Theresa May finally U-turns on austerity, but only for Britain’s elite

After seven years of austerity, millions of people in Britain are at breaking point. But instead of giving a break to those who most need it, Theresa May is handing a windfall to the country’s highest earners – by backtracking on her pledge to crack down on executive pay.

The pledge

Just over a year ago, in the first speech of her leadership campaign, May promised to make sure Britain’s economy worked for everyone. At the heart of her plan was a pledge to keep executive pay in check by allowing shareholders a binding vote on corporate pay every year rather than every three years. She even wrote the pledge into her party’s manifesto [pdf p20]:

The gap between those paid most and those paid least has grown from 47:1 in 1998 to 128:1 in 2015. The next Conservative government will legislate to make executive pay packages subject to strict annual votes by shareholders…

Now, The Financial Times reports [paywall] she is dropping that pledge:

Theresa May has been forced to abandon another key policy in her attempt to improve boardroom behaviour… Mrs May’s allies on Monday confirmed that a plan to have more binding votes on remuneration was likely to be dropped.

And according to The Telegraph, there are more executive pay U-turns to come:

It is understood, however, that the most radical of the proposed reforms are likely to be abandoned in the coming weeks.

Corporate lobbying

After sustained corporate lobbying in 2016, May backed down on her plans to force companies to put workers on their boards. Since then, corporate interests have been arguing that the government doesn’t need to legislate on executive pay. Consulting firm Deloitte compiled figures showing that FTSE 100 CEO pay fell by 19% between 2016 and 2017. So, it says:

The current framework is working well and we do not believe further regulation is needed to move things forward.

But the High Pay Centre suggests that fall was a one-off result of public pressure. And now, May has backed down on another key pledge.

Executive pay is out of control

The PM’s latest climb-down effectively tells company boards that it’s OK to carry on with business as usual. But it is not OK.

Executive pay is out of control. According to the Equality Trust [pdf], FTSE 100 CEOs take home around 190 times an average employee’s salary – or 386 times that of someone earning the National Living Wage. It would take the average worker 1,718 years to earn the £48.1m a year paid to Britain’s highest paid FTSE 100 boss, Sir Martin Sorrell.

Successive governments have allowed executive pay to skyrocket. Meanwhile, since 2010, Conservative governments have pushed relentlessly for what they call ‘pay restraint’ for workers, who actually create wealth. In real terms, wages have fallen by 10% since the financial crisis, according to the Trades Union Congress (TUC). The Institute for Fiscal Studies (IFS) calls it the most sustained slowdown in income growth since comparable records began in 1961.

Inequality is devastating

And inequality is devastating for the whole of society, according to the Equality Trust [pdf]:

Too often, bosses are treated as untouchable talent to be retained at all costs, while millions of workers are seen merely as costs to be reduced. The result is that the UK is one of the most unequal countries in the developed world… More unequal developed countries like the UK suffer from poorer mental and physical health, poorer educational outcomes, and lower levels of trust in others. There is even evidence to suggest high inequality negatively impacts our economy and businesses.

The rich are getting richer

The Prime Minister openly supports allowing the rich to get richer while the poor get poorer. But she’s swimming against the tide. 42% of the British public now think the government should redistribute income from the rich to poor, compared to 28% who disagree – a sea change from pre-financial crisis figures. Now we need to make sure that our opposition is heard loud and clear.

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Featured image via screengrab