Inequality: moving from analysis to action

The causes of poverty and inequality are well understood, we now need to have the difficult conversations about taking action.


All this week, BBC Scotland have been running a series of features under the heading Unequal Scotland. They have looked at education, health, life expectancy and income. This fairly describes inequality and the impact it has, not just on those most impacted, but also the economy and everyone in Scotland.


As Douglas Fraser explains, this issue is being given a lot of attention by those in power, including heads of government, central bankers, the International Monetary Fund, even the Davos gathering of the economic elite. Nicola Sturgeon has put the tackling of inequality alongside economic growth as her twin priorities. Even a Tory Prime Minister has targeted her political message at those "struggling to get by".


Describing inequality is something we are very good at doing. Taking real action is more tricky, primarily because it involves some difficult conversations with those of us who are not in poverty.


A good example of this is highlighted by Gideon Calder from Swansea University. His research asks, is it okay for parents to pass wealth down to their children? So the kids gain a house when mum dies, for example. And before that, get everyday benefits just because their parents are relatively well-off? He concludes that we are not willing to have this conversation because the 'family' is sacrosanct.


The First Minister's poverty tsar touched on a similar point with her call for increased taxes, not least by addressing inheritance tax. She also picked on tax increases for the richest and the need for a progressive council tax - something the Scottish Government has ducked yet again. She said: "When people say they want a really wonderful NHS they don't say I want to pay more taxes for it. Well, I'm afraid you cannot have a really wonderful NHS unless you are willing to pay more taxes for it."


However, her most telling comment was that she was not convinced governments would raise taxes to the levels needed. She said: "You [governments] can always go further but you'll always have your eye on the next election and what people can expect". This goes to what I call Scandamerica, the idea that we can have Nordic levels of public services without most of us, not just the very rich, having to pay more taxes. Remembering that we now have the powers to address this in Scotland.


The Scottish Government is currently consulting over what a Scottish social security system should look like. This is important because some 37% of benefits will be devolved to Scotland, when you exclude pensions. However, as Govan Law Centre and others have highlighted, the consultation is almost entirely about process, not about adequacy of benefits, a crucial element of any strategy for tackling income inequality.


This theme is also covered by the tax lawyer Jolyon Maugham QC who points out that this year we’ll collect around £170bn of income tax, but forego through reliefs about £30bn of income tax - almost £500 a year for every man, woman and child in the UK. He says these reliefs go  overwhelmingly to those who need it least, the inevitable consequence of two deliberate policy choices: to distribute that £30bn through the tax system and to fail to monitor what good it does.


Tackling these reliefs would include some difficult conversations on issues like ISA's and tax relief on pension contributions, which are valued by middle income groups. Perhaps his most striking statistic is that the highest earning 15,000 taxpayers, almost 0.05% of all taxpayers, netted 5.5% of total deductions and reliefs. Most will have seen six figure reductions to their income tax bills.


This isn't just a parochial issue for us in Scotland and the U.K. As Thomas Piketty argues in the Guardian this week, Trump’s victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this. Fiona Buchanan from Christian Aid makes a similar point in relation to the developing world, also highlighting the issue of gender justice.


There are some serious attempts at developing a consensus around some solutions. The IPPR's Economic Justice Commission is one such initiative. Their background paper makes the point that for all the rhetoric about a strong economy, it isn't an economy that works for all. Half of all UK households have seen no meaningful improvement in their incomes for more than a decade. The JRF's 'Talking about Poverty' project also points the way to a better understanding of the solutions.


So, hats off to the BBC for doing what a good public service broadcaster should do - educating us on probably the most important issue of our time. However, we need to move on to some, often uncomfortable solutions. Tackling inequality is in all our interests, because more equal societies do better on every count. This means we all have to contribute to the solutions, and yes, it will cost us.