My Lords, Amendment 84AHAA speeds right to the heart of the matter in hand. The disparity in pay between top and bottom earners has informed much of the public outrage about remuneration, and it no doubt lies behind the polling figures that I mentioned previously. Had the minimum wage kept track with executive pay since it was introduced, it would now be worth in the region of £19 per hour. Instead, we see a very pronounced wage discrepancy. It is felt particularly acutely here in London, where many FTSE 100 companies and our financial sector are based. In 2010, the top percentile here received 16.5% more than the bottom percentile. The ratio between top and bottom pay has gradually grown over the past 30 years to the point that in both the Lloyds Banking Group and Barclays top pay was 75 times that of the average employee in 2011. By way of comparison, in 1979 the difference was only 14.5 times.
Put simply, too many are being left behind. This is certainly not the one-nation economy that this country needs. Therefore, shareholders should have more power to hold to account the companies they invest in, as we argued with regard to the previous amendment. Greater transparency about levels of pay at the top and bottom of the company would give shareholders the tools they
need to make informed decisions on how they vote. This amendment gives shareholders those tools by requiring companies to disclose the top and bottom 10 earners outside the boardroom.
There are corresponding moves to increase transparency on pay, so it is worth going over why we consider there to be a need for this amendment. Most of the moves to get companies to release more information on pay to their shareholders cover only banking. The Treasury’s current consultation proposal is that the top eight highest-paid earners beneath boardroom level in banks are to have their salaries disclosed. Although it is difficult to know the details at present, it appears as though the European capital requirements directive IV will opt for a different disclosure proposal, whereby the figures for those earning more than €1 million a year are to be collated and sent to the EBA, which will then produce the numbers in a common format. It is possible that in some institutions this could produce less information than the Treasury proposal.
Both these proposals from the Treasury and in the European capital requirements directive IV differ from ours in several important ways. First, they concern only the banking sector, but this issue is not limited to that industry. Let us consider the top pay at BP. In 2011, it was 63 times that of average employee pay, whereas in 1979 the difference was only 16.5 times. However, these proposals had nothing to say about the severe problem of low pay, which, as my noble friend Lady Turner of Camden pointed out in Grand Committee, produces many difficulties in our society. I think we could all agree that pay at the bottom of a company should be considered when pay at the top is set.
The initial Private Member’s Bill of my noble friend Lord Gavron contained a similar provision. Clause 2 said:
“A company’s annual report must prominently feature details of the remuneration ratio between the highest remunerated director or employee and the average remuneration of the lowest remunerated 10% of employees”.
This amendment is slightly different but would have the same effect, introducing a measure of transparency as to the ratio between the highest and lowest paid workers.
Yesterday, Secretary of State Vince Cable pledged to support a push for openness about what tax businesses pay in different countries. This amendment is a similar push for transparency. I hope that the Government will find that they are able to support it. I beg to move.