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Limits to taxation? The UK General Election 2010

Posted by on July 16, 2010 in Economic Theory, Politics, Taxation | 0 comments

The May 2010 election saw a substantial swing against the incumbent Labour government, though the Conservatives were denied an outright victory. In a fair number of marginal seats which they would have expected to win on the national trend, the swing to the Conservatives away from Labour was distinctly low.

There are obviously many possible reasons for this. But there is good evidence to confirm a widespread view that the constituencies which receive a net public subsidy stayed Labour, and those which pay for the subsidy through a net export of their taxes voted Conservative.

A readily available proxy for this is the percentage of the population of working age which is in employment . Ideally, income per head should also be taken into account, but this is only available at local authority level and not by constituency. However, it is very plausible that such data would strongly reinforce the message of the employment data. Income per head in, say, Beaconsfield is distinctly higher than in Bootle. Further, the proportion employed in the public sector is also relevant. But as a first pass, the employment data itself is revealing.

On average, the percentage of the working age population in employment was six percentage points higher in Conservative seats than in Labour ones (for the record, the Lib Dem position was in between the two, though somewhat more similar to Conservative seats than to Labour). Six percentage points may not seem a lot, but across the country as a whole it amounts to more than 2 million people.

So, in almost three-quarters of Conservative seats more than 80 per cent of the working age population were in employment. But in more than three-quarters of Labour seats, less than 80 per cent of the working age population were working.

A potential counter to the general point is that the votes simply reflect regional preferences, with for example the North of England and Scotland showing a definite preference for Labour and the South for the Conservatives.

However, the employment differences are reflected within the regions. Not all regions can be looked at in this way because of the dominance of one or other of the parties, but here is the data for the more ‘mixed’ regions.

Average percentage of working population in employment
Region Conservative Labour Difference
North West 80 75 5
Yorkshire 82 77 5
East Midlands 83 75 8
West Midlands 82 73 9
London 78 74 4

As noted above, the analysis should ideally take into account income per head and the percentage employed in the public sector, and a further refinement would be to allow for the proportion of pensioner households. But as an initial broad sweep through the results, the employment data does suggest that the areas which, through their high employment rates, pay more tax than they receive in subsidies decided that Gordon Brown’s government had gone too far in extracting money from them.

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