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Carol Craig is the Centre's Chief Executive. She is author of The Scots' Crisis of Confidence, Creating Confidence: A Handbook for Professionals Working with Young People, The Tears that Made the Clyde: Well-being in Glasgow and The Great Takeover: How materialism, the media and markets now dominate our lives. She is Commissioning editor for the Postcards from Scotland series. Carol blogs on confidence, well-being, inequality, every day life and some of the great challenges of our time. The views she expresses are her own unless she specifically states that they reflect the Centre's thinking.

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Posted 11/04/2012

Shortly after the publication of The Spirit Level on how inequality leads to worse health and social outcomes, one of the co-authors – Professor Richard Wilkinson - spoke at a conference in Edinburgh.

At the break I chatted to two senior Labour folk in Scotland – an  ex minister at Holyrood and an ex councillor who had been very senior in local government. They clearly weren't aware of Wilkinson's and Pickett's arguments and they were obviously shaken by what they had heard.  'We've been barking up the wrong tree' for years was the gist of their conversation: pursuing economic growth in the belief that it would 'lift everyone's boat' and lead, not just to a everyone becoming richer, but to a better society. Now they had learned that once people's basic needs are met more economic growth is not automatically beneficial as the more important issue is inequality and they had been fuelling this through their economic policy not tackling it. (Peter Mandelson's famous statement that he was 'intensely relaxed about people becoming filthy rich as long as they pay their taxes' comes to mind.)

Just how much income polarisation increased under the Blair Government can be seen in the following figures: When Blair took office 'the best off one thousandth (0.1 per cent) of the population received an income 61 times what the 90 per cent at the bottom received; by 2007 this ratio had risen to 95 times.'

The quote above is from a recent report from the social geographer Professor Danny Dorling - 'The case for austerity among the rich'.  His work has also led to a growing consciousness about income inequality. In his book Injustice he shows that between 1918 and 1979 Britain became fairer as a result of taxation and government policies. This reversed in the early 1980s and we are now back at levels of inequality which pertained in the UK in 1854 when Dickens wrote Hard Times. The UK is currently the fourth most unequal country amongst developed nations after Singapore,  the US and Portugal.

In that recent paper Dorling shows too how much of the inequality in the UK is geographical with the South East of England much richer than the rest of the country. Barclay's Wealth  Report from 2011 illustrates that London and the South East have much more wealth, higher house prices, more luxury car dealerships, more private schools and more Michelin-starred restaurants than the national average.

Dorling also quotes research from the High Pay Commission (November 2011) which shows that 'the pay of chief executives of the 100 largest companies on the London stock exchange had risen by 49 per cent during the previous year, compared with average increases of less than 3 per cent for their employees.'

Dorling argues that part of the reason why wage differentials have grown so much is that in 1988 the then Chancellor Nigel Lawson reduced the top rate of income tax to 40 per cent. If he hadn't done so, Dorling writes,  'the rich might have been less encouraged to become so greedy' . In other words, top managers would have been less inclined to pay themselves inflated salaries if so much of what they were earning was simply going to be deducted as tax. 

Of course, as we've seen this week, taxation is itself a huge issue. The problem isn't simply that the top rate of tax isn't high enough; those with money are using all  sorts of tax avoidance schemes to  ensure that they pay very little in tax.

Dorling argues that outside the UK there is an increasing clamour for the rich to pay more tax. Indeed even in the United States  there has been more discussion on this issue than in the UK. The billionaire investor Warren Buffett  has argued  that the wealthy must pay their fair share of tax and President Obama is calling for new ways to ensure wealthy Americans pay fair taxes along the lines of Buffett's proposals.

This week in the UK the topic of tax avoidance has been centre stage as the Chancellor of the Exchequer announced that he was shocked by the extent of tax avoidance amongst the wealthy!

Richard Murphy
is one of the main people in the UK arguing that we need to change our tax regime to make it fairer. And he should know as he is a chartered accountant – a poacher turned gamekeeper.  He has been doing a sterling job in arguing for more fairness in the tax system, helping to explain the current avoidance schemes and arguing for international co-operation on tax.

The health conference I attended where some of the Labour folk present were shocked by the downside of inequality was only three years ago. So much has changed since then. Across the political spectrum there is now much greater awareness of inequality and its negative effects. Time will tell whether there is any appetite to do anything about it.

All I can say to Wilkinson, Pickett, Dorling and Murphy is keep up the good work: the UK's inequality is a scandal and undoubtedly one of the reasons why the country scores poorly on well-being and happiness measures and why the UK has the worst child well-being in the OECD.

We need the evidence and arguments presented by Wilkinson, Pickett, Dorling and Murphy on vitally important questions of inequality and unfairness. However, this leads me to an important question.  Given the prospect of an independent Scotland, or even devo max,  where are the equivalent Scottish thinkers and analysts?  

 

NOTE: This blog has led to a big discussion on facebook.

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