Jessica Fino 10 Jan 2017 12:25pm

Jeremy Corbyn proposes maximum earnings limit

Labour leader Jeremy Corbyn has called for a cap on the maximum amount people can earn, arguing that he fears Brexit will see the UK become a “grossly unequal bargain basement economy on the shores of Europe”

Corbyn told BBC’s Radio 4 Today programme that he would like to see a maximum wage for the highest earners in a bid to reduce inequality.

"We have the worst levels of income disparity in most of the OECD countries in this country. It's getting worse, and corporate taxation is part of it," he said.

“If we want to live in a more egalitarian society and fund our public services we cannot go on creating worse levels of inequality.

“I say let’s look at it. We cannot set ourselves up as being a sort of grossly unequal bargain basement economy on the shores of Europe."

In a separate interview on Sky News, Corbyn said a wage cap would be "somewhat higher" than his £138,000 salary. He said, "Why would someone need to earn more than £50m a year?"

The Labour leader is expected to give a speech later today where he will say that the UK can be “better off” after Brexit.

He told the BBC that the UK needs to end the “grotesque levels of exploitation” of migrants coming mainly from Central Europe.

Corbyn argued that these workers are brought in to the UK by agencies and undercut existing working arrangements and conditions, creating “awful tensions” in the communities in which they work.

Despite saying that a company should have to advertise the jobs locally first, he urged people to think “quite carefully” about the implication for UK services on restricting immigration.

He also pointed out that the majority of the country’s exports and trade are with the EU, therefore “there has to be a close trading relationship”.

In his speech taking place in Peterborough later today, the Labour Party leader will say that the party is “not wedded to freedom of movement for EU citizens” as a point of principle.

Responding to Corbyn's comments on a maximum wage cap, a spokesperson from the High Pay Centre said, "Top pay has risen to extraordinary levels and is out of control. But the difficulty with setting a fixed cap is working out what that number should be and then effectively policing it.

"So in practice it is very hard to do. Publishing pay ratios and putting pressure on companies to explain and justify pay gaps is less dramatic but probably more effective."

Sam Bowman, executive director of the Adam Smith Institute, said"A maximum salary cap would be completely bananas, hurting British firms and ultimately ordinary British workers.

"If you're a worker for a FTSE 100 firm, this is bad news: your job security and wages will suffer if your company isn't led by the best people in the world.

"If you're saving for a pension, this is bad news: the value of your savings will suffer as British firms become less productive, starved of global top talent. If you rely on the NHS or other public services, this is bad news: tax revenues will fall as these highly-paid executives move abroad. If we want Britain to boom, we need to let business hire who it wants and pay them what it wants."

Oliver Parry, head of corporate governance at the Institute of Directors, said the suggestion of a maximum earnings cap was a “non-starter”.

Parry added, “Politicians simply do not know the right level of pay for the heads of multinational companies, and no successful economy operates with this level of intervention by government. Would the cap also affect entrepreneurs who have built up a successful company, who surely have every right to the rewards?

“Boards must see today’s suggestion as a warning of things to come if they do not show they can moderate directors’ remuneration.”

A spokesperson from the Confederation of British Industry said that introducing a targeted binding vote regime would “focus attention on the most concerning cases and give shareholders the teeth to truly have the final say on top executives’ pay”.