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
Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
PROMOTED VIDEO
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick