Income inequality is at a historic high in Britain, but according to new research from the Joseph Rowntree Foundation, the public is becoming pessimistic about the possibility of changing this. In a report last month on British attitudes to inequality, the social policy research charity found that although a large and enduring majority of people think the income gap between rich and poor is too large, there is little understanding about the extent of inequality in Britain and a poor grasp of how wide the gap has become in recent years.
People still express concern about unequal distribution of wealth, but are clear that they don’t want to pay higher taxes. Many consider today’s income inequalities unfair but equally they firmly believe that people get what they deserve. Most significantly, among complex and, the report’s authors admit, contradictory results, they found a strong pessimism that poverty would fall within the next ten years.
The extent to which inequality has increased has been well documented in recent years. An Institute for Public Policy Research report in May showed that the proportion of wealth held by Britain’s richest 10 per cent rose from 47 per cent in the 1990s to 54 per cent in 2004. And another report, from the Rowntree Foundation in July, noted that over the past 15 years, more households had fallen below the poverty line. In 2001, one in four households was classed as “breadline poor”.
But though a large majority of Britons still find the growing income gap unacceptable, we appear less certain now than before Labour came to power in 1997. Back in 1993, 87 per cent agreed that the income gap was too large. In 2004, only 73 per cent found the (even greater) gap unacceptable.
More worrying for policymakers who believe in increasing equality as a social goal is that the public appears confused and ignorant about the extent of the problem. The Rowntree Foundation describes the general knowledge of actual distribution of wealth as “limited”.
“The gap between high- and low-paid occupations is far greater than people think it should be, or would consider appropriate,” the authors write. For example, asked what they think a chairman of a large national corporation earns, most would say about £125,000. A more appropriate salary, they believe, would be about £75,000. In fact, at the time of the research (2004), the real average salary of a chairman of large national corporation was £555,000. Similarly, those questioned thought an Appeal Court judge would be overpaid at £80,000 and should earn £50,000; the actual salary then was £139,900. Despite the old Tory gibe of “the politics of envy”, the public tends to estimate the pay gap rather benignly. The Rowntree Foundation’s respondents believed that the income of a company chairman was 12.5 times higher than that of an unskilled worker. In fact, it was more than 40 times higher.
Nor does the public hold particularly trenchant or united views on how to deal with huge pay discrepancies. Support for wealth redistribution increased between 1985 and 1995 – two years before Labour came to power – but then declined substantially from 44 per cent in 1996 to 32 per cent in 2004.
Karen Rowlingson, professor of social policy at the Uni versity of Birmingham and co-author of the Rowntree Foundation report, told the New Statesman that this may be connected to values in the UK. “These are a bit of a mix between Europe and America. [Britons] think that if you work hard you can make it, and therefore if you don’t succeed it is because you haven’t worked hard enough.”
The report points out that even those who agree the income gap is too large may not believe that governments should intervene to force a redistribution of wealth. Younger people are the most hostile to redistribution, Rowlingson finds: “Scepticism of young people towards inequality in general and redistribution in particular is quite worrying.”
She elaborates: “Taking from the rich and giving to the poor is not something that most people in the UK want. They are more willing to invest in services, like education and health.”
Why this lack of support for redistribution? Certainly, the “r” word was banned from Labour vocabulary for some time, even if the reality was that, as chancellor, Gordon Brown practised redistribution by stealth to avoid even deeper inequalities. The Office for National Statistics showed in May that Brown used tax credits, for example, to boost incomes for the less well-off. The former Treasury financial secretary John Healey told the BBC recently that, as a result of such policies, families from the poorest fifth of the population were £3,000 a year better off than in 1997.
But a culture hostile to equality was created by remarks such as that of Prime Minister Tony Blair in 2005: “It’s not that I don’t care about the gap [between high and low incomes], so much as I don’t care if there are people who earn a lot of money. They’re not my concern. I do care about people who are without opportunity, disadvantaged and poor.”
With such statements, the Labour Party failed to combat the public’s gloomy view that inequality is inevitable.
“You cannot have equality of opportunities when people don’t start from the same point. Inequality is a barrier to aspirations,” says Rowlingson.
Will the former redistributive chancellor change the culture? His March Budget was short on handouts and, in response to new statistics on child poverty, he concentrated on measures to encourage parents to work. There is little parliamentary push for major tax realignments. The Liberal Democrat shadow secretary for children, schools and families, David Laws, recently said: “It is a national disgrace that Britain is the developed country where your chances in life are most dependent on your family background.” But the Lib Dems have abandoned as a party their policy of a 50p rate of income tax for those with incomes above £100,000.
The Conservatives, too, who talked of redistribution in 2005, have recently been silent on the issue.
The Rowntree Foundation findings suggest that Britain risks falling into a gulf of apathy made even deeper by ignorance of the true nature of our current economic segregation.
“In Africa, the feeling you cannot do anything about things is called compassion fatigue,” says Rowlingson. “Leaders have to prove action against inequality is possible.”
Rich and poor
1997 “The boundaries of the welfare state are going to have to change”
Tony Blair, days before becoming prime minister
2001 “It’s not a burning ambition for me to make sure that David Beckham earns less money”
Tony Blair, rejecting higher tax rates for the rich
2006 “I don’t think making the top 1 per cent richest poorer makes the 10 per cent poorest richer”
David Cameron, leader of the opposition
2007 “This Budget was an opportunity to rebalance the tax system in favour of the less wealthy and the Chancellor has failed to do that”
Menzies Campbell on Gordon Brown’s final Budget as chancellor