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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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

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