There will no doubt be complaints, the usual emotive allegations that the Government is threatening Britain's ability to compete in the global economy. With the battle over the 50p tax rate already raging, the plans to crack down on tax avoidance by the wealthy and to control runaway executive pay are easily co-opted into the rhetoric about the Government penalising Britain's much-needed wealth-creators. Were such charges justified, they would be serious. But they are not.
To begin with the issue of tax, yesterday's announcement by the Treasury Secretary that more than 2,000 extra inspectors will be targeting tax evasion by society's highest earners is to be welcomed without reservation. Unlike in the US – where President Obama wants to close tax loopholes in order to raise more money from people earning more than $1m – Danny Alexander is proposing only to insist on compliance with Britain's existing system. It is staggering that extra scrutiny of just the top 350,000 of Britain's earners could add £2bn to the annual tax take. More startling still is that it should take a world-shaking recession for the Government to put into practice the simple premise that tax owed must be tax paid. This is not "soaking the rich", it is simply enforcing the law.
The wealthy are coming under increasing pressure across the developed world as governments scrabble to pay down soaring public debts. Rightly so. So far, both the impact of the financial crisis and the burden of sorting it out have fallen disproportionately on to the less well-off. In fairness, the shift of attention has not all been "pull" from cash-strapped governments. There has also been some "push" from the wealthy themselves. Warren Buffett's observation that he and his billionaire counterparts should be doing more to help the US to balance its books quickly prompted similar pledges from small bands of the super-wealthy in France, Germany and Italy. Even in Britain, Sir Stuart Rose, the former boss of M&S, has said he would be prepared to pay more even to help UK plcs – though sadly his was a lone voice easily drowned out by the clamour to abolish the top tax band.
The proposals from Vince Cable, the Business Secretary, for tackling over-inflated executive pay are likely to meet with an equally muted response. Corporate regulation is always a tricky area for government. Companies guard their autonomy jealously, and it is absolutely the case that the UK must stand the test of an increasingly competitive global marketplace.
But that is no argument for leaving in place a culture of paying for failure that is egregiously out of step with Britain's stagnating economic reality. The directors of Britain's 350 largest public companies have seen their pay soar by 130 per cent over the past decade, while the value of their firms has risen by a meagre 8 per cent.
Even when the economy was booming, the gap between the salaries of directors and those of their staff was a matter of concern. At a time when the average worker can expect a below-inflation pay rise, if any at all, it is morally indefensible. And in the current climate of economic stagnation, the money would be better spent investing in the company, or even paying out in dividends to shareholders.
Mr Cable has a range of ideas, including ensuring that companies come clean about the pay differential between the top and bottom of the organisation, boosting shareholders' ability to hold boards to account for their remuneration schemes, and forcing directors to justify their bonuses. The proposals are far from draconian. Nor are they unduly interventionist. Nor do they represent a drag on Britain's ability to compete. The economy is in a dire need. To paraphrase the Chancellor, it is time we really were "all in this together".Reuse content