As the local and European elections amply illustrate, the fallout from rising inequality can be considerable. That's why there is renewed debate about the haves and have-nots
Long, long ago, David Cameron and George Osborne used to talk optimistically about sharing the proceeds of growth: our home-grown version of trickle-down economics.
But that was before the global economy went belly-up, making such discussions redundant. After all, what’s the point of debating wealth distribution when none is being created?
Now though, with at least some growth in sight, it appears that whilst most people have suffered a steep real-terms decline in living standards, an elite few have prospered.
According to the latest Sunday Times Rich List, 1,000 individuals in the UK now own a third of the nation’s wealth. Their combined fortunes have doubled since 2008.
Britain, it turns out, has one of the lowest equality rankings of OECD nations.
No wonder then that the ‘I’ word – inequality – is back on the agenda. Or that a 696-page tome on the subject, by an obscure French economist, should have become an overnight bestseller.
Thomas Piketty’s Capital in the 21st century argues, in a nutshell, that stark inequalities are not an aberration, but part of the natural capitalist order – and that remedial action is needed.
Politically this matters, a lot. As Patrick Diamond argues a growing majority – estimated at 75% of working-age and retired populations – now constitute ‘the new insecure’.
This vast squeezed middle – including many in the public sector – is under enormous pressure from structural and fiscal change. With wealth concentrated in the hands of just 5%, according to Diamond, and another 20% poor and marginalised, debate over the haves and have-nots is hotting up.
It’s an argument that also applies to cities and regions. The rampant growth of global cities like London, as Peter Hetherington explains, certainly boosts GDP. But it also deepens inequalities when ‘second-tier’ cities are denied fiscal freedom to share the proceeds.
As the recent elections illustrate, the political fallout from these social tensions can be considerable. That’s why all the parties are so keen to show they are on the side of those left out from a return to growth.
Hence the increasingly acrimonious debates within the coalition over the use and misuse of schools budgets. And with the Opposition, over the desirability of ‘predistribution’ and reforms to the minimum wage.
Whether these, or other contested policies, even come close to addressing the deep insecurities of the 75% is very much open to question.
Or whether, as May 2015 approaches, a growing proportion will say ‘none of the above’.
This opinion piece was first published in the June edition of Public Finance magazine
