Half Term Report – Government Could Do Better
At the mid-way point in the Coalition Government’s five year term, Living Wage Week has shone a welcome light on insufficient wage levels at the bottom of the income scale in the UK. But, as a wealth of evidence shows (e.g. in Wilkinson & Pickett’s The Spirit Level), a vast and widening gap between top and bottom earnings, rather than low wages themselves, is what leads to so many of the ills we traditionally associate with poverty.
So how has the current Government fared in tackling income inequality so far? And why does it matter?
A new report by One Society, The Coalition Government and Income Inequality: The half term report, charts some progress by the Government but demonstrates that more must be done. The report kicks off with an important political point: that the Government’s three key priorities of building stronger families, stronger communities and a stable economy cannot be achieved unless income inequality is addressed.
Contributors Stewart Lansley and Kate Pickett pick up on the third of these priorities by exploring how ‘excessive’ levels of income inequality are holding back economic growth and causing instability. Lansley, an economist and financial journalist, argues that the upward redistribution of income in favour of a small elite has restricted consumer spending, encouraged debt and created an economy more vulnerable to financial crises.
Deborah Hargreaves of the High Pay Centre also writes a section which assesses Vince Cable’s efforts to curb high pay in the private sector. So far these have been insufficient to produce any meaningful change.
At the other end of the pay spectrum, the Joseph Rowntree Foundation’s Chris Goulden and One Society’s Sue Christoforou look at action the Government has taken on low pay. While it is encouraging to see the National Minimum Wage (NMW) being extended to apprentices and the adult rate of NMW being paid to those aged 21 for the first time, the below-inflation up-rating of the level of NMW has tightened the squeeze on low-waged employees. The report also includes contributions on how the Government’s policies on tax enforcement, welfare reform and income tax have impacted upon income inequality.
It should be noted that the Government have shown some signs of progress, particularly on pay in the public sector as Duncan Exley, Director of One Society, argues. A recent One Society report, Leading the Way on Fair Pay, demonstrates that as a result of this Government’s Localism Act some local authorities are doing well to narrow pay ratios and are encouraging local employers to follow suit on policies such as the Living Wage. The hope is that this good practice will eventually filter into contractors and the wider private sector.
One Society’s half term report should be read carefully by policy makers and politicians alike. When a nation’s wealth reaches a certain level it no longer matters how wealthy a society is; what matters is how equally the riches are shared. Levels of ill health, social unrest, teenage pregnancy, drug addiction, etc. all soar as the gap between rich and poor widens.
What is more is that policies to address income inequality are becoming increasingly popular with the public. A poll last year showed that 74% of people think income inequality is too high and even CEOs are beginning to recognise they are probably overpaid. Meanwhile No. 10′s favourite think tank recently warned that the Conservative Party are still see as the party of the rich.
Even if this Government’s concerted attempts to restore economic growth and balance the budget are successful, it must do more to tackle income inequality so that the benefits can be felt by all.