“Anyone mystified by the rise of Jeremy Corbyn should look no further than today’s survey of chief executives’ rocketing pay.
“Nobody believes more strongly than the Mail that the hard-left socialism preached by Labour’s frontrunner would be an unmitigated disaster for Britain.
“But no wonder Labour activists demand radical solutions when the High Pay Centre finds the bosses of our top 100 firms earn almost £5 million a year each. That’s a staggering 183 times the average worker’s annual salary of £27,000.
“You don’t have to be a Bolshevik to find this huge disparity offensive. For in most cases it owes nothing to merit – and everything to the greed of mutually back scratching remuneration committees.
“Even ardent champions of capitalism will be appalled that chief executives have helped themselves to an extra £800,000 each over four years in which they’ve imposed minimal increases or pay freezes on their employees.
“As most Britons are intelligent enough to see, Corbynite socialism is no answer. But while the boardroom pay racket continues, the enemies of capitalism will never be starved of support”.
Daily Mail editorial August 17
While the Daily Mail is not an organ that greatly appeals to left-leaning readers, it made an excellent summary of the problem. Unsurprisingly, the Mail did not go on to talk about what might be done to halt and then to reverse this unseemly trend. Had it done so, it might have advocated a policy along the lines of that suggested by Edward VIII when he visited the distressed areas in the Welsh valleys: “Something must be done.” Quite so. But what?
We must hope that the Labour Party now takes a break from its entertaining but hardly helpful infighting and considers what, if anything, might be done. A stroll down memory lane might be a useful place to start
A few years ago, I wrote a book which I called A Cushy Number. In this, I examined the demands made on and the rewards received by a selection of professional workers, including teachers, doctors, lawyers, politicians, engineers, and fat cats in business and the City. I defined a cushy number as a job which combined low demand on the post-holder together with high rewards, and I established a league table of cushiness for 20 professions.
I looked at the cushiness or otherwise of the jobs of senior executives in the City of London. The job population under review covered banks and investment houses, together with the plethora of financial institutions which grace the square mile. Where did and where does this group stand in the cushiness stakes?
Broadly speaking, the practice of the City has invariably been to take as big a cut as possible from the money which flows through. The size of this cut has varied only slightly down the ages, from the enormous at the bottom end to unseemly looting at the top end. I hesitated about the use of the word “looting”, and it is appropriate to stress that I was speaking here only of legal looting, rather like the honest graft practiced by George Washington Plunkitt and his Tammany Hall colleagues in New York in the late 19th and early 20th centuries.
City customers only seem to take alarm if the amount of money which sticks to the fingers of the City top brass equals the total input. Whatever the method of calculation, the amount abstracted from the flow is always at or near the level that had in an earlier era brought obloquy to King Midas.
One aspect of the (huge) reward side of the job deserves comment. Those in favour of massive reward packages for senior managers argue passionately that the top City boys would head for new and greener pastures abroad if measures were to be enacted which would curb their acquisitive propensities. A little evidence to support the dash for cash argument would be nice. But no evidence was forthcoming at the time or since.
The main culprits in the United Kingdom’s banking collapse were brought before a parliamentary select committee to explain what had gone wrong. In the main, their testimony consisted of an interminable series of apologies with little by way of any coherent explanations as to root causes. The Royal Bank of Scotland’s Sir Fred Goodwin, as he then was, took a lot of flack, but there also interested in the reluctant contribution to the proceedings of Andy Hornby of HBOS. Hornby apologised profusely as required, but did little else.
My interest in Hornby stemmed in part because, in his capacity as chief executive at HBOS, he had been responsible for the loss to me of a significant part of my modest life savings.
The other reason for my interest was that Hornby was duly appointed as CEO at Boots, the chemist, where he reigned briefly before withdrawing from scene with a stress-related illness. It would appear that Hornby combined the breaking strength of a chocolate bar with his other qualities of greed and ineptitude.
There is a general consensus that the critical period in the global financial crisis in 2008 was triggered in the United States with the collapse of several major banks and other financial companies. The jury is still out as regards to the root causes of the global crisis and the world is still waiting for someone of the stature of JK Galbraith to allocate causes to consequences. But there are sufficient similarities between the events of the 1930s and those of the first decade of the 21st century to attribute the global crisis to the collective sharp practices carried by the senior managers in major global financial institutions prior to the collapse.
Those in search of policies to ensure that the events of the late 1920s and of the years preceding 2008 are not repeated should begin by studying what went wrong and why in those years. This study should view with caution any input from Gordon Brown since he somewhat rashly claimed to have put an end to the boom and bust phenomenon shortly before the crisis.
So, what has been going on since 2008? The short answer is that it has been a period of financial business as usual and this means those at the top dealing off the bottom of the pack in order to feed their highly developed acquisitive tendencies.
For instance, some £593 million of profits have been shared by 721 partners at Deloitte, an average of £822,000 per partner. And this is a firm that has attracted some criticism for its costly failures in recent years.
What measures ought the new Labour leader and his colleagues consider to amend the fairly clear Tory policies?
Some early Labour Party responses to the recent Tory Budget have not been encouraging. Acting leader Harriet Harman said that Labour would accept some of George Osborne’s measures, including the controversial child benefit provisions
Newly elected Labour MP Stephen Kinnock, saying that “the Labour Party should look seriously at cutting the top rate of income tax to 40p or lower, and that the party should ban the phrase ‘the people with the broadest shoulders should bear the heaviest burden’”.
He warned that it would put off people who are working hard and trying to do well. He also intimated that he would abolish inheritance tax. Did he argue along these lines in his pitch to secure the Labour nomination for Aberavon prior to the general election?
More egalitarian policies for Labour Party to consider could include:
Ensuring that demonstrably poor performance in senior jobs is followed by the prompt issue of a P45.
Outlawing the widespread practice whereby failure is rewarded – remember that the failures by senior managers are all too often followed swiftly by job losses for the most vulnerable. Those outside the magic circle – most of us – are all too frequently assured after yet another pitiful failure that the lavish payout which followed the fiasco was all as per contract.
Reviewing the case to introduce a steeply progressive tax rate for those at the top end of the reward spectrum in order to make the point to the looters that their days are numbered.
Reviewing the case to bring in a steeply progressive tax rate on pensions for those at the top end of the pensions case.
Reversing the forthcoming increase the inheritance tax threshold. The raising of the limit to £1 million is simply a formula to reward the well-off living in the south-east of England at the expense of the rest of us.
Reviewing the case to bring in a property tax with the objective of returning the wealth fortuitously acquired back to the community.
Any review would need to take careful account of the understandable reluctance of some senior Labour grandees to kick some of these issues into the long grass (and of some grandees to kick all these issues into the long grass.)
Measure along these lines would be an effective way of ensuring that affluent migrants, who have come to see the UK as a safe haven to enjoy wealth acquired elsewhere and by whatever means, make some contribution to the UK economy.
It would be disappointing if the Labour Party were to take the view that rich immigrants are performing a valuable service by allowing the poor in Britain to enjoy the occasional crumbs that fall from the top table.
What about measures to improve the performance of the management of HM Revenue and Customs in the key task of collecting the taxes laid down by Parliament?
We need to ensure that tax laws and tax rules are stripped of the notorious ambiguity which serves to make nice work for tax lawyers, and enable the rich to flout the intentions behind tax laws and the rules.
Labour must prepare legislation to curb the odious activities of payday lenders and seek to curb the vultures now circling ominously above the vulnerable holders of cash withdrawn from pension funds following the changes made by the Chancellor.
Above all, it should be made by all possible means that a Labour government would put in place measures to end the dash for cash performed tirelessly and effectively by those in a position to do so.
The performance of HMRC during both the years preceding the 2008 crisis and since then has been notably shaky. This has been especially evident in the dealings between HMRC and the senior managers of major private sector organisations as attempts were made to resolve a complex variety of company and personal taxation issues.
At one stage, HMRC was led by Dave Hartnett and he was portrayed in some quarters more as a gastronomic pimp a term coined by Nye Bevan in a different context) than as a resolute tax collector.
His modus operandi of choice was to allow those suspected of tax avoidance or evasion -to wine him and dine them at length. At some stage during protracted proceedings, a settlement figure would be agreed – a figure which the cynical and the dubious thought to verge on the generous.
Following his departure from HMRC, Hartnett moved to HSBC – where he doubtless combines gastronomic pleasure with ensuring that the wealthy are suitably isolated, insulated and ring-fenced from the tiresome business of paying taxes.
After a spell in charge of the (open) Border Agency, Lin Homer is now in charge of HMRC. Those with a taste for sadistic television reality shows will recall her appearing before the Public Accounts Committee and its formidable chair, Labour MP Margaret Hodge. Hodge hammered away at the hapless hopeless tax supremo describing her ineptitude in terms which might trigger litigation if uttered without the protection of parliamentary privilege.
Labour policy review here is relatively easy with just two elements.
First, ensure that all senior managers within HMRC operate in a way that, like Caesar’s wife, ensures that they are above suspicion.
Second, to ensure that they are competent, and quickly handed a P45 wherever and whenever the case to do becomes clear. This would cause some consternation across Whitehall but there is much to said for senior mandarins sharing the same pressures as the rest of us.
What about the clarity of tax legislation? Much of it seems to have been drafted by lawyers anxious to foster the maximum degree of confusion so as to create the maximum of opportunity for avoidance and evasion. Labour Party should strive to keep it simple, with possibly an element of rough justice to speed up the process.
This article first appeared in Tribune Magazine on September 28, 2015