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Britain Will Fail to Reduce Poverty Until It Tackles Inequality

Stewart Lansley looks at poverty in the UK and how it has always been inextricably linked with inequality.

Poverty and inequality are critically linked. Poverty occurs when sections of society have insufficient resources to be able to afford a minimal acceptable contemporary living standard. Its scale is ultimately determined by, as the key architect of post-war prosperity, John Maynard Keynes, put it, on how the ‘cake is cut’. History cannot be clearer: high levels of poverty and inequality have gone hand in hand. It is no coincidence that over the last four decades, poverty levels have more than doubled, while the share of national income accruing to the top one per cent has surged.

Barring the short post-war period, Britain has been a high-inequality, high-poverty nation for most of its modern history. This is because the ‘battle for share’ has mostly been won by an over-empowered financial and corporate elite. Ultimately how the ‘cake is cut’ depends on the model of capitalism in place, the strength of democratic structures, the power of counter-movements, and the lengths to which over-empowered business and financial elites have been prepared to go to preserve their wealth, power and privileges. In recent decades, as in the period up to 1939, these factors have worked in favour of those with capital, and against the interests and life chances of those without.

Despite Britain’s long and deeply embedded poverty/inequality cycle, those who have had the biggest influence on the course of social history – the political classes and business elites, policy makers and mainstream thinkers – have mostly taken the view that poverty is a standalone issue, quite separate from the way the gains from economic and social progress are shared. They have simply dismissed or ignored the link between inequality and poverty.

In the 19th and early 20th centuries, when poverty was widely seen as self-inflicted and the social divide reached extreme levels, some social reformers argued that tackling poverty depended on tackling wealth. As R. H. Tawney put it, ‘What thoughtful people call the problem of poverty, thoughtful poor people call with equal justice, a problem of riches’. Yet Tawney was in a minority. His views were dismissed by those in power, and were not shared by other social reformers such as Seebohm Rowntree and Joseph Chamberlain. Inequality was also a blind spot for William Beveridge. He aimed to mould a social security system within the framework of a liberal market economy. He was not an egalitarian and inequality was, significantly, not one of his five ‘giants’.

Despite the mixed heritage of the post-war reforms, this period was one of ‘egalitarian optimism’. Poverty levels hit an historic low in the late 1970s when equality peaked. Such optimism was short-lived. Outside of this period, the dominant view, driven by both New Right thinkers and mainstream economists, has been that inequality is necessary to invigorate the private sector and drive economic progress. Keith Joseph, one of the key advisers to Margaret Thatcher, put it bluntly in 1976: ‘The pursuit of income equality will turn this country into a totalitarian slum’.

A year after the 2008 global financial crisis, Lord Griffiths, the vice-chair of Goldman Sachs International, told an audience at London’s St Paul’s Cathedral that the public has to ‘tolerate inequality as the price to be paid for prosperity’. When he was London mayor, and just a few years before he moved into Downing Street, Boris Johnson was invited to give the third Margaret Thatcher lecture. He told his audience that the top 10 per cent should be fêted with ‘automatic knighthoods’. In fact, the evidence is clear. High levels of inequality have been associated with weakened economic performance.

While creating greater equality has long been Labour’s central purpose, the party has mostly been much less precise about what it means or how to achieve it. ‘The commitment of the Labour Party to equality is rather like the singing of the Red Flag at its gatherings’, wrote the economist Tony Atkinson. ‘All regard it as part of a cherished heritage, but those on the platform often seem to have forgotten the words.’

In 1997, Labour inherited levels of poverty and inequality at unprecedented post-war levels. Despite this, Tony Blair explicitly abandoned the equality commitment. He bought into the argument that poverty could be tackled while ignoring runaway incomes at the top. Labour’s early success in cutting poverty levels was never going to be sustained when a super-rich elite continued to seize disproportionate rewards using extractive business methods that played havoc with ordinary livelihoods and local communities.

Today, with mounting evidence of the negative impact of today’s levels of inequality on economic stability, social resilience and individual life chances, politicians play lip service to narrowing social divisions. Yet the key force driving today’s four-decade long poverty/inequality wave – Britain’s model of extractive capitalism – remains intact. Boris Johnson’s big idea – levelling up – dismissed by some as a ‘slogan in search of a policy’, seems little more than an excuse for inaction.

There is much talk of the imperative of creating a better post-COVID-19 society. A post-pandemic society can take one of two paths. It can retain today’s value-sapping and high-inequality system. Or it can be steered in a wholly new direction, one built around a different set of social values aimed at finally breaking Britain’s high-inequality, high-poverty cycle. On current trends and policies, the odds are on the former.