When George Osborne announced his national living wage in the Budget earlier this year, this newspaper was among those that warned that, welcome though it was, it was unlikely to compensate families for the cuts the Chancellor was also making to tax credits. We also pointed out that the Chancellor had managed to £12billion in benefits cuts but only £5billion from tax evaders and avoiders. The risk, we said, was that we gap between the richest and poorest in society would be widened still further.
We will not have long to wait to see whether the prediction comes true, but two pieces of research published today already provide some shocking indications of the direction of travel in our economy. They also provide shocking evidence of the relative fates of the richest and poorest in society.
The poorest, according to the IPPR Scotland think tank, stand to lose more than £500 a year as a result of the Budget changes, but the hardest hit – lone parents – are expected to be three times worse than that. Meanwhile, those in the top 20 per cent of Scottish households will be better off by £110 a year.
Another piece of research drives home the point. According to the High Pay Centre, 35 executives at some of Scotland's biggest companies took home a total of £55million last year. The High Pay Centre looks at the most recent annual reports of the 12 Scottish-headquartered businesses include in the FTSE 350 index of the UK's largest listed companies and found that the median pay for the 35 executives disclosed in the annual reports was £1.1million – which is 77 times as much as a worker on the minimum wage.
We know that the minimum wage is to be raised and that a so-called national living wage will be introduced from next April at a rate of £7.20 an hour, rising to £9 by 2020. But that is unlikely to have any profound effect on the gap between the rich and the poor unless the UK Government rebalances the welfare and tax system so that the better-off pay more. In particular, it must do more to tackle the billions lost annually in tax avoidance and evasion by companies and rich individuals.
As the High Pay Centre points out, the Scottish Government should also set an example. A raft of new powers on welfare and tax will be coming Holyrood's way in two years' time and they present a radical opportunity for the Scottish Government to use those powers and prove that it can offer an alternative to the Chancellor's assault on tax credits.
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