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Scotland’s war on inequality

Regardless of the referendum outcome, nothing less than fundamental social change can create a more equal society north of the border suggests Paul Tracey, Professor of Innovation & Organisation at Cambridge Judge Business School.

Scottish flagAs the countdown to the Scottish vote on independence begins in earnest, one aspect of the debate has grown in importance: the question of inequality.

For nationalists, inequalities within Scotland are evidence of a failed union. Only with separation, they say, will Scotland have the powers to make the profound changes needed to reverse Scotland’s position as one of the most unequal societies in the developed world. This will help the country move closer to a Nordic style system characterised by high levels of investment in public services and a taxation regime that ensures comparatively small differences in income between the richest and the poorest.

For unionists, separation from the rest of the UK represents a tremendous risk, one that is not worth taking because of the economic uncertainties it would create. They argue that the powers needed to tackle poverty and inequality already exist within a devolved Scotland. And given that the Scottish Government wants to keep using the UK pound, the capacity of an independent Scotland to enact meaningful changes to taxation and welfare would be limited in any case.

Both sides accept that Scotland, like the rest of the UK, is an unequal society by European standards. In terms of income, inequality increased sharply during the 1980s and 1990s, a period when the structure of the Scottish economy changed markedly. Jobs in engineering and heavy industry declined and were replaced by less secure, less skilled, and less well-paid jobs in services. And at the same time, many middle-income jobs were lost to emerging markets or were displaced by new technologies and disappeared altogether. While income inequality in Scotland has increased more slowly since the late 1990s, overall it remains high – arguably unacceptably high.

In terms of health, inequality in Scotland is even more marked. Indeed, while income inequality is broadly comparable to the rest of the UK, health inequality is much worse. This is particularly the case in Glasgow, where life expectancy is significantly below other parts of Britain. Indeed, on this measure the city ranks alongside Albania and the Palestinian territories. The reasons for health inequality in Scotland are neither straightforward nor clearly understood, but appear to be rooted in a complex mix of factors including local economic conditions, social and community networks, and a range of individual lifestyle choices.

Professor Paul Tracey

Professor Paul Tracey

But while the two camps may agree that inequality exists, the arguments of both appear to be rooted in rocky ground. The Scottish National Party espouses the benefits of a Nordic style system of taxation and wealth redistribution while at the same time promising to attract inward investment through lower rates of corporation tax and refusing to commit to higher rates of income tax. This begs the question: what policy mechanisms would an independent Scotland use to address inequality?

The unionist parties speak of having the “best of both worlds” and of belonging to “the most successful political union in history”. But this political union has produced the levels of inequality the country now endures. Here the question is asked: if the union has been so effective, why are rates of inequality so high?

Interestingly, the reality of inequality in Scotland may have rather less to do with its constitutional status and rather more to do with the social and political attitudes of its inhabitants. Many politicians have remarked that Scots hold a different set of attitudes to people in England; that fundamentally they are more progressive in their social and political views. The differing voting patterns of the two nations – there is currently only one Tory MP in Scotland – is used to support this assertion.

Survey evidence over the last 15 years has consistently undermined the idea that the union comprises a “tolerant” Scotland juxtaposed against a more “right-wing” England. Indeed, a recent study by Maria Gannon and Nick Bailey at the University of Glasgow reinforces powerfully previous research that shows that concern for levels of inequality and support for redistribution amongst people in Scotland is broadly in line with the population of the UK as whole. Put simply: neither people in Scotland nor people in England want to pay more tax.

This suggests that, regardless of the outcome of the referendum, high levels of inequality in Scotland will persist: there is insufficient appetite among the populace for the kind of radical reform of welfare, taxation, and public services that would be required to create a quasi-Nordic system. If Scotland’s politicians are serious about building a more equal society, then they must be prepared to challenge social attitudes and to champion the kind of social change that does not currently resonate with the electorate on either side of the border. Arguably they must do this whatever the outcome in September.