Why does the UK need Robin?

Most people don’t realise that poverty in Britain is rife. This harsh reality makes a Robin Hood Tax even more important.

In Britain 13.5 million people live in poverty, that’s one in five. Without radical reform this situation won’t change much in our lifetimes.

If this was widely understood, decision-makers would be far more likely to implement radical but rational measures like the Robin Hood Tax.

The state of the nation

Here are some hard facts:

Rich richer, poor poorer:
Since 2002 the poorest tenth have become £9 a week poorer (a lot if you can barely get by). Meanwhile, the richest tenth have £94 more a week (DWP).

The assets owned by the richest tenth in Britain utterly dwarf the poorest tenth’s possessions; they are at least 100 times more valuable (The Government’s ‘Hills’ Report’, Jan 2010).

Tax just isn’t fair:
The poorest fifth pay more tax as a proportion of their income than the richest fifth (39 per cent as opposed to 35 per cent). (ONS, 2009).

In that context the 0.05% Robin Hood Tax doesn’t really seem all that radical.

Did you know that the differences within the top 0.5% of the country (where many high-flying bankers live) is many times greater than difference between the top 1% and the bottom 1%?

It ranges from just over 2.5 million up to Roman Abramovic’s £11 billion so the richest man is actually at least 4,273 times richer than anyone in the top 2%.

It was like this even before recession:
The Government’s figures show little change in the real value of earnings across the distribution for men or women between 2002 and 2008, even before the recession started.

According to the Joseph Rowntree Foundation’s (JRF) latest data analysis, 2004-05 marked a “key turning point”, with poverty, unemployment and repossessions on the increase (Joseph Rowntree Foundation, December 2009).

Poverty in Britain cannot be solved through economic recovery alone.

Things aren’t getting better:

The long view is far starker. Professor Richard Wilkinson and Kate Pickett document in their influential book, ‘The Sprit Level’ how Britain is far more unequal than it was in the 1970s.

Inequality rose increasingly rapidly during the 80s and was almost 50% higher by 1991 than it was at the end of the 70s. We’re still in more or less the same place we were at the end of the 20^th Century.

Politicians of all stripes recognise this picture and worry about the wider implications for the whole of Britain.

Alan Milburn, who works on social mobility for the UK Government, said as long ago as 2003 “Children born — as I was — in 1958 were far less dependent on the economic status of their parents than those born in later years.

Birth not worth has become more key to life chances. If these trends continue, Britain will be in danger of grinding to a social halt. Responsibility and enterprise will be thwarted.”

Poverty in Britain is a trap:
For years political actors have agreed that equality of opportunity is right. Yet the harsh reality is that gross inequality of outcome (itself often unjust) often leads to inequality of opportunity.

Many people just don’t get the chance to develop the merit they require to flourish in a meritocracy. Just look at exam results (often slated as too high). Last year only 27 per cent of children eligible for free school meals got five GCSEs at grade C or above including maths and English, compared to 54 per cent of other students.

In 2009, 175 boys at Eton got three As at A-level. For the entire population of state schoolboys on free school meals, the total was 75. Government figures show that the paths of children from low and high socioeconomic status who have the same high IQ start rapidly diverging when children are as young as 22 months old (Marmot Review, 2010).

The fact that it’s hard to escape poverty means that the problem isn’t just big, its endemic.

Many are trapped in debt:
At the bottom of society, even if you total up the value of everything someone in the bottom owns, you still find them deep in debt.

They don’t just have next to nothing; they have less than nothing. These are people who play by the rules but still need to borrow to stay afloat however hard they work. It’s impossible to live like this endlessly.

Your identity can make you poor:
The Government’s National Equality Panel has concluded, “the inequality growth during the last 40 years is mostly attributable to growing gaps within groups rather than between them”.

But as the panel also points out, there are still systemic differences between groups that are totally unrelated to experience, education and access to services. For example, 67% of Pakistani and Bangladeshi children are living in poverty, compared to 27% of white children (DWP).

Women are worse off than men:
Data in the Labour Force Survey shows that even when allowing for shorter working hours, women in full time employment earn 22 per cent less per week than those of men. Women’s earnings are highest for women in their early

thirties, and they actually decrease for subsequent years. Only women with high qualifications who work in the public sector tend to see their earnings rising throughout their lifetime (Hills Report).

Being poor means more than having no money:
‘The Spirit Level’ points out that the inequality in developed countries directly correlates with worse levels of wellbeing (social problems like crime and bad health).

The Government’s recent ‘Marmot Review’ of health inequalities showed that poor people in Britain live much shorter lives, and on average die seven years earlier than the affluent.

They also spend more time disabled: 17 years earlier on average. This is surprising given that Britain has a National Health Service which is free at the point of use and which must meet basic standards.

The stats point ultimately to enormous disparities between the lives people lead as a result of the amount of money they have.

Poverty in Britain is similar in nature to poverty anywhere:
In developing countries people are often locked in poverty because their monolithic undeveloped economy is intertwined with a rigidly stratified society that structurally militates against individual or small collective attempts to break free from poverty.

There, new forms of economic activity can ultimately help to break these external constraints. One might assume that a developed economy that offered economic freedom, public education and health care, would contain the kind of society that enabled people to improve their lives by their own agency.

The reality described briefly above completely contradicts that assumption.

Poverty harms us all:
The Joseph Rowntree Foundation estimate that poverty in Britain costs the economy £25 billion a year. This economic cost is just the beginning.

The decreased wellbeing described above that results from inequality doesn’t just affect people in poverty; it creates social problems like crime, poorer mental health outcomes and decreased community cohesion that affect everyone.

Inequality in context

If any of this wasn’t clear to you before, don’t worry, you aren’t alone. The IFS have pointed out “Most people have little understanding of the income distribution, and many are much further up the scale than they imagine.”

The number of people identifying themselves as ‘middle class’ has increased markedly in recent years. As Alastair Muriel who has led the IFS’s work recently observed in the Financial times, whilst you might think a young single graduate in a first job in the civil service fast stream or a top accountancy firm on around £25,000 would be about in the middle of the income distribution, only about a fifth of the population stands between that person and the Queen.

Consider almost any classic scenario of ‘middle England’ and you are probably in for a shock. Only 13 per cent of the population are richer than a couple without children earning £50,000 between them. If they have two children under 13, they are still better off than 70 per cent of the population.

The fact that most people (rich and poor) are unaware of where they sit in the income distribution is part of the problem. Widespread unawareness helps to deter politicians from enacting policies that would reduce inequality – policies like the Robin Hood Tax.

Robin’s role

We can draw two lessons from the reality of UK poverty – one sobering, one cheering.

Firstly, even experts have underestimated how complex and comprehensive the problem is.

The fact that poverty has only remained roughly stable over the past 20 years despite political consensus that poverty in a rich country is wrong shows poverty is a tough nut to crack.

Our lack of progress requires some deep soul searching.

As outlined above, gross inequalities destroy any pretence of meritocracy by preventing many from acquiring the means to compete for opportunities that are only nominally available to all.

This reality is already eliciting a variety of responses. For example, Philip Blond and John Milbank recently asked whether, if we want to make society fairer but we accept that some inequality is the product of real variations in merit and graft, won’t we need to find ways to differentiate between merited and unmerited inequalities before we start ending them?

There are big discussions ahead, but one thing is certain: poverty will be endemic in Britain until there is massive social and economic renewal.

But more positively, if innovative measures like the Robin Hood Tax are passed the outlook will be much brighter.

We might not know everything, but we do know a lot.

We know that basic faults in the system make things worse. The state’s actions sometimes inadvertently worsen poverty.

That means the Government can achieve real change through reform. For example, aside from the blatant unfairness of much of the tax system, why is it that Marginal Tax Rates (the proportion of the additional income gained through working that is then rescinded to the Government through tax or the withdrawal of benefits) are far higher for people earning less than £13,000 than anyone earning more than that?

In fact it is 50% higher than for people earning more than £150,000! This situation gets far worse if we go further down the income scale.

For example, for those who can earn just enough to pay tax but can’t find more than 30 hours of work a week, working brings no material reward. When you play by the rules, do your best to contribute by working and still lose out, that’s not fair.

That’s just one of the reasons we need a Robin Hood tax.

We estimate it will cost £2.7 billion per year to increase earnings disregards and introduce a standard 55% withdrawal rate for both out-of-work and in-work benefits, to end the benefit trap (based on calculations by the Centre for Social Justice and the IFS). A Robin Hood tax would give us billions each year so the landmark achievement of pro-poor welfare reform would be just the beginning of what a Robin Hood tax could do.

Actually we could also end fuel poverty, create affordable housing, help break the manacles of personal debt, and meet the Government’s targets to halve child poverty.

If there’s one final lesson to be drawn from the small example of welfare reform it’s this: the Robin Hood tax isn’t about stealing from the rich and just giving to the poor.

In a time of severe fiscal constraint, a Robin Hood tax would be a lifeline that if deployed effectively would allow people in poverty to make a better life for themselves and their children, a chance denied for many for decades, not just since the downturn.

A Robin Hood tax could help us create the society we all wish to live in.

We may be in the shadow of recession, but we shouldn’t wait until recovery dawns to fight poverty.

After all, Robin Hood didn’t wait for the Lionheart’s return.

Scribed by merry man Ben Braveheart from the band of Oxfam UK Poverty.

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Posted in: In the UK, Why we need Robin