Time for a High Pay Commission?

Our guest writer is Gina Byrne of Compass

“Why is it always the little guy who gets shafted?”

The question hung in the air momentarily, echoing around the large committee room. It was what everyone present – and perhaps the entire country – has been asking themselves for the past eighteen months. The words, spoken by Jon Cruddas MP, heralded the start of last night’s event ‘Unequal Britain – Time for a High Pay Commission?‘ held by The Smith Institute in association with Compass.

Inequality and high pay have always been poignant issues, especially after New Labour’s romance with big business became evident, but ever since the crisis began, they have taken on a new urgency. Early Day Motion 191, which calls for a High Pay Commission to be set up, has now been signed by over 130 MPs.

John Battle MP, who introduced the motion, highlighted the differences between those who are culpable for the crisis and those who are paying for it, showing just how huge the gulf is between them:

“My constituents weren’t the people running the banks, they were the people cleaning them.”

Cruddas, too, showed a local perspective in talking about his Dagenham constituency, where over half of children live in families affected by poverty.

The next guest was the Alan Manning, head of the Department of Economics at the LSE, who, perhaps unexpectedly, argued against one of the perceived tenets of economic theory, and endorsed a raise in the highest level of tax. The regulation of the financial services, he said, was essential to combating future excesses and thus bring about a reduction of overall inequality.

The final speaker, Reform Director Andrew Haldenby, went against the tide of popular opinion, arguing that although there is a huge disparity in income inequality, it should not be tackled by regulation, but through a more competitive atmosphere at the top of the wage scale, as well as greater investment in education. At this point, Chair Polly Toynbee intervened, challenging Haldenby’s views on how a lack of regulation would help to tackle the inequalities which depend on tax and benefits to be resolved. Haldenby stumbled, but clung to his views, and had his points roundly disputed by the audience in the subsequent question and answer session.

The evening’s discussion made a strong link between social inequalities – not just in wealth but in health, education and quality of life – and the high pay and low levels of taxation enjoyed by some of the UK’s richest people. Recent events, however, have placed this situation in jeopardy, as public discontent with those who broke the economy mounts. The fear of an “angry mob” of the have-nots rising up against the “haves” is now being considered, as it had been during the crises of the 1930s and 1970s, as a very real possibility by those who are among the top earners in the country.

While this is a overly-hysterical view, there is growing public support for redistributive measures, as it becomes clear that income inequality in the UK is often more dramatic than people think – partly due to a lack of transparency when it comes to wages. However, as Manning suggested, regulating high pay will never be as simple as implementing a minimum wage, and any public body entrusted with the task must consider a wide range of solutions, such as scaling pay, encouraging an open policy on how much individuals earn, or even implementing higher taxation to redress the balance after years of false belief in the trickle-down effect. It is clear that something must be done, and this panel paved the way for it.

Perhaps one of the most useful contributions to the debate came from a short comment made by Manning. Mobilising opinion, he said, was key to breaking the cycle of high pay. Without public support for an end to hugely inflated earnings, nothing could be done, even by the most determined politicians, pressure groups and journalists. The little guy himself must see the social inequalities around him as a direct result of unregulated earnings at the top of the pay scale and become sufficiently incensed to end such a damaging cycle. Maybe an angry mob wouldn’t be so unwelcome after all.