A concern with inequality lies deep in Liberal DNA. The foundations of the welfare state were laid out under a liberal government 100 years ago. More than 150 years ago, John Stuart Mill argued for a cap on inheritance so that wealth might be more fairly distributed in society, an argument that jarred with Victorian attitudes of the time. We currently live in one of the most unequal societies in the developed word, and for contemporary Liberal Democrats, this remains a deeply troubling fact.  

Today Demos published Wealth of Opportunity, arguing for a renewed liberal equality agenda, based on evidence of the divisive impact on inequality on society and recent finding of the central role that financial security and access to resource plays in life changes and child development. In this pamphlet we recommend: 1) taxing wealth; 2) focusing on early years support in benefits and services and 3) capitalising low-income families. 

1) Reform of the wealth tax system that is riddled with loopholes and widely perceived as unfair could reap fruitful rewards. We argue that there is more political capital in a gift tax than an inheritance tax – a tax that the public despises and which is easily avoided by the wealthy. We also argue for the introduction of a land value tax and a Tobin tax on international transactions.

2) Benefit and tax credit levels should be increased to take more families with children out of resource poverty. We suggest that extra resource be channeled into services used by children from disadvantage backgrounds and their families in the form of a life premium to boost the capabilities of the most disadvantaged children. SureStart should be reformed to focus more on the programmes with a proved impact on child-well being, capability development and parenting.    

3) Evidence suggests that financial security is a key factor underpinning well-being and capability development in childhood. To capitalise low-income families, we therefore recommend a replacement of the minimum wage with a true living wage; replace the Child Trust fund with lump-sum grants of £500 for low income families; and reform of the child benefit system to low income families to pay a higher rate of benefit for the youngest children.  

The Liberal Democrats face a unique opportunity: concern for economic inequality has never been more or higher on the public agenda than in this post-recession era and following the double-scandal of MPs expenses and bankers bonuses. A radical agenda focused on the recommendations laid out by Demos has the potential to cement the reputation of the Liberal Democrats as the vanguard of the contemporary progressive left.  

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