Fabian Society report calls for ‘predistribution to pay for redistribution’

4 March 2015

Using OBR assumptions for earnings and employment growth the Fabian Society have projected that 3.6 million more people could be living in poverty by 2030. The report states that: ‘The outlook for the next 15 years is very poor, with a projected rise in median incomes of just 9 per cent between 2015 and 2030′. This equates to what the authors describes as ‘an anaemic growth of 0.6 per cent per year’.

The report’s projections also warn that child poverty will rise by 1.2 million by 2030, and calls on proceeding governments to take ‘dramatic action’.

The report’s authors Andrew Harrop and Howard Reed project that the gap between rich and poor will widen over the next 15 years: ‘Incomes will rise 11 times as fast for high income households (at the 90th percentile of the income distribution) as for low income households (at the 10th percentile). This reflects a general increase in inequality, with top earnings rising twice as fast as low earnings.

The report’s authors make 10 key recommendations for successive governments, advising that they: raise the minimum wage and ensure all public sector jobs pay the living wage; and aim for at least 80 per cent of adults to be in work by 2030 and act to improve employment opportunities, support and incentives for mothers, disabled people and people in their 60s. They also recommend that future governments ‘Reject major cuts to benefits that would reduce the living standards of low and middle income households’.

The approach laid out in this latest report represents what Jacob Hacker has recently termed ‘predistribution’. Harrop and Reed state that: ‘Successful predistribution interventions will generate significant resources for the exchequer. If this money is recycled to low and middle income households, the proceeds of predistribution could have a much greater (indirect) effect on families than the original (direct) market effects’.

The report can be read in full here.