In fact, it is rather difficult to say what his policy prescriptions were. He called for more housing – a sector which is entirely controlled by the nationalisation of land-use rights through the 1947 Town and Country Planning Act. He also called for education and skills training that would equip people for the future. Again, it’s hardly a sector that is exposed to the rigours of market forces.
His call for a new tax system could be taken to mean that he wants more redistribution. But is it really feasible to get the top one per cent to pay more than 30 per cent of all income tax? Even the Institute for Fiscal Studies has described the tax base as “dangerously narrow”.
So, it is difficult to know what the Archbishop is in favour of. What he is against is a little clearer. He described inequality as destabilising and he is clearly concerned with the lack of economic success of some regions (as it happens, those dominated by the public sector). In addition, he expressed serious concern about pay stagnation, with half of all households not receiving a pay rise in real terms in recent years.
Some of his assertions are certainly contestable. Inequality is at its lowest since the mid-1980s, and for people in a given job, median pay has been rising at a reasonably – though not spectacularly – healthy rate. There are two reasons, though, why this does not show up in higher incomes for most households.
First, as The Resolution Foundation has shown, because people in the lower part of the income distribution have received higher pay rises than the rest, median pay has risen, while around half of households have not received pay rises. But, this also reflects the reality of falling inequality. Indeed, only the richest 20 per cent of households has experienced a fall in real incomes in the last 10 years. The bottom quintile has done best.
Secondly, the recovery of national income since the financial crisis has been accompanied by an astonishing rise in employment. It is not surprising that people who have taken the newly-created jobs have experienced a cut in real income. However difficult this may be for those concerned, it is a better situation than the mass prolonged unemployment of the 1980s.
But, rather than just quibbling about the figures, especially given the clear underlying feeling of dissatisfaction in the country, perhaps we should draw Archbishop Welby’s attention to a more important point.
The Archbishop has spoken of the importance of taking urgent and radical action in relation to climate change. Along with his predecessor, he has also been sharply critical of the financial sector. But he has skirted around the implications of action. Pope Francis, in contrast, has bluntly spelled out what he believes to be the cost of protecting the environment. He has argued in favour of getting used to living on less – especially in the developed world.
Regardless of whether shrinking the financial sector and reducing carbon emissions are sensible or desirable ideas, such policies have implications. They cause lower incomes today, in the hope that the financial system will be more stable and dangerous climate change will be averted in the future.
The contribution of the financial sector to the economy has fallen by nearly a quarter since 2009. It has been constrained by more and more regulation. As finance is our most productive large industry, this will have affected incomes. When it comes to climate change, policy has also had an effect. Tax on petrol represents nearly 70 per cent of its price. By 2020, climate change policies are likely to raise electricity prices by around one-third.
In addition to all this, working people are also struggling because the Government is trying to keep the lid on spending in the context of a welfare state in which ever-increasing pensions and healthcare costs for the elderly are not funded through saving but through transfers from taxpayers. Such systems are vulnerable to changes in population structure. Indeed, it can be argued that they are inherently unjust. I have yet to hear any prominent Anglican comment on the injustice of huge, centralised pay-as-you-go social security systems.
Economics is the science of not having your cake and eating it. Pope Francis is honest. He tells us that we need to consume less today to protect the planet. We can question whether this is wise, prudent or accurate. But, he is clear.
The Archbishop of Canterbury should reflect further. It could be argued that he misidentifies the problems with the UK economy. But, problems there are. Some of them, such as the housing crisis, can be fixed. But, to some extent, low pay and falling living standards are not a bug, they are a feature of economic policies that many Christians support.
It would be better if the Archbishop opened a debate about whether we should accept lower incomes today in order to achieve more important societal objectives – rather than complain about the inevitable implications of policies he supports.
This article was first published by CapX.