Inequality and the deficit are two sides of the same coin

5 Jan 2015


The idea that it was Labour’s excessive state spending that caused the recession and subsequent deficit gives the human brain what it loves most-a simple, causal story. Ever the opportunists, by using this simple narrative the Conservative Party has callously used a global recession to usher in a domestic portfolio that has led to inequality and suffering not seen this side of World War Two, all in the name of reducing the deficit. As Suzanne Moore, alongside countless others, documents, austerity is quite literally destroying, and in some cases even ending, lives up and down the country - and it’s not even working.


Despite our benefits witch-hunt purging all the flat-screen TV’s out of Salem, a ruthless fire sale on various public services, and an immigration approach with all the tact of a shotgun, the Chancellor has utterly failed in all of his predictions and promises concerning the deficit. Indeed, what he has managed to do is to hand unprecedented amounts of money to the rich from the poor, and bring back Victorian-style inequality and suffering - quite simply, we need another way.


Here are four policies that would do more for solving inequality AND the deficit in one year than Gideon has in five:


A Living Wage

Whilst only 3% of our welfare expenditure goes to those without a job, a whopping 21% is spent on those in work. Since the start of this Parliament, those claiming housing benefit that are in work has nearly doubled, whilst our wages have, on average, stagnated more than any others in the G20. By implementing a living wage policy, based on the amount of welfare spent on those already in work we could stand to shave a cool £33 billion a year off of the deficit whilst actually making people’s lives better, not worse.


One of the reasons the deficit is not falling as quickly as promised is because the majority of the jobs that have been created over the past four years are poorly paid, reducing the amount of income tax the Treasury were banking on. Again, a living wage policy would have more income tax flowing in, whilst still leaving people better off than before. Failure to do so is quite literally allowing big business to continue to shift their costs onto tax payers.


Clamping Down on Tax Evasion

Tax evasion is conservatively estimated to cost us £15.2 billion a year, and this isn’t even to mention the costs of tax avoidance that is estimated at many times more; it’s Amazon and Starbucks that should be held to account, not White Dee, of the controversial Benefits Street. Unfortunately for us, we have a government that is all smoke and mirrors, appearing to act tough on such issues but actually increasing the number of tax loopholes and the amount lost through them, showing the current Treasury is rather navigationally gifted when it comes to furthering tax avoidance.


A Wealth Tax and a Financial Transactions Tax

An additional wealth tax of just 2% on those stockpiling more than £3 million could potentially raise up to £40 billion a year for the public purse. The much lauded ‘Robin Hood’ tax on financial transactions, as Mehdi Hasan points out, has the backing of voters and experts, and is estimated to bring in £20 billion a year for the UK alone, as well as help reign in the financial services. This could act as ankle bracelet, community service, and victim reimbursement all in one for a sector that is riddled with criminality, a criminality that was the real cause of the 2008 recession.


But above and beyond these sensible policies that don’t entail untold human misery and suffering, the very act of making our economic system more equitable itself will boost the economy. In a recent report, the OECD claimed that our economy could be a staggering 20% larger had inequality not been allowed to rage on unchecked. The Equality Trust have a wealth of evidence that shows large levels of inequality inevitably bring about adverse conditions in areas as diverse as crime, health, social mobility, and education: all of which come with a hefty price tag.


It is by being unable to recognise the value of many public services, and the straitjacket that inequality places the economy under that Mr Osborne has utterly failed to come anywhere near his estimates at the start of Parliament. Instead of blaming the poor and vulnerable for a crisis they had no control over, we should be witnessing  a fury at the financial and political elite the likes of which hasn’t been seen in centuries. As Dan Poulton pointed out recently, if inequality continues at the pace it’s going, in just seven years, the 1% will own 100% of the world’s wealth, which just isn’t possible - so something massive is going to happen, soon.


We’ve been told that there isn’t any other way, that we can’t afford anymore, but this simply isn’t true; tackling inequality, creating a fairer society, and getting rid of the deficit are one and the same thing.


It’s not just that the plans outlined above are a more preferable way of reducing the deficit - they’re the only way. Failure by the next government to adopt an alternative to austerity will only serve to drive our society further apart, crush the most vulnerable, and barely make a dent in the national debt.


By Bradley Allsop

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