Time for a high-pay commission?

by Stephen Tall on August 25, 2009

Catching up on what happened in British domestic politics while I was sojourning on the continent, I came across Vince Cable’s Guardian article, The rich must be reined in, in which our deputy leader advocated the establishment of a high pay commission ‘to measure the claims of top earners that their rewards are justified and necessary, even if they offend natural justice and our sense of fairness.’

It seems to have evaded the LDV Collective’s radar (tsk, I go away for two weeks, see what happens), so here’s an excerpt:

There is nothing intrinsically offensive to most people about talented inventors, entrepreneurs, performers or sports stars benefiting substantially from unique talents that enrich or protect or entertain the rest of us. Even if Bill Gates didn’t give away a lot of his fortune, most of us wouldn’t quarrel with his being a very rich man.

There are, however, two things that do cause offence: one is reward without merit, or reward for failure; the other is tax-dodging. We have plenty of both. If a £25,000-a-week footballer is lazy or useless, the crowd provides a public exercise in market-testing. Other talents are less public. That is why all high pay should be publicly declared in a way that directors’ pay already is. …

The lazy assumption that the market sets pay rates is at best only partly true of bankers whose institutions are underpinned by state guarantees, or publicly owned after collapsing. Indeed, many industries depend on public contracts. Highly paid public-sector employees are sheltered in varying degrees. We are often told that highly paid talent might emigrate, but immigration controls operate in an opposite sense. I suspect that the number of well paid dentists GPs, media executives and finance directors would shrink rapidly in a fully competitive international market.

Both Mark Littlewood at Liberal Vision and Giles Wilkes at Centre Forum’s FreeThink covered the issue here and here, with Mark’s critical article of Vince’s intervention in particular provoking a good discussion thread.

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We also have to rethink the role of corporate governance. There was one famous CEO who used to tell his friends that the best way to get a pay hike was to make sure that the person appointed to head the Compensation Committee was considerably richer than you!

The rise of institutional investors with little interest in compensation means the checks and balances have been thrown out of whack.

by Simon R on August 25, 2009 at 7:57 pm. Reply #

I am surprised and somewhat disappointed at the way the party pussyfoots around on this issue. There is an overwhelming case for creating a more equal society similar to that of the Nordic countries.
If you have any reason to doubt that, I recommend you view the videos on this page;
http://www.equalitytrust.org.uk/resources/inequality-video
The videos show the research of Richard Wilkinson, who recently published the book; “The Spirit Level. Why More Equal Societies Almost Always Do Better”.
If anyone thinks his research is flawed, they better say why. Maybe they can point to research that shows the contrary? If not, then if we want to create a better (and I would say more liberal) society, we have to be committed to policies that put into reverse the divisions created by successive governments since 1979.
Great Liberals of the past, such as William Beverage and John Maynard Keynes have gone done in history as Liberals who brought about a significantly more equal society. We should be seeking to emulate their acheivements again today.

by Geoffrey Payne on August 25, 2009 at 9:21 pm. Reply #

We mentioned the Facebook group

by Alex F on August 25, 2009 at 10:01 pm. Reply #

I can see that Vince is having an interesting discussion about the effectiveness of current corporate payment systems – and that’s fair enough. As Simon R notes, corporate governance today is certainly not what it should be, and it’s right that govt asks how to set a framework in which corporate governance is more effective.

What I don’t understand is how it can possibly be a public issue that person X worth £10B decides to pay person Y £10M. High pay in the private sector is to me a very private thing, which is best assessed by effective private institutions, rather than effectively “nationalising” people on high wages.

As a liberal, I believe that we have to be careful about taking choices away from private organisations and giving them to the state unless it really does increase individual liberty. I would have thought that few people who agree with Vince actually believe that inequality is significantly increased in this country by the handful of people earning over £1M salaries, so I have to say I can’t understand how this could be a good thing – even for “new new liberals” who believe the state’s role is to remove differential outcomes from society.

by Peter on August 25, 2009 at 11:11 pm. Reply #

Glad to see him pointing out the distorting effect of immigration controls. Global free trade makes no sense as long as we restrict economic migration.

by Liz W on August 26, 2009 at 8:05 am. Reply #

Peter, it is not just the people earning over £1M.
However the answer to your question can be found here; http://www.equalitytrust.org.uk/resources/inequality-video

by Geoffrey Payne on August 26, 2009 at 10:29 pm. Reply #

Geoffrey,
The video is certainly very interesting, but I noticed that when people did try and discuss it on the forums and elsewhere, you didn’t seem to want to take up the debate. There is loads of debate to be had, and some of it is fairly technical etc, but judging by its importance, you should be well up for it. Perhaps you could resurrect the thread by replying to some of the responses?

by Steve on August 27, 2009 at 9:35 am. Reply #

Geoffrey


Great Liberals of the past, such as William Beverage and John Maynard Keynes have gone done in history as Liberals who brought about a significantly more equal society. We should be seeking to emulate their achievements again today

Yes, in the past our party would naturally have regarded this as an issue to be concerned about. Not just 20th century liberals like Beverage and Keynes, but 19th century liberals too who questioned the assumption that the aristocrats were better people and naturally ordained in their places to be wealthy. In the 19th century, free trade was part of this questioning of how the wealthy became so wealthy at the expense of others, but it wasn’t the ultimate aim of 19th century liberalism. Those who like to call themselves “19th century liberals” and claim it is have it wrong – the ultimate aim is to question power and privilege and challenge it, and as in the 19th century that was the established Church and the aristocracy, now it is the power given by “free market” assumptions when enterprise is on such a bigger scale than was the case in the 19th century. I would therefore say that those who today call themselves “19th century liberals” and use that to say we should not be bothered by big wealth differences are really in spirit 19th century Tories – people looking for excuses to defend wealth and privilege.

This would have been taken for granted in our party until only a few years ago, and we would have been united behind Vince Cable here. I remember the horror when this first strain of simplistic ultra-marketeer politics appeared in our party – it was in the SDP and was a reason some Liberal Party members did not want the merger. Our party was enormously damaged at its foundation when what was meant to be a founding policy document was stupidly left to be written by a couple of young researchers who were the predecessors of those oh-so-trendy people now who have picked up the simplistic marketeer ideas that have become dominant conventional thinking. The “Dead Parrot” document as it became called. Now the same type are holding back our party, organising some sort of Militant
Tendency within it to convert it to their way, making use of the plentiful funds that will come your way to help spread your ideas if your politics supports the power of wealth and privilege, using names like “Liberal Vision” to pretend to be the true voice of our party.

It is clear from our opinion poll figures that we have failed to capture the political imagination, and now Liberal Democrat Voice readers see us as a declining force. I believe we have missed an opportunity because of the influence of our party’s small right-wing, pulling it away from saying what the people of this country want to hear. Unfortunately we even have a leader who has been influenced in some ways by it, which explains why he so often seems to fumble and not say the things that could be said and I believe would win us support that currently has nowhere to go.

Vince Cable is saying the right sort of things, and he’s not a lefty, very much in fact in the centre of the party in fact. Like many of us (but Vince also has personal factors we know about), the recent financial mess has enabled him to speak with more confidence on matters where our criticism of ultra-market politics a few years ago seemed out of tune. But why is it always seen in the media as “Vince” and not the Liberal Democrats? The reason – it is not echoed by our leader, he is not picking up and using those themes and making clear they are shared across the party. Our party’s national image is Nick Clegg being vacuous rather than a team doing all the work our front bench is doing.

19% in the polls and falling. Great communicator? Huh.

by Matthew Huntbach on August 27, 2009 at 10:24 am. Reply #

http://www.dailymail.co.uk/tvshowbiz/article-1209583/Simon-Cowell-Jonathan-Ross-paid-far-much.html

93% think footballers are overpaid
75% think bankers are overpaid

At least “Liberal Vision” can’t be accused of populism.

by Mouse on August 28, 2009 at 8:38 am. Reply #

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