Former CBI boss warns of a growing divide

Speaking at the University of York last night, he said that if left unchecked, the situation will only get worse. The gap between the highest and lowest-paid workers has grown more quickly in Britain than in any other advanced economy over the past three decades. Today, it is well above average and second only to the United States among the big developed countries.

Sir Richard called for “smarter” spending on education so that the disadvantaged are given “a leg-up” and he said he is convinced by the case for academies – not-for-profit independent state schools with sponsor-managers.

“The UK spends significantly more on educating children up to the age of 16 than the rich country average, but the outcomes are rather worse than average. We don’t need to be spending more: we need to be spending smarter. And high grade teaching is the key.”

He also called for a “more progressive approach to public spending”, with the UK investing more in higher education, research and in creating infrastructure.

Taxes need to be “fairer”, said Sir Richard. “High levels of personal taxes have strong disincentive effects... but taxes on land and real estate in this country are very unprogressive, and have the advantage that property – unlike humans – cannot shift offshore to Mexico.”

Sir Richard said there is a case for shifting the balance of tax somewhat away from labour and towards capital. “The Government is focused on reducing the rate of corporation tax to increase business investment in this country. But that won’t happen if consumer demand is flat and people are worried about their jobs.”

He said that, because a high proportion of its workforce has relatively low skills, the UK has been vulnerable to the growing impact of information technology. “Put crudely, computers increase the productivity and therefore the value of those who have the skills to use them – and take away the jobs of those who can’t.”

And, coupled with globalisation, this has meant companies could transfer their production processes to nations where they could be completed more cheaply. He added the education system’s structure, political change and movements in the housing market have also contributed to inequality in the UK.