Politics

Why the Conservatives must slay their sacred cow

April 30, 2010
Cameron wants to be tough on inequality. But does his party?
Cameron wants to be tough on inequality. But does his party?

When I look back at this election campaign in weeks to come, one of the most memorable parts for me won't be the televised debates, but those Conservative posters—everywhere you go—of Gordon Brown grinning, asking people to vote for him because “I took billions from pensions,” and “I let 80,000 criminals out early.” One poster in particular sticks in my mind: “I increased the gap between rich and poor.”

Hang on a minute. The Conservative party—who oversaw escalating inequality in the Thatcher-Major years—has the nerve to attack Labour for growing inequality? Isn’t this the same Conservative party whose leader, Margaret Thatcher, attacked the opposition for fixating on the gap between rich and poor in her final performance in the House of Commons? I thought the Tory logic was as long as the absolute condition of the poorest improved, growing inequality didn’t matter?

Maggie was wrong: inequality does matter. But I think David Cameron knows this.



High levels of inequality will prevent the flourishing of the connected society he’s keen to foster, where proactive citizens volunteer and start new schools. Fewer people volunteer and fewer people trust each other in more unequal societies. So, despite scepticism from Thatcherite ideologues in his party, Cameron has pledged to tackle income inequality in the public sector, calling for the salary of the highest earners to be linked to the lowest. It’s a positive move—but inequality in our society derives much more from executive pay in the private sector

Labour has concentrated on closing the gap between the poorest and those on middle incomes through increased benefits and tax credits. Welcome as this is, Labour was (and still is) too timid to address the huge gap between the very wealthy and the rest of us, fearful of appearing anti-enterprise. So during the last 13 years the pay of chief executives has sky-rocketed: they got paid 47 times the average earnings in 2000. Today, they get paid 81 times more. A scar on Labour’s record, the Gini coefficient—which measures the gap between the country’s richest and poorest—stands at its highest since 1961.

In a capitalist society, there will and should be some degree of inequality in income. It incentivises hard work and innovation, generating wealth and new jobs that can benefit all. But it would be wrong to say the eye-watering earnings of city folk are simply a reward for their hard graft, dished out by the invisible hand of some objective Hobbesian Leviathan. These bosses set their own pay. And the pay of all their staff.

Too much inequality poses serious problems, problems all Conservatives should be concerned about. Led by the work of Richard Wilkinson and Michael Marmot, there is irrefutable evidence that there is a correlation between higher inequality and lower levels of social mobility and children’s health. Communities with greater income inequality have higher crime rates, and in more unequal societies more people have mental health problems, while expenditure on education—perhaps the greatest route out of poverty—is lower.

It’s not just the poor and vulnerable who suffer from growing inequality: so do those on modest and middle incomes. Look at personal debt. In 1990, net personal savings stood at 3.9 per cent of household income. By 2008, it was -4.4 per cent. Since 2005, the average Brit has been borrowing more each year than saving. This decline in savings is not matched in more equal societies, such as Germany and France, where personal savings have increased over the past decade.

Across Britain, ordinary families have become more indebted in order to maintain living standards as their relative wages have declined. Housing is perhaps the most striking illustration of this. Prices have risen faster than average salaries, forcing people to take larger mortgages. The goods and lifestyle paraded by the rich and glamorous—on TV and in magazines—distort people’s impression of what they should have, leading them to keep paying for expensive things on credit. Consumer credit has risen dramatically over the past two decades, and is higher here than in any other European country.

And as banking and entertainment now have such a higher pay premium than other sectors, young people are increasingly aspiring only to these professions: 54 per cent of today’s 16 year olds want to be celebrities, whereas only 4 per cent want to work in teaching. The City remains one of the most attractive destinations for graduates, with 3 in 10 under-25s now working in financial services, prompting the governor of the Bank of England to warn that too many talented young people are lured into the well-remunerated financial sector.

This narrowing of the professions young people aspire to is damaging in three ways. First, it demotivates those people who don’t land a job in these sectors. This has implications for morale, productivity and wellbeing. Second, it reduces the talent pool other crucial sectors can select candidates from, ultimately affecting companies' performances. Third, it glamorises the stereotypical values associated, albeit often unfairly, with bankers and celebrities: aggressive competitiveness, personal profiteering, materialism and showiness. These values become merited and mimicked—more than things like helping others and an ethos of public service, which are more closely associated with teaching and medicine.

Lower savings, lower productivity, less social capital and less social mobility—all parties should very concerned about the corrosive social and economic effects of gross inequality. But for too many Conservatives the private sector is the sacred cow. Cameron knows very well it’s an easy sell in his own party to attack the public sector “fat cats” by linking their earnings to the lowest paid. What would be more radical, more daring, is exploring ways to tackle inequality in the private sector—through a higher minimum wage, modern-day wage councils and the encouragement of employee-owned firms.

We need capitalism—yes, Margaret you were right—but we now need a capitalism which is an engine for prosperity for all, not just for the few.

Ryan Shorthouse is the spokesman for Bright Blue, which campaigns for progressive policies from the Conservative Party.