If you tax the rich and give the money to the poor everyone benefits, including the rich.
The Scottish Government’s draft budget suggests that low earners in Scotland will pay less tax than elsewhere in the UK while higher earners will pay more. The gap in disposable income between rich and poor in Scotland will, therefore, narrow. Some say these proposals are not radical enough while others predict they will make Scotland a less attractive place in which to do business and the economy will suffer. However, studies of the impact of poverty on society – and the impact on wellbeing and economic growth of narrowing income inequality – suggest that increasing taxation for higher earners and using the money to support the poor would produce a better society, bringing economic benefits to us all.
In 2009, Kate Pickett and Richard Wilkinson published The Spirit Level. In it, they observed that countries with less income inequality had better health, better educational outcomes and less drug abuse and crime than more unequal societies. Narrowing inequality, they suggested, would improve society in all these areas.
Probably the most significant issue raised by critics was that they had simply described an association between inequality and poor outcome and association did not prove cause and effect. Indeed, some critics suggested that their observations could be interpreted very differently. Their work could not rule out the possibility that it was the choices made by people which produced these poor outcomes and subsequently caused their poverty.
However, evidence gathered over the past few years supports Pickett and Wilkinson’s conclusions. It is clear that experience of poverty and the chaos it can cause for families often increases the risk that children fail in later life. Such failure brings with it significant cost. The lower the level of household income, for example, the greater the risk that children will develop mental health problems and fail at school.
Adverse experiences in childhood greatly increase the risk of educational failure, substance misuse and criminal convictions in later life. This relationship between poverty and adversity in early life and failure in adulthood has been observed in many countries and such failure has profound long-term economic consequences.
There is also evidence that taking action to narrow income inequality can improve health, increase educational success and employability and reduce crime. In North America, in the 1970s, a number of towns began to make payments to their citizens to bring their income up to an agreed basic level. The projects lasted for several years until political change brought them to an abrupt end. Predictions that a minimum guaranteed outcome would lead to people stopping work or spending the money on alcohol were wrong.
In the town of Gary, Indiana, pregnant women must have spent the money on food because the number of low birth-weight babies being born fell substantially. In Dauphin, Manitoba, hospitalisations fell by 8.5 per cent, saving the provincial government’s healthcare budget significant sums. In one city, high school graduations in the poorest area increased by 30 per cent. Another project which reduced child poverty by 40 per cent reported reductions in juvenile crime, drug and alcohol abuse and substantial increases in school attainment. These improvements were achieved by ensuring all citizens had a basic level of income, providing security and allowing them to feel more in control of their lives.
The Scottish Government’s programme for 2017-8, indicates a wish to explore the impact of a citizen’s basic income scheme in Scotland. The papers describe such a scheme as “untested.” In fact, it has been tested and it works. While it will cost to set up, ultimately it will deliver considerable benefits to society and the economy in particular as young people become more likely to succeed at school, get into employment and avoid going to jail.
Inequality in life expectancy in Scotland continues to widen as it has done over the past five or six decades. Inevitably, some of the money raised through taxation will go to the NHS to deal with the health consequences of income inequality.
It’s time we also started to deal with the causes, and a basic income policy will transform life in deprived parts of Scotland.
The free market economist Milton Friedman apparently supported the idea of a citizen’s basic income. It seems he thought the most efficient way to relieve poverty was simply to give money to the poor, thereby avoiding the need for a capricious benefits system. Perhaps an additional benefit of citizen’s basic income would be the demise of the Department of Work and Pensions. Now there’s a thought!
Dr Harry Burns is Scotland's former Chief Medical Officer
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