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Maximum Wage

Volume 493: debated on Wednesday 3 June 2009

Motion for leave to introduce a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to prescribe the maximum wage that can be paid; and for connected purposes.

In effect, the Bill puts a cap on the maximum wage that can be paid to any person in any one year. Mr. Speaker, you will remember that it is 10 years since the minimum wage was introduced. In April 1999, 2 million people benefited from a minimum wage of £3.60 per hour. Since then, the minimum wage has been increased by 60 per cent. to £5.80 this October. Millions more hard-working families have benefited from that landmark legislation, of which the Labour Government should be really proud.

There was opposition, of course. You will remember, Mr. Speaker, that the CBI and others argued that there would be job losses. That has not been the case. There are still pockets of resistance to the minimum wage, however; I note that the hon. Member for Christchurch (Mr. Chope), supported by some of his colleagues, intends to bring forward the Employment Opportunities Bill on 12 June. Let us be in no doubt that that would axe the minimum wage. Instead of going backwards, we now need to go forwards. We need to complete the policy circle and seriously consider the introduction of a maximum wage. In an unprecedented time of economic difficulty, hard-working families and pensioners are facing real problems.

There are genuine concerns about executive pay packages. It simply cannot be right that some chief executives are receiving more than £6 million a year. It cannot be right that Terry Leahy, the chief executive of Tesco, has a salary package of £4.3 million, which is equivalent to the average earnings of 335 of his employees working in Tesco. It is completely wrong that there are directors at Tesco, BP and Vodafone who are each individually receiving a salary of more than £1 million a year, and it cannot be right that some of these people are being paid bonuses for performance targets that they cannot meet. Bonuses should be for success, not for failure. People abhor the golden pension package. What really disturbed people was the £730,000 payment to Sir Fred Goodwin, who should have been sacked rather than rewarded.

Against that background, people want change. When they are asked about wage policy, they say that the gap between the highest paid and the lowest paid is too high. Eighty per cent. of people think that those who are paid the lowest should get more and that those who are paid the highest should get less. They want change; they want to see the introduction of a maximum wage. Outside the Westminster village, away from the political classes, there is a growing demand for openness, fairness and justice, and we should listen and respond to it.

There has been a lot of academic work on the maximum wage, but not much of a political policy focus. However, things are changing. It is significant that in February this year President Obama talked about a maximum wage of $500,000 for executives of companies that have received a state bail-out. It is interesting that UEFA and football clubs across Europe are now talking about maximum wages and transfer fees capped at 51 per cent. of a club’s income for their players. Maybe in the not-too-distant future the telephone number figures that professional footballers have been receiving will disappear.

So how would we set a maximum wage? There is a simple solution. We could say to everybody that no one should receive more than the Prime Minister—£194,000 a year. That is not far-fetched. Just look at what is happening in, dare I say, Kazakhstan, where its Prime Minister, Karim Massimov, made such a proclamation earlier this year. The New Economics Foundation, in its paper, “The Alternative Mansion House Speech”, advocated a minimum wage capped at £1 million.

However, there are fairer and better ways to do it. If we are sensible, we need to link the minimum wage to the maximum wage. For example, there is a strong case for arguing that the maximum wage should be 10 times the minimum wage. Based on £5.60 an hour, that would give a maximum wage of £120,000. A rule of 100 would provide a maximum of £1.2 million. Another approach would be to link the maximum wage to the average weekly wage, which was £479 last year. Some, such as my right hon. Friend the Member for Rotherham (Mr. MacShane), have argued that the multiple on the average wage should be 20 times, which would produce a maximum wage of £115,000 per year. It is clear that one of the consequences of a maximum wage policy would be that if the top bosses and chief executives wanted to increase their pay, they would have to increase the pay of everyone who worked in the company. That really is progressive politics.

At the end of the day, it does not matter what process is used to calculate the maximum wage. The issue is not one of practice but one of principle. It is right and popular that we should move to a fairer society. If events over the past month have taught us anything, it is that we need to be clear that voters abhor greed and injustice. There is a crisis in the economic system, and a matching crisis in our political system, and reform is necessary and urgent. We need to set out a clear agenda and, what is more, an agenda for action. I am confident that the Bill that I wish to introduce provides a vehicle not just for debate and discussion but for progressive policy, change, justice and fairness.

I shall certainly not call a vote, but this has to be one of the daftest ideas that I have heard in this House, and we specialise in them on occasion.

We are an island, but we are not isolated. We are competing in an international field, and many of the people who would be severely damaged by such a Stalinist Government restriction would leave this country, and particularly the City of London and many of its businesses. The damage that that would do to this country would be immeasurable. Going back to a communist-type restriction whereby the Government decide wages and jobs is unthinkable. It would be uncompetitive, and it would destroy us.

Question put (Standing Order No. 23) and agreed to.


That Paddy Tipping, Mr. David Drew, Kelvin Hopkins, Judy Mallaber, Mr. Denis MacShane, Albert Owen, Mr. Ken Purchase, John Robertson and David Taylor present the Bill.

Paddy Tipping accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 16 October and to be printed (Bill 103).