In Depth

Oxfam report another nail in the ‘trickle-down’ coffin

Even Barack Obama is calling for higher taxes on the wealthy: but what does his ‘bro’ Cameron have to say?

The Mole

Oxfam’s warning that the richest one per cent of people will own 50 per cent of the wealth by next year unless urgent action is taken to tackle inequality is another nail in the coffin of the Thatcherite concept that wealth will “trickle down” from the rich to the poor if you give them enough tax breaks.

Everyone from IMF chief Christine Lagarde to Bank of England Governor Mark Carney has been warning that inequality has gone too far. Now, as billionaires and economists gather in Davos, Oxfam has joined the chorus.

Oxfam isn’t exactly saying ‘Vote Labour’ – but its message puts pressure on the Tories to do more to level the playing-field, and can only give Ed Miliband encouragement as he argues that Tory-Lib-Dem coalition stands for the rich against the poor.  

Certainly, Oxfam’s suggested solution – that western governments clamp down on tax-dodging by corporations and super-wealthy individuals, and that taxation be shifted from what you earn from work to what you amass in wealth - are good ‘QT’ answers: the sort that receive loud applause on BBC’s Question Time show.

There’s further evidence of the wealth gap from the Equality Trust, which campaigns to reduce inequality in the UK. It found that the richest 100 families in Britain in 2008 had seen their combined wealth increase by at least £15bn, a period during which average income increased by £1,233. 

US President Barack Obama will highlight inequality tomorrow in his State of the Union address when he will propose raising $320 billion in extra taxes over the next ten years from the one per cent richest in the US to fund benefits for working families. Larry Elliott in The Guardian says it will make inequality a "pivotal" issue for the 2016 presidential elections.

Needless to say, the Republicans, now in control of both Houses of Congress, will never let it happen – but it’s the thought that counts. 

The Tories are clearly worried that inequality will become a "pivotal" issue in our general election, too. But Cameron has – so far - come nowhere near suggesting such a radical solution as his ‘bro’ Barack.

Instead, the PM will today give an election commitment to return Britain to "full employment". Well, sort of…

As Norman Smith, assistant political editor of the BBC, pointed out on Radio 4’s Today programme, Cameron has discovered to his cost that setting out specific targets - for instance, on immigration - is dangerous because he inevitably misses them.

So “full employment” does not mean achieving the target of three per cent unemployment set by William Beveridge to fund his plans for the post-war welfare state.

Instead, Cameron is aiming at the more woolly objective of pushing the UK up the employment league table. The UK is currently in fourth place with 72 per cent employed: Cameron wants to replace Germany as the leader with over 74 per cent in work.

Then there’s the question of what exactly Cameron means by “employment”. Nothing gets the Question Time audience cheering like the observation that too many of the so-called ‘new jobs’ created under the coalition government are either part-time appointments or zero-hours contracts, which mean the employee has no idea whether they will still be earning next week.

With so much talk of taxation and inequality in the air, one might expect the City to be screaming ‘Vote Tory!’ from the rooftops.

But a straw poll of City bankers by the Financial Times suggests that what they really fear is the prospect of post-election limbo with no clear-cut winner on 7 May.

“Both Conservatives and Labour are calling into question parts of what have been political consensus over the past 30 years, in terms of fiscal stability, lower inflation, economic openness, EU membership and business friendliness,” said Michael Saunders, a Citibank economist. 

“It’s not the case that for markets there’s a safe outcome. All the outcomes raise uncertainties,” he added. “In previous elections, markets have cheered for one side and we’re not seeing it this time.”

Citibank believes a coalition of the left involving Labour, the Liberal Democrats and possibly other smaller parties is the most likely outcome. Whatever the result, the UK faces “major political uncertainties” compared with the “fairly stable” politics of the past few decades.

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