Economic growth and inequality

The UK is unequal as measured by income [1] and increasingly unequal as measured by wealth [2] but recently the UK has also been getting poorer [3], particularly amongst the poorest [4].
Conventional politics (Conservative, Labour and Lib Dem) want to boost economic growth so that everybody, the including poorest, can have increased standards of living, i.e can consume more.

Only the fringe Green Party rejects the drive for growth. They advocate helping the poorest by a Universal Basic Income [5]. (I have advocated a related policy with some similar effects using labour subsidies paid as tax rebates.[6])

Growth, jobs and productivity

Traditionally the Labour Party has had the most concern for the living standards of the poor but It seems that, for electoral reasons, they have ruled out a wealth tax & increases in income tax [7]. For Labour, improvements in the living standards of the poor are to come from economic growth, which should give the poor better jobs and increase government revenues [8].

Economic growth and well-being

GDP (Gross Domestic Product) is a usual measure of economic output. Increases in economic output become “economic growth”. In recent years this idea is increasingly being criticised because it is not well aligned with well being [9][10][11]. The concept, Gross National Product, a precursor to GDP, was impressively criticised by Bobby Kennedy [12].

Rents and economic growth

Oddly, rent is part of the official measure of GDP [13] so as rents rise so does GDP. This means GDP increases when house prices – and consequently rental values – increase. Higher rent payments from tenants to landlords result in higher GDP, even though nothing extra is produced. This also increases inequality.

GDP also includes imputed rent – the notional (imaginary?) rental value homeowners pay themselves for living at home. This has been criticised for distorting estimates of GDP [14].

Climate change: Under-reported but accelerating.

This year, 2024, has begun with increased awareness of climate change. In the UK, the increased rainfall of the past months has hit the headlines. Even the BBC reports the connection with climate change [15]. But climate change is still under-reported by the BBC [16].

See the feeds on X of Ben See (@climateBen), Professor Kevin Anderson (@KevinClimate), or what the foremost climate scientist, James Hansen writes about the acceleration of climate change [17].

Economic growth and climate

Producing goods for consumption causes pollution, especially the greenhouse gases, which are driving climate change. When more goods are produced more pollution is generated.

Although pollution may be limited by cleaner methods of production (for example by changing to renewable sources of electricity), improvements are not happening fast enough to have more production and also avoid a climate disaster [18]. To avoid this the world must produce and consume less.

In the conventional terms of GDP that means becoming poorer.

The UK should play a part and find ways of living that fit within planetary boundaries. That includes reducing GDP – in the medium term at least. [19]

UK’s carbon emissions

There are three common ways of measuring UK’s carbon emissions [20]:

1. Consumption emissions: emissions caused by the goods and services we consume.
2. Residence emissions: emissions associated with UK production.
3. Territorial emissions: emissions that occur within the UK’s borders.

DEFRA is responsible for compiling consumption emissions. The Department for Energy Security and Net Zero is responsible for compiling territorial emissions. Territorial emissions are typically 30% lower than consumption emissions as they exclude aviation, imports and emissions from burning biomass at DRAX [21].

Territorial emissions have fallen fastest as the UK has manufactured less and imported more [22]. Unsurprisingly, the UK Government emphasise territorial emissions, claiming that the UK has cut emissions faster than any other G7 country – ignoring the fact that in per capita UK emissions are still larger than those in France [23]

Net zero 2050

The UK is aiming at becoming net-zero by 2050, with emissions to close to zero with the remaining emissions absorbed through natural climate sinks [24].

According to some climate models world wide net-zero would stop global surface temperatures rising further. However, any such fall after net-zero would be slow and the Earth would still have increasing ocean temperatures, ice melt and thawing permafrost [25].

Mass personal transport must stop

The House of Commons Science and Technology Committee has noted that “In the long-term, widespread personal vehicle ownership does not appear to be compatible with significant decarbonisation.” The Committee also pointed out there “are significant emissions associated with the manufacture of vehicles”, requiring very large amounts lithium, cobalt, graphite and nickel to be mined [26].

Put another way “Cars kill the planet” – even electric cars.

The poor are getting poorer

Over recent years in the UK the poor have been getting relatively poorer as inequality is increases. Recently the poorest 10% have had their incomes decrease. Their disposable incomes decrease even more [27] – partly because rents have increased [28]

The poor own fewer cars – and pollute less

Of the poorest 10% of UK households, about a third have a car but nearly all of the richest 10% of households have a car [29]. These poorest also find it harder to afford the expense of a car [30]. They also have much lower carbon emissions [31].

Car free facilities

In their neighbourhoods where they live, motorists decrease the demand for public transport, local shops and other facilities – so these facilities disappear. [32]. Life gets harder for non-motorists, who are less mobile.

Much (often most) of the cost of housing is not the cost of construction but the value of the right to locate a property on land. Property Location Rights are half of UK national wealth [33]. These are rights that are created by the grant of planning permission – which the land owner collects.

A planning policy mandating car free housing would reduce the cost of housing by removing the right to have car with housing. This would remove the competition from committed motorists, cutting the market value of houses and reducing the landowners bonus.

No one with a Porshe would be competing for car free housing.

Car free housing would support the local facilities that cars are driving out.

A plan for a Greater York

If the House of Commons Science & Technology Committee is correct, to avoid a climate catastrophe, most people must give up their cars. This will be politically very difficult. The easiest start would be car-free housing for the poor because it would provide better living conditions for the car-less (i.e. those without the option of driving to a hypermarket or commuting by car.)

Car free development would show the advantages of car free living, making the transition to car free living politically easier.

I have suggested a policy for York that would build 400,000 car free homes, built adjacent to existing car dependent settlements. The idea is to develop car free facilities near the neighbourhoods of motorists to make an eventual transition to car free living easier [30].

Poorer but happier

For climate reasons, it will be is necessary to reduce many of the activities that cause greenhouse emissions, such as flying, driving in cars and eating carbon intensive food (particularly beef, lamb and dairy). This will reduce GDP so we will technically become “poorer”. Cheaper car free housing with local food production will be a good start because it will automatically reduce inequality.

Following this path we can become poorer, greener, live in pleasanter neighbourhoods – and be happier.

This…

Or this?

NOTES

[Note 1] Inequality of income

The total income of the richest 20% of the population compared to that of the poorest 20% of the population increased from 3.6 times in 1977 to 6.3 times in 2022.
Household income inequality, UK: financial year ending 2022, Office of National Statistics

[Note 2] Inequality of wealth

The wealthiest 10% of households held 43% of all the wealth in Great Britain in the latest period; in comparison the bottom 50% held only 9%.
Household total wealth in Great Britain: April 2018 to March 2020, Office of National Statistics

[Note 3] Growth in real disposable income for G7 countries, 2019 to 2023

Country	Change in disposable income
United Kingdom	-1.2%
Italy	0.1%
Germany	0.2%
Japan*	0.5%
France	2.4%
Canada	3.0%
United States	6.0%
G7	3.5%

TUC: UK families suffering “worst decline” in living standards in the G7, Source OECD

[Note 4] Poor getting poorer

Median income for the poorest fifth of people decreased by 3.8% between FYE 2021 and FYE 2022. This follows a 2.0% reduction between FYE 2020 and FYE 2021.
Average household income, UK: financial year ending 2022, Office of National Statistics

And

“Based on November ONS price data, the Resolution Foundation estimates that the inflation rate for the poorest 10% of households is 12.5%, in contrast, it’s 9.6% for the richest 10%.12 Furthermore, richer households who see big increases in the cost of the goods and services they buy may be able to adapt more easily, for example by reducing how much they save each month or changing spending on non-essentials.”
Cost of living crisis , Institute of Government

[Note 5] Green Party Policy

“To this end, Universal Basic Income will allow the current dependence on economic growth to cease, and allow zero or negative growth to be feasible without individual hardship should this be necessary on the grounds of sustainability.”
Green Party Policy, Spring 2023

[Note 6] Subsidise goods that use lots of labour.
Tax those that don’t.

“The proposal in our report to the European Commission (in 1995) is to “subsidise” jobs through a flat rate rebate on Value Added Tax. The proposal is revenue neutral.  The rebate is balanced by an increase in the nominal rate of VAT and estimated savings on benefits as employment increases.”
A macroprudential proposal for employment

[Note 7] Labour Party: No new taxes

“Sir Keir Starmer has promised not to raise income tax if he wins the next general election.
The Labour leader said he would avoid hikes “across the board”, having previously ruled out a wealth tax on the richest in society.”
Keir Starmer vows to not raise income tax, The Independent,04 September 2023

[Note 8] Labour’s mission to secure high growth

“Labour’s first mission in government will be to: Secure the highest sustained growth in the G7 – with good jobs and productivity growth in every part of the country making everyone, not just a few, better off.”
5 missions for a better Britain, Labour Party, September 2023

[Note 9] World Bank: Productivity and Growth

“Productivity is the key driver of economic growth, accounting for more than half the differences across countries in GDP per capita.”
What we’re reading about productivity growth and jobs, World Bank

[Note 10] Well-being and economic development

“Our current measures for human and economic development revolve around GDP, an outdated concept that emerged in the mid 20th century. In today’s globalised world, it’s clear that the GDP metric is too narrow for our current economic predicament.”
The Big Ideas: A Wellbeing Economy,
Centre for Sustainable Solutions, University of Glasgow

[Note 11] Rethinking GDP

“However, GDP is not a natural object, although it is now everyday shorthand for economic performance. It cannot be measured in any precise way, unlike phenomena in the physical world. Economists and statisticians understand, when they stop to think about it, that it is an imperfect measure of economic welfare, with well-known drawbacks.”
Rethinking GDP, International Monetary Fund

[Note 12] Bobby Kennedy’s speech

[Gross National Product – a precursor to GDP.]

“Yet the Gross National Product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.

“If this is true here at home, so it is true elsewhere in world.”
Robert F. Kennedy’s remarks at the University of Kansas, March 1968

[Note 13] Rents are part of GDP

“The income approach [to GDP] adds up everything earned by people and firms—mainly wages, profits, rents, and interest income.”
Rethinking GDP: It may be time to devise a new measure, International Monetary Fund, 2017

[Note 14] Distortion of GDP due to imputed rent.

Imputed rent will rise as house prices increase. Any increased value of houses built decades ago will feed into higher rents (imputed and real) and increase GDP – even though nothing extra is produced.

“If I buy a house, built 100 years ago, then should my simply living in it count as a part of the product of the country in this current year? If rental prices across the country go up does that mean that my house is producing more? It is a stock, not a flow. And yet by my simply living in the house, the imputed rent is added to GDP.”
Rents and GDP, Ari Andricopoulos

[Note 15] Climate change now recognised

“Wetter weather will be a feature of our changing climate in the UK.

“The Met Office predicts that by 2070, winters in the UK will be up to 30% wetter than they were in 1990 and that rainfall will be up to 25% more intense.”
Why is it raining so much?, BBC website, April 2024

[Note 16] Climate under-reported by BBC

“Like George Monbiot, I think that the BBC is biased and does very little to inform and educate, especially on the most important issue facing the world: climate change. They also confuse the science with weather stories that may be true(ish) but hide underlying climate impacts behind El Ninos and ‘lake effects’”.
The BBC is a trusted source, says Tony Hall, Brussels Blog, 2017

[Note 17] Climate change is accelerating.

“Accelerated global warming is the first significant change of global warming rate since 1970. It is important because it confirms the futility of “net zero” hopium that serves as present energy policy and because we are running short of time to avoid passing the point of no return.”
Global Warming Acceleration: Hope vs Hopium, James Hansen, 2024

[Note 18] GDP and climate

Rise in GDP is not possible without drastically reducing carbon intensity – quickly.
The carbon intensity of economic output is a measure of the amount of CO2 emitted (in grams CO2) for every unit of economic output (e.g. in £). Worldwide it’s presently over 500 grams CO2 for every £ of economic output produced. …

“[Given the current rate of reduction in carbon intensity], what is the maximum rate of increase in GDP that can be achieved without breaching the limit on carbon emissions of 420 billion tonnes?

“Answer (based on GCB Fig 1): It’s a growth rate of -5.2%. That’s heavy Degrowth.”
Green Growth or Degrowth? Brusselsblog.co.uk, 2022

And

“Currently carbon intensity is 540 gm of CO2 for each £ of GDP. If carbon intensity could be reduced twice as quickly (zero intensity in 2042), then what rate of economic growth is possible?
“Answer: 0.1% economic growth is just possible. i.e. Maintaining the status quo.”
Green Growth or Degrowth? Brusselsblog.co.uk, 2022

[Note 19] Gaze at My stars

12 Commandments

Kill My world as little as you can
Don’t drive in cars,
Don’t fly in planes
And leave that corned beef in the can

Build on My world but do it with great care
Don’t build with bricks
Don’t build with steel
Don’t build tall buildings in the air

Don’t kill My world by rushing all the time
Gaze at My stars
Breathe in My air
Guard all creation which is Mine

[Note 20] Measuring emissions

See Measuring UK greenhouse gas emissions, Office of National Statics (2023)

[Note 21] Emissions from DRAX

Over the past decade or so Drax Power Station. has switched from using Yorkshire grown willow coppice to wood pellets from North America. Does this mean the emissions from Drax have been taken out of the UK’s territorial emissions. Have they been added to the territorial emissions of USA and Canada?!
See How Drax could be the greenest machine in the world

[Note 22] Manufacturing outsourced

“Government should be open about ‘outsourced emissions’ according to Committee“
House of Commons Climate Change Committee, 2012

[Note 23] Fall in territorial emissions – still more than France

“This follows progress over the past decades to cut emissions faster than any other G7 country, with the UK having already slashed emissions by 48%, compared to 41% in Germany, 23% in France and no change at all in the United States.”
PM recommits UK to Net Zero by 2050 and pledges a “fairer” path to achieving target

And

The European Commission’s Emissions Database for Global Atmospheric Research, (Edgar), gives territorial emissions for the UK as 4.95 tonnes CO2 per person and for France 4.58 tonnes per person. (That is for CO2 only, also with emissions from imports, international aviation and shipping excluded.)
See CO2 emissions of all world countries

[Note 24] Net zero by 2050

“… by the middle of this century the world has to reduce emissions to as close to zero as possible, with the small amount of remaining emissions absorbed through natural carbon sinks like forests, and new technologies like carbon capture.”
Net Zero Strategy: Build Back Greener, Department Business, Energy & Industrial Strategy,2021.

[Note 25] Oceans will continue warming after net-zero

“According to some climate models, the surface temperature of the Earth stabilises when net-zero greenhouse gas emissions are achieved. This does not stop the Earth from heating as:

• Ice keeps melting
• Oceans keep warming
• Permafrost keeps thawing
• Wetlands keep emitting”

Net-zero is not good enough, BrusselsBlog.co.uk, June 2022

[Note 26] Cars kill the planet

“Electric vehicle batteries typically require specific materials in their manufacturing, including lithium, cobalt, graphite and nickel. The United States Geological Survey reported in 2019 that, globally, there was an estimated 62m tonnes of lithium, 25m tonnes of cobalt, over 800m tonnes of graphite and at least 130m tonnes of nickel that could be economically extracted (continued resource exploration may well cause these figures to increase over time). Compared to the quantities of these materials used in an average electric vehicle battery, this would equate to the amounts needed for at least 2.3bn cars or around 30 years of the current global car production output. The European Commission has further noted that the recycling potential for electric vehicle batteries is ‘significant’.

“The Geological Society warned us, however, that “as it stands, there are no significant lithium or cobalt mines online anywhere in Europe”, leaving “many long-term supply questions in the context of a booming industry, unanswered”. The European Commission has said that “building up and strengthening EU activity in battery material supply is imperative to reduce the EU’s future dependence on imported battery component materials for cell manufacturing

“Amnesty International has additionally noted that more than half of the world’s cobalt sources are in the Democratic Republic of the Congo, where mining can be poorly regulated and dangerous, and is frequently carried out by children using hand tools. It has called for greater transparency in supply chains so that the origin of cobalt can be better traced.”
Technologies for meeting the UK’s emissions reduction targets
Box 4: Material resources required for electric batteries
House of Commons Science and Technology Committee, 2019

[Note 27] The income of the poor is decreasing

“Median income fell by 3.8% for the poorest fifth of people, whilst increasing by 1.6% for the richest fifth of people in financial year ending (FYE) 2022. (Figure 3)”
Average household income, UK: financial year ending 2022, Office of National Statistics,

And

“The largest contribution to change in disposable income across all
households is attributable to original income, driven by a decrease of
4.0% in the poorest fifth of people between the financial year ending
(FYE) 2021 and FYE 2022, compared with an increase of 5.4% in the
richest fifth of people (Figure 4). “
Average household income, UK: financial year ending 2022, Office of National Statistics,

[Note 28] Increased rents

“Rents have risen +7.8% in the last year, the slowest rate of growth in two years.”
Rental Market Report: March 2024, Zoopla

[Note 29] The poor have few cars.

Gross income decile group	% Households with a car/van
Lowest ten per cent	35.00%
Second decile group	54.00%
Third decile group	71.00%
Fourth decile group	80.00%
Fifth decile group	83.00%
Sixth decile group	85.00%
Seventh decile group	91.00%
Eighth decile group	94.00%
Ninth decile group	94.00%
Highest ten per cent	93.00%

[Note 30] Cost of cars

Cost of running a car, excluding depreciation:

“At a very rough estimate, budget around £3,000 to £4,000 (excluding depreciation) to run your car per year.”
How much are your car running costs?, Parkers, February 2024

And

“the car-free city costs between two and five times less

“In 1992, Carlo Ripa di Meana was the European Commission Envioronment Commissioner. He called for cities to be free of cars he said he was ready to become car-less, and so should other city dwellers, to prevent Europe’s cities being choked by the internal combustion engine.

“An excerpt from a press release from the European Commission in 1992:

Based on these observations, Carlo RIPA di MEANA, the European Environment Commissioner, has had a study carried out on car-free cities in an attempt to find the answer to the following question: Is it possible, and if so to what extent, to conceive of a city which will operate more efficiently than the type of cities we have at present, using alternative means of transport to the private car?

The answer provided by the study is positive, even in purely financial terms: the car-free city costs between two and five times less (the costs varying depending on the population density of the city).
Carbon budgets, car free living and happy degrowth

[Note 31] The poor pollute less

The Joseph Rowntree Foundation publication “Distribution of Carbon Emissions in the UK“, estimated that the richest 10% of the UK population caused over three times more than the poorest 10%. (See Figure 1)

[Note 32] As cars move in facilities disappear

“As the decades of the century passed more villagers bought cars. The motorists shopped outside the villages taking their business from the local shops. They moved their children to distant schools and stopped using the buses. The villages lost their shops – except for the government subsidised post office in one. The pubs closed.”
A parable of four villages, BrusselsBlog.co.uk, 2010

An example:

Car free development lessens inequality, BrusselsBlog.co.uk, Jan 2023

[Note 33] Property Location Rights

“When planning permission is granted for a building on a plot of land, it becomes more valuable: In York, an area of agricultural land big enough for a house has a value of less than £700. This increases to around £200,000 when planning permission is given to locate a house on the plot.

“A Property Location Right is a considerable proportion of the value of most buildings. If a building is removed but the right to have a building located on its plot remains, there can be considerable value left because of this Property Location Right. That’s why buildings are usually insured for less than their market value because even when a building is burnt down, value remains.”
The ONS makes a category mistake, BrusselsBlog.co.uk, August 2022

[Note 34] A plan for a Greater York

“This is a project to build homes for one million new residents in the Greater York area – the area within 20 kilometers of the center of York. With very minor exceptions the development will be car free. Housing will become very much cheaper.”
A car-free plan for a Greater York, DontLookNow.org, September 2023