A ludicrous idea is emerging from sections of the left to nationally cap pay.
I say ludicrous, because it is clear that the proposers are more interested in bashing high-earners than actually thinking about how an economy works, how people earn money, let alone the knock-on implications of implementing such a system. It is also rather galling for the signatories to lecture us about the corrupting effects of greed when the list includes expense-fiddlers Margaret “Dry Rot” Moran, David Taylor and Paddy Tipping.
Although it is true that the bonus structures of the banking system helped cause the present financial crisis, it was not the only reason. The poor allocation of bonuses was more of a symptom of a wider systemic problem that failed to appreciate the risk posed by new financial instruments the banking systems used. That was as much the fault of regulators and the major conflicts of interest of the credit rating agencies as any pay structure. Singling out high pay ignores the complex underlying issues that caused the financial crisis in favour of a superficial populist “bash the bankers” argument.
It also does not transfer over to other professions. Yes, it could be argued that many bankers are overpaid for their skills and qualifications, but that does not apply to all high earners. Would they be willing to say the same about MPs, lawyers or doctors? After all, the generous earnings of that final category are due in no small part to Labour’s NHS spending. Furthermore, how would such a bonkers piece of populism be implemented? How to you apply it to a vast number of professions with massively divergent practices, means of payment, working hours and so forth?
This is where the idea falls flat on its face. To impose a national cap requires massive and unwarranted intrusion into the professional realm to standardise practices and pay. That level of intervention will throw a spanner in the works of professions and institutions that bear no fault for the financial crisis. As Tom Harris points out, when you go down that route you might as well just nationalise everything and be done with it. Some of the signatories may jump gleefully at this notion, but they forget that this would include the state control of professions that rely on their independence.
Fundamentally, however, this represents a levelling-down tendency. Will a national cap on salaries achieve anything for the poor and underprivileged? No. If Labour should learnt anything from the last week (though it looks like they were too busy crowing to notice their continued drubbing in the polls), it was that the welfare state commands popular support because it leveled upwards. Labour wins elections when it offers people a route out of poverty, not just a load of resentment. There is a reason it’s called “lifting people out of poverty”. Leveling down achieves no social goals other than smugness: nobody got better from bashing the wealthy. If the best a think tank tasked with renewing the left can come up with is a rehash of the 1983 manifesto, then it is clear that they have run out of genuine contributions to helping people in the recession.
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