The Labour leader, Jeremy Corbyn, wants a cap on high earnings to address inequality in the UK

Did Jeremy Corbyn spell out how it might work?

The Labour leader’s remarks appeared to be off the cuff in his morning interviews, but by his Peterborough speech it had become a formal policy. Labour would not offer public contracts to any firm that paid the boss more than 20 times the wage of its lowest-paid worker.

That’s considerably weaker – but probably more practical – than legislating for a maximum wage, a policy Corbyn’s own former economic adviser Danny Blanchflower described as “idiotic”.

Corbyn also floated other ways of using the government’s power to influence corporate behaviour, including a “kitemark” for companies whose remuneration policies had government approval, or a preferential tax system to reward them.

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Why is Corbyn saying this now?

Corbyn’s apparently unscripted proposal was the first clear example of a new year Labour relaunch. With his poll ratings grim, Corbyn’s advisers have decided to take a new, more populist approach.

They want to emphasise the Labour leader’s credentials as an anti-establishment figure who has never signed up to what they see as a malign post-Thatcherite consensus, which led Labour and Conservative governments to deregulate business and privatise state assets in the belief it was the best thing for Britain’s economy.



While using public procurement is a far narrower and more limited approach than a salary cap, it could still bite hard for consultants bidding for taxpayer-funded contracts, for example.

Would the policy work?

Corbyn’s response to questioning on the radio was less a worked-out policy than a howl of outrage. He believes many voters share his fury that highly paid corporate executives emerged all but unscathed from the financial crisis that plunged Britain into recession.

In response to questioning after his speech, he stressed that hospitals and schools require the hard work of everyone – from cleaners to headteachers and consultants – to be successful.

But the policies he floated fell well short of a maximum pay law and came closer to Ed Miliband-style reformism than to a populist leftwing revolt.

However, as with some of Donald Trump’s most eye-catching policies, Corbyn’s team hopes what the public will take away is not the nitty gritty detail, but the fact that Corbyn is willing to take on fat cats – and the political establishment.

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What is the state of high pay in the UK?

Sir Martin Sorrell, of the advertising agency WPP, was the highest paid chief executive of a FTSE 100 company in 2015, earning £70.4m. By contrast, the median annual gross pay in the UK in 2016 was £23,099.

Workers in banking, excluding insurance and pension funding, have the highest average pay, with workers in the 90th percentile earning £111,183. However, the financial services industry also has the greatest disparity between median earnings and high pay, as median wages were £35,793 in 2016.

Has the gap between the average worker and the highest paid grown?

The gap between the pay of the average worker and CEOs has widened in FTSE 100 companies in the past decade. This year 4 January was the date on which the average FTSE 100 CEO’s pay overtook the earnings of the average worker for the year.

Some companies in effect cap the pay of their highest earners by setting an earnings multiple based on average pay within the company. In 2004 the average multiple was 94, meaning the highest paid staff earned 94 times that of the average worker in the company. By 2014 that figure had soared to 150.



Sorrell’s pay amounted to 1,444 times that of the average worker at the company. The average estimated pay of the Manchester United captain, Wayne Rooney, is £13.5m, while the average annual earnings per player at Manchester United in 2016 was £5.7m, according to the latest Global Sports Salaries Survey.