A/HRC/36/40 Reduction of inequality: Actions should follow words 17. The IFIs’ increased attention to the negative impacts of income and wealth inequality and its causes is a welcome development. The World Bank has emphasized that measures to make income distribution more equal are a necessary condition for attainment of Sustainable Development Goal 1.1 on eradicating extreme poverty, as well as SDG 10.1 on boosting the bottom 40 per cent (Poverty and Shared Prosperity, October 2016). The IMF has published several research papers showing that countries with lower inequality have higher and more durable growth; that fiscal policies have become less redistributive in most countries; and that weaker labour market regulations and institutions, reflected in declining trade union density and collective bargaining coverage, are the main drivers of increased inequality in many countries. 18. However, action in lending programmes or country-level policy advice has been slow to catch up to the IFIs’ discourse and research on the need to reduce inequality. Many IMF programmes or policy recommendations continue to support measures that weaken minimum wages, employment protection regulations or collective bargaining institutions. For example, the IMF has encouraged many countries to substantially weaken or dismantle national or sector-level collective bargaining, despite the role that coordinated collective bargaining systems have played in achieving more equal income distribution. In February 2017, the UN’s Independent Expert on the effects of foreign debt and other related international financial obligations submitted a report to the Human Rights Council, which documented numerous cases of the IMF promoting austerity-related labour market reforms that erode workers’ rights. 4 The report found little evidence that the deregulatory measures, put forward on the pretext of preventing or resolving debt crisis, contributed to economic recovery; but they did contribute to increased inequality. 19. The Fund’s advice or loan conditions in the area of social policy have also had potentially troubling impacts on inequality. Some IMF programmes include a “social spending floor” as a Quantitative Indicative Target, but these are purely symbolic since a failure to meet minimum spending targets has no effect on loan disbursements. The main object of IMF involvement in social programme reforms is to control their fiscal cost, not to improve their adequacy or coverage. In some countries, for example in Egypt, the Fund and the Bank have supported the extreme targeting of social benefits over universal approaches: for example by replacing universal consumer subsidies with severely means-tested benefits. The “proxy means test” mechanism often used has been shown to typically exclude 50 per cent or more of those that should be eligible by virtue of income level, according to research published by the ILO.5 Social protection reform measures promoted by the IFIs that leave a majority of lowest-income people without any assistance are incompatible with inequality reduction and shared prosperity goals. 20. To its credit, the World Bank has in recent years expressed support for universal healthcare coverage and universal social protection. In 2016, it launched a joint programme with the ILO for increasing the number of countries with universal protection. The Bank has endorsed these initiatives in conformity with its support for the SDGs, specifically targets 1.3 on social protection for all and 3.8 on universal health coverage. The Bank should ensure that its country programmes deliver on the promise of protection for all by helping establish comprehensive systems based, for example, on the social protection floor concept developed at the ILO. The IMF should also support this approach, following up on country-level research work it has already been involved in for identifying fiscal space for social protection floors. 21. Additionally, the World Bank has supported the SDG targets linked to Goal 4 on ensuring inclusive and quality education for all, which is another key instrument for 4 5 United Nations Human Rights Council, A/HRC/34/57, 27 December 2016 (http://ap.ohchr.org/documents/dpage_e.aspx?si=A/HRC/34/57). Kidd, Gelders and Bailey-Athias, Exclusion by design: An assessment of the effectiveness of the proxy means test poverty targeting mechanism, (http://www.developmentpathways.co.uk/resources/wpcontent/uploads/2017/03/Exclusion-by-design-An-assessment-of-the-effectiveness-of-the-proxymeans-test-poverty-targeting-mechanism-.pdf). 37