous accusations, described as lying.

Or how about the National Equality Panel? It report led to those headlines about how the wealth gap was 100:1. The 9th decile of households have assets of £880,000 while the 1st decile have only £8,000, leading to shrieks of "Lor', lummee and good grief!"

Except, of course, the statement is false. When we look at income inequality we quite rightly do not look at market incomes alone. We look at incomes after the influence of the tax and benefit system. This is, outside the US at least, how all income inequality statistics are presented. For of course we don't want to run around looking at how unequal things are before we try to do anything about it. What we actually want to do is look at it after whatever it is that we do to reduce it, to see how much more we might desire or need to do.

We should of course be doing the same thing with wealth inequality. And the report most certainly did not do that. For example, private pensions were included in the calculation of assets. State pensions were not. No reason was give but the inclusion of the State pension changes those numbers quite considerably. The State pension is essentially an index linked annuity - a stream of payments until death - and can thus be valued as one. At age 65 for a man this would give a capital value of perhaps £75,000. Add that to both sets of assets and we have £955,000 odd to £83,000 or so. Sure, this is still a large gap but it's nowhere near 100:1 any more. It's more like a little over 10:1.

Owner-occupied houses were included as wealth (as they obviously are) but not the subsidy received by those living in social housing. One recent report said that the subsidy between housing association and market rents in Westminster, to take an obviously extreme example, was for a three-bed house over £20,000 a year. Such tenancies last for life, and indeed in some cases they are inheritable. While they can't be sold (at least not legally), the rights to occupy such housing is clearly and obviously part of wealth. Indeed, a very substantial part. Valuing it again as an annuity (for the obvious reason that it's a stream of income lasting until death) would give a capital value of what, £400,000 or so? It depends upon how many years and what the interest rate used is of course, but £20,000 a year for 30 or 40 years is worth that sort of amount.

So the wealth gap, in this already admittedly extreme example, comes down to something like 2:1, which is a very long way indeed from our original claim of 100:1.

Now yes, I've been extreme here, but the basic principle still stands. There's no one at all in this country that has “wealth” of £8,000 or less. We've all got vastly more than that, for we've all got a pot of wealth which will provide us with an income stream. It's called the welfare state.

This is, sadly, how we're governed now. The way used to be simply to lie directly - vote for me and I'll make the country a better place. Now we have the indirect lie - look, here's a report from the experts saying I should do what I already want to do anyway. What the report actually says is decided before it is written by skewing the things that are considered. Foreigners selling sex is evidence of sexual slavery, we'll ignore that people enjoy booze 'n' baccy, people getting ill doesn't reduce their income and we'll entirely ignore what we already do to reduce inequality when measuring inequality.

In short, we'll lie to get our way. Or as it is more politely put these days, we now have policy-based evidence making.

It's something of a pity that the upcoming ballot papers will not have a “hang them all” box to tick. ®

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