Putting the broadest shoulders to the wheel
Wednesday's budget is an opportunity to ask those with the most to contribute more to our country
In this week’s budget, Rachel Reeves has a rare opportunity to make a dent in one of the biggest barriers to the achievement of the Labour government’s five missions: wealth inequality.
As we showed earlier this month in our Wealth Gap Risk Register, the gap between rich and poor in the UK - which grew by 50% between 2011 and 2019 - is not only morally wrong, but is so damaging to our economy, society, democracy and environment that it constitutes a strategic risk to the UK, and it’s getting worse.
Luckily, we know what the solutions are - and our report looked at 29 of them. Some directly reduce wealth inequality, while others mitigate its damaging ‘spillover effects’. We assessed not only the evidence base and the impact of each solution, but also its feasibility, taking into account levels of public, political and expert support, alongside ease of implementation and affordability.
There is very strong evidence that several tax reforms would have a significant impact on reducing the wealth gap, and many of these (such as equalising capital gains tax rates with income tax, and removing loopholes around inheritance tax) also score well on our feasibility rating.
Most of the tax solutions in the report are about redressing the imbalance in our current system that taxes income from wealth much less than income from work - a subject on which there have been many excellent reports in recent weeks from the IFS, CenTax, IPPR, Demos, Tax Justice UK, the Patriotic Millionaires and others.
Of course, the Chancellor must win the political argument for making these changes, in the face of fierce pushback from vested interests whose voices are loud and listened to - much more than they should be, on both counts. But how can she be confident that the public will support her in making the bold decisions that are needed?
Luckily, Steve Akehurst at Persuasion UK has just published some excellent research (also summarised in a substack post) into what shapes voter opinion on the budget, which finds that “the issue [that] target voters will punish and reward the new Labour government on the most is public services”, and that “the narratives which pull people towards progressive positions here involve either utilitarian calls to re-build public services or values arguments around the fairness of asking more from those at the top when ordinary people are feeling squeezed”. This echoes our research into the power of what we call fair exchange (reciprocity).
As Will Hutton argued in his recent Observer column about our Wealth Gap Risk Register, politicians need to “reframe the argument… it is not wealth itself that is the problem, rather it is disproportionate wealth and the way it has been won…differentiate between value-generating and extractive wealth, and the dangers of an economy and society over-reliant on high property prices… hence the case for tougher inheritance tax, introducing a proportional tax on all residential property instead of regressive council tax, and aggressively taxing the gains from land development.”
Report co-author Jack Jeffrey has also written about the risks of wealth inequality in an article this weekend for LabourList. He concludes: “Some have asked, reasonably, what the point of this Labour government is. In tackling this problem, they can combine purpose – perhaps the Party’s original purpose – with the practical urgency of addressing wealth inequalities. If they don’t, they risk not only alienating potential voters but also having to contend with an increasingly disfigured and unstable Britain, made more and more ungovernable by wealth differences.”
Jack and Will were joined by Dr Tania Burchardt from the London School of Economics and Lena Swedlow from Compass in an episode of the Compass podcast, It’s Bloody Complicated, to talk about the report’s findings. You can listen on Spotify, Apple Podcasts or wherever else you listen to your podcasts.
EVENT NEXT WEEK
Great Britain? How We Get Our Future Back – with Torsten Bell MP
Monday 4 November 2024, 12:00 to 13:00, Zoom
What does the future hold for Britain, and how can we reclaim our prosperity?
In his latest book, Great Britain? How We Get Our Future Back, economist and politician Torsten Bell offers his vision for revitalising the UK's economy and society.
A former Chief Executive of the Resolution Foundation and now Labour MP for Swansea West, Bell dissects the economic stagnation that has gripped Britain for over a decade, exploring how this prolonged period of low growth has impacted various segments of society – and what we can do about it.
Join us for the next event in our Fair Society series with the Policy Institute at King’s College London, as we discuss Bell’s book and his ideas for how to raise living standards and create a more equal country.
Speakers:
Torsten Bell, Member of Parliament for Swansea West, former Director of the Resolution Foundation
Zoë Billingham, Director, IPPR North
Bobby Duffy, Director, the Policy Institute at King’s College London (chair)
David Hope, Senior Lecturer in Political Economy, King’s College London
Gaby Hinsliff, Columnist at the Guardian