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Use Tax To Curb Excessive Pay

Wednesday, April 23, 2014

GMB Call On Government To Use Tax System To Curb Excessive Pay And Bonuses

Vince Cable has same chance as King Canute rolling back the waves as getting the city fat cats to voluntarily take their snouts out of the bonus troughs says GMB.

GMB commented on letter from Business Secretary Vince Cable to top companies urging them to show restraint over executive pay and slash bonuses to restore public trust. See notes to editors for news of the letter.

Paul Kenny, GMB General Secretary, said “GMB has repeatedly warned since the days of Cedric the Pig protest on excessive executive pay that exhortation will not curb excessive pay. Vince Cable has same chance as King Canute rolling back the waves as getting the city fat cats to voluntarily take their snouts out of the bonus troughs.

The share of income from labour in the UK going to the top 1% of earners has nearly doubled from 7% in 1970 to 13% in 2011. Before the recession the top 1% of earners were raking in over 15% of all pay. See notes to editors for the data series since 1970.

This doubling of the share to the top 1% is leaving less money for the pay of the rest of the workforce.

Fat cats like Simon Wolfson at NEXT getting all the cream is the major reason for the growth in precarious forms of employment like zero hours, bogus self-employment, agency and temporary work, very short hours part time jobs, flexible and casual employment.

The lesson from history is that Government has to use the tax system to deter employers paying excessive pay. If the marginal tax rate for earnings above £1m a year is raised to 80% there would be a dramatic drop in numbers getting paid that amount. That would leave more for the rest. 

This would help the economy will get back to pre-recession levels as we have a very long way to go to climb out of the hole caused by the recession. Given the increase in population GDP per head is still 5.8% below 2007 levels. This is the root cause of average earnings being down 13.8% in real terms since then.”

End

Contact: Kamaljeet Jandu on 07956 237178 or Martin Smith 07974 251 722 or Mick Rix 07971 268343 GMB press office 07921 289880

Notes to editors

1 Report on BBC website 22 April 2014 Last updated at 23:51

Vince Cable warns businesses on 'ridiculous' pay awards

Britain's top companies have been warned to exercise caution on executive pay by Business Secretary Vince Cable.

As firms prepare for their annual general meetings, Mr Cable has written to all FTSE 100 members to remind them that pressure on pay awards must be kept up to assuage public anger.

He said pay levels at banks in particular had been "ridiculous".

He singled out Barclays, which has its shareholder meeting scheduled for Thursday.

The bank came under fire earlier this year when it allocated about £2.5bn in bonus pay, despite a dip in profits.

Last year, Mr Cable introduced rules forcing listed firms to give shareholders a binding vote on directors' pay to make a "clearer link between pay and performance".

'Trust lost'

The move followed investor anger over rising boardroom salaries at a time of falling share prices and sluggish earnings.

"A lot of trust has been lost, because of the extremes of what happened in 2010, when pay escalated massively unrelated to the performance of companies," Mr Cable said in an exclusive BBC interview.

Mr Cable warned excessive pay for top executives has alienated the public

"This is an opportunity for these companies to make peace with the public.

"It's particularly true of the banking sector where pay reached ridiculous and dangerous levels, and with Barclays in particular coming up on Thursday, we will see how far they have listened to people who own the banks - the shareholders - and exercise responsibility in long term thinking."

Annual general meetings are an opportunity for shareholders to ask questions of a company's board and to vote on board members' election and executive pay, among other things.

Shareholder Spring

"In the last year we have seen striking examples of shareholders rising up to protest against pay that neither reflects past performance nor is well calibrated to encourage a decent performance going forwards," Mr Cable writes in the letter to company bosses.

"You will be conscious that this issue continues to be the focus of considerable public debate. Unless business is seen to act responsibly, pressure for further action will inevitably result."

Mr Cable's push for more moderate salaries follows the so-called "shareholder spring" of 2012, which led to the resignation of Trinity Mirror chief executive Sly Bailey and Aviva boss Andrew Moss.

 

2 Percentage of income from work going to the top 1% of income earners in the UK- from 1970 to 2011. Source http://topincomes.parisschoolofeconomices.eu  

Year    

    Top 1% income share-married couples & single adults

  Top 1% income share-adults

1970

7.05%

 

1971

7.02

 

1972

6.94

 

1973

6.99

 

1974

6.54

 

1975

6.10

 

1976

5.89

 

1977

5.93

 

1978

5.72

 

1979

5.93

 

1981

6.67

 

1982

6.85

 

1983

6.83

 

1984

7.16

 

1985

7.40

 

1986

7.55

 

1987

7.78

 

1988

8.63

 

1989

8.67

 

1990

 

9.80

1991

 

10.32

1992

 

9.86

1993

 

10.36

1994

 

10.60

1995

 

10.75

1996

 

11.90

1997

 

12.07

1998

 

12.53

1999

 

12.51

2000

 

12.67

2001

 

12.71

2002

 

12.27

2003

 

12.12

2004

 

12.89

2005

 

14.25

2006

 

14.82

2007

 

15.44

2009

 

15.42

2010

 

12.55

2011

 

12.93%

 

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