HL Deb 23 March 2004 vol 659 cc585-7

Lord Lea of Crondall asked Her Majesty's Government:

Whether there are any negative consequences for social cohesion in the growing gap between the highest and lowest pay levels in the United Kingdom.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

My Lords, the Government's objective is to build a strong economy and a fair society, with opportunity and security for all, by tackling poverty and social exclusion. The Government's policies are aimed at raising the incomes of the poorest families with children and pensioners relative to the average of the population, not at trying to drag down the position of the highest earners. With the new tax credits, the national minimum wage and the pension credit, we have taken major steps to achieve this.

Lord Lea of Crondall

My Lords, top FTSE chief executives arc now for the first time being paid an average of £1 million per year, which is 100 times the minimum wage compared to 20 times only a few years ago. Is it not "the unacceptable face of capitalism"—to quote Sir Edward Heath for the same people to urge ordinary workers not to put in for double-figure pay rises, while at the same time awarding themselves increases that are six times the average in percentage terms and 600 times more in absolute terms than those at the bottom?

Secondly, in view of the restrictive practices and total abdication of social responsibility by remuneration committees of boards, will my noble friend provide for a representation of employees as well as shareholders on them, and refer their activity to the Restrictive Practices Court or its equivalent?

Lord McIntosh of Haringey

My Lords, I happen to share my noble friend's distaste for conspicuous consumption at the top, but that does not take away from the fact that it is far more effective when dealing with social cohesion—to go back to the original Question—to deal with poverty rather than to concentrate on the activities of the highest paid. Even taking that into account, we have to remember that the top 10 per cent of income taxpayers pay 52 per cent of the income tax received.

I think that the noble Lord's second question about management boards is somewhat wide of the Question.

The Lord Bishop of Portsmouth

My Lords, my question is about children. Top people quite rightly attract a lot of attention. The Government are to be congratulated on wanting to bring child poverty down by 25 per cent in the next two years. Does the Minister agree that 12 per cent of all children living in abject poverty and in lone-parent homes is a worryingly high figure? What does he propose to do about it?

Lord McIntosh of Haringey

My Lords. I entirely agree with that. I agree that it is a worrying figure. We have to remember that relative child poverty doubled in the years before 1997. We have not yet achieved the reduction of a quarter, but we have taken 500,000 children out of poverty. I take a great deal of pride collectively on behalf of the Government for that. We have done that at a time of very high growth in median incomes against which poverty is compared.

Lord Dholakia

My Lords, is there adequate monitoring of pay levels affecting women and ethnic minorities? Will the Minister confirm that they feature on pay scales at a very low level? If so, what effect does that have on social cohesion?

Lord McIntosh of Haringey

My Lords, there is very full monitoring, as I am sure the noble Lord, Lord Dholakia, knows. I have a document in front of me called The Effects of Taxes and Benefits on Household Income 2001 which, at nearly 100 pages, is a little long for me to read. We do monitor the differentials for women and ethnic minorities and we do acknowledge that there are significant differentials at the lower end of pay scales.

Lord Marlesford

My Lords, does the noble Lord feel that perhaps one aspect of the problem raised by the noble Lord, Lord Lea, was dealt with rather well by the American industrialist J Peter Grace, who, when asked for an enormous salary by one of his executives, replied: "do not have a problem paying you that sort of money; you just have a problem earning it".

Lord McIntosh of Haringey

My Lords, I do not reply to other people's jokes—particularly good ones.

Lord Sheldon

My Lords, is not one of the major problems the remuneration committees themselves? People who are members of those committees have a vested interest because of their other activities.

Lord McIntosh of Haringey

My Lords, that may well be the case in some circumstances. My response to the original Question was about our attack on poverty. I stick to that thrust.

Lord Newby

My Lords, does the Minister agree that one way of dealing with excessive levels of income at the top end and child poverty at the bottom would be to have a somewhat more redistributive income tax policy? For example, the introduction of a rate of 50 per cent on incomes over £100,000 per year—a rate incidentally significantly less than the top rate which obtained during the majority of the previous Conservative administration might kill two birds with one stone?

Lord McIntosh of Haringey

My Lords, I am interested that the noble Lord, Lord Newby, should say that on 23 March 2004. If one looks back at the record of what Liberal Democrats have been saying over the past few years since they adopted this policy, one will find that there are periods of strange silence. I am glad to know that the issue is back on the agenda again. It helps us all to know where we stand.

Lord Hoyle

My Lords, does my noble friend agree that perhaps the solution is to have employees on the boards so that they can watch these activities?

Lord McIntosh of Haringey

My Lords, I have already been asked that question. My answer has been about poverty rather than about a small number of people with very high pay. My objection to such people is more aesthetic than economic.

Lord Skelmersdale

My Lords, the Government's own figures show that income inequality is higher now than at any point under the previous two Conservative Prime Ministers. Why has this inequality risen since the party opposite came to power?

Lord McIntosh of Haringey

My Lords, it has not. The fact is that differences between the top and lower 10 per cent, which had been increasing, have now stabilised—they have stabilised since 2001. In the financial year 2002–03, the income of the bottom 10 per cent rose by 3.3 per cent; and of the top 10 per cent by 2.3 per cent. Of course, we can always play different games with quintiles, deciles and so on to produce the figures that suit us, but those figures are significant.

Lord Haskel

My Lords, does my noble friend agree that one of the main reasons for the growing gap in pay is the difference in skills? Does he agree that industry today demands much higher skills and is prepared to pay a lot more for them, and that the reason for the gap is that those people who have the skills get the pay and those who do not, do not?

Lord McIntosh of Haringey

My Lords, I cannot disagree with that in general, but there are an awful lot of exceptions of people without skills receiving excessive pay packages.

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