Many hard-pressed public servants are facing staged pay awards that fail to keep up with inflation.
So they can be forgiven for what is usually dismissed as the ‘politics of envy’ when they saw the recent revelations about the size of City bonuses and the scale of boardroom pay rises.
Whether or not there was once a time when there were so few of the super-rich that their wealth made no difference to the rest of us is a matter of debate, but it is certainly not the case today. This growing group, which has nothing to do with the rest of society, has affected the housing market and threatens social cohesion.
It is time to start thinking once again about the politics of distribution and the role of public services in making Britain more fair.
While this government has not been comfortable talking about excess at the top, one of its most exciting initiatives in the past decade has been the promise to end child poverty. Since 1997, 600,000 children have been lifted out of poverty.
This is an achievement that any previous Labour government would have been proud of. But it is extremely difficult to make headway. After tremendous progress for several years, last year the number of children in poverty actually rose by 100,000. Obviously we cannot rest on our laurels: what has to happen next?
For the immediate future, the target must be further increases in child benefit and child tax credit. The government has an interim target of halving the number of children in poverty by 2010, and the Institute for Fiscal Studies has estimated that benefits and tax credits for children need to increase by £4bn to hit that mark.
But once that target has been achieved, what is the second stage? Increasing benefits and tax credits still further is probably not the answer. That would cost £28bn a year, an extra 2% of gross domestic product, and could be achieved only by increases in taxation that seem unlikely at the moment.
Ending child poverty over the next 13 years will mean other fundamental changes. We will have to become a society where the original distribution of income is less unequal, so the tax credit and benefit system has to do less of the heavy lifting to eliminate poverty.
That will be a tremendously difficult task. One of the impacts of globalisation has been to increase the differential in incomes between workers who have high levels of sought-after skills and those with low, or no, qualifications.
We can’t turn back the clock on globalisation — too many jobs depend on open trade and investment — but we have to have a strategy that first halts the increases in pay inequality of the past 15 years and then starts to reverse them.
Trade unions have an important role to play in this. First, we need to act as a catalyst in changing the terms of public debate, putting inequality on the agenda by showing how it endangers cohesion, the economy and middle as much as low earners.
Secondly, strong, responsible unions are key reasons why other countries combine economic prosperity with less inequality — look at the Scandinavian nations.
But that will not be enough by itself. This is why we must talk about the social wage once again.
While it is a term that has gone out of fashion, it is a vital part of the environment of equality. Wealth creation does not take place in a vacuum, and entrepreneurs are not the only people who create wealth.
Businesses rely on a vast stock of social capital that includes the unpaid maintenance of families through home-making and caring, the voluntary work of charities and neighbours, and the public services that facilitate the supply of a capable workforce. We all contribute to this social capital, and the social wage is the dividend we receive in recompense.
When we organise through our government to provide social housing, social services, education and health care, we make the arrangements for the payment of this social wage.
And it is entirely reasonable to organise the social wage — and enhance it — as part of a conscious strategy to reduce current levels of poverty and inequality.
Increasing the supply of social housing — and cutting the rents — would reduce poverty directly (housing costs are a direct cause of inadequate disposable incomes) and help the government to make work pay. Better social services will improve the quality of millions of lives and, at the same time, free carers and disabled people to stay in employment.
In the short term, we need an extra £4bn for benefits and tax credits. In the longer term, we need even more for the social wage. The government has big achievements to its credit and big plans for the future.
We want big reforms to turn those plans into reality.
