Boris's championing of inequality is a recipe for destroying social mobility

The mayor presented social mobility as compensation for inequality but it's the gap between the rich and poor that erodes opportunity.

We can at least commend Boris Johnson for his candour. Unlike those in his party who hide behind euphemisms and platitudes, the mayor presented rampant inequality as both inevitable and desirable in his Margaret Thatcher lecture last night. Differences in IQ, the efficient operation of the free market and the need for economic incentives all meant it was "futile" for politicians to even try to narrow the gulf between the rich and the rest. "Whatever you may think of the value of IQ tests it is surely relevant to a conversation about equality that as many as 16% of our species have an IQ below 85 while about 2% have an IQ above 130," he said, oblivious to the fact that this gap isn't the cause of inequality but the result of it

But while delivering this bleakly Hobbesian message, he attempted to sweeten the pill by echoing John Major's lamentation of stagnant social mobility and calling for a dramatic expansion of opportunity. In one passage he remarked:

I worry that there are too many cornflakes who aren’t being given a good enough chance to rustle and hustle their way to the top. We gave the packet a good shake in the 1960s; and Mrs Thatcher gave it another good shake in the 1980s with the sale of the council houses. Since then there has been a lot of evidence of a decline in social mobility, as Sir John Major has trenchantly pointed out.

And in another:

It seems to me that though it would be wrong to persecute the rich, and madness to try and stifle wealth creation, and futile to stamp out inequality, we should only tolerate this wealth gap on two conditions. One, that we help those who genuinely cannot compete; and two, that we provide opportunity for those who can

But his presentation of social mobility as a form of compensation for inequality was almost comically inappropriate. As anyone with the most cursory grasp of the subject knows, reduced opportunity is the inevitable result of greater inequality: it's harder to climb the ladder when the rungs are further apart. As the empirical masterpiece The Spirit Level showed (see graph), it is the most unequal countries, such as the UK and the US, that have the lowest levels of social mobility, while the most equal, such as Sweden, Canada and Japan, that have the highest. In the case of Britain, it was after Boris's heroine took office, and the gap between the rich and the poor became a chasm (the gini coefficient rose from 12.9 in 1978 to 22.2 in 1990), that social mobility began to stagnate. 

Confronted by this unavoidable truth, Boris offered nothing resembling a solution. In his recent report on the subject for the coalition, Alan Milburn wisely noted that "deep-rooted inequality and flatlining mobility have been decades in the making" and that "in most developed countries there has been a declining share of economic growth going to labour (and a higher share to capital) at the same time as there has been growing wage inequality. In the UK, the share of national income going to wages of workers in the bottom half of the earnings distribution decreased by a quarter between 1979 and 2009."

But Boris had nothing say to about repairing the broken link between growth and earnings. Instead, he called for the return of academic selection under the guise of "academic competition" (perpetuating the myth of grammar schools as engines of social mobility) and sought to reassure us that those benefiting most from inequality were already paying their fair share. He told his audience: "Today, when taxes have been cut substantially, the top one per cent contributes almost 30 per cent of income tax [one might note that he is among them]; and indeed the top 0.1 per cent - just 29,000 people - contribute fully 14 per cent of all taxation."

Yet this statistic tells us less about what has happened to the tax system than it does about what has happened to the income system. Over the period in question, the earnings of the rich have soared to hitherto unimaginable levels. As a recent OECD study showed, the share of income taken by the top 1% of UK earners increased from 7.1% in 1970 to 14.3% in 2005, while the top 0.1% took 5%. Quite simply, the rich are paying more because they're earning more. Is this really cause for us to "fete them and decorate them and inaugurate a new class of tax hero"? If 11 million low and middle earners receive the pay rise they have been denied since 2003, they'll pay more tax too. In fact, compared to the rich, they're already paying the lion's share. As the ONS recently found, owing to VAT and other regressive levies, the least well-off households pay 36.6% of their income in tax, while the wealthiest pay 35.5%. Had the coalition taken Boris's advice and cut the top rate of income tax to 40p (with a 30p rate down the line) , that gap would be even wider. 

A more progressive tax system would narrow the gap between rich and poor and tilt the odds in favour of social mobility but here, as elsewhere, the policies promoted by Boris aren't the solution to a society in which birth determines destiny, they're the cause of it. 

Boris Johnson declared in his Margaret Thatcher lecture that it was "futile to stamp out inequality". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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A simple U-Turn may not be enough to get the Conservatives out of their tax credit mess

The Tories are in a mess over cuts to tax credits. But a mere U-Turn may not be enough to fix the problem. 

A spectre is haunting the Conservative party - the spectre of tax credit cuts. £4.4bn worth of cuts to the in-work benefits - which act as a top-up for lower-paid workers - will come into force in April 2016, the start of the next tax year - meaning around three million families will be £1,000 worse off. For most dual-earner families affected, that will be the equivalent of a one partner going without pay for an entire month.

The politics are obviously fairly toxic: as one Conservative MP remarked to me before the election, "show me 1,000 people in my constituency who would happily take a £1,000 pay cut, then we'll cut welfare". Small wonder that Boris Johnson is already making loud noises about the coming cuts, making his opposition to them a central plank of his 

Tory nerves were already jittery enough when the cuts were passed through the Commons - George Osborne had to personally reassure Conservative MPs that the cuts wouldn't result in the nightmarish picture being painted by Labour and the trades unions. Now that Johnson - and the Sun - have joined in the chorus of complaints.

There are a variety of ways the government could reverse or soften the cuts. The first is a straightforward U-Turn: but that would be politically embarrassing for Osborne, so it's highly unlikely. They could push back the implementation date - as one Conservative remarked - "whole industries have arranged their operations around tax credits now - we should give the care and hospitality sectors more time to prepare". Or they could adjust the taper rates - the point in your income  at which you start losing tax credits, taking away less from families. But the real problem for the Conservatives is that a mere U-Turn won't be enough to get them out of the mire. 

Why? Well, to offset the loss, Osborne announced the creation of a "national living wage", to be introduced at the same time as the cuts - of £7.20 an hour, up 50p from the current minimum wage.  In doing so, he effectively disbanded the Low Pay Commission -  the independent body that has been responsible for setting the national minimum wage since it was introduced by Tony Blair's government in 1998.  The LPC's board is made up of academics, trade unionists and employers - and their remit is to set a minimum wage that provides both a reasonable floor for workers without costing too many jobs.

Osborne's "living wage" fails at both counts. It is some way short of a genuine living wage - it is 70p short of where the living wage is today, and will likely be further off the pace by April 2016. But, as both business-owners and trade unionists increasingly fear, it is too high to operate as a legal minimum. (Remember that the campaign for a real Living Wage itself doesn't believe that the living wage should be the legal wage.) Trade union organisers from Usdaw - the shopworkers' union - and the GMB - which has a sizable presence in the hospitality sector -  both fear that the consequence of the wage hike will be reductions in jobs and hours as employers struggle to meet the new cost. Large shops and hotel chains will simply take the hit to their profit margins or raise prices a little. But smaller hotels and shops will cut back on hours and jobs. That will hit particularly hard in places like Cornwall, Devon, and Britain's coastal areas - all of which are, at the moment, overwhelmingly represented by Conservative MPs. 

The problem for the Conservatives is this: it's easy to work out a way of reversing the cuts to tax credits. It's not easy to see how Osborne could find a non-embarrassing way out of his erzatz living wage, which fails both as a market-friendly minimum and as a genuine living wage. A mere U-Turn may not be enough.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.