UK Poverty Post

Only economic democracy can end this sterile tax and spend debate and truly address inequality and poverty

At the next general election it seems we will have a choice between deep public spending cuts and tax rises on the one hand or savage public spending cuts and tax rises on the other. This is obviously bad news for those who wish to see poverty eradicated. However, even if the record levels of public spending under New Labour were somehow, miraculously, to be maintained we would, presumably, carry on roughly as we are – being one of the countries of the developed world most blighted by relative poverty. If public spending is proven as a blunt weapon in the fight against poverty where can progressives turn?

First of all, eradicating poverty has to be based on making the UK a more equal society. In mainstream politics poverty has been surgically separated from – and to a great extent substituted for – debates about inequality. Consider this recent bizarre and irrelevant response from Gordon Brown to a question in the House of Commons from the SNP’s John Mason.

This separation conveniently allows politicians to promote poverty relief whilst leaving the rich alone. Years of economic growth have made this easier – a bigger pie naturally muffles questions about the allocation of the pie. However, whatever way Ministers would like to tip-toe around the issue, poverty is caused by an economy’s underlying failure to distribute income equitably and, shamefully, the UK is a very unequal country.

Second, progressives have to recognise that unequal distribution of income arises from the basic structures of our economy which, currently, actively facilitate the concentration of wealth at the top leaving crumbs for the rest. To address poverty – and its flipside, excessive wealth – progressives have to deal with inequality and the structures of our economy that produce it. I suggest they start with the modern company.

UK company law has, under steady pressure from the business lobby over many decades, evolved to a situation where companies can be owned by a single shareholder – a complete undoing of the very essence of the original joint-stock company where people would come together “in company” for a particular purpose. Large “tax efficient” groups of companies now routinely funnel vast amounts of low-taxed wealth upwards – usually as dividends – to the ultimate shareholder. This can be a private individual, a family trust or a company (usually publicly traded) from which small managerial elites extract huge wealth. Whatever, vast wealth flows to a few unaccountable people with little stake or interest in wider society and its concerns. This wealth is then often held offshore with all the dire consequences that causes.

With wealth comes power. National tax, labour and environmental laws are made “business-friendly” to attract companies and hoped-for employment. In this context, with governments being little more than sock-puppets sitting atop the guiding hand of the market, it is extremely difficult to see how they can offend the wealthy companies and individuals and re-distribute any significant wealth to create a more equal society and address poverty. Compounding this, our steeply unequal society has made us all cling frantically to our place on the ladder and hardened our attitudes to the poor below us. As well as the increasingly harsh language of the immigration and asylum debates we have now, sadly, developed a sense of “deserved inequality” which further undermines attempts to argue for redistribution. The tax and spend approach really does seem to have run its course.

So let’s go back to the structures of the economy. Let’s campaign to bring the units of economic organisation under the control of the people who work in them or the people in the local communities in which they operate. Let’s start agitating now to have shares transferred to employees, employee representation in management and laws that favour co-operatives over companies. Let’s start campaigning around pay differentials and advocating co-operative structures in new areas like public service delivery. Only through real economic democracy can we prevent massive inequality and poverty and make economic activity take full account of the interests of the vast majority and the environment.

The views expressed in this blog are those of the author and do not necessarily reflect the views of Oxfam GB.