Chancellor Rishi Sunak should use tax and spending policies to tackle a widening economic gap between old and young in the UK, according to a group of experts led by Nobel laureate Angus Deaton.
According to the study published by the Institute for Fiscal Studies, the generation gap that opened up after the financial crisis has been exacerbated by the pandemic and will be exacerbated if the Bank of England again loosens monetary policy as planned.
This assessment lays bare the crucial challenge Sunak faces as he considers a plan to help those most affected by the pandemic and to tackle the largest peacetime budget deficit.
The report states:
“The programme of quantitative easing and low interest rates in the aftermath of the financial crisis has led, perhaps inadvertently, to a redistribution of wealth towards the oldest and richest and away from the youngest and poorest…It is important that fiscal policy recognises these distributional effects and leans against them, rather than doubling down on them as has happened over the past decade.”
The analysis found a worrying rise in inequality in society and called on the Government to provide targeted support. This is the trend, accelerated by the pandemic:
mortality rates from Covid-19 almost double in the most deprived areas compared to the least deprived in the early months of the pandemic;
- deaths from the virus among some black groups almost double those among white Britons;
- public school pupils twice as likely as state school pupils to be taught online during the blockade;
- non-graduates more likely than graduates to work in the most depressed sectors, with fewer opportunities to work from home;
- self-employment decreased by almost 10%.
“In the face of such evidence, and in the positive outlook thanks to vaccines, to really get rid of the dramatic effects of the pandemic it is imperative to think about policies … that focus on those who have suffered the most”: this is the message from Deaton, who is chairing the study.
A clear warning against the danger of more inequality and social disparity that applies to the UK as well as the world’s major powers.