The black marks on the government's inequality record

Half way through the parliamentary term, how is the government doing? Not too well, writes One Society's Larissa Hansford.

At the half way point of the Coalition Government's term, debate rages over top pay, low pay and the persistently vast gulf between the two.

The trend to an expanding pay gulf is one that right and left alike have denounced. Front page headlines express outrage over the £1.32m payout to theformer director-general of the BBC, influential multinational board members call for a pay cap on corporate bonuses, and studies show that pay for top bosses rose an average of 10 per cent in 2011. Meanwhile £5m people are living at below living wage pay, with both Boris Johnson and Ed Milliband, backing an expansion of the scheme.

In the midst of so many calls for a reduction in the UK pay gulf, how have the Government performed on these issues? A new report by One Society, The Coalition Government and Income Inequality: The half term report, indicates that their record is wanting. It finds not only that inequality has not been reduced, but concludes that Coalition polices are actually likely to produce an increasing gap between the richest and the rest, at the same time as average incomes fail to keep up with the rising cost of living.

A One Society report on fair pay in Local Authorities showed how much progress has been made in the public sector over the last few years in addressing its inequalities. However, the private sector points out the report, where pay ratios are much more extreme, has largely escaped notice. The much reported "shareholder spring" led to just six substantial protest votes over extortionate pay at the top. BIS (The Department for Business, Innovation and Skills) proposals to increase shareholder power have failed to incorporate important stakeholders such as company employees. Proposals on binding pay votes have been watered down and there has been no significant action on issues such cash bonuses and simplification of pay packages.

At the lower end of the payscale, the two year public sector pay freeze and the upcoming two year below-inflation pay rise have put pressure on already low public sector salaries. Not only does this have a direct impact on inequality, but along with increasing costs of living, has serious implications for living standards. Increased costs of childcare, transport and cuts to tax credits have all played their part in this.

When they stood in the general election, inequality was a major concern for both coalition parties. The Conservative manifesto called for a society in which “wealth and opportunity must be more fairly distributed”. The Liberal Democrats meanwhile decried the fact that “Britain [is] one of the most unequal societies in the developed world, where ordinary people struggle to make ends meet.”

With 74 per cent of people believing that income inequality is too high and even CEOs beginning to recognise they are probably overpaid, it is clearly still a highly relevant issue to the electorate. On top of this, No. 10's favourite think tank recently warned that the Conservative Party are still seen as the party of the rich.

"Excessive" levels of income inequality are not only unpopular, but, as the One Society's report sets out, they are also inefficient. Growing evidence shows that large pay differentials stunt economic growth and cause instability. It also highlights the harmful effect that inequality has on our communities, our health and our environment.

For all these reasons, argues the report, political parties who want to be taken seriously in the next general election will have to outline a plan of action to tackle the UK's unacceptable levels of income inequality. Left and right alike must sit up and take notice of the harmful effect of extreme wealth disparities, and the significant impact that government policy could have in addressing them.

Marking the scorecard. Photograph: Getty Images

Larissa Hansford is a Campaign Assistant at One Society.

Photo: Getty
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Something is missing from the Brexit debate

Inside Westminster, few seem to have noticed or care about the biggest question mark in the Brexit talks. 

What do we know about the government’s Brexit strategy that we didn’t before? Not much, to be honest.

Theresa May has now said explicitly what her red lines on European law and free movement of labour said implicitly: that Britain is leaving the single market. She hasn’t ruled out continuing payments from Britain to Brussels, but she has said that they won’t be “vast”. (Much of the detail of Britain’s final arrangement is going to depend on what exactly “vast” means.)  We know that security co-operation will, as expected, continue after Brexit.

What is new? It’s Theresa May’s threat to the EU27 that Britain will walk away from a bad deal and exit without one that dominates the British newspapers.

“It's May Way or the Highway” quips City AM“No deal is better than a bad deal” is the Telegraph’s splash, “Give us a deal… or we walk” is the Mirror’s. The Guardian opts for “May’s Brexit threat to Europe”,  and “May to EU: give us fair deal or you’ll be crushed” is the Times’ splash.

The Mail decides to turn the jingoism up to 11 with “Steel of the new Iron Lady” and a cartoon of Theresa May on the white cliffs of Dover stamping on an EU flag. No, really.  The FT goes for the more sedate approach: “May eases Brexit fears but warns UK will walk away from 'bad deal’” is their splash.

There’s a lot to unpack here. The government is coming under fire for David Davis’ remark that even if Parliament rejects the Brexit deal, we will leave anyway. But as far as the Article 50 process is concerned, that is how it works. You either take the deal that emerges from the Article 50 process or have a disorderly exit. There is no process within exiting the European Union for a do-over.  

The government’s threat to Brussels makes sense from a negotiating perspective. It helps the United Kingdom get a better deal if the EU is convinced that the government is willing to suffer damage if the deal isn’t to its liking. But the risk is that the damage is seen as so asymmetric – and while the direct risk for the EU27 is bad, the knock-on effects for the UK are worse – that the threat looks like a bad bluff. Although European leaders have welcomed the greater clarity, Michel Barnier, the lead negotiator, has reiterated that their order of priority is to settle the terms of divorce first, agree a transition and move to a wider deal after that, rather than the trade deal with a phased transition that May favours.

That the frontpage of the Irish edition of the Daily Mail says “May is wrong, any deal is better than no deal” should give you an idea of how far the “do what I want or I shoot myself” approach is going to take the UK with the EU27. Even a centre-right newspaper in Britain's closest ally isn't buying that Britain will really walk away from a bad deal. 

Speaking of the Irish papers, there’s a big element to yesterday’s speech that has eluded the British ones: May’s de facto abandonment of the customs union and what that means for the border between the North and the South. “May’s speech indicates Border customs controls likely to return” is the Irish Times’ splash, “Brexit open border plan “an illusion”” is the Irish Independent’s, while “Fears for jobs as ‘hard Brexit’ looms” is the Irish Examiner’s.

There is widespread agreement in Westminster, on both sides of the Irish border and in the European Union that no-one wants a return to the borders of the past. The appetite to find a solution is high on all sides. But as one diplomat reflected to me recently, just because everyone wants to find a solution, doesn’t mean there is one to be found. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.