The Big Question: Should there be a commission into high pay, and how would it operate?

Why are we asking this now?

Compass, a left-of-centre pressure group chaired by Neal Lawson, a former Gordon Brown aide, has launched a campaign to crack down on excessive salaries among high earners. It is pressing the Government to set up a High Pay Commission to regulate the pay of top earners, which would mirror the Low Pay Commission set up in 1998 to recommend the level of the national minimum wage. It would take evidence from the City, businesses, trade unions and other interested parties and make proposals to ministers.

Supporters insist the commission would not dictate the pay policy of every company. Instead, it would set benchmarks such as a "maximum wage ratio", compelling firms to link their top salaries to those of their lowest-paid employees. There could also be a punitive 90 per cent tax rate on huge bonuses.

What is the scale of the problem?

Compass argues that the swift return of the "bonus culture" in the City of London shows the financial services industry has failed to learn the lessons of last year's crisis, widely blamed on a remuneration system which encouraged excessive risk-taking. It wants to go wider than the banks by addressing unfairness on wages across the whole of industry.

The group claims that the pay packages of the UK's 100 top company bosses rose by 7 per cent last year to an average £2.6m in a year when the country's average wage remained flat and the UK stock market lost almost a third of its value. It says this demolishes the myth that pay is related to performance. It calculates that an employee on an average salary of £24,900 a year would have to work 104 years to receive the same as an average FTSE 100 chief executive officer enjoys in just one year. Put another way, someone working a 40-hour week earning the minimum wage would have to work for 226 years to accrue what a FTSE 100 CEO gets in a year.

How will the campaign work?

Compass has won the initial backing of more than 100 politicians, trade union leaders, economists, academics and commentators. It intends to build support through an email-led campaign and to "name and shame" high earners in FTSE 100 companies and those in the financial sector in the next few weeks.

Having won the backing of Vince Cable, the Liberal Democrats' Treasury spokesman, it will seek the endorsement of George Osborne, the Shadow Chancellor, to maximise the pressure on the Government. Mr Osborne has pledged to stop banks from handing out large bonuses, but Compass will press him for a much wider commitment. He is unlikely to be persuaded. He believes a High Pay Commission would mean a prices and incomes policy for the whole economy.

Would the Labour party support such a commission?

Compass showed its ability to build a campaign with a similar push for a windfall tax on the energy companies a year ago. Twenty-nine Labour MPs including Jon Cruddas, the darling of the Labour grassroots, are among the initial backers of its latest drive and more will follow. They believe the proposed commission would be a good way for Labour to speak up "for the many, not the few" and draw a sharp dividing line with the Tories.

Compass will mobilise support at the TUC's annual gathering in Liverpool and Labour Party conference in Brighton next month. Constituency Labour parties are expected to call for a "topical" debate on the issue in Brighton and could force a vote.

With local parties and members each holding 50 per cent of the conference votes, the proposal for a commission could easily be approved. Although it would not be binding on the Government, campaigners would then press for the idea to be included in Labour's general election manifesto.

Isn't the Government going to crack down on City bonuses anyway?

Perhaps. Alistair Darling, the Chancellor, said on Sunday that he would bring in legislation of that was necessary to control "systemic risk" to the banking system. Pressure on the Government to act is growing after Hector Sants, chief executive of the Financial Services Authority (FSA), was accused last week of watering down plans to curb bonuses to softer "guidelines" than the Treasury wanted. But the Tories accuse ministers of making conflicting statements on the issue and failing to match their rhetoric with firm action.

Supporters of a High Pay Commission say their case has been strengthened by the FSA's apparent reluctance to do the job the Treasury has given it.

What does business say?

Banks oppose what they fear would amount to a "pay tax" on the City of London. The British Bankers Association argues that rules on bonuses in Britain are already "more stringent" in Britain than in any other country. The Confederation of British Industry wants action to be co-ordinated internationally to prevent a flight of individuals or firms from the City if Britain acts alone. With France leading calls for action, bankers' pay could be on the agenda of the next G20 summit in Pittsburgh next month.

Business leaders fear that tight curbs on top pay would prevent British firms attracting the best talent and deter the entrepreneurs needed to help the country pull out of recession swiftly. Critics also argue that companies would get round the new rules by rewarding top earners in other ways and outsourcing the jobs of low paid workers.

However, supporters of the proposed commission dismiss such arguments as the "same old scare stories" that were peddled before the introduction of the minimum wage. Warnings that the move could cost two million jobs failed to materialise as the wage was brought it at a relatively low level.

So will the Government set up a High Pay Commission?

It looks unlikely. Some ministers may be attracted to the idea, believing it would be popular with most voters and an example of the "bold decisions" Gordon Brown must take if he is to fight back in the autumn.

But the Cabinet appears sceptical about a policy which would smack of Old Labour interventionism and a return to the discredited incomes policy which contributed to Labour's 1979 election defeat.

Ministers insist that banks need to offer good packages to attract the best talent in order to revive their fortunes – citing Stephen Hester, chief executive of the Royal Bank of Scotland, in which the state has a 70 per cent stake. But his pay package of up to £9.6m for this year fuelled the controversy.

Downing Street reacted coolly to the Compass campaign. The Prime Minister's official spokesman said: "The Government has already taken steps on low pay to tackle the question from that direction." Mr Darling is "not persuaded" by the campaign. He said: "I do think the Government has a role in trying to stop undesirable practices such as the excessive risk taking and bonus payments in the banking system, where we all stand to lose if that goes wrong. But generally, pay agreements ought to be reached by employers and employees meeting together deciding what they can afford and what we need to pay."

Is a High Pay Commission a good idea?

Yes...

*It would ensure fairer rewards for all workers and combat exploitation of the lowest paid



*It could prevent a re-run of the risk-taking that contributed to the financial crisis



*The continuing "bonus culture" in financial services shows that more state intervention is needed

No...

*It would mean a return to the failed incomes policies of the 1970s



*It would damage the City of London and make the British economy less competitive than its rivals



*It would be a bureaucratic nightmare for an independent body to interfere in the pay policy of individual companies

a.grice@independent.co.uk

Start your day with The Independent, sign up for daily news emails
News
Bobbi Kristina Brown with her mother Whitney Houston in 2011
people
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
peopleHere's what Stephen Fry would say
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Caroline Proust as Captain Laure Berthaud in 'Spiral'
tvReview: Gritty, engaging and well-acted - it’s a wonder France’s biggest TV export isn’t broadcast on a more mainstream channel
Arts and Entertainment
music
Arts and Entertainment
Laura Carmichael in still from Madam Bovary trailer
film
News
i100
Sport
Serena Williams holds the Australian Open title
sportAustralia Open 2015 final report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links