In the wake of Iain Duncan Smith’s resignation, much was said about the unfairness of taking money away from the disabled while giving tax cuts to the well off. However, as the government scrambles to plug the holes in its budget after reversing course, we must not forget that this latest fiasco is but part of a package of reforms taken in the past decade. The government’s role and size is changing dramatically, but we have yet to address head on the fundamental question of just what kind of society we want to live in. These policy changes will have far-ranging consequences for the bottom half of the income distribution, but will also bring into ever sharper relief the tectonic shifts in inequality that have been growing for those at the very top. Beyond the squabbles over the minutiae of policy, we urgently need to tackle our blindness to growing societal inequality across the income distribution, and to forge a consensus on our new political contract.
First the facts, because to get to the heart of this malaise we need to understand why the typical Briton increasingly feels that our “political deal” is no longer fair, and that rising tides no longer lift all boats. Overall income inequality (as measured by the Gini coefficient) remains at around the same level as it was in the early 1990s. However, research reveals that this broad headline figure hides substantial changes: the share of income held by the top 1 per cent rose by some 135 per cent between 1980 and 2007 in both the United States and the United Kingdom. Today, a majority of the Cabinet, top doctors, top judges, top journalists and top military officers still come from independent schools. 19 per cent of children still live in absolute low income households, while children from wealthier families studying on the same course at the same university earn up to 20 per cent more than their low-income peers. While the median incomes of those over age 60 have risen by 10 per cent compared to where they were pre-Crisis, the incomes of those of working age have yet to recover.
You don’t have to come from a low-income household to be affected by these long-standing inequalities. Individuals living in countries with more inequality are less likely to help each other altruistically, have lower rates of civic participation, are less likely to vote, show lower levels of trust, and have lower levels of satisfaction with their lives. In the UK, those living in the most deprived areas are less likely to feel a strong sense of “belonging to Britain,” a sobering finding as we debate our national identity, constitutional structures, and membership of the European Union. There’s a growing generational divide too: while half of those surveyed felt a “very strong sense” of belonging to Britain, that plummets to just 39 per cent of 25-34 year olds. For many younger British citizens, the Beveridge consensus that championed the fight against the “five evils” of want, squalor, disease, idleness, and ignorance has lost its meaning and its effectiveness: just 25 per cent of millennials agree that “the creation of the welfare state is one of Britain’s proudest achievements,” compared to roughly 60 per cent of baby boomers.
These statistics paint a complicated picture: one where some indicators of poverty and inequality have improved or stayed constant, where the “top 1 per cent” have separated from the rest of society, and where many people, and especially the young, are losing faith in our most important social institutions. What is notable however is how little policy changes address our changing British society. While some government reforms—such as the creation of ‘pupil premium’ funding —have been targeted at the most disadvantaged, the necessary policy response to growing inequality among the most fortunate has been overlooked. This has real consequences. Put starkly, even a society that succeeds in ending the scourge of child poverty but where so few have so much (and can pass so much onto their children) is unlikely to be a society where many feel we are “all in this together.”
Some might conclude that Britons have lost their faith in government’s role in creating a fair society. This isn’t the case. Indeed, a majority of British people support an increase in funding for “government programmes for helping the poor and the unemployed with education, training, employment, and social services even if this might raise your taxes.” And the British are especially concerned about the effects of share of income captured by the 1 per cent, with an overwhelming majority of 82 per cent saying that the income gap is too large, including 76 per cent of Conservatives, 85 per cent of Liberal Democrats, and 88 per cent of Labour supporters, and with concern growing the most among professional and managerial workers since 2007.
As a member of the recent Lords Select Committee on Social Mobility and Co- Chair of the All Party Parliamentary Group on social mobility, I am especially concerned about the ability of those from disadvantaged backgrounds to progress in society. But we mustn’t forget that top-end inequality and stagnant social mobility impacts all of us, regardless of our social class of origin. The danger is that we slide towards a new political contract accidentally, without considering its consequences, and without addressing the blindspot of the growing separation of the elite from society that our current political consensus seems to ignore. The risk is that as income inequality soars, trust declines and our sense of being “British” along with it, increasingly we will live, work and grow up in entirely different worlds. We won’t know people who aren’t like us or be able to relate to the challenges we face as a nation. Let’s seize this moment—we are in desperate need of a new Beveridge settlement that clearly sets out the contract between the citizen and the state and the principles on which it is based. For me, it’s one where everyone has a fair shot, and one where we’re really “all in this together.” Otherwise, in a time of volatile changes and global challenges, we have a recipe for being an island adrift.
Baroness Tyler of Enfield is a Liberal Democrat member of the House of Lords