Leader: Too many feel that they have no stake in our unequal society

Britain is facing levels of inequality unknown since the Victorian era.

Inequality has risen over the past 30 years throughout the world but nowhere faster than in Britain. This should serve as a fire bell in the night for the UK's complacent political class. The Organisation for Economic Co-operation and Development (OECD) report Divided We Stand showed that the gap between the 99 per cent and the 1 per cent is every bit as wide as the St Paul's protesters suggest. The share of income taken by the top 1 per cent of earners rose from 7.1 per cent in 1970 to 14.3 per cent in 2005. Even more remarkably, the amount taken by the top 0.1 per cent rose to 5 per cent. Without government action, this figure will rise to 14 per cent by 2035. Britain is facing levels of inequality unknown since the Victorian era.

That this should be a matter of political concern is clear. As Richard Wilkinson's and Kate Pickett's book The Spirit Level illustrated, the most unequal countries do worse on almost every quality-of-life indicator, from mental illness and child well-being to obesity and teenage pregnancy.
Much of the UK's surge in inequality took place under the Thatcher and Major governments, which cut taxes for the rich and failed to raise benefits in line with earnings - two of the factors that the OECD blames for the widening gap. Although Labour managed to halt the rise in inequality, it did not begin to reverse it. Gordon Brown's City-funded model of redistribution proved both ineffective and unsustainable.

What of his successor as prime minister? There was a time when David Cameron recognised the need for a more equal society. In a statement of Conservative values in 2006, he declared: "The right test for our policies is how they help the most disadvantaged in society, not the rich." But that was during Mr Cameron's "detoxifying" phase, before the hiring of Andy Coulson and his swerve to the right. After the Institute for Fiscal Studies reported that George Osborne's autumn statement would increase child poverty by 100,000, Mr Cameron announced that the government planned to reject the internationally recognised definition of poverty: household income below 60 per cent of the median income level in that year. Far from solving the problem, the coalition government refuses to acknowledge it.

For Labour, Ed Miliband has spoken of his "deep regret" that the last government did not reduce inequality and has denounced the "arms race" in footballers' salaries.Yet he has said little about how he would address the problem, beyond maintaining the 50p rate of income tax. The question facing social democrats in the UK and elsewhere is how to redistribute wealth in an age when capital is so mobile and the rich are so adept at avoiding taxation. A progressive solution, as the New Statesman has long argued, is to shift the burden of taxation from income to wealth, which is even more unequally distributed. We welcome the OECD's support for greater taxation of inheritance, property and land to narrow the gap.

In his executive summary of the report, Angel Gurría, the OECD's general secretary, warned that "the social contract is unravelling". This is certainly true in England, which this year experienced its worst civil unrest since 1981. Ministers should heed the Archbishop of Canterbury's typically eloquent warning that the country risks a repeat of the riots unless the government does more to rescue "those who think they have nothing to lose". The summer disturbances were symptomatic of a profoundly unequal society, in which many feel they have no stake. Until this changes, further unrest is not just possible, but inevitable.

This article first appeared in the 12 December 2011 issue of the New Statesman, Unholy war