Income Inequality

Lord McFall of Alcluith Excerpts

Thursday 21st January 2016 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, of course one can infer some tentative implications about productivity from yesterday’s data on employment, but it would be very premature to do so. We know from the very latest productivity statistics that, if one uses a magnifying glass, there has been a modest increase in productivity in the last two quarters for which data have been reported. It is an ongoing observation that, in what are generally currently regarded as some of the most successful economies in the world, cyclically, the US included, they have, if anything, an even bigger apparent conundrum on this than we do here in the UK, because of the evidence of the past 12 months.

[Lord McFall of Alcluith (Lab)]

My Lords, the latest figures indicate that the salary of a chief executive in the largest corporations in America is now 333 times the average wage, while in Britain it is now 180 times that. The Minister is right that inequality has been growing in Britain for the last three years. It is now at the level of World War 2; if in 20 years’ time we continue this trend, it will be at the level of Victorian standards. As a distinguished economist, the Minister could do us all a favour by telling the privileged members of the Cabinet that GDP is not the best way to measure the prosperity of a country; it should be a measure of well-being. If we focused on that area, we might start to tackle this horrendous problem.

[Lord O’Neill of Gatley]

My Lords, I take the noble Lord’s suggestions with great interest. I repeat that it is the responsibility of boards and their shareholders to analyse and support the compensation of their chief executives. As we have touched on in parts of the productivity plan, those boards and shareholders should think carefully on an ongoing basis about the justification for those levels of remuneration.