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Redistribution yes, equality no Samuel Brittan: Financial Times: 13/08/04 A subject which has been preoccupying those people who are still within access of newspapers this August is the hoary one of "inequality". The Institute for Public Policy Research has just published an investigation (The State of the Nation),which has elicited a predictable span of responses: ranging from left-wing commentators who are indignant that so much "inequality" remains, despite seven years of Labour government, to others who think the whole discussion misconceived and harmful. The IPPR is following this study up with research on what it calls the "new politics of ownership". Among other things this project is concerned with finding revenue sources to reinforce the "baby bonds" which are are to be given to each British child at birth with a top-up for those from the poorest households. Preliminary investigations with focus groups showed a deeply ingrained hostility to taxation of inheritance. The articulate middle class person who tends to dominate in such groups was convinced that people had the right to leave money to their children - and that, as their earnings were already taxed, any kind of death duties amounted to double taxation. There was also the cynical feeling, which I am afraid I share, that estate duties of any kind were largely a levy on the conscientious middle class, as the working classes would fall behind the threshold and the really rich find ways and means of avoiding such taxes. The best bet seems to be an effective land tax, which has a very respectable pedigree. The underlying ideas were developed by the classical economist, David Ricardo and might have been implemented by Lloyd George had not World War 1 arrived and "elevated" him from being chancellor to war minister. Postwar Labour governments made a mess of trying to extract a "betterment levy". But there is still mileage in the land tax idea if implemented properly. Optimists even hope that such a tax could finance both expanded baby bonds and make a contribution to local government finance. In the meanwhile the auction of planning permission would be an attractive replacement for the hole-in-the-corner deals between developers and local authorities to provide public amenities in exchange for that permission. But I want to go behind these specifics into the debate on whether we need a public policy affecting income and wealth. This has been polarised between those who espouse the ideal of equality and those who believe in the sanctity of the existing distribution. Like that earlier radical, prime minister William Gladstone, I am an "out-and-out inegalitarian". True equality is attainable only in the grave - if even there, remembering where Mozart was buried. Moreover, the whole concept of the "degree of inequality" is inherently ambiguous once m,ore than two people are being compared. But my main irritation is reserved not for egalitarians as such but for economists, many of whom are to the "right" of myself on most specifics, who still treat the absence of "inequality", as a yardstick for measuring economic progress. This is mainly because the term has now entered into the coinage of so many respectable economic writers. On the other hand I cannot see any sanctity in the distribution which arises from the luck of the market and inheritance. My own slogan has long been "redistribution yes, equality no." The test always seems to be attitudes to the peaks of the income and property distribution. An attack on peak earnings which cannot be seen to benefit directly the poor and the unfortunate, is nothing more than jealousy and envy, however much the charge is resented. The late John Rawls, the Harvard philosopher used a tool called "the veil of ignorance". This was to ask what rules we would like to see adopted if we had no idea of our own place in society and we tried to forget our own particular possessions and abilities. This tool seems to be much more promising than the two principles - which can now be found in many political and economic texts - which Rawls purported to derive from it. Even under the veil of ignorance people will differ quite a lot in the rules they would advocate. Unfortunately both Rawls and too many of his critics have regarded the investigation as one for armchair reasoning. This seems a typical closed-shop idea to confine the discussion to academic philosophers. Such actual inquiries as have been made have been confined mainly to US students. For what they are worth they show a Churchillian desire to have a safety net for everyone above which there should be few limits. This leaves the all-important question of how high this net should be. Here would seem to lie an ideal subject for focus groups to investigate. Normal opinion polls would be useless here as they show a belief neither in equality nor in market rewards, but in rewarding "merit". The latter is judged in an absurd and stereotyped way with politicians and journalists competing for the bottom position and nurses nearly always coming out on top. By contrast, no less an economic philosopher than Friedrich Hayek, whom Margaret Thatcher loved to cite, pointed out that there is no particular merit in possessing the properties and abilities that have a scarcity value in the market place; nor is there a demerit in possessing skills, such as that of the handling weavers or coal miners and steel workers whom the market has passed by. He believed that any defence of capitalism based on the idea that it rewarded merit was doomed to fail. In an articulate group however time could be taken to explain the "veil of ignorance", which obviously puts own premium both on imagination and honesty. Such groups could both discuss general principles and investigate specifics such as inheritance or the level of basic income to be provided by the tax and social security system. Much would obviously depend on the skill and impartiality on those conducting the process and we should not blindly follow the results of such groups; but at least we would be further forward than in today’s polarised discussion.
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