IS CAPPING INCOME THE ANSWER TO BRITAIN’S WEALTH GAP CRISIS?
The wealth gap crisis in Britain needs to be addressed urgently. In February 2019, the Office for National Statistics published their report on the average household income in the financial year ending 2018. It revealed that the average income for the poorest fifth of the UK decreased by 1.6%, while, the richest fifth saw their income rise by almost 5%.
To put it simply, the rich are getting richer and the poor are getting poorer.
When the figures are this staggering, and when no meaningful efforts to address them are being made, it is no surprise that conversation around ‘alternative’ means of wealth distribution arises. The concept of a ‘cap’ on an individual’s wealth may seem outlandish, but it is definitely an idea worth discussing.
Nobody needs a billion pounds. Nobody. The fantasy of possessing this wealth is certainly a pleasant one thought – a life of luxury, with no need for any concern about juggling bills. According to HM Land Registry, as of December 2018, the average house price is £230,776. With £1 billion, the average person could repay their mortgage more than four thousand times over.
But, when one considers that if an individual earned £1 billion a year (after tax) and forfeited 90% of it, they would still be taking home £100 million, the idea of billionaires seems to be less palatable.
The very idea of extreme wealth actually becomes rather distasteful when examining the systematic flaws and bias against the working class. Where one’s government does not endorse a minimum living wage, any corporation that fuels a billionaire’s wealth will inevitably fail their lowest paid workers by design.
A CEO’s affluence will ultimately be driven by the poverty of their lowest-paid workers.
The disparity between the highest paid workers and lowest paid workers is astounding and undoubtedly raises moral questions. Take Amazon for example – their CEO, Jeff Bezos, earns the annual salary of his lowest-paid employee in less than 12 seconds. Rather than casting this excess as obscene, however, our society continues to glorify these hyper-capitalists. The ethos that if you work hard, you too can be a self-made billionaire while many of those working for you live below the poverty line is an ideology that is both pervasive and problematic.
Essentially, it has become socially acceptable for individuals to profit exponentially from other’s poverty. It’s modern slavery dressed up with capitalist indoctrination: ‘that’s just the way of the world’.
The minimum wage is some way short of a true living wage, and while this can be ‘padded’ by welfare benefits, it is clear that for too many this is not enough. No matter how hard the government tries to masquerade the minimum wage as that of a living wage, the facts remain that people simply are not able to survive on it. This is laid bare by the continuing rise in the use of food banks. The Trussell Trust recorded that in the financial year of 2017-2018, they provided approximately 1.3 million three- day emergency food supply packs. This amounted to a 13% increase compared to the previous year. Clearly, capitalist Britain – one of the richest countries in the world – is failing its people.
It is clear that we need to close the wealth gap. Could and an income cap could provide the means to do this? A workable model for an effective income cap might rely on two ‘tiers’ – the maximum income an individual can earn in say, a calendar year and a lower figure, after which one would become subject to considerable taxation. In this model, any surplus income that may arise from sources other than one’s primary employment would be immediately taken as tax.
This would significantly increase governmental spending power. Additional taxation funds could then be reinvested into essential services – like the NHS and education. Not to mention, it would be more difficult for politicians to attempt to use the false ‘austerity as a necessity’ narrative to justify their brutal political choices.
Tax is vital in the aim of redistributing wealth amongst a population. Monies generated via taxation forms the large basis of the nation’s wealth and budget. Those who are richer, pay more tax and this money can be circulated to those in need – whether via welfare benefits or investment in essential services.
Discussion about addressing inequality in the UK also inevitably raises issues to do with nationalisation and publicly-funded services. Capping the income of the wealthiest is no substitute for asking ourselves just why it is that too many of the poor are unable to meet the cost of living.
Aside from the current minimum wage seriously falling short in providing an actual living wage, everything is simply getting more expensive. Core services in both the public and private sectors (such as the transport network) become costlier year on year. From the rise of energy bill caps by Ofgem to NHS standard prescriptions increasing from £8.90 to £9.00, it is clear that the price of survival is high.
The rising cost of living is most starkly exposed when examining transport costs. In July 2018, the Joseph Rowntree Foundation published a report stating that bus travel was 65% more expensive in 2018 than in 2008. Similarly, motoring costs had increased by 28% since 2012.
The nationalisation of these services could go leaps and bounds in reducing the cost of living. Rather than being driven by capitalist greed, profit of publicly-funded services provides resources for reinvestment and improvement of the service provided.
With additional revenue from an income cap and associated taxation, removing privatisation from the public sector and indeed, extending the scope of the sector, it would be viable to control the growing cost of living.
The combination of an income cap, an actual living wage and nationalisation of essential services, paves a viable route for the UK to become a fairer and more equal society. Surely, on an ethical level, this should be a ‘no-brainer’. Unfortunately, there is some opposition to this – though, it is mostly fuelled by the historical demonisation of socialism and capitalist propaganda.
The concept of a cap on income can be particularly contentious, with opponents claiming this could foster a “demotivating economy”. In other words, they assert that innovation and economic growth is propelled by the notion of the human condition being limited by nothing other than oneself and as such, unlimited wealth is an attainable goal.
This argument is not particularly convincing when one considers the true value of large amounts of money. As previously detailed, the highest incomes actually present an inconceivable monetary value to the average person. It is also easy to argue that innovation is not solely driven by the potential profit of such – many are genuinely enthused by their field and development of this field excites them. Arguing that capping income would halt technological and economic development as people are motivated only by money is an oversimplification and misleading view of why and how societies develop.
The basis for other opposition reasoning essentially constitutes polemics against socialist policies and well rehearsed arguments that “it simply doesn’t work in practice”.
Ultimately, an income cap could certainly provide a means for closing the wealth gap. Redistributing wealth and rectifying the inequality fostered by completely free enterprise must be addressed by several measures, not just one. And these measures need to be drastic to match the ferocity of the problem.