Will focusing on inequality really tackle poverty?

Tower Hamlets: ground zero for London's inequality problem. Image: Getty.

Each year the Centre for Cities’ Cities Outlook offers a health-check on the UK’s 63 largest city economies, and this year’s edition features a new benchmark: how levels of equality vary across different cities across the country.

One of the measures economists use to gauge inequality is the Gini coefficient. It determines equality on a scale from 0 to 1 – with 0 representing perfect equality, and 1 representing extreme inequality. New experimental data from the Office of National Statistics has allowed us to construct a Gini coefficient for every city in England and Wales.

Using this measure, Outlook reveals that BurnleyMansfield and Stoke are tied for the title of most equal city in the UK. At the other end of the scale, Cambridge is the UK’s least equal city, followed by Oxford and London.

The most striking finding from this is how the Gini coefficient relates to wider economic performance. Looking at the cities at the top and bottom of the spectrum, we can see that places which have the strongest economies are the most unequal, while those with some of the weakest economies tend to be most equal.

For example, if we look at unemployment (as measured by those claiming unemployment benefits) compared to the Gini coefficient, we can see that cities which have high levels of inequality have low unemployment, while in more equal places average unemployment is high.

This raises an important question which is highly relevant to the growing debate about inequality and “inclusive growth”: what is the most important issue that the UK should address to help the poorest and “least included” in society?

Alleviating poverty should, I would argue, be a top policy priority for national and local leaders, and there are many policy prescriptions that flow from this that we should be considering. But our findings suggest that the case for policy focusing on trying to reduce inequality is much less clear cut. Our most successful places are more unequal because they have such successful components of their economies.

Cities with weaker economies, on the other hand, are likely to be more equal precisely because they lack these components – so while levels of income are more even, they are also lower overall than in more economically vibrant places.


If the policy focus is on reducing inequality, it’s entirely possible to end up arguing that it is better for a city’s residents to be poorer but more equal, than to be more unequal but wealthier overall. But should that really be the ideal outcome of policy?

As the debate about inequality and inclusive growth develops, we need to ensure we are clearer about what tackling inequality really means and what a desirable end result looks like. Our data suggests that boosting economic growth is the most effective way to increase job opportunities and income – and to tackle poverty – in the UK’s poorer cities, rather than trying to sustain their position as one of the most equal cities.

In our most successful cities, where inequality is a bigger problem, dealing with the costs of growth, such as unaffordable housing which will hit the poor the hardest, should be the top priority.

You can explore the Gini coefficient and other city data on our data tool.

Paul Swinney is senior economist at the Centre for Cities, on whose blog this article was first published.

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What do new business rates pilots tell us about government’s appetite for devolution?

Sheffield Town Hall, 1897. Image: Hulton Archive/Getty.

There have been big question marks about any future devolution of business rates ever since the last general election stopped the legislation in its tracks.

Not only did it not make its way to the statute book before the pre-election cut off, it was nowhere to be seen in the Queen’s Speech, suggesting the Government had gone cold on the idea. (This scenario was complicated further recently by the introduction of a private members’ bill on business rates by Conservative MP Peter Bone, details of which remain scarce.)

However, regardless of the situation with legislation, the government’s announcement in recent days of a pilot phase of reforms suggests that business rates devolution will go ahead after all. DCLG has invited local authorities to take part in a pilot scheme which will allow volunteer authorities to retain 100 per cent of the business rates growth they generate locally. (It also notes that a further three pilots are currently in operation as they were set up under the last government.)

There are two interesting things in this announcement that give some insight on how the government would like to push the reform forward.

The first is that only authorities that come forward with their neighbours with a proposal to pool all business rates raised into one pot across a wider geography will be considered. This suggests that pooling is likely to be strongly encouraged under the new system, even more considering that the initial position was to give power to the Secretary of State to form pools unilaterally.

The second is that pooled authorities are given free rein to propose their own local arrangements. This includes determining, where applicable, a tier split (i.e. rates distribution between districts and counties), a plan for distributing additional growth across the pool, and how this will be managed between authorities.

It’s the second which is most interesting. Although current pools already have the ability to decide for some of their arrangements, it’s fair to say that the Theresa May-led government has been much less bullish on devolution than George Osborne in particular was, with policies having a much greater ‘top down’ feel to them (for example, the Industrial Strategy) rather than a move towards giving places the tools they need to support economic growth in their areas. So the decision to allow local authorities to come up with proposed arrangements feels like a change in approach from the centre.


Of course, the point of a pilot is to test different arrangements, and the outcomes of this experiment will be used to shape any future reform of the business rates system. Given the complexity of the system and the multitude of options for reform, this seems like a sensible approach to take. But it remains to be seen whether the complex reform of a national system can be led from the bottom up. In effect, making sure this local governance is driven by common growth objectives, rather than individual authorities’ interests, will be essential.

Nonetheless, the government’s reaffirmation of its commitment to business rates to devolution and its willingness to test new approaches is welcome. Given that the UK is one of the most centralised countries in the western world, moves to allow local authorities to keep at least some of the tax revenue that is generated in their area is a step forward in giving places more autonomy over how they spend their money. That interest in changing this appears to have been whetted once more is encouraging.

There are, however, a number of other issues with the current business rates system which need to be ironed out. Centre for Cities is currently working on a briefing of the business rates system, building on our previous work in this area, and we’ll be making suggestions as to how the system can be improved.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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