It’s official: inequality reduces growth.

The West’s leading economic think tank, the Organisation for Economic Co-operation and Development (OECD), recently dismissed the 1980s concept of trickle-down economics as it found that the British economy would have been more than 20 per cent bigger had the gap between rich and poor not widened since the 1980s.

This ought to be the final nail in the coffin of trickle-down economics, a right-wing concept that was eagerly grasped by Tory prime minister Margaret Thatcher and US president Ronald Reagan in the early 1980s.

They prophesied that by unleashing market forces with policies designed to weaken trade unions and encourage wealth creation, wealth would continue to expand exponentially and ultimately find its way down to the poorest in society. Hence the idea of trickle-down. Yet the evidence is precisely the opposite.

Publishing its first clear evidence of the strong link between inequality and growth, the Paris-based OECD proposed higher taxes on the rich and policies aimed at improving the lot of the bottom 40 per cent of the population. This is the working class, rather than the group identified by Labour leader Ed Miliband as the “squeezed middle.”

The OECD said the richest 10 per cent of the population now earned 9.5 times the income of the poorest 10 per cent, up from seven times in the 1980s.

However, the result of this widening income gap had been slower, not faster, growth.

It concluded that “income inequality has a sizeable and statistically negative impact on growth, and that redistributive policies achieving greater equality in disposable income has no adverse growth consequences.

According to the OECD, rising inequality in the two decades after 1985 shaved nine percentage points off UK growth between 1990 and 2000.

The economy expanded by 40 per cent during the 1990s and 2000s but would have grown by almost 50 per cent had inequality not risen.

Reducing income inequality in Britain to the level of France would increase growth by nearly 0.3 percentage points over a 25-year period, with a cumulative gain in GDP at the end of the period in excess of 7 per cent, said the OECD.

The think tank said governments should consider rejigging tax systems to make sure wealthier individuals pay their fair share. It suggested higher top rates of income tax, scrapping tax breaks that tend to benefit higher earners and reassessing the role of all forms of taxes on property and wealth.

However, the OECD said, its research showed “it is even more important to focus on inequality at the bottom of the income distribution. Government transfers have an important role to play in guaranteeing that low-income households do not fall further back in the income distribution.”

Recent economic reports, combined with Tory Chancellor George Osborne’s Autumn Statement, have illustrated more than ever the explicit and inherent contradictions in the capitalist economic model.

Angel Gurria, the OECD’s secretary- general, said: “This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate.

“Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

Reputable and renowned institutes have issued a series of warnings about the current economic crisis that is set to last a decade and hit the most disadvantaged and poorest citizens across the world.

The International Monetary Fund has cut its growth forecasts, and warned that the world economy might never return to the pace of expansion seen before the financial crisis unleashed as banks collapsed after 2008.

The IMF now expects world growth to be 3.3 per cent in 2014, down 0.1 per cent from its July forecast, and 3.8 per cent in 2015, down 0.2 per cent from three months ago.

In its new World Economic Outlook, just released, the IMF also warns that the markets are underpricing risk and that geopolitical risks have increased.

Another crisis is coming.

The last one almost destroyed the financial system and — despite hopes on the left that it would mark a radical shift in politics away from “free markets” — it was in fact used to consolidate wealth for the financial elite, suppress wages and slash welfare. What will they use the next one for?

Capitalism’s hunger games

If you want to find a great example of the massive disfunction at the heart of modern capitalism you need look no further than food production and distribution.

New research reveals that more than four million tons of food is being wasted by supermarkets and farmers every year — 40 per cent of the total. Meanwhile one million people now use food banks across Britain to ensure their families are able to eat one basic hot meal per day.

The government’s welfare reforms, including benefit sanctions and the hated Bedroom Tax, are a central factor in the explosion in the numbers of impoverished people turning to charity food banks.

A Sheffield University researcher Hannah Lambie-Mumford says the rise in demand for charity food is a clear signal “of the inadequacy of both social security provision and the processes by which it is delivered.”

Her report warns that as social security safety nets become weaker, there is a danger that charity food could become an integral part of welfare provision, or even a replacement for state-funded emergency welfare schemes.

Food price inflation in Britain is amongst the highest in Europe. The political Establishment are all singing from the same song sheet — that austerity is here to stay and will be a permanent feature for a decade.

We used to talk about people falling through the welfare safety net. It seems that modern Britain is about to see that safety net itself removed.

Steven Walker is a United Nations Children’s Champion