It’s a startling statistic that the richest 22 men in the world hold as much wealth as every woman and girl in Africa. Oxfam’s report out yesterday on inequality highlights once again the magnitude of the gap between the haves and the have nots in a world that is wealthier than ever. Combined the world’s billionaires have as much money as half of the rest of the world’s population.
When Chancellor Sajid Javid arrives in Davos later this week it’s doubtful he will be making the connection between global inequality and the state of the nation back home. But the truth is that the situation globally is mirrored by what’s happening in the UK. As a country we are well on our way to being one of the most unequal in the world.
In the UK wealth inequality is twice as bad as income inequality and it has remained stubbornly high since the 1980s. Latest figures from the Office for National Statistics show that the situation is getting worse, not better. This situation is made worse by the fact that many people haven’t had a real pay rise in over a decade.
This matters politically. Boris Johnson has promised that his government will ‘level up’ the left behind towns in the North and Midlands that helped to deliver an 80-odd seat parliamentary majority last month. These new seats are in parts of the country that have seen stagnating growth and their wealth drain away.
The government has promised billions of pounds in new roads, railways and other infrastructure. Much of this will be spent in newly Conservative constituencies such as Blyth Valley and Stoke.
But splashing the cash won’t be enough. There are growing calls from within the Conservative party for Boris Johnson to tackle the economic inequalities that underlie the problems in many of these places.
It might sound optimistic, but just last week Tim Pitt, a former senior Treasury advisor to Sajid Javid and Phillip Hammond, said it was time for the Conservatives to get tough on inequality. He argues that the status quo prevents social mobility, harms economic growth and energises populists on the left and right. Part of his solution is to tax wealth more, for example by introducing more council tax bands for the most expensive properties and cutting back on the pension subsidies for higher earners.
These are all sensible and match the ideas we set out in our manifesto for tax equality.
At first glance this might seem like a very un-Conservative thing to do. However, the government is desperate for cash and will be loath to increase taxes on those who are already struggling. The prime minister has already reduced his wiggle room by ruling out any increases to income tax, national insurance or VAT.
There’s good precedent for Conservatives taxing accumulated wealth. As Chancellor, George Osborne, increased taxes on buy-to-let landlords and put up stamp duty on the most expensive houses. As David Willetts, a Conservative former minister, has pointed out it’s time to ask well off baby boomers to contribute some of their accumulated wealth to avoid increasing taxes on workers. The Conservative manifesto even hints that Boris Johnson might be open to this. In it, the party called for limits on the “arbitrary tax advantages for the wealthiest”.
This approach would be popular. In a poll we did with Oxfam and Yougov, there was majority support for higher taxes on wealth. In particular there was widespread support across the political spectrum for ensuring that those rich enough to live off their wealth pay at least the same rate of tax as those who go out to work for a living.
All this means that there’s good reason for the Chancellor to stand up on the 11th March to deliver his budget and announce higher taxes on wealth. It would show that the government was truly serious about levelling up the poorest parts of the country.
Robert Palmer is executive director of Tax Justice UK