Addressing economic inequality at root

Key findings
  • Economic inequality is having a corrosive effect on our society and democracy and costs the UK an estimated £39bn a year
  • The government should set a tangible target for reducing the gap between rich and poor
  • We suggest 5 key policy goals that should then be prioritised in order to tackle the drivers of inequality

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Photo credit:   Beverley Goodwin

July 10, 2014 // Written by:

Helen Kersley, Head of Valuing What Matters
Faiza Shaheen, Senior Researcher, Economic Inequality

Spiralling economic inequality is undermining our economy, society and democracy. Now seen by many as one of the world’s most pressing challenges – the time has come for action.
Is it any surprise that four out of five British citizens want the government to act on inequality? The richest 1% of the UK population are now wealthier than the poorest 50% put together – a disparity that has been growing steadily since the 1970s, and on current trends is set to get even worse.
But this isn’t about the politics of envy; nor is it purely about what is morally right or wrong. We have convincing evidence that extreme economic inequality is contributing decisively to financial instability, wasted human capital, lower well-being and mental health, domination of politics by an elite few and low voter turn out.
We can no longer afford to ignore our inequality problem. It’s time for action.
The authors of this report call on the government to start with two key steps. The first is to set a tangible target to reduce economic inequality, as they have for child poverty. The second is to establish a high-level commission on economic inequality tasked with devising a broad policy agenda to tackle the drivers of inequality.
We then identify five high-level goals that must be achieved to address some of the root drivers of economic inequality. Each goal is accompanied with a set of policy area priorities:

Policy priorities: Public funding supporting the supply of childcare in order to cap family childcare expenditure at 15% of income; increased standards of training and qualifications to ensure childcare is always high quality; and better working conditions for childcare workers, including a Living Wage, stable contract hours and career and pay progression opportunities.

Policy priorities: Ensure workers have a collective voice in workplace decision-making by law; establish a Department of Labour tasked with restoring wages in the economy and improving working conditions; establish a stronger wage-floor to eliminate in-work poverty; and enforce pay ratio reporting to address wage differentials.

Policy priorities: Promote pooled training investment by sector; invest in incentive structures to improve high-quality management skills at different levels; use state support to ensure apprenticeship schemes lead to progression at work across more industries; and establish better education, training and employment links at the local level.

Policy priorities: Co-ordinate and co-produce a national industrial strategy; establish a state investment bank with regional focus; funding for better jobs and training to guarantee full employment; and reform business to ensure workers have a collective voice.

Policy priorities: Strengthen legislation and resources to abolish tax avoidance and evasion; implement and co-ordinate more progressive income and wealth taxes; establish a Land-Value Tax; and shift the tax burden onto environmentally unfriendly activities through green taxes.

There is no silver bullet for tackling economic inequality: the interconnections between different areas mean that a package of bold interventions is required, with each policy step reinforcing the next. While not exhaustive, we believe this report, produced in partnership with Friedrich-Ebert-Stiftung London, covers the most pressing issues and provides a clear starting point for determined, coordinated action.



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