The UK’s lack of investment in education and low tax rates put it 17th in a new Oxfam inequality index – which ranks Sweden top out of 152 countries, and Nigeria bottom

The UK’s lack of investment in education and relatively low tax rates have created a highly unequal society in which the poor are “often unable to cover living costs”, according to a new report that assesses 152 countries for their commitment to reducing inequality levels.

Researchers at Oxfam and Development Finance International have spent a year investigating 18 indicators across three policy areas that have a key impact on levels of inequality: taxation, social spending on sectors such as health, welfare and education, and labour rights.

Britain is ranked only 109th for the proportion of budget it spends on education – just below Kazakhstan and Cambodia. In 2014, the UK government spent 11.78% of its budget on education, while Zimbabwe, which came top, spent almost three times this amount. (As a benchmark, achievement of the UN’s sustainable development goals for education is calculated to require a 20% spend.)



The UK’s student tuition fees are now the highest in the industrialised world, and the government’s decision to raise fees and abolish maintenance grants has shifted the debt burden disproportionately on to poorer students, according to the Institute for Fiscal Studies. In 2015, the UK government spent 4.7% of the country’s GDP on education, down from 5.8% in 2010.

While Britain’s tax structure is ranked only 96th in the new inequality index, it rises to 33rd on tax overall because of its relatively robust ability to collect tax revenues. This discrepancy mirrors a global trend: low-income countries tend to have more progressive tax structures but fewer resources to enforce them, while the inverse is true for high-income countries.

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“The UK has slashed corporation tax a bit further and a bit faster than most other rich countries,” said Max Lawson, head of inequality policy at Oxfam International. “And if you look at what the government is proposing currently – a reduction from 19% to 17% – that’s only going to get worse.”

Lawson added: “If Labour were in power, and raised corporation and income tax to the level promised in their manifesto, the UK would move up the rankings – but even the 26% rate Labour was proposing is still a lot lower than in Germany, for example.”

Overall, Britain is ranked 17th in the new index. Sweden is named the country most committed to reducing inequality, and Nigeria – Africa’s richest country by GDP – the least committed of the 152 countries ranked. Despite having experienced strong growth for many years since the turn of the millennium, one in 10 Nigerian children still die before their fifth birthday, and an estimated 112 million people live in poverty.

“What we want to be very clear about is that inequality is not inevitable, but the direct result of a government’s policy choices,” said Lawson.

Inequality is notoriously difficult to measure. Countries are typically assessed using the Gini index, which measures the distribution of income and wealth, and ranks a country between zero (absolute equality) and one (absolute inequality).

But the Gini index gives users no sense of the root causes of inequality, which are complex and multiple. So for the new Commitment to Reducing Inequality index, researchers looked at how much governments set aside in their annual budgets for each of 18 key indicators. They believe this offers a more accurate picture of the root causes of inequality.

Taxation

Lawson says rich countries particularly fall down on their toothless corporation tax – the G20 average has declined from 40% in 1990 to 28.7% in 2015.



“We only found one country who had actually raised corporation tax, and that was Chile,” Lawson explained. “If we don’t do something proactive about this global trend, we could see the de facto end to corporate tax in our lifetimes.

“Rich countries tend to do badly on tax because it’s been very much the accepted wisdom to push taxes onto the consumer with VAT,” he added. “Rich people are paying less and less tax, and that’s been seen in mainstream economics as a way of liberating your economy and developing growth.”

At the other end of the scale, the report found South Africa’s taxation system had the greatest impact on inequality. The country is consistently rated as one of the world’s most unequal on the Gini index, demonstrating that a more nuanced approach to inequality statistics can yield dramatically different results.

The Gini coefficient is often calculated from pre-tax income inequality. On this metric, the income gap in South Africa is astronomical – the incomes of the richest decile are more than 1,000 times higher than the poorest. But when the impact of taxes and social spending are factored in, the wages of the richest are reduced dramatically, becoming 66 times higher than the poorest, according to the World Bank.

Employment

In January, the top line from another Oxfam inequality report went viral: just eight men – mostly Silicon Valley CEOs – own the same wealth as half the world’s population.

While this is an extreme snapshot of income inequality, the gap between the wages of bosses and workers has been growing across the board: in the UK, the average FTSE executive now earns 386 times the income of a minimum wage worker.

Liberia has the world’s highest minimum wage compared to its GDP per capita

While real wages have stagnated in the UK, CEO pay continues to rocket, unaffected by sluggish growth. As executive pay becomes increasingly complicated, the share of profits going to labour in the form of wages has fallen, while the share going to capital (dividends, interest and the retained profits of companies) rises.

At the same time, traditional forms of union organising are in decline in developed countries, becoming increasingly unfit to cope with forms of precarious or informal labour.

Austria, where employers with more than 25 staff must ensure at least 4% of their employees are disabled, topped the labour rankings.

While richer nations generally do better on labour inequality overall, poorer countries tend to have much more progressive minimum wages.

Liberia, for example, has the world’s highest minimum wage compared to GDP per capita; in the US, the minimum wage has been frozen at $7.25 since 2009. Adjusted for inflation, this means a minimum wage worker is now worse off than they were 50 years ago.

Palestine had the highest spend on minimum wage in the world – and also scored highly on labour rights, ranking eighth overall. But the index doesn’t capture the key drivers of inequality in the country: protracted occupation, recurrent conflict and the denial of Palestinian rights.

Women are hit hardest by wage inequality. Globally, women do the bulk of domestic labour and care work, which subsidises national economies for little or no reward. Women are also overrepresented in the lowest-paid jobs and precarious forms of employment.

Oxfam found that only half of the 152 countries have laws forbidding gender discrimination or mandating equal pay.

Social spending

The countries that fared best on social spending were, unsurprisingly, European nations who established robust welfare states after the second world war. But, as the report points out, many of these – including the UK – are “trading on past glories”, while governments have worked to erode welfare provision, particularly after the 2008 financial crisis.

Many consider the NHS to be the crowning glory of the UK’s welfare state. But its well-documented funding crisis means the UK was ranked 77th for health spending – just above the tiny island nation São Tomé and Príncipe.

High-income countries tended to fare much worse than low-income countries on education spending. Researchers found that Zimbabwe spent an astonishing 29% of its budget on education for each of the last three years. The country also has one of the best pupil-teacher ratios in the world.

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This can partly be explained by the demographics in developing countries, according to Lawson. “There are, relatively, a lot more young people in poorer countries, which is a structural factor that makes education more important for their governments.”

“But there’s still a really positive and important story in African countries like Ethiopia and Mozambique in particular, where primary education is now free.

“These countries are putting almost a fifth of their budgets into education, and more kids are being educated than ever before, in the context of an exploding population,” he said.

“If you compare this amount of spending somewhere like the UK, it’s pretty remarkable. When we were that poor, we didn’t spend anything like that much of our budget on education, which was largely provided through charities or the church.”

Nigeria, Pakistan and India are singled out for criticism; in all three countries, the absence of good state education has led to an explosion of private provision, which has entrenched class and gender inequality.