We need a lasting settlement on pay

By Joe Cox / @compassoffice

Today, JP Morgan Chase has announced profits of 11.4 billion dollars with plans to pay 9.3 billion dollars in bonuses. The figure is huge, but it’s its context that makes it all the more galling. It is happening at a time when the west is pulling out of its greatest post-war downturn, caused largely by the very same institutions. While most will endure pay freezes, pressures for unpaid overtime or even unemployment, a small group will receive bonuses of the equivalent of a lifetime’s pay for minimum wage workers.

The Compass campaign for a High Pay Commission has received more media and grassroots interest than others because it touches upon some very basic moral questions – such as fairness. Is it fair that a few thousand financiers can make huge rewards through gambling? Is it fair that the same institutions that caused the crash now receive such huge rewards? Is it fair that ‘socially useless’ activities receive such large remuneration? To most, the answers are obvious.

Compass previously called for a windfall tax on bank bonuses and in the Pre-Budget Report the Chancellor enacted this measure. It is forecast to raise up to £2 billion in revenue and polling has shown it to be hugely popular. Nevertheless, the measure was always unlikely to tackle excessive pay and bonuses.

The big questions about pay and remuneration remain unanswered: why have the richest 10% of society increased their share of income dramatically to over 30% of total income? What are the social effects of these huge income disparities? What are the economic effects of high pay? Since 2000, stock market valuation by the FTSE 100 has declined 25% while executive pay has risen 85%, and bonuses by 350% – there is a clear problem that needs a lasting settlement.

Compass think this lasting settlement could be achieved by a wide ranging, open High Pay Commission. Over 100 MPs agree with us and have signed an early day motion calling for action.

The growing gap between high earners and the rest of society is politically, socially and economically damaging. It erodes the bonds of common citizenship, and undermines the principles of equal opportunity and the recognition of equal worth. Today’s announcements have shown that we are no nearer tackling excessive pay.

To lobby your MP to support John Battle’s EDM 191 on a High Pay Commission please click here.