Tackling Economic Inequality is the Real Power-Play

In recent weeks, inequality has cemented itself within the political lexicon. Alongside Obama’s promise of action on inequality and George Osborne’s stated desire to raise the national minimum wage, Ed Miliband has increasingly identified inequality as a unifying theme, tying together a number of social and economic problems.

In an article for yesterday’s Observer he wrote “For decades, inequality was off the political agenda. But there is growing recognition across every walk of life in Britain that large inequalities of income and wealth scar our society.”

But Miliband uses this as a bridge, suggesting there is another form of inequality that needs to be challenged – power inequality. One such example is that of the unresponsive state, oblivious and uncaring to the needs of citizens. For Miliband, as with many before, the best way to tackle this is to pass power down from state to the local and individual level. From personal budgets, to ownership of personal information, Miliband argues that this can deliver a more efficient and effective public sector.

While he is right to identify power inequality as a cause of concern, the danger is that this approach may artificially split power, wealth and income into separate concerns. In reality they are intrinsically linked.

For example, economic inequality affects the political response to voter demands.  Research shows that US senators are more likely to listen to the preferences of high and middle-income voters than low-income voters. If power is genuinely devolved to the individual level, this problem may be avoided. But if it means central government responding to local needs, it must be questioned as to whether all local needs will be genuinely represented, or just those from the middle classes up.

Miliband also makes an accurate point when he says a “Serco-G4S state can be just as flawed as a centralised state.” With many Government contracts requiring significant capacity, large companies like G4S are in pole-position, despite previous high profile mistakes. But it is not only the size and power of these companies we should be concerned about.  One of the major issues with the public services industry is the huge rewards it offers its executives, irrespective of outcomes; rewards that are not felt further down the staff chain. New research has highlighted how companies with higher pay ratios are often less successful, with higher staff turnover and more work-related illness.

A more practical and painless way to challenge an unresponsive state would be to require PSI to provide greater transparency as to their work and pay practices. The ‘Review of Fair Pay in the Public Sector’ included recommendations for PSI organisations to provide pay ratios. This is a sensible start, but if users are to be given more power, they must also have access to more information. As such, PSI companies should also be subject to Freedom of Information requests.

It is encouraging that politicians of all hues are increasingly willing to discuss inequality, for too long it has been off the political agenda. But they must recognise that many inequalities – power, gender, race, are either caused or exacerbated by economic inequality.  If we want to fix broken markets and an unresponsive state, we need policies that tackle economic inequality. 

John Hood, Media and Communications Manager