The opulent interior of The Surgeon’s Hall in Edinburgh hosted an event organised by the Resolution Foundation to discuss their briefing note on the variation of household wealth in Britain and what it means for policy, entitled A wealth of variety.
Joining chairman Torsten Bell to debate the issues raised by the report were, former leader of Scottish Labour Kezia Dugdale, Liz Lloyd, Sir John Curtice, and co-author of the report Ian Mulhearne who kicked off proceedings with a summary of the headline findings.
Why are Scotland’s house prices 30% lower than in rest of UK?
These centred around the fact that over the last 30 years, personal wealth in Britain has surged from 3-4 times GDP to over 8 times in 2021, equivalent to an increase of £18.5tn. The vast majority of this wealth, however, is not gathering interest in bank accounts, it is held in pension pots or as property assets. This accounts for £4 out of every £5 of household wealth.
Mulhearne noted that house prices in Scotland are 30% cheaper than in the rest of Britain but was at a loss to explain the causes. It may simply be a case of supply and demand as Scotland builds more new houses per capita and has a higher housing stock per capita than other parts of the UK. The ability for devolved nations and regions to attract incoming immigrants may be a factor too.
Working hard to succeed ethos meets unaffordable house prices; crash and burn time
The report found that wealth is more evenly distributed in Scotland, but remains a concern as inequality in the UK is large and expanding. Bell commented that the conservative ethos of working hard to get on and succeed has crashed and burned on contact with unaffordable house prices.
The chairman invited the panel to comment on the report with Liz Lloyd contending that council tax, targeted in the report as a method of levelling-up, was not a useful tool for the purpose due to it not being directly linked to wealth. She also commented on her concerns that proposals on land tax would fail to bring the results desired by those promoting them.
Kezia Dugdale hinted at the potential for change through the election of a Labour Government at Westminster and that a concentration on policies around housing and taxation were the fundamental requirements to tackle inequality. When asked later in the Q&A whether social housing was part of the mix, she ruled out any possibility. It is indicative of how far right the Labour party has travelled to render itself electable when social housing is not part of the debate in the current housing crisis.
Could a post-Indy Scottish central bank and currency alleviate wealth inequity?
The constitutional context was applied by Professor Curtis. In his opinion the only conclusion to draw from the paper is that the Union does not work for Scotland as far as wealth is concerned. House values in Scotland are lower, Scots are less well-off relative to income and society suffers from the effects of a gulf in wealth inequality.
He went on to say that this could well be alleviated by independence and a Scottish central bank issuing a Scottish currency, but that in his opinion markets would force the Scottish treasury to increase interest rates higher than that required of the rest of the UK, thus placing Scotland in a weak economic position. There is widespread agreement on the fundamental need for a Scottish currency after independence, but not the assumption on rates being forced up. This perception of market power is based largely on an orthodox narrative. Many heterodox economists contend it is government that’s in control of the economy and that markets can only have as much influence as government allows.
Lack of maturity in UK politics and distrust of politicians by younger voters
This issue of influence was one of the main takeaways from the discussion, for several reasons. Torsten Bell noted that events such as this one by the Resolution Foundation are rare in Scotland. There seemed to be wide agreement in the room that more long-form discussions of a similar style would be useful and probably necessary to take society forward.
Linked to this, as Kezia Dugdale said, is that younger voters are distrustful of politicians and Curtice inferred that UK politics lacks maturity. There seems to be an inference that what is lacking, whether in organised debates in the private sector or within the government realm, is the willingness to give voice to contending perspectives.
Western culture is dominated by an economic paradigm that works well for 10% of national populations and allows a further 60% to get by. The academic defence of this system is robust. It is estimated that 90% of economists largely support the orthodoxy, despite obvious repeated failures in modelling and predicted outcomes. These are adherents of Margaret Thatcher’s ‘no alternative’ doctrine.
Path to enlightenment paved by interrogating assumptions and challenging the orthodoxy
Still, 10% of economists, do not agree that neoclassical economics is the only option. Many of these people have prominence and have stellar careers like Nobel laureate Joseph Stiglitz, Stephanie Kelton, Marianna Mazzucatto and Kate Raworth. These economists have taken the difficult route. It is easy to agree with tutors and textbooks and accept the information provided without question. The path to enlightenment is paved by interrogating assumptions and challenging the orthodoxy.
The conclusions of the panel members highlighted this inability to think outside the box. The answers to the wealth inequality problem was to build more houses, and Dugdale’s belief in Rachel Reeves saving the UK through taxation. Professor Curtice made the intelligent comment that to increase income relative to wealth the nation must increase productivity. The caveat is how that productivity is increased, for society’s benefit or individual gain?
If younger voters are to be encouraged into participating in UK politics then these events are a useful vehicle on the journey. There must be proper debate based on fundamentally different points of view. Our panel members were politically diverse but economically aligned, as is current political thinking. Until the diversity of economic views can be debated, either at private sector events like these, or in parliaments across the Western world, societal advancement is unlikely.
