The war on inequality

Patricia d’Ardenne asks what impact a new Labour government might make 

Since Das Kapital, wealth and income inequality have always been the priority of the Left.  Karl Marx believed that private capital accumulation inevitably led to the concentration of wealth in ever fewer hands. By the twentieth century, Simon Kuznets postulated that growth, competition, and technological progress would ultimately reduce inequality and achieve greater social harmony. By the end of World War II, concern about extreme inequalities led to the progressive taxation systems and redistributive welfare state installed by the Attlee Government.  We became a more equal nation, but was the war on inequality being won? It seems not. We might all be getting wealthier than our grand parents, but the wealth is not equably distributed. It is getting more unequal. We have good UK Census data from 1961 that the inequality gap in household incomes has been steadily increasing to the present day. In 2000, the ratio of poor to rich was 47:1. In 2012, it was 120:1. Whatever else is going on in the boardroom, wealth is not being shared equally throughout the workforce. Why does this matter?

Infamous quip

Peter Mandelson’s infamous quip about ‘being intensely relaxed about people getting filthy rich, as long as they pay their taxes’, reflected a centralist position at a time when any restraint on executive pay was seen as anathema to the business vote. Blairites believed that New Labour could and would rescue those in absolute poverty. Relative poverty was dismissed as ‘the politics of envy’. Not any more.

There are many signs that equality of income and capital is now part of mainstream aspiration.  As the private jets of the world’s financial leaders arrived in Davos in February, the buzz topics were inequality and the need for fair and trusted financial systems. Mark Carney, Governor of the Bank of England, at a 2015 London Conference on inclusive capitalism, argued that financial reform must help to build social capital.

Justin Welby, one time oil executive, and current Archbishop of Canterbury said, “Tax is part of solidarity…it says I belong to this place.  I benefit from the fact that we have the police, health service and welfare system, external security. I am part of that, and therefore I contribute to it.”

In 2009, The Spirit Level, by two epidemiologists (Richard Wilkinson & Kate Pickett), showed how inequality throughout the top twentieth developed countries could be correlated with other ills – mental and physical ill health, life expectancy, violence, illiteracy, educational under-achievement and crime. The rich also suffered. Their message was simple; equality is better for everyone.

In 2014, Thomas Piketty’s best-selling Capital in the Twenty-First Century, warns that, contrary to mainstream left and right assumptions, inequality is innate to modern Capitalism, (the post war period was, sadly, a blip), and is actually on the increase. Worse, the increase of inherited wealth (e.g. property and investments) means that inequality of opportunity is also on the increase. Not only are there more super rich; they do not have to earn their wealth to keep it. Of course, some have challenged details of Piketty’s data, but there is agreement that inequality is growing and must be tackled. Piketty proposes that it will only be curbed by a progressive global tax on income and inherited wealth. He suggests that top rates of tax need to return to 70-80% if inequality is to be reversed.

Labour has an agenda more likely to address inequality than any other party. It wants to tackle re-distribution of taxed wealth through the 50p tax rate, a mansion tax, a bank bonus tax, and a less harsh benefits cap. Its shadow chancellor of the exchequer, Ed Balls now proposes that banks should be able to claw back bonuses from employees who fail to justify their rewards for up to 10 years. On pre-distribution, i.e. seeking equality before tax collection,  Labour posits universal childcare, a mass house-building programme, a freeze on energy prices, a higher minimum wage, wider deployment of the Living Wage, and worker representatives on remuneration committees. This is the right moment.

Widespread condemnation

We used to accept that football stars were worthy of millions, supported by poorly paid staff. But there was widespread condemnation of Richard Scudamore, chief executive of the football’s Premier League, who winning a £5.14 billion broadcasting deal for its teams, would not concede that stadium workers should be paid the Living Wage of £7.85 per hour. “That’s not for us to do…That’s entirely for the politicians to do.” Quite so.

Could Labour do more? What about removing the charitable status of our top Public Schools, many of them originally established to assist the poor? How about ensuring the NHS stays public, and always free at the point of delivery?

Last but not least, Labour could start by using the language of equality that the public now recognises as an ethical and appropriate goal of government. We have entered an era when bank bonuses, corporate greed, the super rich, excessive consumption, tax havens and tax evasion are now viewed by many as part of the problem. Policies that aim to reverse these need to be described as such. Inequality is bad for us all, and Labour can win this war.

Leave a comment...

This site uses Akismet to reduce spam. Learn how your comment data is processed.