Why are some people richer than others?

Labour today are going back to talk about equality.It’s well within their comfrot zone. If they looked at the numbers and saw the growing inequalities they have presided over they might be more cautious in choosing this topic.

I am with them when they condemn racial or class based discrimination. It is common political ground in modern Britain that we want to live in a society open to all the talents and blind to background, race and colour.

The political arguments need to be centred instead on where there are disagreements. Is equality of opportunity more important than equality of outcome? Should you make a society more equal by taking away money and achievement from the people and institutions that have done well, or should you instead concentrate on changing those things that can be changed so more people and institutions can thrive?

My view is equality of opportunity is what matters most. Policy should be aimed at levelling up, not levelling down. We should not want to abolish Eton, but give to state schools more of the love of learning and pursuit of excellence which makes Eton what it is. I speak as a former scholarship boy whose parents could not afford to send me to a smart fee paying school. I was fortunate to be educated in an era when you could go to a good school on a state financed free place.

I am all in favour of improving the schools that teach people in lower income areas. If only Labour would take the steps needed to achieve that. Their much vaunted belief in comprehensives for all has not produced the equality they expected. Many comprehensives in better off areas outperform by a big margin the majority of comprehensive in less well off areas. The elite schools for the children of the richest outperform all by an astonishing margin. This surely must be as dispiriting for Labour’s class warriors as for the rest of us.

I am all in favour of welfare reform so we have a system which encourages people to succeed more. I would like to see people treated better financially if when unemployed they start to work for themselves.

There are a couple of hard truths about inequality which many Labour Ministers and MPs do not wish to confront. Most of the really successful people I know work harder and longer hours than people who do not reach the pinnacles. Most of the really wealthy who have made their money themselves have made it by taking risks the rest of us would not dare take.

There are limits to what an interventionist governemnt can do to reduce inequality. As this government has discovered, you can spend huge sums of money on trying to balance incomes up, yet the end result of their labour is more inequality than when they began. You can seek to attack the best institutions and the most successful people in your country, but this is not a guaranteed route to greater riches for the many. On the contrary, it is the route to less tax coming in, and fewer role models and job creators remaining here, if you push it too far.

So how can a well intentioned government encourage more people to put in the effort and take the risks that it takes to be well off? There are two main changes required. You need to tax the profits and incomes of success less, so it is more worthwhile for the less motivated to want to try. You need to be less penal on business failure, so more people will think giving it a go a worthwhile bet. Bankers and financiers took too much risk. They did so because they were playing with other people’s money. Elsewhere in our economy we collectively take too little risk. The result is we achieve lower living standards and have fewer home produced goods and choice of home delivered services.

It is not Oxford and Cambridge’s fault that so many state school pupils fail to get three grade A A levels or better, and fail to demonstrate that extra love of learning and additional knowledge that comes from intensive study if they go to interview for a place. The problems lie not in the elite universities, but in the state schools. This government seems to think the universities should solve the social problems the government has so singularly failed to tackle in a way which delivers.

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59 Comments

  1. TomTom
    Posted January 14, 2010 at 10:40 am | Permalink

    Why do I see the institutions of the State as threats to my freedom and livelihood ? Why do I feel I am living in Walter Ulbricht's German Democratic Republic ?

    Why must I feel ready to defend everything I have from theft and why do I feel the police are an enemy ?

    Why is it that living in Britain feels so insecure and life so cointingent ?

    Why does it feel like a ship heading for an iceberg without lifeboats ?

    Why are the politicians so assiduously building a giant funeral pyre and dancing around the structure spraying petrol ?

  2. Stuart Fairney
    Posted January 14, 2010 at 10:58 am | Permalink

    All true save to say that were I a banker in a bailed-out bank, I am stupid if I don't take mad risks (where's the downside, I'll just be bailed out again, they can hardly be allowed to fail now) and indeed the government wants to "get banks lending again" So I can take any insane risk I like and hopefully get rewarded for a few years and then clear off. Moral hazard indeed.

  3. Ian Jones
    Posted January 14, 2010 at 11:00 am | Permalink

    Blair promised equal opportunity not outcome. Brown and Harman are making sure its equal outcome and not opportunity.

  4. Michael
    Posted January 14, 2010 at 11:01 am | Permalink

    On the education point, the issue is much larger than merely tinkering with school structures or playing around with the syllabus now and then. Part of the problem lies with the so-called 'progressive educationalists', most of whom are crammed into the teaching colleges up and down the land, spreading their wacky ideas onto the next generation of teachers. To challenge these requires an intellectual assault as much as a political one – and a lot of back bone in the face of some really quite powerful unions.

    The irony is that, as the results of all these 'progressive' teaching methods are unleashed, it is not the children of these middle-class intellectuals, nor their political or social acolytes, that suffer the consequences. Indeed, the system merely tilts toward wealth; those who can afford to supplement their child's education with extra tuition, or private schooling, or moving to the right area. Which leaves behind sink-schools, catering for children in sink-estates, where even the brightest flame can be extinguished.

    • David Robertson
      Posted January 15, 2010 at 6:26 am | Permalink

      The stereotype of loony lefty teacher training colleges & powerful unions spreading progressive nonsense is badly out of date. Since the late 1970s control of the curriculum, teaching methods and school organisation has been progressively concentrated at the centre by both Labour and Conservative governments. These days teacher training is mostly about complying with the government line, and the failure of teacher unions to improve the pay and conditions of their members in recent years suggests they are not as powerful as you think. Headteachers will tell you that the biggest obstacle to school improvement is neither teachers nor academics, but is instead the control-freakery of central government.

      • Michael
        Posted January 15, 2010 at 9:41 am | Permalink

        David – yes and no. You identify one strand of the problem, but then dismiss the other. I'm afraid the stereotype really isn't badly out of date (I went to a teaching training college for my undergraduate degree) – and the consequences can often be seen in the classroom (my wife is a teacher – the things you hear!).

  5. alan jutson
    Posted January 14, 2010 at 11:01 am | Permalink

    I started to write a rather lengthy post on my thoughts of education over the Past 50 years with comparisons of then and now.

    The shorter version rather agrees with you John.

    Look at how the very successful schools (Private, Public and State) run their affairs, see what the common denominator is. Question the heads of those Schools and compare with the rest and try to emulate them as best you can.

    You will probably find as in Business, that the Head/CEO is the most important factor in any School/Business and the further he keeps away from outside (State) interference the better the performance.

    Good Teachers enthuse their pupils and create an interest in learning. Good parents allow the School to do their job by helping to foster that interest.

    State Education in my view has failed many generations past by attempting to be too clever, too controlling and too involved, at too Local a level, and that is the fault of Political dogmer on all sides.

    Yes we need examinations, but we need to provide pupils with a rounded education, not an education just to teach them how to pass examinations so that the School gains Brownie points.

  6. Stronghold Barricade
    Posted January 14, 2010 at 11:03 am | Permalink

    Since Labour has singularly failed to achieve equality, and in fact made it worse by all government statistics, maybe the policy carried out should be pursue one goal and achieve the exact opposite.

    I would, however, like to know what policies you are going to pursue to reach this state of enlightenment, so that they are not merely aspirations

  7. Neil Craig
    Posted January 14, 2010 at 11:16 am | Permalink

    Equality of opportunity & equality of outcome are mutually incompatible because the latter requires fixing the game to achieve the outcome.

    Equality of opportunity is what the original egalitarians were after & the redefinition is yet another of these weasel political attempts to take over a respected term & slide a new meaning under it. “Liberal”, “poverty”, “investment”are others – personal rant – I saw Nick Robinson on the BBC comparing “Conservative cuts” with Labour “investment” but investment is the exact opposite of running expenses which is all Labour does.

  8. Stepjhen
    Posted January 14, 2010 at 11:17 am | Permalink

    "So how can a well intentioned government encourage more people to put in the effort and take the risks that it takes to be well off?"

    There's a story – perhaps apocryphal – but well known in Scotland, about a miner walking across the Duke of Hamilton's estate in Lanarkshire in the 1920's. At the time the Hamilton's owned large estates .. and crucially, the mineral rights to the coal beneath.

    Many thousands of miners worked in the pits of the area . The Duke's income was greater than that of the entirety of the wages paid to the mining workforce.

    The Duke inquired, how politely is not recorded, as to what the miner was doing walking on his land

    "What do you mean your land?"

    "The land is mine I own it"

    "And how did you get it?"

    "I inherited it from my father"

    "and how did he get it ? "

    "He got it from his father, its been in the family for hundreds of years"

    " But how did you get originally?"

    "We fought for it"

    "Right then" says the miner "Get your jacket off and we'll have a square go for it just now "

    The point being of course to demonstrate that Mr Redwood's contention that being well off is a consequence of taking risks and making an effort is rubbish.. .. not when one person can inherit most of central London or 400 square miles of Scottish countryside.

    Government should be committed to encouraging people to become well off by putting in effort and taking risks. This would be a far healthier state of affairs than living off the proceeds of exploitation, murder or prostitution undertaken by remote ancestors.

    Of course to do this would involve steep – even confiscatory – levels of inheritance tax. This would certainly increase equality of opportunity – and help establish some connection between being wealthy and having put some effort in. Rather than owning vast swathes of the country merely by having dropped out of the right womb.

    • Kevin Lohse
      Posted January 14, 2010 at 9:00 pm | Permalink

      An essay in praise of the Politics of Envy.

      There was an American, A Chinese and an Englishman sitting by the road when a Rolls Royce drove past. The American said to himself, If I work hard save my money and get on in life, One day I will drive a car like that. The Chinese said to himself, If I work hard, save my money and get on in life, One day my son will drive a car like that. The Englishman stood up, picked up a stone, hurled it at the departing car and screamed out, " One day I'll get even with that Bastard."
      Here ends a tale of the Politics of Achievement.

    • Lola
      Posted January 14, 2010 at 9:40 pm | Permalink

      Wrong again I am afraid. A better 'solution' to landowning, or as you imply a franchise to collect taxes for yourself, might be land value tax. Inheriting wealth is never the problem. Or to look at it another why should you not pass dow to your children all the wealth you have made? The State didn't make it, you did.

    • no one
      Posted January 14, 2010 at 10:55 pm | Permalink

      you know i actually agree with this

      not like me to agree with this argument

      sadly in the international market the super wealthy would just move abroad if UK PLC did this

      and mostly the super wealthy can afford teams of accountants to take avoidance measures

      its inheritance tax on the ordinary bloke who worked his socks off and did well that needs stamping out big time

  9. Sally C.
    Posted January 14, 2010 at 11:30 am | Permalink

    You have brought up a number of different subjects in this piece. Like you, I was awarded a scholarship to a private school under the old assisted places scheme run by local councils. My parents would have struggled to pay the fees without that help. While I am very grateful for that, I fundamentally feel that private schools should not be that different from state schools. My experience with local state schools is that the teaching is just as good as in the local private schools but the effect of peer pressure from other students and general behaviour problems have a bigger impact than in the private schools where there are smaller classes and parental approval of stricter control. However, re Oxford and Cambridge, my own family experience has lead me to the conclusion that the school you attend still matters. If you have been to Fettes, for example, you are in a very strong position to win a place at Cambridge. Certain schools have close relationships with either Oxford or Cambridge. That is why some people are prepared to pay a lot of money for a place at those schools. I don't agree with it but it does seem to be true.

  10. Lola
    Posted January 14, 2010 at 11:41 am | Permalink

    Very rich people are just World Champions at making money – UK bankers excepted,as they working for a state supported cartel. Warren Buffet is a good example of a financial World Champion.

    What defeats me is why people are very happy to laud the likes of Lewis Hamilton or Tiger Woods as World Champions in their particular sporting field, than they are to celebrate the equally World Champion class talents of successful entrepreneurs. It is even worse when the population express an ambition to become 'famous' like some awful reality TV self publicist rather than try and emulate someone like Simon Cowell, who actually makes more money by pandering to the celebrity zeitgeist.

    I think that Mr R has put his finger on it when he says that the most successful both work longer and harder than most people are prepared to take huge risks.

    Intriguingly the risk takers don't see it that way at all. They mostly only see the potential rewards and are very confident that the risk they take will succeeed and they will be well rewarded. They feel safer taking what we think of as risks rather than working for someone else, which they see as very risky indeed. Plus of course they are generally very driven and really really want a lot of money.

    And there are only a very few ways of achieving that; you can win it, you can inherit it, you can marry it, you could steal it (not recommended); you CAN become a successful celebrity or you can make a business and sell it, which is the most certain route. Of course under New Labour there are other ways. You can get rich by moving around the quangocracy (especially the EU) and state sanctioned cartels (e.g. the banks) or if politically employed 'do a Mandleson'. These latter routes are entirely without merit as they do not involve any wealth creation at all but just permit unworthy people to take money by coercion from the poor bloody taxpayer and reallocate it to themselves.

  11. Alan Wheatley
    Posted January 14, 2010 at 11:49 am | Permalink

    I think Gordon Brown is an "outcomes" person. I do not understand why such a clever bloke should be so wrong.

    Tony Blair was right: it is all about education. A political problem of investing in education is that the results take a long time to work through. This would not matter if you argue the case on the principle, but this seems to be a lost art for the politician, of scant interest to the political commentator and beyond the comprehension of the population.

    To get the best out of education, investment has to be in the right places. For the last sixty years Education has been ill served by the educational elite. There has been a steady stream of whizo ideas, but implementation has always been flawed because the application has been equally to all. It never ceases to amaze me that those who are so concerned with the education of children fail to understand that not all children are the same, and that what works well for some children does not succeed with others. Teaching has to recognise differences and to get the best out of each child it needs a flexible approach suited to the child.

    For instance, the introduction of the GCSE in parallel with O-level was a move in the right direction as it offered an alternative academic route, so allowing more children to achieve a qualification of value. But this proved to be unacceptable to the social engineers and was scrapped for no good reason. Advance, retreat, confusion!

    • Lola
      Posted January 14, 2010 at 9:45 pm | Permalink

      Education will not of itself lead you to riches. Nearly all of the richest blokes I know are self educated and have no university degree. What a degree does do is make you more employable. or to look at it from my point of view, make you more useful to entrepreneurs who can exploit your training for their own ends.

      BTW as an employer I do not want 'trained' staff. I want educated staff. There's a huge difference.

    • no one
      Posted January 14, 2010 at 11:01 pm | Permalink

      ancient history but I think you mean CSE?

      GCSEs were 'O' levels for a while until they dropped the old title

      CSEs ran in parallel

      one of the many problems was that competition between the exam boards usually meant the schools picked the exam boards with papers that were easiest to pass, cos for the school results means prizes

      state school pupils struggled to pass chemistry practical exams because the lab equipment just was not good enough in their schools

      lots of marked course work was brought in which favours girls over boys (another long discussion that one, but its true)

      and much of the sylabus is pre assumes a nice middle class work view, and not how real life looks if youre on a slum estate

      much to be done

  12. Stuart Fairney
    Posted January 14, 2010 at 12:00 pm | Permalink

    did you have in mind Denham's speech
    http://news.bbc.co.uk/1/hi/uk_politics/8458298.st

    when you wrote this? This is a remarkable statement from a government minister if I may say so, not least of which because much of it is self-evidently true, but I had regarded it as unsayable in New Labour ranks. Maybe he can't take the logical next step to the implication of what he says??

  13. Rare Breed
    Posted January 14, 2010 at 12:18 pm | Permalink

    So blindingly obvious and yet so hard for them to see.

    It is a great shame that the vast majority of socially conservative Labour MPs were driven from the party. These kinds of, desperately needed, reforms would be far easier to implement if they were still around.

    Having said that it realy would be preferable if David Cameron were the more vocal politician on opportunity and enterprise and not Peter Mandelson.

    RB.

    P.S.

    Since Japan's debt party seems to be coming to an end having managed to stave off Hyper-inflation for 20 years, does this mean that if we fail to cut the public debt (rather than just keep it stable, which is what I predict DC will do) then we have at least two "lost" decades ahead of us before we succumb to a similar fate?

  14. no one
    Posted January 14, 2010 at 12:36 pm | Permalink

    well said

    but state schools have selection by ability of parents to live in the best catchment areas

    this selection criteria is probably the worst of all worlds

    it doesnt select on ability

    and it doesnt select "comprehensively" giving everyone a fair and equal chance

    plus the schools on the worst estates and worst inner cities cannot attract many good teachers, as lets face it who wants to work for the same money being abused everyday as you would get paid in a cushy middle class school somewhere where the parents bring you in box of choclates regularly?

    but from what youve said most importantly its not the kids going to the worst schools fault, and there is merit in looking at the top 1% of a 2000 kid comprehensive as high achievers even if they are getting terrible exam results by the standards of the wider education achievement. that top 1% should be able to escape and become role models for their communities.

    i think there is some merit in asking univerisities to take into account an applicants relative position in the exam scores to his peers in his own school, as well as the mark relative to all kids in the country.

    but on the whole we need "tanks on the lawns" emergency measures in the bottom 20 % of schools, and radical radical change

    thanks for this post, its brings up many good points

  15. David Cooper
    Posted January 14, 2010 at 1:04 pm | Permalink

    There is another strand of thought to this issue too. Some people are richer than others because they wisely refrained from instant gratification and spent their time, or their money, or both, on self improvement. Any government should, of course, encourage this but quite often the most effective manner for a government to do so is to get out of the way and stop taxing and regulating business so harshly that the would-be entrepreneurs – just like the one you covered a few days ago – give up and go for instant gratification instead.

  16. A Griffin
    Posted January 14, 2010 at 1:10 pm | Permalink

    Thankyou for an interesting post. How does a clever child (in an academic,artistic, technical,sporty or other way) from a grotty or even an ordinary home make it to a successful career and life? And after that, what should they give back? (money as tax or gift, expertise, philosophy, training?) Schoolchildren have 'the right' to an education that addresses their needs. This is meant to apply to the talented as well as those who have other special education needs. I suspect that in the resource limited and target led state system the clever are largely left to their own devices and only those from better homes suceed. Most human characteristics following the typical bell shaped normal distribution curve. Gifted children are identified as the top 5%, but no one would suggest only supporting the bottom 5%. A bright child in an ordinary class is bored stiff but will have results that look good on paper. Schools are acessed in public by test league tables which also look better with less at the lower end. Combine this with greater adaptation of the middle classes and you have a self selecting system of mediocrity and sink schools. Grammar schools are not the answer because a win or loose all at age 10 or 11, based on a disreputable testing system, is much too blunt an instrument to select with. I think that continuous super streaming and more support for top abilities might help. Once again the government needs to encourage local innovation within the public education sector. I think the Conservatives schould ask people who are famous for having done it, like Michael Caine, how opportunity could be improved. Michael is also forthright about what he is prepared to pay in tax. It would be ideal if the quality of life in Britain was so fantastic and taxes spent so well that people didn't mind paying them! There must be a wealth of collective knowledge amongst older people that would be useful if it could be applied. I was once told that good mentoring was the key to education sucess. The dim also need equality of opportunity and a chance to earn a worthwhile living even if they can't manage this themselves. Perhaps succesful business's could be given more funds or tax breakes to employ and train/educate those who can't find work rather than the state managing all joblessness itself. It's upsetting to think of all the lost 'Einsteins' who have never reached their potential both in this country and the rest of the world. They might have had much to contribute to mankind.

  17. oldrightie
    Posted January 14, 2010 at 1:34 pm | Permalink

    The detailed answer to your poseur is extensive. The one major tenet is that Socialist dogma is just plain wrong. We are not all the same. We are built of billions of cells with each having different characteristics. Job done!

  18. Norman
    Posted January 14, 2010 at 1:43 pm | Permalink

    I'm sure most people would agree that education achievement (leaving aside the top public schools which is a slightly different case) is more to do with parenting than with how much money you throw at a school. The success / failure will then perpetuate itself through recruitment of staff and parental choice of school.

    The best way to raise the standard of education of children is to raise their expectations – record numbers of families where the sole / neither parent are working certainly isn't doing that.

    A classic left / right dividing line. The conservative view is that you incentivise earnings by lowering taxes for the low paid and encouraging small businesses, the socialist view is to help less fortunate families by improving benefits (the latest pre-election bribe being thrown around is free laptops and internet connection) and using emotive lines such as 'bringing children out of poverty' which no sane person wouldn't want but giving someone more benefits is the least effective way to achieve this.

  19. Mark M
    Posted January 14, 2010 at 1:55 pm | Permalink

    "Most of the really successful people I know work harder and longer hours than people who do not reach the pinnacles"

    And that is the thing lefties just can't grasp. Generally speaking, being rich doesn't come easy. The senior manager at my company works 7-7 every day of the week, and is on call during the weekend too. He doesn't have a seperate home and work life. The two intertwine. I work 9-5 every day, and come the weekend I'm off – no more work til Monday. He gets paid more than me, a lot more than me, and I have no problem with that.

  20. Alex Sabine
    Posted January 14, 2010 at 2:46 pm | Permalink

    Agree on many of the sentiments. An important priority in this area is tax and benefit reform to improve the incentives to move from unemployment into work, or from part-time or low-paid work into better-paid work etc.

    At the moment the withdrawal of means-tested benefits and the overlap with income tax and NI creates penal deduction rates of 60-70% (and in a few cases as much as 90%) – much higher than those faced by high earners. This is a longstanding problem that successive governments have grappled with largely unsuccessfully, and in some cases made worse.

    The tax element is the easiest to solve, at least in principle, by raising the starting point for income tax and NI to the level of full-time minimum wage earnings, half the median earnings, or whatever – ideally £10,000-12,000. That way you reduce marginal withdrawal rates by 31 percentage points across a crucial band of income, substantially reducing the unemployment and poverty traps.

    Clearly the problem is affordability, especially in this climate. I don't think the answer is to claw back the personal allowance from those earning over £100,000, because this causes unnecessary distortions to the tax structure and spikes in marginal rates across narrow bands of income, encouraging avoidance activity. Nor does it yield that much money because there aren't enough people earning that kind of money.

    You could look to fund the tax cuts by cuts in government spending, but the reality is that these savings – and more – are going to be needed to reduce the massive budget deficit.

    An interesting way of squaring the circle that I see Lord Tebbit has mooted would be to reduce the threshold where the 40p income tax rate cuts in so that it offset the value of the increased personal allowance. What is your view on this John?

    So in effect you would be restricting the increased personal allowance to basic rate taxpayers, thus reducing the revenue cost of the policy by far more than a clawback of the p.a. above £100,000 would do and without the distortions to the tax structure. It would not raise the tax burden on higher earners, because the effect of the 40p rate cutting in earlier would be offset by the higher tax-free slice.

    Normally I would favour raising, rather than lowering, the threshold for 40p income tax as it already cuts in quite early. But it's a question of priorities. The change described above would have the merits of reducing the direct tax burden on low and average earners, alleviating the unemployment and poverty traps, while not increasing the burden on higher earners.

    But it would still be expensive, particularly in the short term, even if in the long term it should help to reduce the welfare bill and maybe even boost revenues. So it would probably have to be done in stages.

    Dealing with the withdrawal rate of means-tested benefits and tax credits is much more problematic. If you reduce the taper you ensnare more people in the system for longer, creating middle class welfare and increasing the cost (in essence what Brown has done). If you withdraw benefits more sharply as earnings rise you worsen the disincentives to work.

    If you reduce means testing and rely on universality you may improve incentives to work and save but at the price of a more expensive system that directs benefits at people who don't need it, or else doesn't even provide for a subsistence level of income.

    I fear any solution to this (how to boost the market returns of those who are in work but not earning a decent living) will always be partial and flawed, but simplifying/streamlining the system and looking at in conjunction with the tax system is clearly essential if any progress is to be made.

    Reply: I favour lower rates, not different thresholds.

    • no one
      Posted January 14, 2010 at 11:07 pm | Permalink

      yep and the way tax and benefits system deals with people who want to take extra education or training needs fixing, at the moment they discourage it! we should be supporting people who want to learn more and do better through education and training

      • alan jutson
        Posted January 15, 2010 at 12:53 pm | Permalink

        no one

        Agreed.

    • alan jutson
      Posted January 15, 2010 at 12:53 pm | Permalink

      Alex

      Agree fix the starting rate of tax (personal tax allowance) at 50% of average earnings.

      Example:
      If average National earnings is £25,000, then starting rate for tax should be £12,500.

      Income Tax and National Insurance should be combined as one tax (lets be honest about real tax take) its more simple and cheaper to administer and understand for everyone.

  21. JimF
    Posted January 14, 2010 at 2:52 pm | Permalink

    It's actually not the Universities, or even just the schools. There is a prevalent attitude now, particularly in the UK, that somebody else will take responsibility. Whether it's sliding on snow, feeding yourself, learning, working, living with your parents at 30…..
    If you couple this mentality with people actually seeing the Benefits Society in action, then it's a no-brainer. Literally and metaphorically.

    Perhaps the coming times will be a salutory experience, that actually dependency isn't so smart. That will feed through to people actually wanting, needing to drag themselves up. Into a decent education, job, future.

    The school system is just a structure, not a dogma, which should be there, free at point of use, to cater for whatever the young person is best at and wants to learn, prefererably surrounded by like-skilled and like-minded young people.

    It's another area which needs the reset button pushed.

  22. Eddyh
    Posted January 14, 2010 at 2:57 pm | Permalink

    The problem of our education system is too much central direction, too many targets etc. The solution is to put the power in the hands of the parents. Work out total state spending on education, divide this by the number of children in the system and give each parent a voucher for this amount to spend as they feel fit. Some would still send their child to a bog-standard comprehensive but many would look around for a better education and there would be no shortage of people and institutions queing up to provide for them.

    • Mike Stallard
      Posted January 14, 2010 at 10:45 pm | Permalink

      YES!!!!

  23. Kevin Peat
    Posted January 14, 2010 at 3:46 pm | Permalink

    You can't make the poor rich by making the rich poor.

    So they're making a darn fine effort of making those in the middle poor instead.

    Is someone tapping into my bank account ???

  24. michaelmph
    Posted January 14, 2010 at 5:15 pm | Permalink

    If the route to being wealthy was simply to work harder, then we could all be rich. If only it were that simple. There is a far greater and more relevant maxim that applies here, viz: Money makes money. Most wealthy people I know make their money do the work and/or get other people to work for them, In my area of north London, most of the wealthy people are bankers or lawyers. None have ever built a 'real' business. As Andrew Neil asked a banker on the 'Daily Politics' yesterday, "Why do bankers pay themselves sums vastly greater than the heads of huge corporations such as BP and Shell receive?"

  25. Chuck Unsworth
    Posted January 14, 2010 at 5:23 pm | Permalink

    What's so good about equality? Someone's got to empty the dustbins and someone's got to do the neurosurgery. Why should they be equal? All depends on your definition of 'equality' though, don't it?

    This move by Labour is the usual politics of envy stuff – it's just the continuation of invidious class-warfare. But I note that they seem to believe that they are more equal than others.

    • Mike Stallard
      Posted January 14, 2010 at 10:43 pm | Permalink

      And, Chuck, what are you planning for your children? Dustmen? Toilet cleaners? If you are at that level, or beneath it (and I have been) then you will do almost anything to get some chance of a half decent job. You walk round demanding equality – "fair go" is what the Australians call it, I believe.

      • Chuck Unsworth
        Posted January 16, 2010 at 11:34 am | Permalink

        Well Mike, the one thing they did learn from me is that it's a dog-eat-dog world and if they wanted the riches they'd have to work for it – or get very lucky.

        I too have been at the bottom of the pile, but I've never regarded that as 'unfair'. Misfortune is not the same as inequality. That said, compassion is a tremendous virtue.

        • Mike Stallard
          Posted January 16, 2010 at 6:21 pm | Permalink

          Bingo!

  26. John Bracewell
    Posted January 14, 2010 at 5:28 pm | Permalink

    I agree completely with your piece about equality of opportunity. I would add one more factor which improved my own education. Although his parents could only afford to pay for his elder brother’s Grammar School education, my father encouraged both his sons to do as well as possible at school and although he was a single parent (from my first birthday), who worked extremely long hours as a blacksmith, put us both through Grammar School, and, University on State grants. This has resulted in both sons having good jobs and a vastly better standard of living than he did.
    It is this sort of parental encouragement and dedication which appears to be lacking these days. I do hope, after the election, that present trends both in society and education can be reversed.

  27. David Belchamber
    Posted January 14, 2010 at 6:04 pm | Permalink

    "My view is equality of opportunity is what matters most. Policy should be aimed at levelling up, not levelling down".

    That is the whole case in a nutshell.

    The difference between the USA and the UK is largely one of aspiration, as exemplified by the story of an unemployed American who saw an obviously wealthy man drive past in a very expensive car.

    Whereas Gordon Brown and his lot would no doubt wish to take the car and other possessions away from that wealthy American, the unemployed guy merely commented that one day he was going to have a car as magnificent.

    Luckily I believe that Brown's class warfare and recent delusional utterings will convince middle England that aspiration will be a dead duck under Labour.

  28. Brian Tomkinson
    Posted January 14, 2010 at 6:11 pm | Permalink

    JR: "So how can a well intentioned government encourage more people to put in the effort and take the risks that it takes to be well off?"

    As far as Labour is concerned I would firstly question the use of the words "well intentioned". They have endeavoured to produce a "client state" dependent on them for their salaries or benefits in the belief that this way they will retain power.
    Yesterday, I read Lord Tebbit's blog supporting an increase in the level at which income tax starts to be paid to £10,000 or £12,000 p.a. What is your view?

    Reply: I agree with lower Income Tax rates, but not necessarily with a large hike in the tax free allowance.

  29. Michael Lewis
    Posted January 14, 2010 at 7:24 pm | Permalink

    Broadly agree with this apart from one point, government should not fund individuals into fee paying schools.

    I don't see why taxpayers should fund private businesses like that, that is a state subsidy in all but name.

    If there is Education budget – make it available to the state schools to improve their performance.

    Or, as has been mentioned, give the money back to parents to decide for themselves how to spend their education alloation.

    The alternative is just a subsidy for a private business, and not something the government should be involved in.

    • Ian
      Posted January 14, 2010 at 10:56 pm | Permalink

      Surely Michael the investment should be made where it makes the biggest impact for the lowest cost. Why is it wrong to pay x to a private school to achieve a better outcome than spending 2x at a state school for a poorer outcome? Why should taxpayer's pay more for less?

      Let's talk about great schools and great learning – not who owns them.

      • Michael Lewis
        Posted January 15, 2010 at 12:06 am | Permalink

        I don't believe government should subside private companies. I don't believe government is in the best position to choose 'what the biggest impact is' .. and, also, if state schools don't need the money – let parents have that money back. Rather than take from many to subsidise a private company, and education of a few pupils – let parents have the money so that they can spend it on their own children.

        • Mark
          Posted January 16, 2010 at 2:36 pm | Permalink

          It isn't a subsidy – think rather of purchase of outsourced services, in this case of education, rather than say collecting rubbish. You might argue that the individual parents rather than the state should be the purchasers, but the money might need to be hypothecated to avoid it being spent on high living rather than a child's education.

    • no one
      Posted January 14, 2010 at 11:11 pm | Permalink

      give the money to the parents to spend as they see fit on any extra training or education

      the state will never be able to tell as well as the parents what will work

  30. david
    Posted January 14, 2010 at 8:51 pm | Permalink

    The reason why some people are richer than others, has very little to do with education, its because they are born that way.

    • Martyn
      Posted January 15, 2010 at 10:38 am | Permalink

      That is simply not true. There are many rich people in the world who started off in life with nothing but the willingness to take a chance, think laterally, innovatively and make their fortunes through sheer bloody hard work. Alan Sugar and Richard Branson, for example spring to mind…..
      I am personally richer than many others. Not actually rich, in fact very far from it, but throughout my working life I have saved, made cautious and safe investments and now, fully retired, I have a well-earned but quite modest income that enables me to live comfortably. Well, comfortably enough for as long as this benighted government will let me before it takes even more income away from me to pay for all those who cannot or will not work.
      Think on this – if 'we' gathered together all of the money in the land, totalled it up, subtracted from it the national debt and then redistributed equally to every person in the country, would we all be rich? Not at all – in fact everyone would probably find themselves living at a meagre subsistence level as a result of this hugely impractical idea. Personally, I would find it very cold comfort indeed to be sitting around in poverty warmed only by the glow of knowing that everyone else was as poor as me….

  31. Alex Sabine
    Posted January 14, 2010 at 8:52 pm | Permalink

    I also favour lower tax rates with a broader tax base rather than higher rates with more exemptions.

    However, I fail to see why it makes sense to levy direct taxes on people who earn less than full-time minimum wage earnings, and to tax people with one hand and give them means-tested benefits with the other. That is just the government creating overheads, and unnecessarily eroding people's self-reliance.

    Given the number and level of indirect taxes (which tend to be regressive), we now have a position where the poorest 20% pay a greater proportion of their income in total taxes than the top 20%. Therefore there is a very strong case for reducing their direct tax burden as a priority.

    My point about significantly raising the personal allowance was that it would reduce the marginal tax RATE faced by low earners (those moving from unemployment to a low-paid job, or part-time workers wanting to work more hours) by 20 percentage points (or 31 if you raised the NI threshold correspondingly) – ie from 31% to 0%. They would then have just the benefit withdrawal taper to cope with rather than that plus 31% taxation.

    If you say you want to extend opportunity, this would make rather more difference than trimming 2p or 3p off the basic income tax rate, as Lord Tebbit recognised in his Telegraph blog. (It would certainly be more relevant than raising the inheritance tax threshold!)

    Reply: I agree that we could cut some of the high marginal rates of tax and benefit withdrawal – but raising the allowance to £10,000 tax free is a very expensive way of doing that.

    • Alex Sabine
      Posted January 15, 2010 at 1:20 am | Permalink

      OK, I agree that with the current size of the deficit it is too expensive – but then so are any significant tax cuts. Unfortunately the next government is going to have to raise taxes rather than lower them, as well as cutting spending sharply.

      But when considering tax cuts that would also be tax reforms, I personally see a rise in the personal allowance as a priority. Cutting the top rate would be less of a priority (although I wouldn't go ahead with the 50% rate – 40% is enough and keeping it would in all likelihood cost zero revenue). Cutting things like employers' NI and the corporation tax rate would be higher priorities than a big rise in the inheritance tax threshold.

      I'm not convinced it's easy to significantly cut high rates of benefit withdrawal without spreading means-tested benefits further up the income scale, which is undesirable on both cost and 'middle class welfare' grounds – so major action on the tax side is necessary.

      • alan jutson
        Posted January 15, 2010 at 1:09 pm | Permalink

        Agreed.

        John you do not have to raise the Personal Allowance all the way in one go.

        It could be done in stages over say 5 years, with the rate to still end up as 50% of National Earnings at the end of that 5 years .

        A higher allowance would at least reduce the number who say they are caught in the Benefit trap, where there is not any incentive to work, as it does not pay them to do so, because they would be worse off.

        The reliance on Benefits culture, has to be resolved, otherwise it will increase and cost even more.

        Why not incentivise people to work with less Tax Demand at a lower level, when you seem to agree it works for higher earners.

  32. Javelin
    Posted January 14, 2010 at 10:10 pm | Permalink

    Education often just turns you into a tool. A degree may turn you into an expensive screwdriver for a large corporate.

    Another way to make more money is to have aspirations of leadership. You climb the greasy pole. Longer hours, stress, managing people. The larger the company the higher you can climb.

    A third wat to make money is to take risks with money either as an entrepeneur or sales person. The risk is that your income reflects your revenue.

    A fourth way to make money is to own the means of production. This cannot be taught and whilst Marx resented it people can either inherit or reinvest their wealth.

    Finally you may have a talent. Like Beckham or tiger woods you may just be born lucky.

    So let's summarise…

    Educated intelligence
    Leadership aspiration
    High risk taking
    Inherited wealth
    Lucky talent

    So why does the Government need to help?

    Of course if every body was wealthy then wealth would mean nothing. In a global economy wealth would be reduced by inflation and we would be left working really hard for no reason.

  33. Mike Stallard
    Posted January 14, 2010 at 10:38 pm | Permalink

    This afternoon I was teaching English to a lovely young Polish lady when three Poles walked in. For two solid hours I explained, patiently, in both Polish and English how to do the Present Simple to people who could not even say "Hello". And, do you know what? I was thrilled to see that at the end of the lesson they had mastered it! One of them has been in the country for four days and is a black belt in Judo. The others work in a factory processing food.
    And then there other people who just sit in the park getting drunk on cheap beer.
    What we have forgotten is the difference between the deserving and the undeserving poor.
    I will say nothing of the deserving and the undeserving rich.

  34. John C
    Posted January 15, 2010 at 1:31 am | Permalink

    "I would like to see people treated better financially if when unemployed they start to work for themselves."

    I just wish the Tories would put more effort into this area.

    As I understand it, if someone takes a job or decides to become self employed, they lose most, if not all of their benefits immediately.

    Surely, it is not beyond the capability of some bright sparks in the Treasury to allow people to keep some or all of their benefits in this transition period and claw it back later in taxes – assuming they were successful.

    If they weren't successful then the money would be lost – but it would encourage many people to try to advance themselves.

    The true work-shy would not try to take advantage of such a system as they don't intend to work anyway.

  35. Javelin
    Posted January 15, 2010 at 7:53 am | Permalink

    Remember only a small percentage of investment bankers were involved in the credit crunch. The credit derivative desks form a very small part of any bank.

    To put it in context investment banks maybe a fifth of the bank. Trading floors are a fifth of the investment bank. Credit and debt products are a fifth of the products. Credit and derivatives are a fifth of these products. About a fifth of those on the credit desk actually make decisions about strategy. Then for the strategist at the bottom you probably have 5 people above him deciding to trade those products, 5 people deciding NOT to trade because they are too risky and 5 people on the board who approve the decisions.

    So I'd say there were no more than 20 decision makers in the bank who could have stopped the trading. Perhaps 20 admin, 20 management, 20 economists, 20 IT, 20 analysts who weren't responsible but could have raised an objection by resigning in protest.

    I have been told (word of mouth) that Goldmans invented credit derivatives but Golsmans also hedged out or cancelled most of their trades before the crunch.

    So you're looking at

    • Mark
      Posted January 16, 2010 at 2:26 pm | Permalink

      The person usually credited (!) with inventing credit derivatives is JP Morgan's Blythe Masters (now busily engaged on devising and promoting carbon derivatives).

      Goldman Sachs hedged out much of their risk on mortgage backed securities and collateralised debt obligations, but remained dependent on the 800lb gorilla in the CDS market – AIG (effectively the main provider of credit risk insurance to the entire market) – although they did resort to inserting one of the other banks as an insulating layer in the transactions for a small fee (credit risk insurance of itself) rather than dealing directly as the counterparty risk with AIG mushroomed. They were significant direct and indirect beneficiaries of the AIG bailout. A little research will turn up interviews with senior Goldman personnel that verifies these facts.

  36. Lindsay McDougall
    Posted January 16, 2010 at 1:48 am | Permalink

    You also have to be a bit cunning and resourceful and avoid obvious mistakes. For example, if you rent a high street shop in order to sell a line of goods that is already being sold by many others, you are unlikely to prosper. If your item is slightly novel, you use cheap warehousing and sell direct via a web site, you might do better.

    In my humble world of transport consulting, the knack is to keep your curriculum vitae bang up to date and 'spun' towards the requirement of the Terms of Reference. The World Bank is entirely transparent in telling tenderers for a study the way in which bids will be evaluated. It's usually 80% for technical merit and 20% for price. Of the technical marks, usually 60% is based on the quality of CVs submitted. Naturally, this favours older candidates who have more past projects. The old dictum that if your CV is longer than 4 pages you are past it, is studiously ignored.

    There is a danger in taking this too far. The story goes that a certain consultancy firm west of the atlantic had an employee whose CV was a perfect match to the requirements for team leader on a World Bank project. Unfortunately, the man had been dead for 3 weeks. Undaunted, the firm's proposal included this person on the grounds that nobody would realise until after the award of the study. Regretably (for them), the World Bank got wind of the news and promply banned the said firm from bidding for their studies for 2 years.

    The best motto with CVs is that you can fool all of the people some of the time. Bear in mind, though, that if you win a job on the basis of 'spun' CVs, you'll have a steep learning curve before the project starts. In that circumstance, enterprise and hard work really do go together.

  37. Adrian Peirson
    Posted January 19, 2010 at 6:05 pm | Permalink

    I've worked out that the best way to survive is to not have any money, once they realise that they tend to leave you alone.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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