Thursday 15 January 2009

The Narey Commission: once again, what about wealth?

Having commented on the government's White Paper on New Opportunities, I thought I would have a look at the Narey Commission on Social Mobility's report, commissioned by the Liberal Democrats, to see if it fares better in terms of addressing wealth inequality as an obstacle to social mobility.

While there are, again, a lot of interesting proposals in the report, worth serious consideration, it is, if anything, even more quiet on the issue of wealth inequality than the government's White Paper. While the White Paper at least has a section on 'encouraging asset ownership', referring us to measures such as the Child Trust Fund and the Saving Gateway, the Narey Commission report, so far as I can see, does not even do this. The closest it comes to addressing issues to do with wealth inequality and asset poverty is a proposal to increase the ability of disadvantaged households to access credit.

Beyond this, important as it is, there is, so far as I can see, no proposal directly to help asset pooor households accumulate capital. And, once again, the issue of taxing wealth, capital gains and inheritance is not mentioned.

Why? Aren't such taxes a potentially important way of raising revenue to help reach the government's child poverty target, as well as a way of removing sources of unequal opportunity?

As Martin Narey said in endorsing the pamphlet on inheritance tax that I recently co-authored for the Fabian Society:

'Inheritance Tax or a reformed version of it - set at a reasonable level as outlined in the Fabian Society pamphlet - is one way of mitigating against the increasing concentration of wealth and opportunity.

Rather than easing the so called 'burden' of inheritance tax, which affects only about 6 per cent of the population, the Government might have invested in the 3.8 million children locked in poverty in the UK. It is these children who will pay for the Government's largesse.'

Well, indeed.

The Liberal Democrats have a poor record of late in this area. They initiated the political Dutch auction for raising inheritance tax thresholds with their commitment at the 2007 party conference to raise the then threshold to £500,000. And they have consistently opposed the Child Trust Fund, despite their traditional commitment to a society based on the principle of 'ownership for all'. The Commission report, for all its merits, fails to challenge the Liberal Democrats - and the political community more generally - to develop a credible policy to tackle the inequality of wealth, despite its obvious relevance to the achievement of greater social mobility.

I can understand that an economic recession might not be the best time to start proposing taxes on wealth ('The value of my property is falling and you want to tax it?!'). But as with the government's White Paper, the Commission could at least have acknowledged that there is an important issue here and put it clearly on the agenda as part of a long-term strategy to increase social mobility.

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