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Slums and skyscrapers in Manila: The Philippines has high inequality despite high growth (photo: GreenArcher04, via Flickr)

When a giant among UK economists such as Sir Tony Atkinson publishes a book in which he gives prescriptions based on the work of a lifetime, it deserves to be taken very seriously indeed. Hotly tipped last year for the Nobel Prize, he aims in Inequality: What Can Be Done? to reach the general public as well as policymakers and fellow econometricians.

His book follows two others by his previous co-authors, Joseph Stiglitz’s The Price of Inequality (2012) and Thomas Piketty’s Capital in the Twenty-First Century (2013).

On reading his headline recommendations, some readers will be put off immediately, perhaps assuming that Atkinson is merely rehashing the high tax, high public spending policies which landed the UK in so much trouble in the 1970s. That would be unfortunate because the work is rich in ideas and practical proposals. It is possible to dis-agree with large parts of his redistributive approach while still finding valuable new approaches and insights in every chapter.

Though concern about economic inequality and the problem of poverty led him to create the celebrated Atkinson Index when he was still in his twenties and though he shares the worry expressed by the managing director of the International Monetary Fund, Christine Lagarde, the OECD and many fellow economists about rising inequality in much of the Western world, he resists the pessimism of much recent discussion about the topic. He insists that much can be done.

As I write this review, I find myself still grappling with and resisting some of the remedies being proposed. Is a 45 per cent tax on income earned above £55,000 a year and 65 per cent on annual income over £200,000 really the way to go? At the same time, other recommendations, such as those for child benefit and for the reform of taxation of high-end homes, should appeal across the political spectrum. The coalition implicitly recognised that the council tax currently fails to make adequate demands of owners of multi-million-pound homes in Central London when it introduced a new, progressive system of taxing property sales.

A signal strength of his work is the strong moral conviction that lies behind the tables. In this book, Atkinson resists the technicalities and ditches the mathematics, following Stephen Hawking’s dictum that each equation halves the number of readers. His commitment to international aid, family life and social justice has led him to contribute his royalties to Oxfam, Emmaus UK, Quaker Housing Trust and Tools for Self Reliance. Some of his favoured policies involve voluntary action rather than public fiat. Even if one accepts Will Hutton’s finding that there should be no official cap on the multiple of earnings allowed for the most senior civil servants over those of the lowest-paid members of the organisation, such caps should be accepted voluntarily. In John Lewis, the highest-paid director is not allowed to be paid more than 75 times the average salary. In TSB, the permitted multiple is 65, and in the fair trade organisation Traidcraft it is six. “As this example illustrates,” writes Atkinson, “the adoption of a pay limit may well reflect the ethos of the organisation.”

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