An Excessive Pay Levy can redistribute income while empowering workers. This could be one starting point for a broader roll-out of economic democracy.
Citizens cannot spend eight or more hours a day obeying orders and accepting that they have no rights, legal or otherwise, to participate in important decisions that affect them, and then be expected to engage in robust, critical dialogue about the structure of our society. Elaine Bernard, Why Unions Matter (1) The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms ... The history of inequality is shaped by the way economic, social, and political actors view what is just and what is not ... Thomas Piketty, After Piketty (2) I was recently sitting in a lecture about the power of private education in the UK and what should be done about it. The proposals were far from radical--there was little talk of abolition for example. Yet during the question and answer session one comprehensive schoolteacher stood up to forcefully drive home her point--'How is anything that you've said going to improve my experience of teaching or make my school better?' It received probably the largest round of applause all evening.
This is not to say that private education is particularly popular. Yet arguments against private education are not necessarily perceived as arguments for improving state education. A lesson, perhaps, for any inequality-related public policy--it is very easy to separate the privilege of those at the top from the plight of the rest of the population. Why should we care about the rich when we have our own immediate needs to be met? This conundrum is further deepened by the inconvenient fact that as income inequality increases so do people's beliefs in meritocracy. (3)
This reality is a problem for any agenda that seeks to tackle high levels of income or wealth inequalities. If disparities are viewed as legitimate, attempts to reduce them could fail to garner public support. With reference to the topic of this article then, why should we care about the pay packets of 'superstar CEOs' when average weekly earnings are still below the level they were in 2008?
A decade on from the financial crisis, such issues are finally being discussed across the political spectrum. The Labour Party manifesto in 2017 included an 'Excessive Pay Levy' (EPL), which aimed to disincentivise companies from paying employees 'exceptionally high rates', and even Theresa May very fleetingly advocated for workers on boards at the start of her premiership.
Yet much has been written in these pages about the need for Labour to move beyond a simple redistributive agenda. For example, Joe Guinan and Martin O'Neill have advocated a democratic socialist project with a 'direct focus on ownership, control, democracy and participation' that moves beyond the pattern (and narrative) of Labour spending and Conservative cutbacks. (4) Does some variation of greater taxes cut it as part of this new 'transformative' agenda for government? Should we not be talking about predistribution instead of redistribution? How can an agenda that tackles corporate power and gross inequality build popular support and withstand the scare stories about socialist profligacy?
This article will explore the relevance of an EPL as part of Labour's wider institutional turn and the landscape of policy on inequality in the UK. The following section outlines the current debates and state of inequality in the UK before the discussion turns to the specificities of the policy at hand. The final section situates the EPL within wider debates about predistribution and redistribution, and considers complementary strategies for economic renewal.
Cutting through the noise on inequality
After Prime Minister's Questions on 15 May 2019, the Sky News economics editor Ed Conway tweeted out that Jeremy Corbyn had made a 'classic mistake' in attacking Theresa May for rising inequality. 'In fact, UK income inequality is DOWN over the past decade.'5 Anyone who follows parliamentary debates or speeches will be familiar with this rhetoric about falling income inequality. (6) Yet there is a whole host of evidence to suggest that inequality has continued to rise following the financial crisis. (7)
It is also well known that headline figures such as the Gini Coefficient downplay the various inequalities between different deciles of the income distribution. It is perfectly plausible for the Gini to remain stagnant while those at the top of the income distribution continue to pull away from the rest. In the UK, for instance, as bodies such as the High Pay Centre and others have highlighted, FTSE 100 top chief executives continue to pull in ever greater salaries. (8) In the 1980s, CEOs were paid roughly twenty times the salary of an average UK worker. Today, the gap is approaching 150 times and, after a...