This is not an article about the recent Budget but about a social issue that is relevant for every Budget. It also has wider implications for economic policy. The issue is the gross inequality which exists in Britain in the distribution of wealth, income and opportunity.

What makes this issue of special relevance at the present time is that the inequality has been getting worse. The cost of living is rising at a faster rate than for many years. This has a disproportionate effect on pensioners, the unemployed, the disabled and millions of workers who have low paid jobs.

This recent and continuing rise in prices, accompanied by serious instability in stock exchanges, fluctuations in rates of currency exchange and in the loans market for property of all kinds, has not been caused by the British government, except that its support for the invasion of Iraq has certainly added to costs in many directions.

Periodic instability in the economy is an inherent characteristic of capitalism. It is an unplanned system motivated by the drive for ever greater private profit. As part of this motivation it seeks to hold down the purchasing power of very substantial numbers of workers.

Defective demand, resulting from lack of consumer purchasing power, can be offset for a limited time by demand stimulated by expectations of growth in new directions. The lack of planning, however, which is a characteristic of capitalism, leads eventually to periodic disruption. This disruption may be prompted at different times by a variety of apparently dissimilar events. Nevertheless periodic economic setbacks of varying intensity are an inevitable feature of capitalism. The pain is felt by millions of working people through unemployment or attacks on living standards or even through war caused by economic greed for markets, for areas of investment for future profit or for the control of raw materials or other supplies.

There are a number of causes of the current world-wide rise in prices. There is increased demand for oil, attributable in part to the industrial expansion of China and India, but aggravated by war in the Middle East. There is a rising demand for consumer goods, including grain and other farm produce, again stimulated by the developing world. The lifting of millions of people from poverty and periodic famine is not a ‘calamity’. It is a welcome development.

Climate change has also already begun to affect the output of certain primary goods. Drought in some areas, excessive rainfall in others, turbulent weather and flooding have all contributed to uncertainties in the means of life for millions of the world’s population.

The economy has also faltered seriously in the USA because of the scramble for private profit in the market for property loans. The financial disturbance has spread to many other capitalist countries, including Britain.

It is at the very heart of the tradition of the labour movement to seek to eradicate the evils of capitalism. Gross social inequality is one such evil.

There are still far too many children in Britain living in poverty. It is to the credit of the government that they have acknowledged this fact and through the payment of family tax credits have reduced the number in poverty. Nevertheless it seems likely that the target of poverty elimination will not be achieved by the target date. More action is needed.

In 1997 pensioners were promised that Labour would defend the basic state pension, without means-testing, and would ensure that it remained the foundation of pensions policy. It also pointed to the ‘unfair lottery of community care’ and accused the Conservatives of betraying a generation of older people who were promised care from the cradle to the grave.

Means-testing for supplements to the basic state pension is now a strong feature of the system and the link to earnings in annual pension increases, originally introduced by Labour, has not been restored. There are many elderly people, other than in Scotland, who still have to pay for care.

Since 1997 the very rich in Britain have become even richer, whether measured before or after tax. A recent report of the Institute of Public Policy Research pointed out that over the past 10 years the average earnings of British employees have gone up by 45 per cent but for the lead executives of the top 100 companies the rise had been six times as fast. The rise had not been 45 per cent but 288 per cent. The richest one per cent have seen their share of total income double from 6.5 per cent to 13 per cent.

Labour must address itself to the gross inequality that disfigures British society.