Why growing inequality threatens prospects for future generations.
"You can neither be too rich nor too thin"
The Duchess of Windsor
Wealth is news. the Sunday Times Rich List tells us the top 1000 have doubled their wealth in five years, the UK has more billionaires per head of population than any other country and that London is the world capital of the super rich.
Before we decide whether to dance in the street or wheel out the guillotine, think about this. A million seconds is equivalent to 12 days and a billion seconds to almost 32 years. That puts the difference between a million and a billion pounds into perspective.
According to the Office For National Statistics, the number of millionaires has risen by 50% in four years despite the financial crisis. 9% of households have assets worth more than £1million. Should we be celebrating? It IS good news that more British people are more prosperous and that the richest people in the world regard Britain as a safe haven and politically stable.
The bad news is that growing inequality is approaching pre first world war levels. The richest 10% in Britain own 44% of total national wealth, five times more than the poorest 50% of the population who collectively own 9%. The figures for share of national income are even more startling. The share going to those on the lower half of earnings has fallen by 25% since the 1970's (OECD) whilst the slice going to the top 1% has increased by 50%. The most recent figures from HM Revenue and Customs confirm that the return of economic growth in the last year has overwhelmingly benefited the top 1% of earners.
This matters because the more unequal societies are the most dysfunctional, unhealthy and violent. Looking ahead, there are danger signals: persistently high youth unemployment, the threat to middle class jobs by digitisation, unaffordable housing, the increasing cost of energy, transport and higher education, limited legal aid, declining trust in authority (who trusts the police?) and public disengagement from democratic politics. IF the 30 year trend towards greater inequality continues and the middle classes lose more wealth, power and influence to a plutocracy, the fundamentals of democratic society will be compromised. There will be little room for mutual interest, mutual respect, contract and consensus in a world where the super rich are in control.
The crucial factor that should concern us all is that the young are likely to be less prosperous than their parents whilst a tiny minority grows fantastically rich. That could undermine commitment to civil society and would be bad news for everyone.
What is the solution? Thomas Picketty in his best seller Capital in the Twenty First Century forecasts an era of growing inequality as returns on capital exceed economic growth. He recommends an international global tax on capital but that is never going to happen. We should not deter people from creating wealth but we do need them to be more socially responsible.
Too many of the super rich pay proportionately less tax than most of us and, despite a minority of exceptionally imaginative and generous people, most are not charitable, unlike their forbears. This should be a scandal. The amount of tax "lost" is estimated to equal the defence budget or the cost of local government.
The government is responsible for who pays tax, not the tax payer. Government should follow US practice and insist all UK citizens pay British tax wherever they live. We need all party agreement to a strategy and consistent policies to encourage more philanthropy so that it becomes financially disadvantageous and socially unacceptable not to give.
The Financial Times has called for the reform of capitalism and this capitalist agrees: labour should receive a fair share of growth, everyone should pay their fair share of tax and the richer we are, the more we should give to charity. Who will provide the necessary moral and political leadership to ensure more social responsibility? There is no answer. A lack of leadership is the curse of our age.
John Nickson is the author of Giving Is Good For You: Why Britain Should Be Bothered And Give More. He is donating his royalties to charity.