Wednesday, 7 October 2015

If Jeremy Corbyn Managed A Restaurant......

If Jeremy Corbyn took over the restaurant (country) that David Cameron and George Osborne are currently running, would the customers have a fairer dining experience? Let's find out. I recall seeing a neat little illustration in an American paper about a year ago, which I can't quote verbatim, but the writer was using a pub illustration to show what the American tax system would be like in terms of a round of drinks. I've borrowed the idea, and tweaked it a bit to represent the British tax system, and replaced the pub with a restaurant.

Suppose that a group of ten people go out for a slap up three course meal and lots of drinks (for simplicity let's call them A-J), and at the end of the night the bill comes to £1000. Let's be creative and suppose that the restaurant manager charged them in the same way that the government taxes us. By my last check on the UK tax system, here's how the £1000 bill would be divided up, with A being the poorest person and J the richest, consistent with scale over the whole UK population.

A pays nothing
B pays nothing
C pays nothing
D pays nothing
E pays £10
F pays £30
G pays £70
H pays £120
I pays £180
J pays £590

As you can see, J, the richest person, picks up nearly 60% of the entire bill all by himself, with the four poorest diners paying nothing at all.

Now try this on for size. After the bill is paid, the owner decides to offer them a deal. On their next trip he will give them a 20% discount. On their next visit they consume the same again and receive a bill for £800. Once again, the restaurant manager charges them in the same way that the government taxes us. What has changed? Here's the new bill - it makes quite interesting reading:

A pays nothing
B pays nothing
C pays nothing
D pays nothing
E pays nothing
F pays £20
G pays £50
H pays £90
I pays £150
J pays £490

As you can see, E now joins A-D in paying nothing, F pays £20 instead of £30 (a 33% reduction), G pays £50 instead of £70 (a 28% reduction), H pays £90 instead of £120 (a 25% reduction), I pays £150 instead of £180 (a 17% reduction), and J, the richest diner, now pays £490 instead of £590 (a 16% reduction). When the bill is paid the diners discuss how the 20% discount has benefited them. After a lot of squabbling, J brings the table to silence by pointing out that the discount has disproportionately favoured the poorer diners, as each personal reduction was by a higher percentage the lower the earnings. E, who did pay £10 but now paid nothing enjoyed a 100% saving, whereas J who did pay £590 but now paid £490 only received a 16% saving.

Unfortunately we live in a society in which many of the population are more likely to complain the absurd - that these unfair tax breaks mean poor E only saved £10 whereas rich J saved £100, instead of looking at the situation with the proper context and perspective: that J's reduction was 84% smaller than E's, but even more noteworthy, that the only 'saving' J enjoyed was from paying just under 60% of the bill down to just under 50%.

I'd like you to remember this restaurant illustration the next time you feel compelled to shout that the rich get all the tax breaks. Especially remember the conclusion we just reached that if J doesn't turn up for the meal, the other nine diners couldn't even cough up enough for half the bill between them.

The scenario I just described is what the dining experience is like with David Cameron as the restaurant manager. I hope it doesn't require too much of your imagination to consider what the dining experience would be like if Jeremy "The Conservative restaurant is unfair" Corbyn took over as manager and tried to make things 'less unfair'.