Clarke defends high earners

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The Independent Online

Business Editor

Kenneth Clarke, the Chancellor, is tonight expected to give a robust defence of high earnings for high performance at privatised companies in a speech that claims that the pay issue has been used as a "Trojan horse'' by those whose real agenda is to undermine the privatisation programme.

Mr Clarke says world-class companies require world-class managers and ``this means inevitably that higher salaries will have to be paid to attract and retain the best people. Those salaries are going to be met more easily by a company operating in the private sector than by the public purse.''

What the Treasury thought was a final draft of the speech was released last night, in an attempt to gain wider coverage for the often impenetrable issue of privatisation policy.

But Mr Clarke decided later to rewrite it on the overnight plane home from the finance ministers' meeting in Washington. He is believed to be inserting a much more political attack on Labour's attitude to state industry and the privatised utilities, ahead of Tony Blair's Clause Four conference tomorrow.

In the draft of the speech, to be given in Nottingham, Mr Clarke reiterates the Government's line on the need to earn pay increases. "It is absolutely clear to me that no sensible person approves of an excessive pay award that is not based on performance - be it on the shop floor or in the boardroom. It is just plain business sense,'' he says.

The Prime Minister has hinted that he would be willing to legislate on this if the Greenbury committee on top pay recommended it.

But Mr Clarke goes on to defend the performance record of gas, telecommunications, electricity and water companies, listing big productivity improvements and price reductions at all the privatised utilities.

He says British Gas is now active in exploration and production in 25 countries, providing a valuable contribution to exports. "That fact did not appear to get much attention from the media when it was raking over the remuneration package of a certain company executive,'' the draft says, in a reference to the 75 per cent earnings increase last year of Cedric Brown, the chief executive.