Issue 208 of SOCIALIST REVIEW Published May 1997 Copyright Socialist Review

Election special: Who benefits?

Sabby Sagall

Inequality is at a postwar record. According to 1993 Inland Revenue figures the richest 1 percent of the UK population, about 450,000 people, owned 17 percent of the UK's private wealth, with the richest 5 percent owning 36 percent of the total. At the other end of the scale, the poorest half of the population owned a mere 7 percent down from 8 percent in 1979. In just one year 1995 Britain's rich became 15.5 billion richer.

As for income, the disparity between rich and poor started to grow before 1979. However, during the 1980s the gap widened sharply. According to the Child Poverty Action Group, between 1979 and 1993/4 the real incomes of the bottom tenth of the population fell by 13 percent, while those of the top tenth increased by 65 percent. The income gap between the richest and the poorest has grown by 78 percent.

There are several reasons for this ballooning inequality. One is Tory taxation policy. The 1980s saw increasing cuts in top rates of tax. Income tax fell from 83 percent to 40 percent, and corporation tax from 52 percent to 33 percent. In addition, there has been a switch from direct to indirect taxation, with those on lower incomes paying the same for any item as those on higher incomes. It was estimated in 1995 that the poorest 10 percent of the population gave up 20 percent of their gross income to indirect taxes while the top 10 percent only gave up 8 percent.

The Tories cut the link between social security benefits and wages, tying them instead to prices. This severed the connection between income support and the general rise in living standards. For example, if the pre-1979 method of uprating pensions had been kept, a single person would have been receiving 86 a week instead of 62.45, and a married couple 137 instead of 99.85.

There have been other key factors the erosion of employment regulations through the attack on trade union rights, the abolition of wages councils, and the spate of measures aimed at increasing the 'flexibility' of the labour market. These have enabled employers to drive down the wages and working conditions particularly of the unskilled and badly organised workers. Casual labour enables the bosses to cut the wage bill by sacking workers when demand is low and rehiring them when it starts to rise.

Public expenditure cuts have meant both central and local government have increasingly contracted out public services to low cost providers, resulting also in lower unskilled wage levels and worsening working conditions.

Whether the new Labour government will do anything about inequality is one of the yardsticks by which it will be judged. All the signs are that it will fail. The exciting thing about the scale of the Tory defeat is the confidence it gives ordinary working people to fight on these crucial issues that lie at the root of growing inequality and so much misery.


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