"It’s only natural that a Labour government would want to concern itself with inequality, not least because that’s what many voters want. According to the Resolution Foundation, the share of the public citing poverty and inequality as one of the most important issues facing the UK rose from 7 per cent in 2010 to 19 per cent on the eve of the pandemic.It seems obvious that inequality in the UK has been rising since the financial crisis, and in particular since the Conservatives took power in 2010. No catechism of the UK’s woes is complete without the rote intonement that “inequality is rising”.And yet, it isn’t. Don’t take my word for this. Take a look instead at the World Inequality Database, painstakingly assembled by a team including the economic superstars Emmanuel Saez, **riel Zucman and Thomas Piketty. All three are closely associated with the view that inequality is a serious problem.And yet the WID is clear: in the UK, the share of income flowing to the richest 1 per cent is lower than it was during the financial crisis. It is much the same in the most recent numbers as it was in 1997, when Tony Blair was elected, and this is true both for pre-tax income (of which the richest 1 per cent get 13 per cent) and for post-tax income (8.5 per cent). Income inequality hasn’t risen, it’s fallen. Redistributive taxes have given it a little extra nudge.If the point about redistributive taxes seems surprising, it shouldn’t be. We have all been told — rightly — that the total tax take relative to the size of the economy is near the highest level for more than 70 years. Yet for people on average incomes, direct taxes (income tax and national insurance) are at their lowest level for decades.That is partly because more taxes are levied through indirect taxes such as VAT, but also because the rich pay more tax than they used to. According to Paul Johnson of the Institute for Fiscal Studies, someone earning £200,000 a year pays about £10,000 a year more in tax under today’s tax arrangements than they would have in 2009.Meanwhile, for someone on average earnings, the total income tax and national insurance paid has fallen fairly steadily from about 30 per cent in the late 1970s to less than 20 per cent today. Record taxes? Not for Jane and John Average.If income inequality has fallen, and taxes have become more redistributive, then what is the problem? The answer: slow growth. Broadly-based economic growth supplies the funding for public services and benefits, while easing people’s concerns about affording the essentials of life. The UK’s problem is not that economic growth has been too narrow, but that it has barely happened at all. What we have had is broadly-based stagnation."
