Tag: Power

Why is the UK so unequal?

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The US and UK share an ideology of ‘free-market’ fundamentalism and competitive individualism. More widely called ‘neoliberalism’ these ideas were introduced, respectively, on both sides of the Atlantic by Ronald Reagan and Margaret Thatcher. 

Earlier this year, Angus Deaton, professor of economics at Princeton University and a Nobel laureate, launched a five-year review on the subject of inequality. Sir Angus, who is teaming up with the Institute for Fiscal Studies, with funding from the Nuffield Foundation, a charity, intends the review to be the “most comprehensive scientific analysis of inequalities yet attempted”, examining not just the gaps between the rich and poor, but also differences in health outcomes, political power and economic opportunities in British society and across the world.

It will attempt to answer which inequalities are beneficial, providing “incentives” for people to strive harder, and which should be stamped out because they are derived from luck or cronyism and, according to Sir Angus, “make a mockery of democracy”.

Personally, I have some major issues with the neoliberal language of “incentives.” In its crudest formulation this entails providing the conditions for the market sector to produce growth, and accepting that this will somehow result in inequality, and then relying on some vague mechanism of redistribution of some portion of this growth to help repair the inequality that has resulted from its production. Over the last decade, we have witnessed those ‘safety net’ mechanisms being dismantled, leaving a large proportion of society with dwindling resources, while a few people have become obscenely wealthy. The language of “incentives” implies that it is human behaviour and not market fundamentalism, that creates growing inequality.

But that isn’t true. Neoliberalism has failed the majority of citizens horribly, the evidence of which is stifling both the UK economy  and our potential as a society. There are a few beneficiaries, who, curiously enough, are working flat out to promote the failing system of economic and social organisation that was ushered in by the Thatcher administration, while viciously attacking any ideas that oppose their dogma and challenge their stack of vested interests.

The Deaton review starts from the premise that not all inequalities are bad. Deaton and the IFS also believe that inequalities based on luck or rigging the system are far worse than those based on the skills of individuals: “If working people are losing out because corporate governance is set up to favour shareholders over workers, or because the decline in unions has favoured capital over labour and is undermining the wages of workers at the expense of shareholders and corporate executives, then we need to change the rules,” Deaton said.

This assumption that cronyism and damaging activities of the rich have left others in poverty has raised hackles in some free-market circles. Ryan Bourne, economist at the Cato Institute, for example. He says the IFS should be careful not to assume wrongdoing just from data showing rising inequalities, and: “Income inequality, for example, can be increased through entrepreneurs making fortunes off hugely welfare-enhancing new products,” he said. Whether or not this is correct, many UK officials are concerned that the market economy is in danger of becoming rigged against ordinary people.”

Andrew Tyrie, chair of the Competition and Markets Authority, the competition watchdog, admitted earlier this year that the authorities had been “slow” to address shortcomings in competition and rip-offs and would in future “be doing and saying a lot more”.

I have a lot more to say on this topic, too.

I’m planning to produce a series of in depth articles on inequality and growing poverty in the UK. To introduce this series of works, I’ve invited a guest writer, Kenura Medagedara.

Here is Kenura’s article:

Despite having the fifth-largest economy in the world, the United Kingdom is a surprisingly unequal society. It has the fifth-highest income inequality in Europe. The top 20% highest earners earn six times more than the poorest 20%. The top 10% of wealthiest households own five times more wealth than the bottom 50%.

These statistics may not come as such a surprise to some of us. Unfortunately, Britain’s historic class divisions are showing signs of increasing. But why is Britain so unequal, especially compared to other wealthy nations? And what can we do about it? These are the questions I’ll be trying to answer in this article.

The problem of inequality

Before I discuss any of this, I should first explain why inequality is so dangerous. We all know that absolute poverty is bad, as it means that people can’t afford to survive. We also understand that undeserved wealth is problematic, as it gives some people an unfair advantage over others. Did you know, for instance, that the third-wealthiest landowner in Britain, Hugh Grosvenor, amassed his £9 billion fortune entirely through inheritance?

Like I said, most people can see the problems with these two issues. However, (as many of those on the right point out), these issues aren’t intrinsic to inequality. It is possible to conceive of an economy where inequality exists, but the poorest household still has its basic needs met, and measures like inheritance tax can somewhat prevent situations like the one described above. So what’s wrong with inequality?

One of the main problems is inequality of opportunity. In any society, there are a limited number of opportunities available. Big companies only have so many vacancies, top universities only have so many places. Even in a society where absolute poverty doesn’t exist, opportunities for social mobility will still be limited. And these opportunities tend to stay in the hands of the rich. There are a wide range of reasons for this, from subtle ones like poorer students facing more mental stress when applying to university than richer ones as the cost of them failing is significantly higher, to more obvious ones like wealthy people being able to afford additional courses and qualifications to make them more qualified for higher-paying jobs. Either way, economic inequality brings about very unfair circumstances.

Money in politics

Another problem is that of political power. In a democracy, everyone’s voice should be heard equally, through universal suffrage. However, money can significantly increase someone’s political power. For example, they can afford a party membership, giving their party more money to spend on advertising campaigns to win elections. They can also make donations to influence policy decisions. In these ways, the wealthy have an unfair say in politics over the economically disadvantaged. Technically, this could be remedied by certain policies, such as all political parties receiving the same amount of funding from the government, but this seems very implausible, so I’d argue that inequality remains the real issue here.

From a more pragmatic perspective, economic inequality actually hinders economic growth. A 2014 study by the OECD found that the UK’s failure to address inequality meant that its economic growth was six to nine percentage points lower than it could otherwise haven been. This is because, as previously mentioned, people from poorer backgrounds find it harder to get good education opportunities as the rich can use their wealth to give them an unfair advantage. As a result, the poor get low-skilled jobs contributing little to the economy, whilst the rich get high-skilled jobs with relatively little competition, and so are generally not as efficient as they should be. It turns out that reducing inequality actually benefits everyone.

Why is the UK so unequal?

Before we can combat inequality, we first need to understand what causes it. In the UK, one of the main causes is the housing market. Currently, only 64% of all households are owned, compared to 71% in 2003. And this is expected to get worse; the average wage in London is 16 times less than what would be needed for a deposit. A house is normally the most expensive asset someone will own. Britain’s situation has meant that the children of homeowners inherited vast sums of money, giving them a huge advantage over people who weren’t as lucky.

This has allowed them to afford their own property, and buy more assets to generate even more wealth. This makes the rich get exponentially richer, whilst the poor are forced to cope with higher rents due to increased housing demand, reducing their disposable income and effectively making them poorer. As a result, 10% of households own 44% of all wealth, while the poorest 50% of households own just 9%.

Education

But this isn’t the whole story; after all, the UK has a fairly average wealth distribution compared to other OECD nations. Another major source of inequality is the education system. Despite the fact that this is often touted as the ‘great equaliser’, only 21% of children eligible for free school meals go to university, compared to 85% of children from private schools. As a result, those from poorer backgrounds tend to get low-paying jobs, whilst the opposite is true for the wealthy. This ensures that the rich stay rich and the poor stay poor.

One major reason for this contrast is the price of nursery. The average price of full-time nursery in the UK is £242 per week, which is roughly 50% of the average household disposable income. Those on lower incomes will struggle to afford this compared to richer parents. This may explain why economically disadvantaged children even do much worse than their wealthier counterparts in primary school.

Solutions

To solve wealth inequality, the government must reform council tax. This is one of the main reasons why the housing market is in such bad shape. Firstly, this policy is regressive. According to a report by the Institute for Public Policy Research (IPPR), a household in band A property in London pays almost five times what a band H household would pay as a proportion of property value. Additionally, in 2013 the government simultaneously devolved council tax benefits and cut funding for it, forcing councils to start taxing those on the very lowest incomes. As a result, council tax has greatly contributed to economic inequality.

One possible solution is to exempt those on the lowest incomes from paying council tax. This will somewhat stop the tax from being regressive if poor households simply don’t have to pay it. Another, more long term, solution could be to scrap council tax entirely, and replace it with an annual flat rate tax. This would guarantee that the policy is progressive. According to City Metric, a 0.25% tax would raise the same revenue for London as the current system, but 80% of households will pay less.

To solve the gap in education, one possibility is to make nursery free. In a 2016 report on child well-being in rich countries, UNICEF called for high quality early education and care for children to reduce inequality in education. Making it free would certainly achieve this. In addition to this, British charity Teach First, who work to reduce educational inequality, claim that the government needs to increase the amount of teachers in schools in deprived areas. This will reduce class sizes, which plays a big role in the success of the pupils.

Conclusion

To conclude, economic equality is vital to achieve political equality and equality of opportunity, and also creates more economic growth. Two of the main causes of inequality in the UK are the housing market and the education system, both of which require serious reform if we’re to solve this issue.

Inequality is a very complex problem, and I’m not suggesting that this article has magically solved all of the issues that cause it. However, hopefully more discussion on this topic will eventually give us the answers.

If you enjoyed this article, you may want to check out Kenura’s blog for more analysis of British politics.


 

I don’t make any money from my work. But if you like, you can contribute by making a donation which helps me continue to research and write informative, insightful and independent articles, and to provide support to others going through disability  assessment and appeals. The smallest amount is much appreciated – thank you.

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It’s the Tories that want something for nothing: the democratic contract and government responsibility

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The Conservative defense of increasing economic inequality, the lionisation of Randian, Libertarian, selfish individualism and the proliferation of ideological justification narratives regarding the dismantling of the “Big (Welfare) State”, where the latter, in Orwellian fashion, is now being indicted for many of the very social and economic ills that the free market era has actually delivered has surely worn threadbare by now. 

It’s abundantly clear that it’s the Tories and the very wealthy that want something for nothing. Cameron’s mantra is “social responsibility, not state control equals Big Society.” Cameron, in his Hugo Young lecture (2009), claimed that the “Big Society demands mass engagement: a broad culture of responsibility, mutuality and obligation”.

But this isn’t about a transfer of political power or decision-making from government to the public: it’s a transfer of responsibility and duty only.

In true Orwellian spirit, Cameron went on to say: “The recent growth of the state has promoted not social solidarity, but selfishness and individualism.”  Only a conservative would claim poverty and social cohesion as their concern and passion, and then attack  the mechanism that until now has been used to alleviate them  – publicly funded state spending.

Democracy (based on the partnership between political and economic enfranchisement) happens when the concept of property encompasses access to “social goods” such as healthcare, education and public infrastructure as a right of citizenship. The idea of political representation becomes consolidated when access to such social goods is guaranteed by a legal process, as well as a political process.

The electoral franchise in countries which adopted a Lockean liberal constitutional  system, such as  Britain, had a property qualification attached to it. Universal suffrage coincided with a wider public access to social goods, giving rise to a new type of social contract: by giving up a portion of their property by way of taxation, the propertied class ensured the survival of capitalism, and the working class escaped the worst ravages of capitalism.

Access to social goods was a means of widening and legitimising the scope of democratic political representation.

However, whilst removing all of our public services, provisions, destroying our post-war settlement, the key features of which were accepted in principle by the main political parties at the time, namely: a mixed economy, a free public sector healthcare and education, a guaranteed (though minimal) state pension and social welfare provision, the government is removing social goods, nullifying the established social contract between state and individual, and is expecting that we each fend for ourselves.

I don’t remember any consent amongst the public to accept diminished living standards in return for Cameron’s proposal of national fiscal security (which he has consistently and spectacularly failed to deliver) and the maintenance of the “market-state”. Nor was there consent for authority, inequality and hierarchy, or an acceptance of being less than we can be and having less than we can have.

Our welfare provision (and I include our National Health Service, here), paid for by us, IS OUR MEANS OF BEING RESPONSIBLE AS A SOCIETY AND INDIVIDUALLY: it is a means of securing provision for ourselves if or when we need it. Our welfare provision is, and has been since its inception, each citizens’ responsibility, because we pay for it. It doesn’t belong to the government.

The consensus that the welfare state was the best basis for a healthy society was first rejected by Thatcher, who notoriously denied the very existence of society, and unashamedly espoused greed as the  “best social driver.”  Cameron, building on Thatcher’s previous groundwork, has effectively delivered an economic enclosure act, claiming OUR collective, public funds, turning that money into the private property right of the rich, in the same way the land enclosure act robbed the public of their commonly shared land, and enabled rich landowners use of their control of state processes to appropriate public land for their private benefit.

Yet despite this blatant theft: the massive transference of public funds to a few private accounts, the demands being made by the state on citizens have never been greater. All the Tories talk about are OUR obligations and individual responsibilities, whilst they claim they have NO responsibility for citizen well-being. But we have paid for state services and continue to do so via the tax and national insurance system.

In 2013 the Government spent approximately £93.5billion of our money on the private sector. This is half the £187bn government usually spends on goods and services each year. Recent growth in outsourcing of government services to private providers has been widely criticised for a lack of transparency, poor management of money and, in particular, excessive remuneration of top executives and pay inequality between employees. Extreme pay inequality and a succession of scandals in the largest government suppliers suggests that, in its present form, government outsourcing is a very poor use of tax payers’ money and not fit for purpose. This is verified by the Equality Trust’s research report: Subsidising Unfairness

It’s only the very wealthy that gain (enormously) from austerity, and they  manage to avoid  any socially responsible contribution by using government endorsed accounting systems and dodges to avoid paying taxes wherever possible. The estimated amount of taxes unpaid, thanks to evasion, avoidance, error and criminality, soared to £34 billion, according to HM Revenue and Customs. This equates to £1 in every £15 owed in taxes not being collected last year.

Furthermore, it is the poorest 10 percent of households that pay eight percent more of their income in all taxes than the richest – 43 percent compared to 35 percent, outlined in a report from the Equality Trust. The poorest pay more than four times as much of their income, in Cameron’s poll tax-styled council tax system, than the wealthiest top 10 precent.

The government’s “hardworking taxpayer” myth which is at the heart of the Tory ideologically driven austerity narrative, and divert, divide and poison strategy, creates an artificial dichotomy between benefit claimants and taxpayers. Cameron’s diversionary rhetoric has got nothing to do with responsibility and fairness: it’s simply about justifying policies that privilege a wealthy elite at the expense of the poor.

 Such us and them dichotomies  can be linked to the distinctions made between the “deserving” and  “undeserving” poor, going back over a hundred years or more, to the cruel and punitive Poor Law Reform Act. The Tories have purposefully created scapegoats: adversarial identities that are politically constructed according to notions of difference which simultaneously encourages a public comparison to, and rejection of, Others. This Othering narrative portrays benefit recipients as the enemy in a battle against fairness and responsibility.

And the public have bought into it, the Equality Trust thinktank highlights a gulf between perceptions of the tax system and its reality. A poll, conducted with Ipsos Mori, found that nearly seven in ten people believe that households in the highest 10% income group pay more of their income in tax than those in the lowest 10%.

Wealth concentration damages economies. It focuses activity within finance and other services geared towards only towards serving the super rich.Maintaining inequality requires penalising and further impoverishing the poor.

Reducing  wealth inequalities will require the introduction of wealth taxes, like the inheritance tax  we introduced a century ago. Reducing inequality requires a high top rate of income tax. This reduces income inequality not only by raising revenue, but by deterring the profit-driven greedy from asking for more money. When there is a tax rate of 60 percent on incomes above £200,000 a year, it makes little sense to pay employees much more than that.

But the wealthy tend to get so indignant when policy proposals from the opposition indicate that they will be required to actually contribute something to a society that they have taken so much more than others from. There’s been an outraged outcry, for example, regarding Labour’s Mansion tax proposals. These ignoble, self-serving Randians are happy to sit back and allow the poorest and most vulnerable to suffer and starve, whilst being subjected to the unfair, punitive bedroom tax, which contravened human rights: the poorest are bearing the terrible burden of austerity cuts whilst the wealthy continue to profit massively. Presumably, Cameron exempted the very rich from responsibility, duty and contributing  to society in any meaningful way.

Of course this is about restricting political engagement, the Conservatives have always sought to reduce it to a basic partnership between corporate interests and professional politicians. Cameron’s Conservatism rests on the unwitting rejection  of the social democratic consensus by the population which, paradoxically, need what they reject. Public consent is being manipulated to accommodate the idea that democracy is a relationship between rulers and governed, rather than it being about an elected government that reflects, represents and serves public needs. The population are being incrementally subordinated to a political system which is not conducive to the betterment of their lives, well-being or material conditions –  the Tories are imposing an imbalanced social contract comprised of citizen duties with no citizen rights; the acceptance of ever-lower living standards and increasing state authoritarianism.

The Conservative scapegoating narratives, which have blamed Labour, the poor and the unemployed for a recession caused by the private finance sector, and not the “big state” as claimed, have permitted the Coalition to pursue an ideological, destructive and grossly unfair economic strategy, which has generated only a bogus and isolated recovery largely based on government-fuelled asset bubbles in real estate and private finance, with stagnant productivity, plummeting wages, millions of people in precarious jobs, inflated living costs and utterly savage welfare cuts.

One obligation that all democratic states have, surely, is that of protecting citizens rights and freedoms. Those are most certainly being steadily diminished, and Cameron has been quite candid about scrapping our Human Rights Act, and withdrawing from the ECHR in the future.

See what I mean? It’s all take take take…

Danny Dorling says: “Gross economic inequality is as vile as racism, misogyny and hatred of the disabled; as damaging in effect; and as dependent on a small group of supporters who believe that just a few should have more and more and more, because they’re “worth it”.”

I believe that growing social inequality generates a political necessity for prejudices: they are entrenched vis-à-vis Social Darwinism in Tory ideology, fueled and perpetuated through justification narratives and amplified via the media.

I’ve said many times previously that never in this country have those who fight for democracy and social justice carried a greater burden or faced the possibility of bigger losses of human rights, human freedoms, human dignity and human welfare than they do right now.

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 Many thanks to Robert Livingstone for his brilliant art work