Listening to Today in Parliament on Radio 4 I silently cheered to hear a point put to David Cameron at Prime Minister’s Questions by veteran Labour figure Michael Meacher, a man I’ve interviewed and met once at a meeting near Liverpool. He said: “FTSE 100 directors get £86,000 a week on average, while the poor are left to starve. Is there no end to the brutality and nastiness of Tory Britain?”
Bang on the money, as they say. The disparity of earnings is the clearest indicator of a broken economy and dysfunctional society, building inequality into the national way of life by allowing a tiny elite to set a bad and unchecked example while the majority are losing their standard of living and are told they must bear the burden of shrunken output and lowered expectations. It isn’t an argument against bosses, top businessmen and decision-makers being recognised as major contributors and harvesting the rewards, but rather fury at the mountainous scale of remuneration and pension which for many is a generational jackpot ensuring wealth for their children’s children’s children.
The pay of FTSE 100 directors has grown by 14 per cent in the past year – 20 times faster than that of the average worker, according to figures released from Income Data Services which tracks pay trends. Recent figures from the Office for National Statistics show that total pay including bonuses across the labour market grew by just 0.7 per cent in the period July to September 2013 compared with a year earlier well below the Consumer Price Index (2.2 per cent) and the Retail Price Index (2.6 per cent).
But for FTSE 100 directors pay grew during the same period by 14 per cent – 20 times faster than that of the average worker.
Time for legislation to put ordinary workers on the pay committees of companies…to bring some sanity to the way in which directors are paid.
There is concerted resistance elsewhere. For example Swiss voters have been voting on strict new laws to limit executive pay to no more than 12 times the wage of the lowest paid. Chief executives are earning more than 200 times what their employees take home or in one case over 800 times. It emerged earlier this year that Swiss banking giant UBS had awarded $2.6m (£1.6m) in bonuses – the figure matched exactly the bank’s losses over 2012.
I’m always intrigued by the idea that you need a bonus to work properly. I suppose if you’re doing something exceptional and beyond the call of duty, it is reasonable to pay more but in my experience that happens to employees all the time but no one ever says they must be compensated. Why are the principles AND the rules different for the boardroom? If you were told you’re bonus would be two million rather than one million, would you work harder? What would you do to improve? Well, one answer is that you would take more risks and endanger the company, the customers and the economy by pressurizing those beneath you even to the point of breaking the law as we find yet again this week with Lloyds deliberately cheating customers into taking the wrong products to boost sales.
Then came the riposte. Cameron said Meacher has a lot of brass neck, given that he served in a Labour government with a lower top rate tax rate and higher City bonuses.
And, again, he was right on the money. I found myself agreeing with both. Meacher was right about the Tories and Cameron was right about Labour. They both play the same nod and a wink game with the City and allow them to run rings round the rules to justify their fantasy incomes because neither party – in government – really cares about inequality or fairness when confronted with the awful truth that Britain is utterly reliant on one sector of business for its growth and secure income. They simply can’t afford to clamp down on the bankers because they have no alternative strategy for tax revenues, no industrial strategy, no plan for manufacturing and virtually no regional industrial strategy to provide alternative income streams. The size of the banking sector is five times national output, which is why it has aggravated the problems policymakers have faced when the banks got into difficulties. Yet Cameron promised to rebalance the economy and heal the north south divide.
Here’s a report from 2008: Our economy has become too focused on finance and services at the expense of other sectors and is now paying the price, according to Conservative leader, David Cameron. In his address to the CBI annual conference in London last week, Cameron said Britain had become “reliant on just a few sectors for growth” and the government needed to take a more responsible attitude to economic development. “We must never again let our economy become so dependent on such a small number of industries and markets such as finance and housing,” he said. Richard Lambert, the CBI’s director-general, picked up on the theme, saying that the City had “sucked talent” from other sectors and that “maybe too many prospective engineers ended up working in City trading rooms”. Sir John Rose, chief executive of Rolls-Royce, argued that manufacturing had suffered from this effect, pointing out that only 13 per cent of UK GDP now comes from manufacturing, compared with 19 per cent for the US and 23 per cent for Germany.
Exactly, and that was caused principally by Labour governments pathetically sucking up to the City to prove they weren’t tax-and-spend socialists…key among them Scots John Smith, Gordon Brown and Alistair Darling.
Increasingly the evidence is that Labour and the Tories are all but interchangeable on key issues despite trying to create a different impression and using different language. If this is the best of both worlds where we share the risk and benefits, I’m an investment banker. They will never rewrite the rules. Time to do it ourselves.