Thursday, 2 February 2012

A 'Spirit Level' Britain?

In an interview with the Guardian this week, Ken Livingstone praised Ed Miliband as the man to make make us a 'Spirit Level Britain'.  Despite this being a rather cringeworthy turn of phrase, Livingstone makes a key argument: that Labour must strive to make Britain a more equal society in its income distribution

New Labour didn't believe that income equality was important.  As far as Blair et al were concerned, what mattered was raising the economic condition of the poorest; as long as that improved, the rich could be as rich as they wanted to be.  More traditional social democrats baulked at this easiness with inequality but grudgingly accepted it: the economy was booming and New Labour was able to utilise tax revenue to boost incomes at the bottom.

Now the economy isn't booming.  And in addition, we have lots of evidence that high levels of income inequality are linked to a range of health and social problems.  So what Livingstone is saying is that it's time Labour revisited inequality and, presumably, proposed policies which aim to reduce it.

How can this be done?

In The Spirit Level, Wilkinson and Pickett argue that there are two central paths to greater equality.

First, Labour could pursue the path taken by the Scandinavian countries.  This involves accepting a highly unequal labour market but using the welfare state to redistribute from rich to poor.  Could this work in Britain?  I don't think so: we have a much more liberal attitude to earning money and many - even people on modest incomes - don't like the idea of the state 'penalising hard work'.  Further, with such hostile attitudes to many of those who would benefit from a more redistributive state, it seems politically untenable and would require deep cultural change.

The second way to greater equality is how Japan achieves it: through a more equal labour market, with no need for the state to intervene with people's incomes.  But as Wilkinson and Pickett admit on their website, market incomes are relatively equal in Japan because of how their companies are structured and ran.  To ape this in the UK would require deep economic change and could certainly not happen over night.

Is there a third option?

If these two ways of achieving greater equality are hard to envisage in the UK, is there a third option available to the centre-left?

One solution might be to consider the ideas of a basic income.  In short, a basic income involves the state provision of a grant to each citizen and is paid unconditionally.  Whilst I don't think a full basic income is economically viable nor morally desirable, some variation of it could provide the Left with a solid plan for building a more equal Britain.

In theory, it's not hard to imagine a universal grant available to everyone except those who fall, say, in the top 20-30% of the income distribution.  The principle would be that a universal grant could improve the quality of life for everyone in society, except those who are very rich and for whom it would have a negligible impact.  You would have to increase taxes to pay for it, but since 3/4 of adults would benefit it would be a much more acceptable form of redistribution than that which goes from the very top to the very bottom.  Plus, if implemented it would mean savings could be made in other areas - there would be no need for JSA, for example, and other means-tested benefits could also be reviewed.

This all needs to be fully costed, but if affordable what could hold a universal grant back?  It would transform the scale of inequality over night and, given what know about its harmful effects, make Britain a much better place to live.

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