Labour leader says executives should not earn more than 20 times the wage of their lowest paid worker

Jeremy Corbyn has promised Labour would introduce a maximum wage for executives at companies with government contracts, but backed away from proposing the nationwide pay cap he had mooted hours earlier in broadcast interviews.

Kicking off a long-planned relaunch, the Labour leader said companies would have to stop executives earning more than 20 times the wage of their lowest paid worker if they wanted to bid for public sector work, which he calculated would set a salary limit at about £350,000.



But the pledge, made in an afternoon speech, did not go as far as Corbyn had in morning interviews where he said he would like there to be ““some kind of high earnings cap, quite honestly” and suggested it could cover star footballers as well as highly paid CEOs.

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Speaking in Peterborough, Corbyn said it was wrong in principle that a company boss could earn in a few days what nurses or other public sector workers take home in a year.

The Labour leader said: “In the 1920s, JP Morgan, the Wall Street banker, limited salaries to 20 times that of junior employees. Another advocate of pay ratios was David Cameron. His government proposed a 20:1 pay ratio to limit sky-high pay in the public sector and now all salaries higher than £150,000 must be signed off by the Cabinet Office.

“Labour will go further and extend that to any company that is awarded a government contract. A 20:1 ratio means someone earning the living wage, just over £16,000 a year, would permit an executive to be earning nearly £350,000. It cannot be right that if companies are getting public money that can be creamed off by a few at the top.”

If adopted by a Labour government, the Corbyn plan would mean that the bosses of public sector outsourcing would have to take massive pay cuts. Andy Parker, the chief executive of Capita, earned £2.68m in 2015, while Ashley Almanza, chief executive of G4S, took home about £2.61m in the same year. The average annual wage in the UK is £27,600.

Corbyn also floated a string of other ideas to tackle pay inequality, including letting workers on remuneration committees set the pay of their bosses, setting a higher rate of income tax on the top 5% or 1% of incomes, or offering lower rates of corporation tax for companies that limit executive pay.

The plan to tackle pay inequality is the first evidence of Corbyn’s relaunch, which is intended to highlight his leftwing populism at a time when Labour is well behind in the polls. Labour figures believe that a more combative approach from Corbyn – and more frequent appearances by the leader in the media – could help the party harness the anti-politics mood in Britain in the aftermath of the Brexit vote.

Earlier on Tuesday, Corbyn had declined to say at what level a wage cap should be set. During an interview on the Today programme he said: “I can’t put a figure on it and I don’t want to at the moment. The point I’m trying to make is that we have the worst levels of income disparity of most of the OECD countries. It is getting worse. And corporate taxation is a part of it. If we want to live in a more egalitarian society, and fund our public services, we cannot go on creating worse levels of inequality.”

Corbyn, who earns about £138,000 a year, later told Sky News he anticipated any maximum wage would be “somewhat higher than that” and hinted that it could cover top sportspeople. He said: “I think the salaries paid to some footballers are simply ridiculous; some salaries to very high earning top executives are utterly ridiculous. Why would someone need to earn more than £50m a year?”

A number of Labour MPs were subsequently reluctant to endorse the idea, including the shadow energy secretary, Barry Gardiner, who said it was not something he would personally favour, while the shadow work and pensions secretary, Debbie Abrahams, said it was a proposal rather than policy.



Business groups such as the Institute of Directors dismissed it as a “non-starter” and a “blunt tool”, while acknowledging excessive executive pay was an issue companies should consider.

But Corbyn’s focus on pay inequality and economic reform after Brexit was praised by Ed Miliband, the former Labour leader. “Whatever precise mechanism, Jeremy Corbyn is totally right to be setting agenda on the crucial issue of obscene pay differentials today,” he said.

Asked about the pay cap proposal, again in Peterborough, Corbyn said it was “probably better to look at the ratio issue”, as he set out concrete plans to limit the pay of those working for government contractors.

The Labour leader also took the opportunity to refine his position on immigration, after comments released before the speech said the party was “not wedded to freedom of movement for EU citizens [into the UK] as a point of principle”. He told the event: “I don’t want that to be misinterpreted; nor do we rule it out.”

Corbyn said Labour’s priority was maintaining access to Europe’s single market but that there would also have to be changes to the way immigration rules worked after Brexit. This may or may not include supporting a continuation of free movement, depending on negotiations with the EU.

“When it comes to border controls, we are proud to say we will meet our international obligations to refugees fleeing wars and persecution,” he said. “To those EU citizens who are already here, we will guarantee your rights. And we continue to welcome international students who come to study in this country. We cannot afford to lose full access to the European markets on which so many British businesses and jobs depend. Changes to the way migration rules operate from the EU will be part of the negotiations.”

Some Labour MPs appeared happier with the idea of pay ratios than proposing in an overall maximum wage cap but there were still some critical voices in the parliamentary party.

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Chris Leslie, the former shadow chancellor, said: “I think it would be better for us to have a discussion about a progressive tax system. It is an important lesson in thinking through policy, consulting and following evidence and best practice. All of the history shows that the best way of tackling unfairness in pay is through a progressive tax system. I thought we were supposed to be addressing the Brexit and immigration issues today and it’s a bit unfortunate that the important message has been perhaps lost in that.”

Patrick McLoughlin, the Conservative party chairman, said Corbyn’s relaunch was descending into chaos. He said: “Today he showed that Labour simply will not take control over immigration, by saying that he ‘doesn’t rule out’ keeping freedom of movement. And he suggested a new 100% tax rate, which he U-turned on within hours ... Labour simply could not be more out of touch with ordinary working people.”

Labour is deeply split on the issue of immigration, with some MPs calling for the party to back much tougher controls and others wanting to stand up for free movement.

In a joint letter to the Guardian, four members of Labour’s national executive committee, a member of the steering committee of Momentum, the general secretaries of two trade unions and a number of others called for a robust defence of free movement of people across Europe.

“We are alarmed by the way more MPs are now also turning their firepower on immigration,” they said. “While we cannot ignore the concerns of anyone struggling and feeling insecure in a country that still has huge but concentrated wealth, we cannot pander to anti-immigrant sentiment in a race we cannot win and should never want to.”