(9 years, 11 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Mr Michael Meacher (Oldham West and Royton) (Lab)
I beg to move,
That this House calls on the Government to set guideline targets for remuneration which over time reduce the ratio between top and bottom incomes in large organisations to no more than 50 to 1.
Even at this rather late hour, when the first debate would normally be drawing to a close, I am nevertheless grateful to the Backbench Business Committee for granting this debate on inequality—not least because the excesses of extreme inequality are increasingly seen as a serious, moral, economic and social problem, yet the issue has not received the attention in this House that it clearly deserves.
It is worth saying at the outset that concern over this matter is not the preserve of the political left. In this past month, Mark Carney, Governor of the Bank of England, and Janet Yellen, the chair of the US Federal Reserve, have both argued that the enormous growth in inequality over the past few decades was not only wrong morally but was having increasingly baleful economic consequences. Then there were the strictures of Christine Lagarde, the managing director of the International Monetary Fund, arguing that the current explosion of inequality was now acting as a brake on growth. They all say that inequality fosters fear, creates too much demand for credit to compensate for squeezed living standards, drives asset price bubbles, catalyses financial instability, and, by displacing too much risk on those who cannot bear it, undermines the legitimacy of capitalism.
The facts on ballooning inequality are broadly well understood. Official statistics show that average weekly pay in June this year was £477, while the average annual take-home remuneration among the FTSE 100 chief executives was £4.3 million, or £83,000 a week. The ratio between their remuneration and the remuneration of the average UK worker is therefore about 175:1. That needs to be put into perspective. In 1998, according to the High Pay Centre think-tank, a FTSE 100 boss was typically paid 47 times more than their workers. In other words, in just 16 years, the gap between top incomes and the average wage has nearly quadrupled. The obvious question then is: is all this justified? In fact, there is rather little correlation between the surge in executive remuneration and company performance; sometimes, there is even a negative correlation.
The director of the High Pay Centre, Deborah Hargreaves, explains the phenomenon. She says:
“The only reason why their pay has increased so rapidly compared to their employees is that they are able to get away with it.”
They are able to get away with it largely because of the structural divide in the way in which pay is determined in this country. For manual workers, it is by collective bargaining. That has dramatically declined in the past 30 years, leading to a very sharp fall in the share of wages in GDP from 65% to about 53%. For white-collar workers, it is by private contracts, which are laid down by the employers. But for chief executives in the boardroom, it is by remuneration committees, specifically chosen by the board itself, which largely operate on the principle of “you scratch my back and I’ll scratch yours.” That is not a system that carries credibility across the whole spectrum of the work force.
One might even question why such elaborate devices are needed for top executives to secure a maximum uplift in pay, since one would have thought that £80,000 a week was far beyond what is necessary for the most comfortable lifestyle. Indeed, one could reduce a £2.5 million income by almost 95% and the recipient would still be in the top 1% of all earners in the UK. That is a staggering fact.
Are incomes 10 or 20 times more than the earnings of those already considered very, very rich strictly necessary? The only answer seems to be that these turbo-charged salaries have almost nothing to do with performance and everything to do with chief executive officers keeping up with each other in a status race. In other words, rather as in the end of the Victorian period, which we are getting closer to now, the very rich constantly demand yet more wealth to show it off in order to demonstrate where they stand in the pecking order.
Does that matter? The apologists for inequality have always traditionally argued that it does not because it does no harm to other people. Peter Mandelson notoriously argued that new Labour was
“intensely relaxed about people getting filthy rich”.
But he did add
“as long as they pay their taxes.”
That was partly on the grounds that wealth would then trickle down to everyone else, but it has not trickled down; it has gushed up as if from a geyser. According to the Sunday Times rich list, the richest 1,000 persons in this country—just 0.003% of the adult population—have doubled their collective wealth in the six years since the crash, from a staggering £250 billion to more than £500 billion. Moreover, that does harm other people. It leads to smouldering resentment, which can at times explode if triggered by a sudden event, such as the five days of rioting after Mark Duggan was shot in August 2011. It undermines trust and solidarity and it weakens the social fabric of communities. Above all, it has been shown unequivocally by Richard Wilkinson and Kate Pickett in “The Spirit Level” that across all countries—it is not just the UK—the greater the inequality, the greater the degree of social pathology in terms of homicide levels, crime and violence, mental illness, imprisonment, teenage pregnancies, obesity, maths and literary educational scores, life expectancy, infant mortality and many others.
It is not just the poor who suffer, although they certainly suffer the most; those impacts extend widely across the whole society. It is not just the social impacts of inequality that damage society, but the economic ones as well. It weakens aggregate demand, which is serious at times like the present when all the other potential sources of demand—Government expenditure, business investment and net exports—are negative.
Andy Haldane, the chief economist at the Bank of England, recently summed up the economic impacts of excessive inequality. He said that
“there is rising evidence that extreme inequality harms, durably and significantly, the stability of the financial system and growth in the economy. It slows development of the human, social and physical capital necessary for raising living standards and improving wellbeing. That penny is starting to drop among policymakers and politicians.”
I hope that his last comment was right.
What should be done? The terms of the motion suggest that the Government should set guidelines for remuneration that, over time, reduce the ratio between top and bottom incomes in large organisations to no more than 50:1. That would still allow top incomes to reach nearly £24,000 a week or £1.25 million a year. I think that that is justified on two grounds. First, in the period when capitalism flourished most in the UK—that is, the three decades after the war—the ratio was 40:1 or less. Secondly, the most successful dynamic economies with the highest long-term growth figures and the greatest social cohesion in the past 40 years—I am thinking of Japan up to the 1990s, the east Asian tiger economies, Sweden, Norway and Singapore, among others—all had a ratio of less than 50:1.
Of course, there are other ways of moving towards the same objective. The Business Secretary introduced new regulations that became operative this year, empowering shareholders with a binding veto over company executive pay policy. Despite his good intentions and the shareholder spring that peaked in 2012, that has not ever been called on, partly because the holdings and voting rights on pay are controlled by very wealthy fund managers and the work force have no say in the process at all. That suggests that the structure of incentives and pressures needs to be recalibrated.
I have already quoted Deborah Hargreaves’s remark that executive pay soars because they can get away with it. Corporate power and the greed and self-interest that go with it have increased dramatically over the past three decades and they are still increasing. That needs to be redressed. There are several measures that could help. One is the mandatory publication of company pay ratios, as is already operated by John Lewis, where the ratio is 75:1, and TSB bank, where it is 65:1. Another would be to strengthen the coverage of trade union collective bargaining, which has shrunk dramatically over the past 30 years from 82% to a wholly inadequate 23%.
A further measure would be to increase the prevalence of work force-wide profit sharing. In my view, the most effective mechanism would be the introduction in all large companies of what I would call an enterprise council, made up of representatives of all the main grades of employees and meeting at least once a year to open up the books, look at all the company’s activities, consider how failures could be corrected and performance improved, think about the financial implications of depreciation, investment, stock control, dividends and so on and then examine the bids for pay increases across the company over the next year. That would strengthen the cohesion and solidarity of the company, greatly improve morale and productivity and almost certainly enhance profitability. I commend that, and all the other measures I have proposed, to the House.
Roberta Blackman-Woods (City of Durham) (Lab)
I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on securing the debate. It is extremely important that the House should consider the growing inequality in this country and specific measures that might be taken to reduce it.
I start by painting a picture of where we are with inequality, both nationally and in my constituency. We know that about 20% of working households rely on some form of tax credit, which shows that a great many people are in work but are relying on benefits because they are earning very low wages. That is compounded by gender. We know that since 2011, the gender gap in wages has been getting worse, not better. The gap between all women working and all men working is about 18.6%; for those who work full time, it is 14.9%. That means that women earn about 85p for every £1 that a man earns. That is important because although inequality affects large numbers of people across our work force, we must be clear that it affects women more than men.
We also know that 3.5 million children nationally are in poor households. That means that they are unable to afford adequate food or transport or to join in activities with their friends. That demonstrates the huge gap emerging between people at one end of the income spectrum and those who are increasing their wages at the other end. I experience that in my Durham constituency a great deal. Take-home pay in the north-east is less than it is in the rest of the country, so although we can give national figures about people relying on benefits, the problem is much greater in the north-east.
Changes to benefits have had an impact on areas like County Durham, where people are losing about £565 per working-age adult—money is going from people who are working and relying on top-up benefits—but the situation is also worsening for those who are out of work and relying on benefits. This is evidenced daily by the increasing number of people using food banks in my constituency. Indeed, some of the people who run the food bank in Durham talked to me recently about setting up a clothing bank and doing so locally, because they recognise that people sometimes cannot even afford to get to the charity shops in the city centre.
My contention is that a raft of measures need to be taken to reduce inequality. Before we look at them, however, perhaps we could stop for a moment and consider what has happened at the other end of the spectrum. The top 100 executives in the FTSE 100 companies took home as much as 131 times the amount their average employee did, yet only 15 of those companies have committed to pay their employees a living wage. Across the country, increasing numbers of companies pay the living wage, and we should stop and recognise that. There are some really good examples—a number of our universities pay the living wage, as does John Lewis—but trying to dig around and find them is difficult. We should have a list readily available. We need to consider what measures could be taken to reduce the income gap, and why we should do so.
Early in the lifetime of this Government, the Prime Minister was keen on looking at measures of happiness. He wanted us to be able to assess what leads to happiness; perhaps he thought that if we had information on that, it would cheer us all up and we would not spend so much time worrying about austerity. I do not know what has happened to all that work, but we do know that people who live in countries where there is more equality are happier. I want to give some advice to the Prime Minister and his colleagues this afternoon: if he wants to make people more content with their life, he and his Government need to address the growing inequality by insisting that companies adopt the living wage and that we get away from a low-pay, low-quality job economy.
Of course, in any economy we need people to work in the service sector. These are important jobs, but we want a much greater variety of jobs, especially high-value ones requiring higher skills. We need to see a real Government programme to support job creation of that type. That is in great contrast to what is available. In preparing for today’s debate, I looked at the jobs available today on my local Jobcentre website in Durham and the levels of income that they offer. The figures are truly shocking. So many of the jobs available do not even pay the living wage. Indeed, about three quarters pay less than the living wage, with about half paying the minimum wage. The jobs available cover everything from care co-ordinators to receptionists and night care assistants. I think we would all regard a senior night care assistant as an important role with significant responsibilities. The job advertised paid £7.35 an hour. These are simply wages that people are not able to live on, which is why so many people rely on in-work benefits.
We need to challenge our employers in a way that we have not done to date. Why do they think they can take home thousands of pounds a month while not paying the majority of their employees the living wage? I do not know about other hon. Members, but I do not want to live in a country that has such growing inequality. I do not want to live in a country where more and more people cannot afford basic rent. Shelter recently published research that showed that 1 million people took out payday loans just to cover their rent. This is clearly ridiculous in a country such as ours that can do so much better.
This afternoon we are challenging the Government to do more to get employers to pay not only the minimum wage—which they have to do, although some still seem to try to get out of their responsibilities—but a living wage. What do the Government intend to do to encourage the creation of jobs with higher-level skills that pay more and can take us forward to a knowledge-based economy? I also want the Government to challenge the companies that pay huge bonuses and whose directors take home obscene amounts of money to plough more resources into their businesses so that they can be successful and pay a living wage.
Mr Iain Wright (Hartlepool) (Lab)
I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on securing what has been a short but perfectly formed debate, and the Backbench Business Committee on agreeing to it. He is right to point out that inequality is one of the most pressing issues facing our economy and society. It is clear that the economy does not work for many working people. Galloping advances in executive pay and real-terms pay cuts for most people in work does not suggest an economic model that is performing well or efficiently or providing the greatest benefits to the greatest number of people.
My right hon. Friend mentioned that for the past 30 years or so the prevailing model has been the shareholder value model, which was supposed to maximise returns to the shareholder. The argument goes that if there is an alignment between the interests of shareholders and executives, perhaps in the form of share option incentive plans, executives would act in the interests of the owners of the company. Evidence shows that that theory has been found wanting. Directors of large companies are often remunerated far in excess of the performance of the company that they lead or the extent to which they have created value for the firm’s stakeholders.
Don’t get me wrong: leading a company requires enormous skill and judgment, and those men and women—sadly, it is still predominantly men—should be rewarded for bringing such skill and judgment to bear. If that skill results in a company being transformed and improving beyond the norm, that should be recognised and appropriately remunerated; and as my right hon. Friend eloquently said, for all the talk of aligning shareholder and executive interests, ironically, executives have been extracting value from large companies for themselves at the expense of the company, its shareholders, its work force and ultimately its society. Let me illustrate this point.
In 1980, the median pay of directors in FTSE 100 companies was £63,000. At the time, median pay across the country was £5,400. In 2010, the median pay of directors in FTSE 100 companies was £2.99 million, while median wages for the rest of the country was £25,900. That meant that the ratio of executive wages to the average wage moved over a generation—30 years—from 11:1 to 116:1. And it is not getting any better, despite the recession, and despite stagnating economic activity.
The High Pay Centre revealed earlier this year that FTSE 100 chief executives received remuneration worth 143 times the average wage. This single fact encapsulates everything that is wrong. It takes a chief executive three days to receive what a worker on average wages earns in a year. That is at a time when there is an explosion in zero-hours contracts and greater insecurity at work for many people. Incomes are lower on average now than they were a decade ago, and the worst off and the lowest paid have seen the biggest falls, leading to a rise in in-work poverty that we have not seen in this country for decades.
I pay tribute to my fellow north-east MP, my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), who made a passionate speech and is well versed in the problems of her constituency. She will know that figures derived from the Northern TUC show that our region has a particular problem in relation to low pay. In Hartlepool more than half of women working part time are paid below the living wage. She also mentioned the impact of spending cuts on general demand in a local economy. The north-east has borne the brunt of that. In Hartlepool we have lost £680 per household as a result of the austerity measures. That money has been taken away from the economy, exacerbating inequality in this country. We did not have a food bank in Hartlepool in 2010. We do now.
One in five workers in this country—some 5.2 million employees—are not paid the living wage. That has increased from 3.4 million workers in 2009. The UK has the second highest rate of low pay in the OECD, and lower levels of productivity than our main competitors. All this provides a compelling argument that inequality is not producing a more resilient or a more competitive economy. It is clear, as I said, that the economy does not work for most people. As my hon. Friend the Member for City of Durham said, we will succeed in the global economy only if these issues are tackled and if we address low pay and poor productivity, and work to ensure a more equitable distribution of wages.
My right hon. Friend mentioned an important point—perhaps all this would be excusable if a growing gulf between average pay and executive remuneration reflected superior company performance. The argument goes that talent on this scale, which is often global in its outlook, requires a premium in remuneration. Superstar pay packages attract super talent, which in turn incentivises superstellar performances. I have never quite understood, though, how executives are expected to be motivated to work harder by means of ever escalating pay, but workers on average and low earnings are supposed to be motivated by greater insecurity and no pay increases at all. But the evidence suggests that there is no correlation between executive pay and company performance—quite the reverse.
An article by Michael Cooper, Huseyin Gulen and Raghavendra Rau concluded that firms that pay their chief executive officer a sum within the top 10% of pay earn negative returns of –13% over the next five years. Throughout the whole of 2014, the FTSE 100 has fallen in value by 0.02%, even though executive pay has risen. The model of aligning executive pay with shareholder returns is broken, and the executives are the ones who are benefiting at the expense of others.
There appears to be a correlation between unequal and disproportionate reward at the top and inefficient and dysfunctional performance by the organisation. Far from securing star performers who can transform an organisation and motivate their work force, the more a firm’s executive pay exceeds the average in that company, the higher the rates of industrial action, staff turnover and work-related stress in that company. The evidence suggests that inequality is a disincentive to success, hard work and loyalty, as workers feel resentful that bosses at the top are not earning their remuneration. That breeds discontent, lower productivity and ultimately inferior company performance.
It is important that there is increased transparency and scrutiny in this area. I appreciate that the Government have made some progress in the past couple of years with its reforms of corporate governance and executive remuneration, but I think the Minister would agree that more needs to be done. That is why we believe that large firms should publish the ratio between the pay of their highest earner and that of the average employee in the organisation. I believe that is Liberal Democrat policy, and I hope the Minister will confirm that and say that it will be Government policy.
We believe that employees should be members of remuneration committees, ensuring that the voice of the workplace is heard when executive pay is set. We would reintroduce the 50p rate of income tax for the highest earners. We would raise the minimum wage to £8 an hour by 2020, bringing that rate closer to average earnings.
John Maynard Keynes said:
“The businessman is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society.”
This debate has shown, as has evidence collated over the past 30 years, that those gains are often far in excess of what those activities have contributed to society and to those executives’ companies. A more unequal society results in a less productive economy. We in this House should resolve to change that.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing this debate. I am grateful that we have the opportunity to discuss this important matter, and I thank the Backbench Business Committee for allocating the time. On many aspects there is substantial agreement across the House.
The right hon. Gentleman was right to say that concern about the issue is not the preserve of the political left. The Government—not just my party, but my coalition partners—have understood that concern. The very concept of rewarding failure shows that markets are not working as they should. From every political perspective, we want to make sure that people are properly rewarded for doing well and are not rewarded for failure.
There is concern that levels of directors’ pay have ratcheted upwards. At the same time the link to company performance and wages at other levels in the company has grown much weaker. That is damaging to the long-term interests of business and it is right that we are acting to address this market failure. That is why we have taken decisive action to restore the link between top pay and performance in UK public companies.
The reforms that we introduced, which came into force last October, create a more robust framework for the setting and reporting of directors’ pay. They have boosted transparency so that what people are paid is clear and easily understood, and have empowered shareholders to hold companies to account through binding votes. They restore a stronger, clearer link between pay and performance, and address the important issue of rewards for failure. Our reforms require companies to report the ratio of average percentage change in employee pay compared with the percentage change in the chief executive’s pay, allowing shareholders to understand whether pay increases apply proportionately to all employees or only to those at the top. They also mean that companies must report on how the pay and conditions of employees informs the remuneration policy for directors, whether they have sought the views of their work force, and how the work force was consulted.
During the debate concern has been expressed about the pay ratio galloping ahead and hugely increasing. Although I recognise those concerns, it is important to set some of the figures in context. The hon. Member for Hartlepool (Mr Wright) mentioned a ratio of 143:1, which I believe is from a report from the High Pay Centre back in August. It is worth noting that subsequent to the initial release of that figure, the High Pay Centre and The Guardian, which had reported it, had to retract the figure because it was found to be a miscalculation. The figure suggested now is 130:1. Another research organisation, Manifest, has suggested that it is 121:1, compared to a peak of 151:1 in 2007. I am not for a moment saying that that is a level that many people would find acceptable, but the trend is not going ever upwards. There seems to have been a peak in 2007 and the ratio is now falling, which I hope hon. Members will recognise and welcome.
Mr Iain Wright
I am glad the Minister has put that clarification on the record. She is galloping away somewhat, rather like executive pay over the past 30 years. May I bring her back to the Government’s reforms? In respect of binding votes, how many companies have had to change their pay policy as a result of shareholders voting against it?
Jo Swinson
I will talk about the particular reforms in a moment. There are two ways in which the Government’s reforms can have an impact on executive pay and, therefore, company behaviour when agreeing directors’ remuneration. One way, obviously, is to have a binding vote that a company could lose, and as a result the pay policy would not go forward. The other way—it is an important one—is that companies, because they know they will face a binding vote on executive pay, will be incentivised to have more detailed discussions with investors and shareholders in advance of the annual general meeting. I would not want us to get into a situation in which we thought that it was only if lots of votes were won that the reforms were not successful, when actually it might be a sign that there is much more engagement, which in itself would be a sign of success.
Mr Meacher
Does the Minister accept that, despite the good intentions of the Business Secretary’s reforms, the fact that they have not actually been exercised suggests that we need to go significantly further and that that is probably because of the excessive influence of very wealthy fund managers and, in particular, because the work force has no say at all? Does she believe that the work force should have some say in executive pay?
Jo Swinson
I certainly think that the points the right hon. Gentleman made about involving the work force are important. That is why our reforms require that it be set out how employees have been involved and consulted. It is not a prescriptive approach, but it requires that to be taken into consideration. Indeed, the Government have tried in other ways to influence corporate governance. For example, the work we have done on employee ownership has supported different types of ownership and engagement models, through various changes to the tax system and the provision of materials on how to make it easier for companies to convert to employee ownership models, so that employees can be much more involved in the running of their companies. We know that that can have real business benefits, because employees buy much more into the success of the company. That also starts to deal with some of the productivity issues that the hon. Member for Hartlepool mentioned.
Mr Wright
The Minister is making a very important point, and I really agree about the need to ensure that employees have a say in the running of their businesses, because that improves the value of those companies. Could that be formulated within corporate governance? Does she agree with the notion of having employees on remuneration committees?
Jo Swinson
I think there is a difference between recognising and supporting business benefits, and prescribing in legislation or regulation exactly how companies should go about doing that. There is a lot of agreement on the advantages for companies, but I do not think there is much agreement with the idea that the best way is for the Government to be very prescriptive, stating, “This is exactly what companies must do, and this is the only way to do it.” There are different ways in which companies can achieve that level of engagement successfully. It might be through employee representation on the board or remuneration committee, but there are other ways in which that can be done. We should enable companies to find the way that works best for them.
We are monitoring the impact of the reforms we are undertaking in the context of the 2014 reporting and annual general meeting season. We want to understand how companies have interpreted and applied the regulations, what trends can be observed in the remuneration packages that have been put forward and how shareholders have responded. We intend to publish the key findings from that work shortly, along with any policy conclusions that flow from them. We have always said that the policy will remain under review, because we want to see how what we have implemented works in practice.
Of course, it is useful for the Government to take on board and consider interesting proposals made in the House, in the context of looking at how our reforms are actually working. We know from the evidence already available that companies are increasingly responding to shareholder expectations on remuneration. There are positive signs of restraint on levels of directors’ pay and a substantial number of companies have simplified their remuneration policy, linking it much more closely to measurable performance over longer periods of time—that is crucial—to try to get away from the short-termism culture.
There have been reports in the media about rising pay, but often they reflect the impact of previously agreed pay awards. What matters most in assessing the impact of the reforms is what pay is being awarded under the new regime. The latest evidence shows that the median total remuneration awarded to FTSE 100 CEOs fell by 5% in 2012 and by a further 7% in 2013. Some 35% of those CEOs and 30% of the executive directors did not receive a salary increase at all last year. The median salary increase for FTSE 100 executive directors overall was 2.5%. Only 16% of companies gave their directors a salary increase of more than 3%; in the previous year that figure was 25%. The trend shows that pay is coming down, but obviously we will want to look at all the evidence that comes forward before publishing those findings and having a clearer picture.
The right hon. Member for Oldham West and Royton talked about the importance of engaging investors in the process. That ties in closely with the work my right hon. Friend the Business Secretary is doing on long-termism, particularly the Kay review, because investment funds, pension funds and so on have a crucial role to play as active investors. Important campaigning bodies have certainly achieved some success in getting much more engagement from those investors, so that they can properly hold to account the decisions on pay.
On the specifics of pay ratios, overall ratios certainly give us a picture of how things are across the economy, but I suggest a degree of caution about using a ratio between the top and the bottom for paid employees within a company. We considered that very carefully when we introduced the reforms. We decided not to mandate that ratio, as set out in the motion. Transparency is welcome, but we have to guard against potentially misleading information when that is broken down between the top and the bottom.
Obviously, that will depend on what sector the company is operating in and the type of staff working for it. For example, a large investment bank that outsources all its unskilled work could end up having quite a low ratio for pay between the top and the bottom, but a large retailer with a large number of relatively unskilled employees would have a much bigger ratio. The retailer could none the less be paying above the living wage and treating its employees pretty well. It might look as though it is the investment bank that should be polishing its halo, but perhaps that is because it outsources its unskilled work to be done in less favourable conditions. Therefore, we have to be slightly careful about unintended consequences, because some factors could mask what is actually happening. Comparing top and median pay might give a more realistic and meaningful figure. The hon. Member for Hartlepool is right to point out the Liberal Democrat policy in that area—he is undoubtedly an avid reader of Liberal Democrat policy documents, as I encourage all hon. Members to be.
The hon. Member for City of Durham (Roberta Blackman-Woods) raised a number of issues that are very important as part of the discussion on inequality and pay policy, particularly the pay gap for women. At the end of last week we heard the positive news that the pay gap is closing. However, we need to be cautious about celebrating that too much when we still have such a significant pay gap. Let us welcome the fact that it is being reduced, but also recognise that our aim has to be to eliminate it.
The hon. Lady’s concerns about part-time work are also important. There is far too much stigma within the workplace about how valuable somebody can be if they work part time. Very important work is being done by organisations such as Timewise to highlight the fact that people in very senior roles can work part time and do their jobs perfectly successfully, so we should be able to deal with some of those issues.
The hon. Lady also mentioned the living wage. We obviously have the national minimum wage, which is a floor, or a basic standard. Of course, this year we saw the first above-inflation rise in the national minimum wage since 2007, which is very welcome. That gives full-time workers a £355 increase each year. We want that to continue, if possible, without negatively impacting on employment. My right hon. Friend the Business Secretary has asked the Low Pay Commission to look at considering above-inflation rises in the national minimum wage, and we hope that, with a growing economy, that can be sustained. Of course, at the same time we have focused on helping people on low pay by cutting income tax by £800 a year, taking 3.2 million people on the national minimum wage out of paying income tax. We have done a significant amount, but we want to continue by encouraging employers to pay above the national minimum wage and to recognise that it is a minimum. Very profitable and successful companies should recognise their responsibilities to their employees, which might mean that they should be paying more. I welcome the fact that many employers are now turning into a positive the fact that they pay more than the minimum wage and badge themselves as a living wage employer. Of course, they will then be able better to compete for talented staff and get business benefits.
The hon. Lady is right about happiness and well-being. In 2010, the Prime Minister said that the Office for National Statistics would be collecting data on well-being and happiness. That was not met with universal acclaim in some sections of the press. I seem to recall that the Daily Mail was not necessarily delighted by the suggestion. I, for one, was delighted, having set up the all-party group on well-being economics and long campaigned for the importance of recognising that people, yes, care about their income and the size of the economy, but also care about the health and happiness of themselves and their loved ones. The more we recognise that in our policy making and in what we measure, the better.
The hon. Lady said that she did not know what had happened to that work, so I will update her. The ONS has been collecting the information, and about 250,000 people a year are questioned. As a result, a rich databank is being built up that can be broken down in interesting ways across different geographical areas, and between men and women and different age groups, so as to be able to assess the impact of policies and see what is happening in different parts of the country in different groups.
We recently announced the setting up of a “what works centre”—a research think-tank that the Government are supporting to analyse how different policies impact on well-being. From a BIS perspective, one of the key strands of this work is about well-being in the labour market and the workplace and what drives it. We recently published research that we have undertaken on that. A range of factors impact on workplace well-being. Obviously, pay is one, but there are also things such as the variety in someone’s job, whether they feel that they get to use their skills, whether they have a degree of autonomy, how they go about their job, and their sense of fairness in the workplace, which very much ties into this debate. I am glad to say that very many businesses are also engaged in this agenda and recognise that continuing to engage with the well-being of employees leads to better business performance.
We recognise that this is a very significant issue, and we have taken action. We do not want to see rewards for failure. A ratio cap as set out in the motion could, in its purest sense, have unintended and perverse consequences. Early signs of the response to our executive pay reforms are encouraging, and we will review their impact and publish the findings. We will continue to work to ensure that pay policies become fairer, and also support low-paid workers by cutting income tax. I know that we will return to this topic in the House. I thank the right hon. Member for Oldham West and Royton and the Backbench Business Committee for giving us the opportunity to discuss it today.
Mr Meacher
This has inevitably been a rather short and truncated debate, but a useful one for all that. I think it fair to say that there is broad cross-party agreement that inequality is now out of control and further action needs to be taken. My hon. Friend the Member for Hartlepool (Mr Wright) made the essential point that an increase in the ratio between top and bottom from 11:1 to 116:1, within one generation, cannot remotely be justified in terms of the performance of the British economy.
I am grateful to my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) for making important points about the raft of measures that are still necessary to deal with poverty, including tax credits to deal with in-work poverty; the continuing unfair span of gender inequality; the need for the Government to press the issue of the living wage—some companies are paying it but far too many still are not—and the need, above all, to shift away from a low-pay, low-skills and low-productivity economy to a high-pay, high-skills and high-productivity economy.
I thank my hon. Friend the Member for Hartlepool for observing that the relationship between executive pay and company performance does not justify these excesses and cannot remotely do so, that the voice of workers needs to be directly involved in the determination of pay, and that we do not currently have a productive economy to the degree that we need and that is clearly possible both socially and economically.
I am grateful to the Minister for her, as always, positive and bubbly tone, but I realise that she cannot go beyond her brief. I hope that if there is one lesson she will take to her right hon. Friend the Business Secretary, it is that he has to move from the action that he has already taken, which is valuable, to direct involvement of workers in executive pay. If we can get that message across, this debate has been worth it. I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.
Diana Johnson (Kingston upon Hull North) (Lab)
On a point of order, Madam Speaker. It is reported in The Independent today that John Vine, the Government’s independent chief inspector of borders and immigration, has written to the Chair of the Public Accounts Committee expressing concern that the Home Secretary has been intervening to delay and manipulate the publication of inconvenient reports on the Government’s immigration and asylum policy, and compromising the independence of his role. Given today’s news of the continuing mess that the Government’s immigration policy is in, have you, Madam Deputy Speaker, had any indication that the Home Secretary will be making a statement to the House on this matter?
Madam Deputy Speaker (Dame Dawn Primarolo)
I thank the hon. Lady for her point of order. I have to say—I am sure she will be a bit disappointed—that today’s business is not a matter of order for me, and I have not received any such notification. However, I am sure that those on the Treasury Bench have heard her point, which is now on the record.