Ordinary wealth in every postcode
Why tackling extreme economic inequality will be the defining test of Andy Burnham's government and how he could do it
It’s telling that the new Prime Minister’s chief criticism of his predecessor Tony Blair’s contribution to Labour’s recent internal debate was that he ignored inequality.
The conviction that Westminster has long overlooked the distributional consequences of its decisions sits at the heart of Burnham’s own diagnosis, and it’s likely to be a defining feature of his governing agenda in the months ahead. As the new Labour leader said in Friday’s victory speech:
Britain took a series of wrong turns in the 1980s. Political power was centralised and economic power was privatised. The country surrendered control of the essentials – housing, water, energy, transport - and left people exposed to higher costs. That in turn led to the concentration of more wealth and power in the hands of fewer people and fewer places.
He takes office at a moment when the evidence on this could hardly be clearer. Our research has shown that the wealth gap has widened dramatically over recent decades, driven by rising asset inequality, and that wealth now plays a bigger role in shaping life chances than at any point in living memory. The consequences extend well beyond fairness: extreme wealth inequality is frustrating economic growth, undermining community cohesion and eroding faith and trust in democracy.
Burnham is right that successive governments failed to confront the scale of this challenge. The result is an economy in which, as the incoming Prime Minister has outlined, wealth, opportunity and power have become concentrated among a small number of people and in one corner of the country.
This concentration is no accident. Over recent decades, governments have centralised power in London, while privatising and deregulating swathes of the economy. Their decisions have built an economy that rewards ownership over work, and the extraction of value from existing wealth over the creation of new wealth.
Along the way, Britain has lost sight of the distinction between economic activity that raises living standards and activity that simply drains wealth from others. Too often, the latter is effectively given a free pass in our economy. This has created an unfair playing field, with too few people able to share in the proceeds of growth.
Redistribution of wealth will not be enough to reverse this trend. Instead, we must demand a programme that reshapes how wealth is created, shared and governed. That means a serious programme to tackle both the causes and the consequences of extreme wealth inequality. It means giving more communities a fairer share of economic opportunity, and building a policy agenda around broader and fairer access to wealth. And it means confronting the extraction built into today’s economy while backing Britain’s productive sectors. This could include an agenda that introduces new measures to reform private equity, helps young innovative firms to scale, and ensures that work is rewarded more fairly by taxing unearned wealth more effectively.
It also means sharing wealth more broadly. New wealth funds could ensure that income-generating assets are held more equitably, so more people benefit as the economy grows. Effective fiscal devolution could strengthen the inclusivity of regional economies, while renewed investment in public services will become even more important, particularly as AI reshapes the economy.
Finally, it also means building guardrails between money and power. Rebuilding trust in democracy requires urgent political reform, including through capping political donations in the Elections Bill and delivering on Burnham’s promise of long-term politics through a new Committee for the Future in Parliament.
If Andy Burnham is serious about building a fairer Britain that delivers good growth in every postcode, then tackling extreme economic inequality must be a central tenet of his agenda. That means providing everyone with the opportunity to build ordinary wealth, guaranteeing a basic floor of security on which we can all rely, and giving everyone a fair chance to contribute to, and benefit from, our economy. The incoming Prime Minister has already recognised this in his diagnosis. The challenge now is to build the policy agenda capable of delivering it.