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Why the Rich Are Getting Richer

Over the last two decades the UK has gone from being one of the most equal to one of the most unequal countries in the industrialised world.

nef’s new report, Why the Rich Are Getting Richer, examines what caused this surge in economic inequality and how policymakers can address it.

Key findings:

  • The 80s and 90s saw an unprecedented rise in economic inequality in the UK.
  • UK levels of inequality are not inevitable; they are the product of a vicious cycle.
  • We need to move beyond taxation to tackle inequality in Britain.
  • Existing Government policy is undermined by its failure to address inequality.

Dr Faiza Shaheen, co- author of the report commented:

 “From the Occupation of the London Stock Exchange to the looting and rioting on the streets of deprived parts of our cities, the scale of inequality in the UK is becoming harder to ignore.

“Politicians may make noise about bonuses and high pay, but over the last thirty years they have allowed the UK to go from being one of the most equal to one of the most unequal countries in the industrialised world.

“A cycle of inequality that begins at birth means that the rich are getting richer, and taxation is not enough to address the divide.”

1. A surge in economic inequality

In 1979 the UK was one of the most equal industrialised countries in the world, today it is one of the most unequal. The only comparable rise in inequality from this period was Russia’s following the collapse of the Soviet Union.

2. A vicious cycle

A cycle linking wealth, education, the labour market and globalisation has created the conditions for inequality to flourish and feed on itself.

3. Moving beyond taxation to prevent rather than cure inequality

Too much emphasis can be put on tackling inequality through taxation. Tax treats the symptoms of our unequal system, but not the causes –unequal life chances, a lack of middle income jobs, a polarised education system. Tax is also becoming less effective as a policy tool meaning soon we will need to redistribute more to maintain our present level of inequality.

4. Policy implications

The coalition government’s failure to acknowledge economic inequality undermines its equality of opportunity and poverty reduction agenda. This is particularly true of its strategies for addressing social mobility, child poverty, and re-balancing the economy.

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