A Tory Own Goal?

I rather hope that David Cameron's proposal last week that senior public service salaries should be capped at no more that 20 times that lowest paid in the orgainisation will prove an "own goal."

First, it is clearly ill thought out. Although some senior public servants, particularly local authority and hospital trust chief executives, have broken the public service ethic by demanding, or at least receiving, excessive salaries, if the "lowest paid" in their organisation is paid the minimum wage (presently £5.80 an hour, which works out at £12 064 per annum for a 40 hour week,) there are actually very few public service "fat cats" earning 20 times more than this: £241 280 per year. In addition, it is probably silly to base the multiplication factor on the lowest paid member, who could be a part-timer or someone under 18 earning less than the adult minimum wage. It would be more sensible to place the cap on the average earnings of the lowest paid 10% in the organisation.

The real value of the proposal is that it draws attention to the obscene multiples of the lowest paid with which the fat cats in the private sector reward themselves. I was astonished to read a few weeks ago that the number or bankers receiving over £500 000 a year "runs into thousands." I suppose the Tories will argue that such levels of remuneration are necessary to attract executives of international calibre, and that if such "top talent" is not permitted these rewards it will go abroad. Well, let them go. But as Polly Toynbee has repeatedly pointed out, most top executives in British companies are actually "home grown" and there is no great demand for them internationally. Clearly what is sauce for the public sector goose should be sauce for the private sector gander.

What we should now be debating is what is a reasonable range of incomes in a civilised and cohesive society. Plato thought it was a factor of four (though whether he included the slaves in this is not clear.) I believe a factor of 10 is quite sufficient to reward additional hard work and enterprise. So if we adopt the Green Party's proposal of a "citizen's income," set that around £10 000 a year, then there is no need for anyone to be earning over £100 0000 a year. That should be ample for everyone's needs and quite a lot of greed as well.

Unless and until a government has the courage to adopt such a cap in both the public and private sectors, a recent useful proposal for PLCs is that all annual accounts should be required to publish the factor by which the remuneration of the each senior executive exceeds that of the lowest paid 10%. This may not shame them into reasonableness, but will at least keep the issue alive and alert voting shareholders to the issue.