Children play football in front of a residential development in the London borough of Tower Hamlets. Photograph: Getty Images.
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How inequality is costing the economy billions

The social consequences of inequality, such as reduced life expectancy and worse mental health, cost the equivalent of over £39bn every single year.

Since the late 1970s, the UK has become one of the most unequal countries in the developed world. As the rich have got richer, the rest of us have been left behind. Research released today by Oxfam shows that just five families now have as much wealth as the poorest 20 per cent of the population. It’s a frightening statistic, and for most people, one that offends their basic sense of decency. Can anyone really be "worth" this much? Can so many people be worth so little?

Worryingly, for some the answer appears to be "yes". For these people, an elite but small group of "wealth creators" are delivering jobs and driving economic growth. If five of these people happen to have the same wealth as a fifth of the population, well that’s just reward for their hard work and, no doubt, superior intellect. Perhaps even more concerning is the argument that inequality is not just acceptable, but desirable - driving the competitiveness vital to entrepreneurialism. But does seeing someone paid hundreds or even thousands of times more than you act as encouragement, or as a painful reminder of how little society values you?

The reality is that the consequences of the UK’s extraordinarily high levels of inequality are far-reaching and catastrophic. Of the developed OECD countries, the UK is ranked 17th out of 23 for life expectancy, 19th out of 22 on obesity, 17th out of 21 on teenage births, and 17th out of 23 for imprisonment. More equal societies, meanwhile, top the table on almost every measure.

Inequality shapes how we see others, our levels of trust in strangers, our sense of community. It erodes the bonds between individuals. But might it go even further? The IMF and others have pointed towards the damaging effects that inequality may have on economic growth. It makes perfect sense; if wages stagnate or fall for the majority of people, a consumer-led recovery becomes tricky to engineer without encouraging a huge growth in personal debt.

In addition, the impact of inequality on our health, wellbeing and crime rates may also have a financial cost. Research recently conducted by the Equality Trust has found that the impact on the UK of some of the social consequences of inequality, including reduced healthy life expectancy, worse mental health, higher levels of imprisonment and murder, could cost the equivalent of over £39bn every single year. If this was broken down to an individual level, it would show that the impact of inequality on every man, woman and child in the UK can be valued at £622.

Yet these figures may be just the tip of the iceberg. Many of the costs associated with inequality remain incalculable. For example, how does one value the higher level of community cohesion, trust, and social mobility associated with less unequal countries? Our estimate is based on a comparison between the level of inequality in the UK and the average level seen in developed countries. In other words, small changes to our level of income inequality would have a huge effect.

In recent weeks, the issue of inequality has gained significant coverage, it is now unquestionably part of the public and political narrative. But we need action to match the rhetoric. A living wage, a fairer tax system, and the creation of jobs with genuine opportunities for advancement should all be part of political party manifestos. But all parties serious about reducing costly social problems must also include an Inequality Test - an explicit goal that the net impact of their policies will be to reduce the gap between the richest and the rest. The benefits of reducing economic inequality are clear - a richer, healthier and quite possibly happier society. But we need politicians to have the courage and conviction to deliver real change.

Duncan Exley is the director of the Equality Trust

Duncan Exley is the director of the Equality Trust

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Ken Livingstone says publicly what many are saying privately: tomorrow belongs to John McDonnell

The Shadow Chancellor has emerged as a frontrunner should another Labour leadership election happen. 

“It would be John.” Ken Livingstone, one of Jeremy Corbyn’s most vocal allies in the media, has said publicly what many are saying privately: if something does happen to Corbyn, or should he choose to step down, place your bets on John McDonnell. Livingstone, speaking to Russia Today, said that if Corbyn were "pushed under a bus", John McDonnell, the shadow chancellor, would be the preferred candidate to replace him.

Even among the Labour leader’s allies, speculation is rife as to if the Islington North MP will lead the party into the 2020 election. Corbyn would be 71 in 2020 – the oldest candidate for Prime Minister since Clement Attlee lost the 1955 election aged 72.

While Corbyn is said to be enjoying the role at present, he still resents the intrusion of much of the press and dislikes many of the duties of the party leader. McDonnell, however, has impressed even some critics with his increasingly polished TV performances and has wowed a few sceptical donors. One big donor, who was thinking of pulling their money, confided that a one-on-one chat with the shadow chancellor had left them feeling much happier than a similar chat with Ed Miliband.

The issue of the succession is widely discussed on the left. For many, having waited decades to achieve a position of power, pinning their hopes on the health of one man would be unforgivably foolish. One historically-minded trade union official points out that Hugh Gaitskell, at 56, and John Smith, at 55, were 10 and 11 years younger than Corbyn when they died. In 1994, the right was ready and had two natural successors in the shape of Tony Blair and Gordon Brown in place. In 1963, the right was unprepared and lost the leadership to Harold Wilson, from the party's centre. "If something happens, or he just decides to call it a day, [we have to make sure] it will be '94 not '63," they observed.

While McDonnell is just two years younger than Corbyn, his closest ally in politics and a close personal friend, he is seen by some as considerably more vigorous. His increasingly frequent outings on television have seen him emerge as one of the most adept media performers from the Labour left, and he has won internal plaudits for his recent tussles with George Osborne over the tax bill.

The left’s hopes of securing a non-Corbyn candidate on the ballot have been boosted in recent weeks. The parliamentary Labour party’s successful attempt to boot Steve Rotheram off the party’s ruling NEC, while superficially a victory for the party’s Corbynsceptics, revealed that the numbers are still there for a candidate of the left to make the ballot. 30 MPs voted to keep Rotheram in place, with many MPs from the left of the party, including McDonnell, Corbyn, Diane Abbott and John Trickett, abstaining.

The ballot threshold has risen due to a little-noticed rule change, agreed over the summer, to give members of the European Parliament equal rights with members of the Westminster Parliament. However, Labour’s MEPs are more leftwing, on the whole, than the party in Westminster . In addition, party members vote on the order that Labour MEPs appear on the party list, increasing (or decreasing) their chances of being re-elected, making them more likely to be susceptible to an organised campaign to secure a place for a leftwinger on the ballot.

That makes it – in the views of many key players – incredibly likely that the necessary 51 nominations to secure a place on the ballot are well within reach for the left, particularly if by-election selections in Ogmore, where the sitting MP, is standing down to run for the Welsh Assembly, and Sheffield Brightside, where Harry Harpham has died, return candidates from the party’s left.

McDonnell’s rivals on the left of the party are believed to have fallen short for one reason or another. Clive Lewis, who many party activists believe could provide Corbynism without the historical baggage of the man himself, is unlikely to be able to secure the nominations necessary to make the ballot.

Any left candidate’s route to the ballot paper runs through the 2015 intake, who are on the whole more leftwing than their predecessors. But Lewis has alienated many of his potential allies, with his antics in the 2015 intake’s WhatsApp group a sore point for many. “He has brought too much politics into it,” complained one MP who is also on the left of the party. (The group is usually used for blowing off steam and arranging social events.)

Lisa Nandy, who is from the soft left rather than the left of the party, is widely believed to be in the running also, despite her ruling out any leadership ambitions in a recent interview with the New Statesman.However, she would represent a break from the Corbynite approach, albeit a more leftwing one than Dan Jarvis or Hilary Benn.

Local party chairs in no doubt that the shadow chancellor is profiling should another leadership election arise. One constituency chair noted to the New Statesman that: “you could tell who was going for it [last time], because they were desperate to speak [at events]”. Tom Watson, Caroline Flint, Chuka Umunna, Yvette Cooper, Andy Burnham and Liz Kendall all visited local parties across the country in preparation for their election bids in 2015.

Now, speaking to local party activists, four names are mentioned more than any other: Dan Jarvis, currently on the backbenches, but in whom the hopes – and the donations – of many who are disillusioned by the current leadership are invested, Gloria De Piero, who is touring the country as part of the party’s voter registration drive, her close ally Jon Ashworth, and John McDonnell.

Another close ally of Corbyn and McDonnell, who worked closely on the leadership election, is in no doubt that the shadow chancellor is gearing up for a run should the need arise.  “You remember when that nice Mr Watson went touring the country? Well, pay attention to John’s movements.”

As for his chances of success, McDonnell may well be even more popular among members than Corbyn himself. He is regularly at or near the top of LabourList's shadow cabinet rankings, and is frequently praised by members. Should he be able to secure the nominations to get on the ballot, an even bigger victory than that secured by Corbyn in September is not out of the question.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.