Is the Budget good, bad or neutral on income inequality? Currently there is no official assessment of how Budget measures affect the gap between rich and poor.
Is the Budget good, bad or neutral on income inequality? Currently there is no official assessment of how Budget measures affect the gap between rich and poor; though the Institute for Fiscal Studies (IFS) does make some observations.
The Treasury is behind the times. This year two heavyweight reports have focused on how inequality affects the quality of our lives, the health of our economy and the state of the communities we live in. Shortly, the Equality Bill – with its duty for public bodies to regard the socio-economic impact of their decisions – is set to become law.
The Chancellor is right that “those who have benefited most from the strong growth in incomes in past years should now pay their fair share of tax”. This is a crucial acceptance of the message that many different organisations have been lobbying on: top earners should bear their fair share of the costs of the recession and the recovery. Buried within the mass of Budget papers there was a positive announcement that the Chancellor will look for ways to help shareholders tackle executive pay in financial services.
But otherwise there was a disappointing absence of measures to change the damaging culture of high and runaway pay across all sectors, or tackle wealth inequality. Both will be further entrenched, and the impact of attempts to raise the bottom limited, unless existing one-off moves (like that on stamp duty) are made permanent and further such policies implemented.
The overall picture is of some positive measures at both ends of the income scale, without the Chancellor going beyond limited rhetoric to actually signal the type of changes needed to reverse three decades of high and growing income inequality.
These are his Greg Ford’s headline points:
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• A global bank levy could have some benefit; even if implemented unilaterally;
• Not re-imposing the tax on bonuses is a missed opportunity to start tackling root causes of high pay – as was unwillingness to investigate remuneration committees and other financial sector reforms;
• A full competition review of investment banking is needed, as currently ordinary savers are subsiding high risk activities without getting benefits;
• The Chancellor missed open goal and the bigger prize of bringing non-doms into the tax system, rather than focusing on offshore tax evaders; and
• Universal bank accounts are a good idea but need to be well-regulated so that vulnerable customers do not face higher exposure to predatory lending (or other inappropriate marketing of financial products) as a result.