Reducing inequalities

Publication date: 30 Oct 2019 | Publication type: National Institute Economic Review | Theme: Macroeconomics, Exiting the EU & Britain after Brexit | External Author(s): Jones, R; Llewellyn, J | Journal: National Institute Economic Review Issue 250 | Publisher: Sage Publications, London

A backlash against numerous inequalities – and in particular against perceived unfairness in society – is a significant driver of the UK’s current political malaise. Addressing inequalities between income groups, regions and generations will thus be key to re-establishing faith in government and avoiding further decline or even the threat of social unrest.  

In income terms, the UK has become much more unequal than in the immediate post-war decades, and it should be a goal to reverse that trend – targeting the OECD average for income inequality and a halving of the number of those living below the poverty line. Measures to deal with perceived unfairnesses could include tighter scrutiny of competition in high-yielding sectors such as technology, and incentives for the appointment of worker representatives to company boards. But a government intent on tackling inequalities will inescapably need to raise public spending and direct taxation of income and capital from their current historically low levels. In particular spending on education and active labour market policies needs to increase, while gaps in the benefits system and regional imbalances are addressed.  

Given the scale of technological change and the severe implications for the labour market, the risk is that policy will be insufficiently bold to deal with widespread disenchantment, which could ultimately pose a threat to democracy.