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Welby backs call for ‘purposeful and active state’

05 September 2018


Archbishop Welby visits a Roman Catholic centre for refugees and asylum-seekers, in a former Methodist church in Haringey, during a week of prayer for the Church’s work serving those in need, “Listen To God: Hear the Poor”

Archbishop Welby visits a Roman Catholic centre for refugees and asylum-seekers, in a former Methodist church in Haringey, during a week of prayer for...

THE Archbishop of Canterbury is among the authors of a new report that says that the economy is failing millions of people and must be redesigned, with justice “hard-wired” into it.

The final report of the Commission on Economic Justice, a project of the left-wing Institute for Public Policy Research (IPPR), argues that a “palpable feeling that the economy is not working for most people” is rooted in reality, pointing to stagnant earnings and young people set on course to be poorer than their parents.

It calls for a “paradigm shift” in economic thinking, of the magnitude of the post-war Keynesian settlement, and Margaret Thatcher’s free-market reforms. Many of the recommendations pertain to a “more active and purposeful state”, including billions more public investment and the establishment of a Citizens’ Wealth Fund.

“For decades the UK economy has not worked as it should, with millions of people and many parts of the country receiving less than their fair share,” Archbishop Welby said on Wednesday. “The widening gulf between rich and poor, and fears about the future among young people and their parents, have damaged our nation’s sense of itself.

“Our report shows that it doesn’t have to be like this. By putting fairness at the heart of the economy, we can make it perform better, improving the lives of millions of people. Achieving prosperity and justice together is not only a moral imperative – it is an economic one.”

Writing for the Daily Mail on Wednesday (prompting the front-page headline “Welby Wealth Tax Storm”), he called for “a new deal on tax, so that it promotes prosperity and justice at the same time”, drawing attention to the report’s proposals for “a reform of the way income tax is levied, so that taxes are cut for those on lower and middle incomes”.

The report itself argues that there is a “fundamental injustice in the way that income from work is taxed more highly than income from wealth” and proposes that all income be taxed in the same way. This would, the Archbishop writes, be “just as it was under Mrs Thatcher”.

Among the statistics the Archbishop highlights is the calculation that the wealthiest ten per cent of households own more than 900 times the wealth of the poorest ten per cent, and five times more than the entire bottom half. He also draws on data from the Church’s own experience: the 40 per cent of those using food-banks who are in work.

He joined the Commission, he writes, because “as a Christian I start with learning from Jesus Christ that people matter equally, are equally loved by God, and that justice in society matters deeply a theme that runs throughout the Bible.”

At the Commission’s launch in 2016, he spoke of the opportunity to “seek to put our economy on a foundation of values and virtue” (News, 25 November 2016). In the Financial Times at the time of an interim report, he wrote of an economic model that was “broken” (8 September 2017).

The report has many echoes of Catholic Social Teaching, and sets out a vision for a “good economy, where prosperity is joined with justice”.

“The good economy values people for who they are as much as what they do,” it says. “It is judged not only by its results but also by the conduct of those within it, and is concerned with reciprocity, generosity and kindness.”

Companies are defined as “communities of common interest” and a call is made for a shift in the public debate on taxation, “to focus on the common good it can build, rather than solely the burden it imposes”. The report notes that, while income is “very important”, the goods we consume “are not enough to make us happy or give us a sense of a fulfilled and flourishing life”. Footnotes point to The Common Good and the Catholic Church’s Social Teaching by the Catholic Bishops’ Conference of England and Wales (1996).

“Putting the economy back on a moral footing is not just a matter of morality,” the report says. “It will create a stronger economy too.” It warns, however, that without fundamental reform, “our economy will continue to fail large numbers of people. We have to ‘hard-wire’ justice into the economy, not treat it as an afterthought.”

On joining the Commission the Archbishop envisaged recommendations that “go beyond party politics”. Although IPPR is Left-leaning — it was founded by Clive Hollick, now a Labour peer — the membership of the Commission is broad, encompassing both Frances O’Grady, general secretary of the Trades Union Congress, and Dame Helena Morrissey, head of personal investing at Legal & General Investment and a prominent Brexiteer. The two women co-wrote an interim report on reforming corporate governance.

The report acknowledges strengths in the economy including record employment, and the fact that the UK is second only to the US in exporting services, home to the world’s leading financial sector, and a “scientific superpower”. In his Daily Mail article, the Archbishop argues that, “economically, politically, and often morally, we remain a global power. There is much of which we can be proud.”

But the report also diagnoses a raft of weaknesses, including too little private and public investment, too few exports, and too much debt-fuelled consumption.

“We do not attribute blame to any particular politicians or parties, since our economic problems have developed under successive governments of all colours,” the IPPR’s head, Tom Kibasi, writes.

Recommendations include some that build on existing government policy, such as the National Living Wage, the new industrial strategy, and proposals requiring companies to publish the pay ratio between company directors and the median pay of the company’s workforce.

The call for a “purposeful and active state with its role in wealth creation better understood and actively embraced” is not out of kilter with government policy. In 2016, the Prime Minister argued that “government can and should be a force for good”: “the state exists to provide what individual people, communities and markets cannot.”

But whether, in the wake of austerity, the Government will embrace the Commission’s call for “investment-led growth” — a key tenet of Labour’s last manifesto — remains unclear. Some of the proposals revive ideas already shelved by the Government, including a mandatory requirement for workers to be represented on boards.

Other recommendations include doubling the planned increase in public investment, a national investment bank (a Labour policy), tax credits to provide low-paid workers and unemployed adults with up to £700 a year to invest in their skills, a rise in the National Living Wage, a requirement that all those on zero-hours contracts be paid 20 per cent above the higher rate, a £10-billion Inclusive Growth Fund “with the explicit objective of narrowing geographical inequalities within the UK”, and a review of whether the Government should set a target for house-price inflation.

A thread underpinning the report is imbalances: between regions (an “extraordinary skewing of infrastructure spending towards London”), saving and borrowing, long-term value creation and short-term returns, and employers and workers.

“The country has been getting richer, but most people in work are no better off,” the authors observe. They write of “poor and precarious jobs on low pay”, stating that “too many once-thriving communities now offer few good jobs and little hope,” and argue that “we need to escape from the idea that wage costs must be as low as possible.”

Unions are held up as an important part of the answer: “vital social institutions” that can address the concentration of “too much power . . . in the hands of management”.

Currently, one quarter of workers are union members, compared with one half in 1979. The percentage covered by collective-bargaining arrangements has fallen from 70 to 26 per cent. The report recommends “making it easier for unions to gain access to workers and increasing the coverage of collective bargaining agreements”.

“In today's fragmented workforce, many low-paid workers are too insecure to ask for more pay,” the Archbishop writes in the Mail

In defence of radical interventions, the report harks back to the Keynesian ideas that formed the basis for a new economic settlement after the Second World War: a project on which a former Archbishop of Canterbury, William Temple, exerted his influence (News, 10 November 2017). 

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