Brits Head to Polls, But Will Either Party Take on Income Inequality?
Economists John Weeks and Susan Himmelweit say the Labour and Conservative parties will do little to reverse damages of austerity.
JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
On Thursday citizens of the United Kingdom will be heading to the polls in one of the tightest general election races in decades. The Conservative party and the Labour party have been the two biggest parties, forming the leadership in the UK since the 1920s. And the leaders of both parties, current Prime Minister David Cameron who you see on the left, and the leader of the Labour party Ed Milliband, who you see on the right, have been squaring off in a series of debates.
But instead of getting into the horse race of this race, here at The Real News we want to specifically look at each party’s policies and how they will affect everyday people. Now joining us to unpack all of this are our two guests. We have joining us from London Susan Himmelweit. Susan is a Professor Emeritus of economics at the Open University. She is the coordinator of the Policy Advisory Group of the UK Women’s Budget Group. It’s an independent voluntary organization that produces gender analysis of government spending plans, budgets, and policies. And joining us from London is John Weeks. John is a Professor Emeritus at the University of London, and he’s the author of the book The Economics of the 1 Percent: How Mainstream Economics Serves the Rich, Obscures Reality, and Distorts Policy.
Thank you both for joining us.
JOHN WEEKS, PROFESSOR EMERITUS, UNIV. OF LONDON: Thank you.
DESVARIEUX: So I’m going to start off with you, John. The big issue in this election cycle is income inequality. According to the nonprofit organization Equality Trust, Britain’s billionaires have seen their net worth more than double since the recession, with the richest 1,000 families now controlling a total of about 547 billion pounds, which is about $830 billion.
So that means that they own more than the poor’s 40 percent of British households, John. So considering this has been a big issue, can you just map out how both parties, the Conservative party and the Labour party, plan on dealing with this widening gap?
WEEKS: Well first, I think it would be fair to say about the Conservative party that they think that the way you reduce inequality is through equality of opportunity. And there’s very much–I don’t know if you’d want to call it trickle-down view, but the idea that we don’t really need any public policies to address the question of inequality, that that will be sorted out through people working hard within the private economy.
On the Labour side, I would characterize their policies as being aimed at indirectly affecting inequality. If you think about the major ways that you would deal with inequality, very progressive tax systems being the most important, taxation of wealth, inheritance tax, they have in general not emphasized those. I would say the main things they’ve identified would try, as I say, indirect is one. Taxing British people who have non-dom status, as the term goes. They are people who are owning businesses, making money in Britain but are not British citizens, but are redirecting their income via tax havens abroad. Labour party says it’ll get rid of that. And it’s going to have a tax on housing worth more than a certain amount, called a mansion tax.
That’s pretty much it, I would say. They would cut–third, they would restore the high income tax rate to a bit higher, but not enough to have a serious impact on inequality.
DESVARIEUX: Susan, I want to talk about how this would affect the majority of people. Do you see this in any way reversing austerity and helping the majority of people?
SUSAN HIMMELWEIT, PROFFESOR OF ECONOMICS, OPEN UNIVERSITY: Well I would just like to add a little bit to what John has said about the difference in the party’s plans. Because while I think the Conservatives actually don’t really have policies on inequality because they actually don’t think it’s such a bad thing, they think having poor people is a bad thing. But inequality in itself they see as part of a spur to people working harder and therefore producing more.
But the Labour party has said that it wants to tackle some of the, some things that go on within the labor market that produce very poor working conditions and very low wages. For example, and this has increased a lot in the, during the last five years in which we’ve had a coalition government the Conservative party has led. And as we’ve come out of austerity, what they have seen as coming out of the recession, we’ve had a huge increase in the numbers of people on very poor quality labor contracts, where they don’t know what they’re doing. They’re known as zero-hours contracts, where employers can call on labor whenever they want. Wages are very low. And people get no security.
Now, that–the Labour party has talked about tackling inequality through what it calls pre-distribution. Trying to make things better in the labor market for those at the bottom. And so on top of the tax, and the tax changes that John talked about, they would want to intervene directly into the labor market.
The other big respect in which I think the parties differ is in what they’re spending on public services. Because for the poorest in society, actually what they get from public services is probably more important than their cash income. And while both main parties are promising a continuation of austerity in the sense of cuts to public services, they’re of a completely different order. And–.
WEEKS: I’ll just come in on that point very briefly. The Office of National Statistics of Britain reports three types of income distribution. What you get paid, what you directly after tax, and after–including social services. And the big difference is not between pre-tax and post-tax income, but between post-tax income and when you add in social services. So it’s just as Sue says, the most important equalizing instrument, you might say, is the delivery of public services.
HIMMELWEIT: And that’s why austerity has had such a big effect of increasing inequality.
DESVARIEUX: Okay. Let’s talk about what policies should those in power–I don’t want to say advocating for, but at least the people. What should the people be trying to pressure their governments to be proposing instead of these type of policies that we’re seeing coming out of the Labour party? I’ll start off with you, John.
WEEKS: Well, I think that one thing is that we have to move towards a high-tax, higher-taxation, larger public sector economy. And I think Sue wants to say more about this from her perspective on social services. But the basic problem in Britain, more so than the United States–the United States public sector, even at its largest, wasn’t close to being as important in Britain. In Britain the big blow to equality and to people at the bottom of the income distribution has been the reduction in public services as a result of the austerity ideology.
So what we need to do is to get back a position where taxation and expenditure are more than 40 percent of GNP. Which was the case even 10, 15 years ago. And we need to return to that.
DESVARIEUX: Susan, your response? Or would you like to add?
HIMMELWEIT: Well, yes. I’d like to add something from a gender point of view. Because one of the effects of the past, the government of the past five years, has not only been to increase inequality, income inequality among quintiles of the population, if you like, but also increase inequality between men and women. And we had, like most developed economies, we–the UK [economy] are moving on a path towards more inequality. Towards more equality between men and women. And the austerity really had a very severe effect on that.
DESVARIEUX: Can you give us some examples?
HIMMELWEIT: Well, I think it happened for three reasons. One is that women are particularly dependent on public services. And often they’re dependent on public services in order to be able to take employment. So for example public services that end up caring for your child or an elderly relative may be precisely what enables a woman to take a job. Secondly women, when those services are cut, it’s often women’s unpaid work that makes up for them. And finally, women suffer particularly badly from such cuts because they were often the ones employed in the public sector.
In the UK, like again in most developed countries, women are the majority of employees in the public sector. They were employed much more in the public sector than men were. And while the, along with austerity, came a notion that we should replace public sector jobs with private sector jobs. And that has–there was a move from the private sector to the public sector. The conditions in the private sector are very much worse, and things like the gender pay gap is very, very much higher in the private sector than it is in the public sector. You don’t tend to get family-friendly policies. The public sector has always led its way in that.
So women did badly in that respect, and women would do better, particularly women would do better, from a expansion of the public sector and a rebuilding of the public sector. Not necessarily to be exactly what it was before. But to be something that really can benefit everybody in society. Because it recognizes that some things are much better provided collectively than for individuals going out and buying on the market. And child care’s quite a good example of that, as are other caring services.
DESVARIEUX: All right, Sue–oh, John, did you want to just jump in?
WEEKS: Yeah, I would just say briefly in addition to what Sue said, the public sector has a more compressed wage structure. So the difference between the poorest paid and the best paid in the public sector was much, much less than the private sector. I mean, that’s so obvious that I hesitate even to mention it. But that means as you cut public sector employment, which has happened to a draconian extent in Britain, and you get the replacement of it with private sector employment, of low-wage employment, that in itself increases inequality.
DESVARIEUX: All right. John Weeks and Susan Himmelweit joining us both from London. Thank you guys for being with us.
HIMMELWEIT: Thank you.
DESVARIEUX: And thank you for joining us on The Real News Network.
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.