A report this week found that the worsening cost of living crisis will lead to the biggest rise in inequality since Thatcher, writes Ken Livingstone.
The Resolution Foundation warned this week that falling living standards for the poor in the period ahead will threaten the biggest rise in inequality since Margaret Thatcher was prime minister.
In response, Labour’s shadow chancellor John McDonnell commented that: “It demonstrates to us all once again that the economy under a Tory government will be rigged for those at the top with poor and middle income households facing their worst parliament for income growth for a period of time.”
What the findings mean is that the current parliament would be the worst for living standards of the poorest half of households since records began.
In terms of living standards, it suggests that between 2015 and 2020, the poorest half of households will see incomes fall by 2 per cent.
To put this in perspective, there was a rise of 1 per cent in the five-year period from 2005, even though those include the deepest recession since the 1930s!
Broadly speaking, inequality was roughly steady after a massive increase from Thatcher’s victory in 1979 to the early 1990s.
As now, in that period we were confronted with an ideologically driven Tory offensive that damaged the economy.
The forecast that inequality will soar again is based on the idea incomes will fall for the poorest half of the population while the richest fifth will see a gain of about 5 per cent.
This element — the heightening of already stark inequality — is a direct consequence of the Tories’ reactionary policies on tax and benefits, which are set to continue especially as the Tories are both failing to take real action on tax avoidance and are engaged in massive corporation tax giveaways.
This is a political choice to deepen inequality. Indeed, the week before this report was released by the public accounts committee (PAC) showing that HMRC’s tax collection efforts from high net worth individuals showing that the very wealthy are receiving preferential treatment.
This is part of a pattern that has been clearly identified by the Labour front bench — the Tories have run a rigged economy where the super-rich pay less and less in tax while earnings for average working households are still below their level of a decade ago.
It is nothing short of a national scandal that the amount lost in tax from the super-rich would be enough, to give one example, to help end the crisis in social care.
To give another, the cost of Tory corporation tax cuts — worth almost £15 billion by 2021 — is equivalent to the cost of employing 10,000 teachers, 10,000 police officers and 12,000 nurses full-time, every year, for a decade.
In terms of the national political debate, we now need to explain to people that while Theresa May has claimed she will take action to support those who are “just about managing,” rising inflation and an end to recent strong jobs growth will hit the less well off the hardest, increasing further inequality and signalling an approaching cost of living crisis.
Most analysts now agree we are entering a period of further welfare cuts and sluggish wage increase at a time of flat productivity, rising oil prices and a sharp fall of the pound since the EU referendum last June.
The Resolution Foundation report suggests that low and middle-income families with children will be among the hardest hit.
What is vital to understand is that — under Jeremy Corbyn’s leadership — Labour now has both a credible and coherent economic alternative based on investment that will benefit the majority and not the few.
This includes a new approach to tax, social and welfare policies and guaranteeing the future of public services such as the NHS.
At the time of the Autumn Statement, Labour called for an end to unfair cuts to in-work benefits, while the Tories were going ahead with tax giveaways to a wealthy minority.
However, Chancellor Philip Hammond and May chose to carry on with the work of their predecessors George Osborne and David Cameron.
Now, they propose a “bargain basement” post-Brexit Britain that will threaten, among other things, the very existence of NHS.
“It is becoming clearer by the day that working families will be forced to pay for a Tory Brexit that favours the rich and not the rest of us, as our country faces its biggest rise in inequality since Margaret Thatcher,” said McDonnell.
In contrast, the next Labour government is committed to rewriting the rules of British economy in favour of working families with, to give just one example, living wage expected to be £10 an hour by 2020.
Our job now is to fight the Tory cuts all the way and popularise our progressive alternative. Those in Westminster thinking about another sustained campaign of destabilisation of Labour’s leadership team should think again and get behind our programme to invest in our future and for a better Britain.
First published in the Morning Star