Peter Hoskin

Why high pay restrictions are a bad idea

Why high pay restrictions are a bad idea
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I'm not sure how I missed Hamish McRae's latest column in my morning dash through the papers but, now I've seen it, I'd recommend it to all CoffeeHousers.  Why?  Well, it's the bottom line on the debate about limiting high pay that has been rumbling on for the past few days; a cogent reminder of how futile and destructive such a move would be.  I was particularly struck by McRae's description of how his former employer, the Guardian, got around restrictive pay policy in the 70s:  

"Because an employer could not increase people's pay they had to find other ways of retaining them when another company tried to bid them away. I worked for The Guardian then and its particular wheeze was giving its staff cars supplied with free petrol. Journalist salaries were relatively modest but the management revealed in some negotiation that the paper had more editorial cars than the Times, Telegraph and FT put together."

Those who think that limiting high pay - and, indeed, many of those advocating higher taxes for higher income earners - would do well to dwell on that example.  Companies and well-off individuals will always find ways around income-draining measures; ways that, more often than not, will result in a lower tax take for the Exchequer.  Given the state of the public finances, the likely result would then be a greater burden on low income earners.  Progressive?  Perhaps not.