GLA leads the way on pay ratios

A piece of good news amongst a wave of depressing cuts stories ahead of the Budget: the Greater London Assembly is following the example it set on the Living Wage, again leading the way in best practice on remuneration and reducing inequality. Yesterday the GLA passed a motion (proposed by Darren Johnson AM) setting the maximum pay ratio allowed within it and its associated bodies.

The GLA has now committed itself to reducing the difference in pay between the lowest and highest paid staff to no more than 20 times, with a long term goal of no more than 10 times.

Wage ratios focus attention on the lowest and highest earnings within an organisation: giving momentum to bring low wages up whilst stemming runaway pay at the top.  The fledgling ‘Just Wage’ movement – of which One Society is at the heart of – believes that all organisations and companies should seek to reduce their wage ratio as much as possible.

The government’s pledge to introduce a 1:20 ratio in the public sector has been met by all but a tiny percentage of jobs in that sector already; however it should be seen as just a starting point. The real driver of executive wage growth and huge pay ratios is the private sector, and that is where real action needs to be taken.

As Darren Johnson points out in his article in today’s Guardian, there are two other reasons why closing the wage gap matters:

“to make our society more equal [the arguments set out in The Spirit Level and by The Equality Trust] … and as we enter an era of damaging cuts, we need to build a consensus around more equal pay to ensure we really are all in it together.”

The broadest shoulders are currently not bearing (and without urgent and sustained campaigning will not bear) the broadest burden of deficit reduction measures and public sector cuts.

There has been a significant backlash by parts of the Tory party and the right-wing press against some of the limited proposals in the Coalition Agreement to redress this.  Their top target has been the plan to raise Capital Gains Tax in line with Income Tax.

Currently only 250,000 people pay CGT, and it is used by the wealthy as a means of avoiding paying their fair share of tax.  One Society has joined with Social Liberal Forum and 38 Degrees in attempt to bring balance to the debate and persuade the government to stick to its plan for a rise. 38 Degrees is asking people to email George Osborne to show the strength of feeling on this issue.

Anyone who was in the GLA Chamber yesterday, or who listened to the debate online, will have no doubt about the scale of the challenge ahead.  All the Conservative Assembly Members voted against the pay ratio motion.  Indeed with Andrew Boff’s passionate speech in defense of the wealthy and Brian Coleman’s shouts of “Socialist nonsense” it felt at times like attending a US ‘tea party’ rally.

This said, it is heartening to see that the Labour Party may finally be getting it on private sector top pay.  David Miliband, Ed Miliband and Diane Abbott have all publicly supported calls for a High Pay Commission.  Compass is calling for all Labour Party leadership candidates to support it and put pressure on the government to include the private sector in its ‘fair pay review’.

As Compass put it in their call to action:

“Excessive pay is morally wrong and economically damaging and we need a Labour leader that is serious about tackling inequality.”