‘Government fails to deliver’ on income inequality

More action is needed to address income inequality, according to a collection of articles scrutinising the coalition government's record mid-way through its term of office. Despite early suggestions that inequality would be a high priority for the government, it has so far failed to deliver. 

Key points

  • Excessive levels of income inequality are holding back economic growth and causing instability. The upward redistribution of income in favour of a small elite has restricted consumer spending, encouraged debt and created an economy more vulnerable to financial crises.
  • Efforts to curb high pay in the private sector have so far been inadequate to produce any meaningful change.
  • Although the national minimum wage has been extended to apprentices, and the adult rate paid to those aged 21 for the first time, the below-inflation uprating of the level of NMW has tightened the squeeze on low-waged employees.
  • There is evidence that high pay rates in local government may be moderating – but little sign that those at the lower end of the pay scale will benefit. Some of the starkest examples of taxpayer-funded pay inequality, particularly in the public services industry, remain unaddressed.
  • Government policies on benefits, including the introduction of universal credit, are generally regressive: the poorest tenth of households with children stand to lose over 5 per cent of their income, whereas the richest tenth lose only 2 per cent.
  • The impact of tax rate changes is mixed. Those at the 'bottom end of the top decile' (that is, not the very richest) have fared worst. But those at the lower end of the pay spectrum may have fared worse than those in the middle, in part because measures to help low earners – such as the increased income tax threshold – benefit many people higher up the income scale, while having little impact on very low earners.

Overall, the current government has 'done little to meaningfully address' income inequality since gaining office in May 2010 – despite evidence of the electorate’s growing frustration with unjust income inequality.

SourceThe Coalition Government and Income Inequality: The Half Term Report, One Society
LinksReport | One Society press release | New Statesman report