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A New Front in the Income Inequality Wars?

Britain’s new Conservative Party prime minister has an idea for ending pay excess in the public sector. Should overpaid execs in the private sector — in the United States — now be starting to shudder?

By Sam Pizzigati

Conservatives politicians have always enjoyed bashing public employees and their paychecks. So no one should be particularly surprised that David Cameron, Britain’s new prime minister, has just launched a major media offensive against the UK’s highest-paid government officials.

But this new offensive may end up as much more than just another cynical political maneuver to exploit taxpayer frustrations.

Indeed, Cameron’s charge might even trigger — quite unintentionally — a major breakthrough in the struggle against income inequality, in Britain and everyplace else where corporate executives are walking off with outrageously high multiples of the pay that goes to their workers.

A conservative politico triggering a breakthrough against inequality? In the United States, that notion sounds simply preposterous. But the UK’s David Cameron styles himself a different sort of conservative. He’s actually framing his less-government-spending conservatism as an antidote to the UK’s growing gaps in income and wealth.

“Who can honestly say the Big Government approach is working,” he asked this past April, “when inequality is rising and social mobility is stalled?”

CEO payCameron at that time vowed, if he ever became prime minister, to “investigate pay inequality in the public sector.” Now he’s moving to fulfill that pledge — and promoting a pay fairness yardstick for the public sector that many UK progressives see as an appealing precedent for attacking the enormous inequality in Britain’s private sector.

That yardstick: the “pay multiple.” No public sector executive, says Cameron, should “earn over 20 times more than the lowest paid person” in that executive’s public agency.

Establishing a maximum public sector wage along those lines, Cameron argued during this past spring’s UK election campaign, would both “tackle unfair pay policies” and “improve cohesion and morale.”

“Unfair pay policies” certainly do exist in the UK’s public sector. Over 170 British government officials are currently collecting paychecks over £150,000, about $220,000, according to data that Cameron had released last week.

Britain’s highest-paid government agency executive, according to the new data, is making over £270,000, or almost $400,000, nearly twice the £142,500 that goes to prime minister Cameron.

Orthodox hard-line UK conservatives last week welcomed the new data release as a splendid opportunity to fulminate against the “public sector gravy train.” But UK progressive activists working on inequality welcomed the new data as well.

Any serious discussion about pay excess in government service, these activists believe, will soon have the angry taxpaying public contemplating the much greater compensation excess in Britain’s private corporate world.

And that’s already beginning to happen. News reports, for instance, are noting that many of the excessively paid public sector executives came to their positions from private sector executive slots that “pushed up” their government pay rate.

And taxpayer groups are noting that the pay problem goes far beyond the officials who work directly on the British government payroll. They’re pointing out that top execs of quasi-public enterprises — like the outfits that manage local public housing — may “technically” sit at “arms-length from the state.” But these execs collect “huge amounts of taxpayers’ money and should be held to account.”

UK progressives focused on inequality are emphasizing that same theme. All executives grabbing “huge amounts of taxpayers’ money,” they’re contending, should be “held to account,” and that includes the huge numbers of private corporate executives whose companies profit off government contracts or snatch up government bailouts.

The Cameron government’s push against excessive pay, as the director of Britain’s equality-minded One Society said last week, “will be inadequate unless the government takes action on top pay in the private sector, too.”

“That is where,” the One Society’s Malcolm Clark added, “the real drivers of executive wage growth originate.”

The One Society, a new advocacy group working to make inequality a top-tier UK political concern, wants the Cameron government to “widen out the concept of the pay ratio to all sectors of the economy.” 

signupA first step toward that goal could be to deny government contracts to any private companies that compensate their executives at over 20 times their worker pay, the ratio Cameron has already deemed as appropriate — and necessary — for a more efficient public sector.

The conservative Cameron has so far made no move in that direction, and this distinct disinterest in applying his 20-times rule to the private sector may eventually prove politically embarrassing for him, suggests Jonathan Bartley, the co-director of Ekklesia, a religious think tank in London.

The public, notes Bartley, just might want to know “why one set of principles are acceptable and ethical for the public sector, and not for the private?”

Sam Pizzigati edits Too Much, the online newsletter on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Too Much appears weekly. Read the current issue or sign up to receive Too Much in your email inbox.

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