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The gap between rich and poor in the UK has widened since 1997, according to the results of a recent study by the Institute for Fiscal Studies. It found that income inequality in 2007-08 was higher than when Labour came to power and ‘higher than in any year since at least the 1950s’.
On the face of it, this is unwelcome reading for Labour supporters. What is the point of 13 years of Labour Government if it cannot prevent widening income inequalities?
Dig deeper into the IFS’s analysis, however, and it becomes clear that the gap between rich and poor has widened despite the Government’s efforts, not because of them. In the 1980s, when government policies seemed designed to benefit the rich, income inequality increased by an enormous amount. The increase in income inequality under Labour has been far smaller because changes to the tax and benefit system since 1997 have favoured poorer households at the expense of richer ones.
But what is missing from this analysis is an understanding of the causes of the increases in inequality that have occurred before the effects of government policy are taken into account. Throughout the last three decades, it seems, underlying inequality has been increasing. In the 1980s, this was exacerbated by government policy; over the last 13 years it has been mitigated by it. But under Conservative and Labour governments alike, it has remained a powerful trend.
There are a host of explanations for this trend, including globalisation, technological change and the dominance of the financial sector in the UK economy and we need to develop a full understanding of them because – as Richard Wilkinson and Kate Pickett have demonstrated so conclusively in their book The Spirit Level – greater inequality leaves everyone worse off.
So, while it is right to challenge the main political parties during the election campaign on how their tax and benefit policies might affect income inequality, it is perhaps more important to ask them what they intend to do about the growing disparity in pre-tax incomes. If they are, to quote Lord Mandelson, ‘intensely relaxed about people getting filthy rich’, they shouldn’t be.
Tony Dolphin
Yesterday (17 March) saw the launch of the interim findings from Peter Mandelson’s Low Carbon Construction Innovation and Growth Team, who have been tasked with conducting a review of the construction industry to ensure it is fit for purpose for delivering a low carbon economy.
The report identifies big opportunities for the industry in building the low carbon homes of the future, upgrading the existing housing stock and providing new infrastructure for low-carbon energy and transport systems. It also identifies a host of barriers that need to be overcome before the industry can fully benefit from these low-carbon options.
The LCCIGT have a clear message for government, which is that in order for the industry to transform its products to low-carbon models, it must be confident that the market is also transforming. They go on to suggest that ‘the evidence is that the clearest signal of this will be taken from well-designed regulatory standards, underpinned by the presumption of a stable and realistic price of carbon.’
The three main political parties have all shied away from the use of regulatory standards to drive improvements to the existing housing stock (in the privately-owned sector at least), preferring instead to focus on the use of financial incentives to entice homeowners into ‘greening’ their homes. All three parties have announced plans to introduce loan schemes to pay for energy efficiency improvements as they vie to win green votes, but none have suggested that our homes ought to be required to meet minimum energy efficiency standards.
The Government’s recently published Strategy for Household Energy Management announced a consultation on regulations to make cavity wall and loft insulation compulsory in all privately-rented properties, but since there would be no compulsion to improve boiler efficiency, draughty windows and other causes of inefficiency, this falls a long way short of providing the kind of powerful signal the industry is seeking.
Similarly, while Europe has an emissions trading scheme, the price at which permits are trading has so far been too low to send a significant signal. Moreover, the uncertain conclusion to the global climate summit in Copenhagen last year and the likelihood that US climate laws will not be based on carbon trading make ‘…a stable and realistic price of carbon’ any time soon highly presumptive indeed.
Thus regulation is all the more important. ippr’s new report on fuel poverty calls for the introduction of minimum energy performance standards for all homes, including rental properties, in order to deliver on both poverty and climate change goals. Politicians have traditionally seen regulation as a last resort and in the run up to the election will fear frightening the business lobby with anything that might be perceived to be an unnecessary burden on industry. But today’s report shows that business may suffer without tougher regulation. Why not give them what they want?
Jenny Bird, research fellow, ippr
The gap between rich and poor in the UK has widened since 1997, according to the results of a recent study by the Institute for Fiscal Studies. It found that income inequality in 2007-08 was higher than when Labour came to power and ‘higher than in any year since at least the 1950s’.
