This article is part of a blog series published in partnership with Academics Stand Against Poverty UK, as they develop their third manifesto audit in the build up to the 2024 election. They will analyse the policies in the manifestos in relation to poverty to assess how confident they are that they will enable British society to flourish.
Keir Starmer has declared that he will be more ‘laser-focused on poverty’ than Tony Blair. This is a welcome commitment. But can sustained cuts in poverty be achieved without a simultaneous attack on Britain’s yawning income and wealth gap?
On this, Starmer has been silent. Here the lesson of pre- and post-war history is clear: poverty and inequality are umbilically linked. Britain achieved peak equality and the lowest poverty levels in the 1970s. This was the high-water mark of post-war egalitarianism and an historic achievement. But it was short lived.
The last four decades have seen a doubling in the level of (relative) child poverty and a surge in inequality. The overriding explanation for these reversals lies in the shift from an egalitarian to an anti-egalitarian philosophy of government. ‘True’ Conservatives need ‘to make the case against egalitarianism’ wrote Keith Joseph in 1976. Far from creating a more dynamic and stronger economy, as claimed, the anti-equality counter-revolution has turned Britain into a high-poverty, high-inequality and economically turbulent nation, returning it to its pre-war history.
Ultimately, the level of poverty depends on how the cake is shared. Only once in modern history – in the three post-war decades – have the forces of change aligned to bring greater equality and less impoverishment. While the state played a decisive role in mitigating the inbuilt bias to inequality in those decades, it has since returned to its long-term norm as an agent of inequality.
The lesson for Labour is that an attack on poverty needs to raise the floor and lower the ceiling. This is for two key reasons. First, because the corporate mechanisms used to drive ever higher fortunes have increasingly come at the expense of the incomes and life chances of ordinary citizens. The strategy of the post-war years ensured that the gains from economic activity were more equally shared than in the pre-war era, in part through policies that also acted as a restraint on returns to capital. With these restraints dismantled, a small business and financial elite has been able to capture a rising share of the cake, not through a boost to productive activity, but through the accretion of economic power and greater elite control over scarce resources.
Too much corporate activity has been geared to personal enrichment rather than wealth creation. Many large companies have been turned into cash cows funnelling profits upwards through the rigging of markets, financial engineering and increasing monopolisation. The return of pre-war levels of corporate asset ‘extraction’ has sapped social resilience and economic strength, and contributed to Britain’s low-investment, low-wage, low-productivity economy. Cutting poverty levels depends on ending the instruments of personal enrichment that undermine wider living standards and life chances.
The second reason is that ever-rising fortunes at the top in an over-marketised economy have created an extreme form of luxury capitalism, in which the pattern of economic activity has less and less to do with meeting key social priorities. Scarce resources are being diverted from meeting vital, but increasingly unmet social needs, to feeding the lifestyles and pet hobbies of the super-rich. Britain underspends heavily on social and health care, infrastructural investment and youth services, while fractured public services face severe pay, staffing and funding crises. In contrast, it overspends on private jets, super-yachts and luxury housing. It’s time to reassert the 1970s’ dictum of the economist Fred Hirsch: ‘So long as material privation is widespread, conquest of material scarcity is the dominant concern.’
To turn back the tide of rising poverty, the economy’s structural bias to inequality needs to be reversed. This requires a three-pronged strategy. First, a more generous, and less coercive benefit system. The most radical approach would be to introduce a guaranteed, no questions-asked, non-means-tested income floor as a right of citizenship. This would create a ‘Plimsoll line’ for incomes, below which no one would fall. Such a floor would be more costly than reforming universal credits, but would be a powerful anti-poverty measure that would extend the principle of universalism, boost income security and raise personal empowerment.
Secondly, part of the ever-growing public wealth pool needs to be harnessed for the public good. It is widely claimed that Britain simply lacks the resources for social reconstruction. Yet it is asset rich. Privately owned wealth – property, business and financial assets – stands at almost seven times the size of the economy, up from three times in the 1970s. A towering nine-tenths of all national wealth is privately owned. Yet these assets are taxed at a rate of around two per cent, yielding revenue of only a tiny fraction of the total tax take. Even a modest rise in tax rates would release resources for meeting social priorities.
Thirdly, we need greater social control over productive resources. Britain is an overprivatised and undersocialised economy. Privatisation has handed too much power to markets. Correcting this needs a mix of more targeted regulation and a higher level of socialisation of the economy, back towards the higher figure of the post-war era.
Such a strategy would involve a shift from the overwhelming dominance of individualised to greater collective property rights. New forms of regulation, socialisation and appropriate taxation could steer resources into high-social-value activity. Such a strategy is far from utopian, but would require the kind of transformative politics at work in 1945. Given the failures of the pro-inequality bias of the last 40 years, and a population hungry for a fairer society, there could hardly be a more opportune time for a programme of progressive change.
Stewart Lansley is a visiting fellow at the University of Bristol and has written widely on wealth, inequality and poverty. His latest book is The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor – A 200-Year History
Read all the articles in the Academics Stand Against Poverty blog series here.
Listen to Stewart Lansley speak about the book in this episode of the Transforming Society podcast.
The Richer, The Poorer by Stewart Lansley is available here on Bristol University Press for £19.99.
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