Company bosses should have their pay limited to less than 20 times that of their lowest paid worker if they want their firms to be eligible for government contracts, Jeremy Corbyn has suggested.
The Labour leader made the proposal as part of a speech on Brexit, in which he also set out plans to tackle pay inequality, hours after he aired the idea of a “maximum wage cap” in an interview with BBC Radio 4’s Today programme.
The proposed pay ratio for government contractors would affect major outsourcing companies, some of whose bosses earn more than £1m every year. On Corbyn’s calculation it would permit executives to earn a maximum of about £350,000.
Speaking in Peterborough, Corbyn said: “In the 1920s, JP Morgan, the Wall Street banker, limited salaries to 20 times that of junior employees. Another advocate of pay ratios was David Cameron. His government proposed a 20:1 pay ratio to limit sky-high pay in the public sector and now all salaries higher than £150,000 must be signed off by the Cabinet Office.
“Labour will go further and extend that to any company that is awarded a government contract. A 20:1 ratio means someone earning the living wage, just over £16,000 a year, would permit an executive to be earning nearly £350,000. It cannot be right that if companies are getting public money that that can be creamed off by a few at the top.”
He also floated other ways to address the issue of excessive executive pay, including the formation of remuneration committees with a majority of workers who would sign off salaries for executives.
Other ideas included a government-backed “kite mark” for those companies that have agreed ratios between the pay of the highest and lowest earners, a higher rate of income tax on the highest 5% or 1% of incomes, or lower rates of corporation tax for companies that do not pay anyone more than a certain multiple of the pay of the lowest earner.
The Labour leader said it was a guiding principle that “we cannot have the CEO paying less tax than a cleaner” and that it was not fair to have a boss earning in a few days what a nurse or teacher made in a year.
“Labour will build a better Britain out of Brexit,” Corbyn said. “That will start with the refinancing of the NHS and the creation of a more equal country, in which power and wealth is more fairly shared amongst our communities. A genuinely inclusive society with strong and peaceful relations with the rest of the world.”
The Labour leader also took the opportunity to refine his position on immigration, after comments released before the speech said the party was “not wedded to freedom of movement for EU citizens as a point of principle”. He said: “But I don’t want that to be misinterpreted, nor do we rule it out.”
Corbyn made clear Labour’s priority was maintaining access to Europe’s single market but that there would also have to be changes to the way immigration rules worked as part of Brexit negotiations.
“When it comes to border controls, we are proud to say we will meet our international obligations to refugees fleeing wars and persecution,” he said. “To those EU citizens who are already here, we will guarantee your rights. And we continue to welcome international students who come to study in this country. We cannot afford to lose full access to the European markets on which so many British businesses and jobs depend. Changes to the way migration rules operate from the EU will be part of the negotiations.”
The idea of limiting executive pay was relatively well received by a number of voters approached by the Guardian in Peterborough, a Conservative-held seat that voted strongly for Brexit. The constituency is a key marginal, which went Labour in 1997 until 2005, when it was taken back by the Tories who now have a majority of fewer than 2,000 votes.
Eileen Stevens, 64, shopping in the local market, said she thought Corbyn was “not a bad guy” and the idea of a maximum wage “would be nice” if it was a fairly high figure. “Some of the banks are still paying great big bonuses out this year,” she added.
The proposal also met with approval by Len Poole, 73, who was not keen on Corbyn because he felt the Labour leader had contributed to Brexit. “I think it’s possible if it’s well thought out … though you need incentives,” he said.
One Labour supporter, Dan Jones, was a bit more sceptical, saying he did not think it was going to be possible for the government to “set people’s wages”. But he approved of Corbyn as a “proper socialist” compared with Ed Miliband who was “too much like the Tories”.