The coalition government may have got more than it bargained for when it commissioned a review of fair pay in the public sector. Today’s interim report by Will Hutton is a rousing call for a fairer society, and at a time when all politicians stake their policies to the ‘progressive’ mast, this is an extremely important contribution in defining what fair pay means across the private sector as well as the public.
Despite the report’s focus on the growth of high pay in the public sector, Hutton makes clear that it is the ‘arms race’ in the private sector which has caused top pay to pull ahead of the average worker’s pay packet. Executive pay has risen consistently since the 1980s regardless of the slow business cycles or financial meltdowns that have affected the rest of society.
The government is right to argue the public sector should set a good example, and the public will only accept the need for some frontline service cuts if the public sector is seen to take the issue of excessive pay seriously. Yet while beleaguered public sector organisations will be keen to show they are able to tackle the problem, businesses and banks are sure to bare their teeth at the hint of government action to rein back inequality.
The public, however, agrees with Hutton. Academic research shows that over 80 per cent of the public believe the gap between rich and poor is too wide, and the majority of people do not buy the line that large income differences are necessary for strong UK growth. Nobody believes that anybody ‘needs’ to earn a million pounds, but opinion may vary as to whether they deserve it or not. Public outrage over bankers’ high pay is largely due to the fact that bankers are earning vast amounts when they have not performed well. The windfall is undeserved.
What we lack is a strategy to tackle the problem. Public support has waned for a solution based on the tax-benefit system, and even policymakers on the Left believe they may have reached the limits of redistribution by stealth. Luckily the final report – due to be published next March – promises recommendations that are will be applicable in the private sector as well as the public. In the meantime, the interim report has made it difficult for the government to rally against high executive pay in the public sector without acknowledging the problem in the private sector. Let’s hope the public can expect some policy meat to address their concerns.
Tess Lanning is a Researcher at the Institute for Public Policy Research
