HC Deb 11 November 1999 vol 337 cc1275-6
3. Mr. David Winnick (Walsall, North)

What further discussions he has had with employers over income increases to heads of companies. [96992]

The Financial Secretary to the Treasury (Mr. Stephen Timms)

At the recent Confederation of British Industry conference, my right hon. Friend the Chancellor warned of the danger that unacceptably high pay rises would lead to higher interest rates. In the case of company executives, it is the responsibility of shareholders and remuneration committees to ensure that pay is justified by performance.

Mr. Winnick

Is it not a fact that many senior directors and executives—many of whom are already on large salaries—have recently given themselves very large pay increases, share options, bonuses and the rest that are very different from the level of salary increases given to the large majority of their employees? In view of that fact, and recognising what my hon. Friend said about the Chancellor's warning, has not the time come for Government action on the matter?

Mr. Timms

There is evidence of pay running at a high level for some senior positions in some of our firms, and responsibility in pay rises is of the greatest importance. Although pay responsibility is important in the public sector, it is just as important in the private sector. Such responsibility is important on the shop floor, but it is just as important in the boardroom. Responsible pay settlements are essential to achieve the high and stable growth and employment levels to which all of our economic policies are directed.

Mr. James Gray (North Wiltshire)

Does the hon. Gentleman acknowledge that it is not only company heads who are paying the top tax rate, but hundreds of thousands of public sector workers are also paying at 40 per cent? Does he agree that 26,000 NHS workers, 9,000 policemen and 28,000 teachers pay at 40 per cent? What are the Government doing, not to have a go at those workers as fat cats, but to relieve their tax burden?

Mr. Timms

We have maintained all our commitments on tax rates. Now, however, the key issue is that, for the first time that most of us can remember, we have a real prospect of full employment in Britain. Most people thought that full employment was only for the history books, but the success of our policies in the past two and a half years has led to a new stability, so that full employment is now a realistic prospect. We have to be vigilant against anything that puts that prize at risk—which means guarding against, among other things, irresponsible pay rises.

Mr. Derek Twigg (Halton)

Based on August figures, wage increases are running at 4.9 per cent. Is that level of earnings growth posing a threat to inflation?

Mr. Timms

The August figures are up 0.3 per cent. on the figure for three months earlier, but the figures are erratic. In the longer term, the figures are still relatively low. The last peak in earnings growth, in 1990—when unemployment was much greater, at 1.6 million—was 10 per cent. Nevertheless, my hon. Friend is right to say that there is no room for complacency: everyone needs to be responsible on pay.

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