They Know Best

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.








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0 thoughts on “They Know Best

  1. Nothing to add, analysis on the money, so to speak!

  2. “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.”

    This is how it should be done. Decent wages for those at the bottom and executive pay limited by what those at the bottom are paid. This would close the inequality gap quickly. It would be quite telling that wages of those at the bottom would rise sharply.

    I’ve been saying for years that executive pay should be linked to workers pay. Good to see that the Swiss are moving in that direction, Scotland should do the same once we are independent.

    The rest of your analysis is right on the button. There really is only one political party in westmister, the westminster preservation party.

  3. ‘Fair comment on Labour in government, but Michael Meacher is one of the good guys.

  4. Inuit’s have a very fair way of dividing up food – the person responsible for doing the cutting (portion size) has the last choice. So it should be for directors of large companies. If they are to get a pay rise it should be benchmarked against what has been awarded to the workforce and shareholders.

    I’m also amazed at the number of failed CEOs who move onto other well paid jobs. It’s a bit like football managers.

  5. Take Meacher’s MP’s salary, his housing allowance, food allowance, expenses etc and that puts him in a higher bracket than the FTSE 100 directors.

    Is there no end to Labour hypocrisy?

  6. Hmm, none of this seems easily to translate into a generally persuasive reason for voting “No”.

    Maybe it’s something about the word itself that I don’t understand… That doesn’t need to be explained to other folk. Perhaps if you unpack “No!” with the correct cultural apparatus, an angelic host will burst spontaneously into view, saluting the greatest Union that ever spread its conjoint beneficence on a barely civilised planet, at last guaranteeing the sun would do its proper job and never set.

    I’m reminded of the world imagined by Tom Leonard in Situations Theoretical and Contemporary:

    The schooner The Mother of Parliaments has anchored in the bay.
    The first British ship has reached your land.

    See the row-boat, pulling to the shore.
    See the ballot-boxes, glinting in the sun!

    Run and tell your fellow-tribesmen.
    We are going to have a referendum!
    Shall we join the British Empire?

  7. Well said Derek. We must be able to set new priorities in fairness an equality. Hopefully this message can get across to the don’t knows, because if we stay in the union it will get worse, not better.

  8. The land of make believe, where the mad hatters tea party is in permanent session! Just the main players get wee shots each. By the way Derek was Teflon Tony not a memorable Scottish personality?

  9. In a recent poll Herald I think it showed that the No Vote is at its highest in the affluent areas of Scotland.
    The poorest in our society are already on board.
    Problem is the No ones are in the Scottish equivalent of the FTSE £86,000 shysters.
    Child care ,or a living wage , a fairer society is of no interest to those who oppose Independence..
    That is our biggest problem., and these people traditionally are more likely to vote .
    Our job is to get into the deprived areas and ensure we energise those to register to vote and turn out on Sept 18th.

  10. The Westminster establishment has completely accepted that the only show in town is Thatcherism (or voodoo economics as Bush senior described it) where if you reward those at the top,the benefits will eventually trickle down to the plebs.Unfortunately,at the same time as Thatcher “liberated” the labour markets,she also “liberated” currency controls which instead of allowing wealth to supposedly trickle down within the UK,allowed it to disappear into offshore tax havens.
    Someone should write a book entitled “The Poor had no Accountants (or offshore bank accounts)”.

  11. Someone should write a book entitled “The Poor had no Accountants (or offshore bank accounts)”.
    They did ,it is called the Tory ,Labour Liberal election Manifestos!!

  12. Rod Mac

    I’m one of the people the Herald were talking about. Before I retired three years ago, I had a salary and benefits package which put me in the top 5-10% of earners and I live in a fairly affluent area on a full final salary pension

    Inexplicably for the No campaign however, I shall be voting Yes.

  13. Rod Mac
    I live in a non-deprived area and am well paid. I will most certainly be voting YES and I am strongly in favour of a much flatter wealth distribution across society, introduced through ideas like Common Weal.

  14. Roibert a Briuis

    Me too but with a performance related pay package so i was paid for the results of my division which i led and was able to have ‘almost’ 100% control of with little interference in a multinational company.

    Someone once said if your not a socialist by the time you are 50 you have a personality defect..

    One of my mantra’s was the top salary in any organisation should be linked {a multiplier} (10/15 times) of the lowest paid worker in the organisation. and of course ban rule bending outsourcing.

    My other one was/is MP’s remuneration……NO PERKS just a straight salary !! and it should be tied to the Old Age Pension again a multiplier..

    Implement those two legally and watch society change for the better.

  15. Derek, I couldn’t agree more.

    • (Derek). The salaries , pension payments , expenses and other incentives which favour directors , management , bankers and politicians have now reached obscene levels and certainly disprove the Tory mantra ” We are all in this Together ” . There has to be a much more fair and equitable system for the distribution of the wealth of our nation and reward for the ordinary worker who , over the last 5 years, has seen wages fall behind inflation and the cost of living . Thereby increasing the gulf between workers and management and directors .This , in a democratic society is a matter which requires addressing . The answer for Scotland will not come from remaining tied to a London centric wages and a reward system which is no longer fit for purpose and encourages a Gordon Gecko ” Greed is Good ” society which once again is starting to flourish . As far as Scotland is concerned we have the making of a fairer more equitable society resting with us come next September . We have a once in a lifetime opportunity to vote Yes for Independence and thereafter mould our country and it’s’ rich resources into a Nordic type society , as described in Lesley Riddock’ book “Blossom” , and will benefit all by way of social equality and the more equitable distribution of our wealth thereby creating a fairer and more just society for our children and grandchildren . The status quo or even devo Max is not a choice and would surely keep us tied to a Disunited Kingdom where greed and the continual erosion of the welfare state is certain to prevail irrespective of a Tory or Labour Government at Westminster . Only an overwhelming vote in favour of Devolution will give us the tools and a Holyrood Government appointed by the people and working for the people in the creation of wealth retained in Scotland for the benefit of Scotland and her peoples .

  16. “If a rat be born in a stable that does not make it a horse” Blair’s father was born a bastard in Scotland to two English parents who immediately abandoned him to be brought up there.
    It would appear that he did not appreciate his Scottish upbringing as when he reached the age of discretion he chose the English way of life and if all reports be true showed a distinct hatred of Scotland.
    Tefelon Tony is proof of the old saw that “what’s bred in the bone will come out in the flesh.”

  17. My main surprise is FTSE 100 directors average is only £86,000. Can that be right? If I was asked to guess it would be closer to seven figures than five.

    • Craig , are you sitting down and is your blood pressure normal because the figure in Derek’s blog for directors in a Footsie 100 Company is given as £86,000 per Week . That equates to £4, 500 ,000 per anum plus I am sure there will be pension payments on top of the salary , share rights , private medical insurance , company car of their choice , expense account and performance related bonus . “Greed certainly is Good ” for the city high fliers whilst the workforce or those on the shop floor probably have to get by on an average wage of about £26,000 per anum And ,under the guise of Gideon’s austerity programme , have seen wages in real terms decrease over the past 5 years . But try to remember that according to Dodgy Dave “We’re all in this together” .It really is obscene when at the same time and before our very eyes the welfare state under the guise of austerity and efficiency is systematically being dismembered and dismantled by our elected representatives at Westminster .

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