“We need to recognise that growth that fails to tackle social inequality will mean that all the economic gains remain at the top. Very few of us felt better off – despite the figures showing that the country’s wealth was growing.”
By Neil Duncan-Jordan MP
One of the most important legacies that this Labour Government could achieve would be the massive reduction in poverty and the widening of opportunities for millions of people who are currently struggling to get by.
Today, just over 14 million live in poverty – 4.3 million of which are children. This figure has barely changed during the 14 years of austerity under the Tories – but we risk prolonging that hardship if we fail to take the right steps.
There has been much talk of growth by Government, but we need to recognise that growth that fails to tackle social inequality will mean that all the economic gains remain at the top. In fact, between 2010 and 2019, the UK’s GDP grew by 1.9% a year – but the wealth gap widened by nearly 50%. Very few of us felt better off during this time – despite the figures showing that the country’s wealth was growing. As a result, we now have the second highest wealth inequality in the OECD after the US.
Poverty isn’t just unfair – it’s economically reckless as well. Reducing income inequality to the level of more equal OECD nations would save the UK up to £128 billion annually in reduced costs in areas such as crime and imprisonment rates, tackling poor mental health, improving healthy life expectancy and welfare.
But none of this will be possible if we continue to use the same austerity driven measures of the past. The means-testing of the winter fuel allowance just weeks after Labour’s victory was based on the ill-judged view that a pensioner living on little more than £12,000 a year was well off. The botched attempt at cutting disability benefits by £7bn was not based on people’s needs – but on Treasury orthodoxy of cuts and the planned reform of SEND will also backfire if its main aim is to reduce spending rather than to improve the plight of families and children going through the education system.
To start with, there has to be an acknowledgement that the state is going to have to do the heavy lifting. Waiting for a modern-day Rowntree or Cadbury to spend vast amounts of money improving the lives of their workers and ensuring they are properly housed is pure fantasy. Only the state has the levers at its disposal to make the necessary changes we need.
For example, the Equality Act 2010 includes a socio economic duty that requires all public bodies to address inequalities when making strategic decisions, but it has yet to be enacted in England. If it had been in place at the time of the debate around disability cuts it would have been more difficult for Government to argue they were not in fact making poverty worse.
More immediate would be to look at rebalancing our entire taxation system. Capital gains could be taxed at the same marginal rate as wages – generating £10bn a year so that income from unearned wealth is treated in the same way as wages. Raising the 45% top rate tax to 50% would impact just over 1m of the wealthiest individuals and ending the paying of interest on bank central reserves would save £22bn. There are also windfall taxes that could be levied on banks, utilities and other corporations making excessive profits and of course a wealth tax on those with assets of more than £10m.
Further afield a staggering £70.6bn in pension tax relief was handed out in 2023, with 63% of it benefitting just 6m individuals paying higher rates of tax. The remaining 37% went to 28m basic rate taxpayers. If the tax relief was levied at 20% for all, the Government would save £14.5bn. Relooking at major spending projects – whether it be nuclear weapons or airport runways – would also potentially divert huge amounts of money into more useful public goods.
Voters by and large – even some of those wealthy individuals that might be affected by these changes – support the idea of greater fairness in our economy. What lies ahead if we don’t tackle the gap between the haves and the have nots are the conditions that will nurture the far right. Public services at breaking point, visible inequality on our streets and a general stagnation or decline in living standards will begin to erode public confidence and trust in the political system which will allow some to argue that the root of these problems is migration rather than capitalism. Put bluntly, the risks of failing to tackle poverty are unthinkable.
- LIVERPOOL EVENT: We CAN tackle poverty & inequality. Sunday September 28, 12.30pm. Join Neil Duncan-Jordan MP, Ian Byrne MP and other guest speakers. Register here.
- Neil Duncan-Jordan is the Labour MP for Poole. You can follow him on Twitter/X, Facebook and Instagram.
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