Sorry, I forgot the 'merit' of the middle. It isn't just wealth that is transmitted down the generations and called 'merit' it is also class privilege through education also called 'merit'. The British middle classes in the 18th century numbered 500 and the private schools and the professions - church, civil service, education, army officer, medecine were invented to look after their younger sons. You had to be processed through a public school and perhaps university and then you were guaranteed a superior income for life.

This model has been adopted and expanded and the middle classes still segregate their children through better schools and get them in to professions on high guaranteed incomes. It is all based on the model of 'merit' when it is mainly transmitted class privilege.

You won't increase social mobility by keeping this deceptive model and trying to boost the climbing powers of the most talented low born. The middle classes will outwit you. If you rejected the model of 'merit' for what it is and reduced the differentials of rewards then the churning according to taste and talent could proceed far more comfortably.

Adrian raises many very well argued points around meritocracy. I certainly don't sign up to the standards by which we judge merit.

The quick leap from making money to that representing excellence - the virtue of making money - even if you cleverly con millions of old people in to wasting their money on something useless - it still counts as entrepreneurial excellence. It's a very dubious link. Determining who is deserving and who is undeserving is not clear or simple.

But move to something simpler. Most people with lots of wealth didn't do something meritocratic or excellent to get it - they inherited most of it and did nothing meritocratic. They probably had excellent private education and were given wealth to use profitably in something that looks like a business or a job. basically the most meritocratic thing they did was get born with wealth.

Then you hit the poorer workers slaving away hard working - salt of the earth. The lower their wages the more meritocratic wealth generated for the businesses they work for.

Or go down to sick people who just had Incapacity Benefit taken away from them and replaced with ESA which is conditional on them beign permanently hounded and going to boot camp and striving to get and keep employment whatever the disabling or serious condition they suffer from. This isn't safe or compassionate. And Gordon says the Tories don't have a heart!

But assuming you can agree on and judge merit - you can take the reward of the deserving and the punishment of the undeserving too far.

What is the difference between being enslaved by chains and whips or being enslaved by debt?
Have the bank bailouts sold the whole population into a new era of slavery?

This campaign worries me. As Steve Bell says, it is too vague. How do you define excessive pay? Like similar campaigns by the Left in the past, it risks being portrayed as representing the rebirth of the politics of envy, and an attack on achievement and the pursuit of excellence. That, perhaps, is why Blair and Mandelson have never countenanced such campaigns in the past.

I am also concerned that the current debate is driven by a cynical political and populist anger against bankers, but they are by no means the worst transgressors. What about footballers, musicians, actors, TV presenters or even barristers, accountants or dentists? All have had their levels of remuneration questioned in the past.

The principal issues in my opinion are not about wealth and pay differentials. These are merely the adverse consequences of bigger issues concerning a general lack of competition, transparency, accountability, meritocracy and proportionality in the remuneration of people at the top of society.

The first of these issues is competition. Many professions enjoy inflated rates of pay because they restrict access into them. By controlling the numbers entitled to practice, barristers and accountants enjoy the benefits of an artificial shortage that boosts their earnings potential. Compare that with science, where our over-supply of qualified scientists in this country results in the one of the lowest average earnings for this sector in the G7, and yet the Government still urges our universities to produce even more to the detriment of both quality and status of this profession. Then in banking and finance there is the issue of rates of commission. If investment bankers are rewarded too highly it is in part because the commissions they charge on various deals are too high. This points to a serious lack of competition in the sector, made even worse by the collapse of two of the main players, Bear Stearns and Lehmann Bros.

Next are issues of transparency and accountability. Many in banking and finance receive bonuses for performance, paid for by the shareholders. Yet the shareholders are never provided with the information necessary to be able to judge the merit of these bonuses. For example, by how much does the profit on their trades in any year exceed the expected growth rate of the market. That was the question Lord Myners recently asked regarding the bonuses of pension fund managers. We also only hear about the traders who win. But for every winner in the City dealing rooms there must be one loser somewhere, so who are they and where? If they are in the same institution you then have traders competing against each other inside a single bank. The net profit for the bank is nil. Fundamentally, though, the reason why bonuses are paid is because there is no reason not to pay them and no-one to stop them. Taxing companies in line with their bonus pay-outs would force shareholders to weigh up the competing interests of higher bonuses and keeping hold of good staff. Shareholders will then need to decide which will cost them more in the long run: higher bonuses or losing their best staff?

Then there is the thorny issue of merit. Much of the resentment over corporate pay and the culture of the "Fat Cat" arises from a feeling that most of these people are not the supremely talented individuals that they claim to be. Many of these individuals have fairly average academic backgrounds and appear to have been parachuted into companies they have had little part in building up. So what exactly is the unique talent that these people possess, and just how rare is it? The suspicion is that there may be a million others that could do most of these jobs but don't get the chance. We need to see companies being more open over their appointment procedures. For example, Sir Michael Bishop the former head of BMI recently criticised the level of homophobia in boardrooms. To help counter this and other deficiencies, shortlists for appointments should be published, CVs of all applicants made public, and the selection panel's decision explained in full. Countries like Germany have a tradition of appointing CEOs with technical expertise in the industry they are running. We don't. Instead we parachute in a bean-counter or management consultant from the City. That must stop. It you want an example, just compare the backgrounds of the last few CEOs of BMW with those of British Leyland.

As David Coats points out, one of the main issues is the relationship between talent and reward (proportionality). How much of the success of a company is down to the people at the top, and how much do they live off the ingenuity of those beneath them.

Finally, one of the factors that distinguishes some of the super-rich from the ordinary worker is the ownership of intellectual property. This is inherently monopolistic, and unlike other assets, requires no risk and no investment. Junior workers in most companies, on the other hand, often have to sign away all their intellectual property rights to the company. Even in most of our universities researchers have no legal rights to the intellectual property they produce. We need to analyse how we can improve the rights of all workers to own, at least in part, their own intellectual property in order that the fruits of that innovation are shared more equitably.

From statement: 'In 1997 a ‘Low Pay Commission' was set up to advise on the implementation of the Minimum Wage - a policy which has ensured greater fairness and economic stability.'

Compass and colleagues could do with reading the latest (March 2009) report for the Low Pay Commission on the impact of the national minimum wage, which gives a worrying indication that it is now doing the reverse of what the 1998 Act intended it to do. Namely, it is holding wages at the bottom down as employers tie their rates to it (half of them in the survey have done this, and only the survey will by its nature not get data from the worst employers). Further, 'The median pay settlement in low-paying sector was 3 per cent in the year to September 2008. This compares to 3.8 per cent in the rest of the economy, indicating that settlements were typically lower in the low-paying sectors.'

(Not allowed to give weblink here but go to 'lowpay' gov dot uk website and look under research reports and it's easy enough to find - report by Income Data Services.)

I've no great problem with a High Pay Commission - it's only a commission, after all - but I fear the energy put into this area may detract from the really important issue of low pay.

"Make all salaries/bonuses above a certain level conditional upon a positive vote by shareholders .... to justify the pay to those people/institutions whose pockets are being raided."
John(Ware)

Two problems with this.

First, I thought that by now it had become transparently clear that the shareholders, who are mainly financial institutions themselves, have a vested interest in maintaining high salaries, because they themselves have their snouts in the same trough.

Secondly, it's not (just) the shareholders whose pockets are being raided. The monopolies/cartels (i.e. the banks, financial institutions, enrgy companies, public utilities) simply raise their prices to pay their own massive salaries. So it's primarily the consumers whose pockets are being raided.

Someone explain to me why the CEOs of water companies, for example (they're a privileged monopoly without even the pretentious cover of competition and market forces) should not have their pay decided in the same way as public servants? Their pay should be based on the level of qualifications and experience required for the job, and the hours they work. So I would tie those salaries (as in principle Civil Service salaries are tied) to a job requiring similar qualifications and with similar demands. Hence my previous example of headmaster of hospital chief executive.

There's nothing new about the principle or the practical application. There's no need for reinvention of this wheel. An ultimately, as I have previously said, Philip Carver is right in stating that our existing income tax system will deal with the remainder of the problem very nicely.

Dugsie - I've been complaining for the last year that the view often expressed here that "socialism" is a minority sport in Britain is wrong. This issue of excessive pay has been a great catalyst in getting people to understand that (hitherto deep down) they hold socialist principles. Coming hard on the heels of the collapse of the financial system and the exposure of the almost-criminality of their activities, and the increasing awareness of the current attempts to destroy our social welfare system, and the transparency of anti-democratic methods of this government, vast numbers of people in this country are "becoming socialists".

That's where I think Compass has an important role to play, in providing a path for such people to channel their views into political awareness and then into party political activity. That's also why I think Compass's new "campaign" for a High Pay Commission is misguided, because it reinforces the New Labour/Humphrey Appleby position that only a small elite is capable of formulating judgements on such an important issue.

Good idea Dugsie, lets commence with revolting against the Prince of Darkness who went on holiday to Corfu and coincidentally bumped into Gaddaffi's son. Making decisions and attending key events and meetings and he is not even elected and accountable. Shocking! A big improvement on last years chance meeting. Peter Mandelson is only interested in Rothschild, sorry Peter Mandelson. A clown in a Labour suit. I hope at some point I have the fortunate chance to meet with him next year in Corfu, as an unemployed holidaymaker

The entire country is full of socialists. I can't believe it. Shall we start the revolution tommow ?

Thats all we want more STATE control freakery, more QUANGO,s. Perhaps we can create another calamity like Trevor Philips who nobody wants to work with, who ensures that he looks after his own boys network. Not the answer. This is not a MARXIST country and never will be Neal. Have you anybody in mind who mixes within your small circle of non influential individuals.

There is a much simpler solution that can be implemented more quickly.
Make all salaries/bonuses above a certain level conditional upon a positive vote by shareholders (requiring a majority of shareholders voting and a majority of shares voted in favour) at the next AGM*. So those who have "earned" the money have to justify the pay to those people/institutions whose pockets are being raided.
* The pay can be held in escrow to be paid after approval.

The problem with this proposal is that it smacks of political headlining and treating bankers as convenient whipping boys and seems devoid of any thought being given to underlying principles.

What is 'high' or 'excessive' pay? Who will be the arbiter and what may seem high to someone on benefits or low wages may seem less so to someone on average earnings or more.

Either it is wrong for ANYONE to earn such high amounts or it is not. If it is not then why should bankers be singled out? If it is, presumably the High Pay Commission will also have to take responsibility over the wages paid to premiership footballers and other leading sportsmen and women (far higher in some cases than bankers earn!) and anyone whose pay is deemed ''high' or 'excessive'. Politically of course this would be a non-starter!

Surely the answer is straightforward:

i) Regulations that discourage short-termsim without deterring entrepreneurial activity.

ii) A tax system that ensures that high earners pay a fair amount of tax.

Philip Carver

I wanted to say something in response to Raymond.

The issue is not the bASIS on which people get paid but simply how much. Many "City" salaries are generally considered "obscene" by thoise ourside the City. For the functions that they perform, and for their achievements to the benefit of society, they are simply paid too much.

If a teacher earns £30,000 a year, and a doctor earns £150,000 a year, how can someone who gambles on currency futures be worth £5million a year?

There was a time when we all believed that the City was earning the country vast profits and investment, and enabling and persuading industry to research and develop new products, and fostering new markets to mutual financial benefit, and taking considered and innovative risks to achieve the progress of civilisation.

But now we all know better.

So the old theory that City folk deserved massive recompense has been finally disproven, and we see that actually we have been paying OUR money to a large number of dangerous chancers, gamblers who have been living off their various cartels and monopolies at our expense.

So in this new world, I'd be willing to see the earnings of the boss of Barclays be linked to those of, asy, the headmaster of a large comprehensive school, or maybe the chief executive of a major hospital. So let's give him £250K a year and work down through the ranks from there.

Lee has it exactly right. We all know what it is that we should be trying to achieve, and why. We already have a well understood and (relatively) efficient way of doing it - it's called income tax.

We don't need research. We don't need a commission. We don't need more worthy people wasting their time and energy inventing ever more complex and obscure new ways to finish up doing nothing.

This is a disappointing diversion for Compass, and will cost them much in support if they pursue it. What surprises me most of all is to see Vince Cable's name attached to the list of sponsors of the proposal, and I desperately hope that he was misled into signing up, or else that he quickly changes his mind.

Alistair Darling doesn't get it. He appears to think that it's none of this business that banks carry on paying obscene levels of pay to the speculators that got us into this mess, while the banks staff get a pittance. (the average bank cashiers salary at Barclays is approx £17,000 per year)

Well, Mr Darling - growing inequality in our society IS your business and this governments business. The fact that inequality has grown since 1997 is to the shame of this goverment. It's the reason why this country lags behind others in the western world in measures of academic achivement, wellbeing and has the highest levels of health-related and social problems. It's also one of the reasons why Labour has lost 4 million votes since 2001 and half of it's membership since we entered office.

The comments posted in response to this proposal show a real public appitite for change. This government should seize the moment - not cower behind the false promises of the discredited banking sector.

I am not in the least surprised that Darling is cool about the Compass idea.
After all New Labour is not very enthusiastic aBOUT The minimum wage either.
It closed down the L ow Pay Unit. Now why was that?
Could it be the rather minimal cost?

Why does it need to be any more complicated than a very high tax on earned income over a stated amount, with exemptions given to investment in socially worthy causes. Why is a commission needed ? Whichever way its enforced will need to huge resistence, whether its by caps or taxes. At least if its taxes, there is a simple relationship between the individual and the government, whereas most other solutions drag organisations into play and that's when it gets very nasty and complicated. Taxes can provide incentives, and there is no limit to the range of incentives that a good imagination can generate.

Everyone knows the joke how if you want something very important not to happen, you appoint a commission. Unfortunately its not just a joke.

This proposal is fine as far as it goes, but the brief is a bit woolly and the idea that policy prescriptions can be recommended now (before the Commission has done any work) looks a bit odd.

The salary cap is where the media will focus their attention and the risk is that the debate becomes polarised and the real issues get obscured. This suits both the orthodox right and the ultra-left. It is so much easier to push the discussion to extremes:"if you're against high pay you are anti-business" versus "nothing will change until we have transformed capitalism".

Following the Low Pay Commmission model doesn't seem quite right - the LPC is a permanent body with a clear and simple task: recommending increases in the level of the NMW. What is needed here is a process that gathers evidence and tests arguments over (say) two years before making any recommendations.

Of course there has to be some foundation of principle on which to build. The simplest starting point would be to say that pay across the whole earnings distribution must guarantee the rate for the job and offer felt fair differentials. In other words, articulating a principle of fairness is essential for the political legitimacy of the exercise. Public confidence in the process will be low if any other approach is adopted.

This suggests in turn that the inquiry should look at the whole of the earnings distribution - not just the top - and diagnose why the middle and the bottom are falling behind.

More specifically the inquiry should address the following questions:

Is there a relationship between talent and reward? What explains the escalating pay of those at the top? Which factors are important?

How does the labour market for the highest paid actually work? Is it true that these rewards are driven by nothing more than the desire to recruit and retain the best? Or is there collusion and mutual backscratching generating the upward spiral of top pay?

Is it true that most of the high value financial services sector would decamp to Dubai or New York if an effort was made to curb excesses at the top? If people did leave then how would this affect the UK economy? Would it matter at all?

Are we talking about an exclusively Anglo-Saxon phenomenon here or have all developed countries seen an explosion of excessive rewards at the top? How have countries achieved more equitable outcomes? Where is the balance struck in those countries between regulation, taxation and social norms?

Would it be practical to use salary caps (or average to top ratios) to restrain the exceses of the highest paid? What other instruments would work in the UK? Are corporate governance reforms needed - more transparency in the reporting of pay for eg?

The goal must be to get the rich to change their behaviour and establish a robust consensus about fair rewards. Of course people are legitimately angry about the excesses in the City, but the return to business as usual suggests that anger and headline catching initiatives (like the proposals for the Top Pay Commission) are unlikely to bring about the change that we need.

The New Right in the 80s and 90s removed the stigma associated with excessive wealth. Conspicuous consumption, which disappeared for most of the period between 1945 and 1980, has become a source of approbation over the last twenty years. If we want to establish equally effective social norms in the future then we must be clear that this is the nature of the enterprise. The arguments of City (and business) apologists must be tackled head on through an accumulation of evidence rather than a polemic driven by the politics of envy.

The advocacy of simple solutions may make us all feel bettter. But achieving a fairer distribution of earnings is a complex process (what can we do about the reliance on low pay despite the successes of the NMW? how can we achieve fair shares for those in 'middling' jobs? what can be done to restrain excess at the top?).

Rising to that challenge demands a comprehensive strategy with a clear economic policy narrative ("if we do this we will do capitalism better"). Progressive political leadership is all about distilling straightforward stories from compelling evidence, enabling people to make sense of the world in which they live. So far, the centre-left in the UK has failed to offer a critique that avoids the seductions of either socialist transformation on the one hand or the desire for a return to post-war social democracy on the other. Responding to that challenge is essential if we are to meet the admirable objectives endorsed by the supporters of the Compass statement.

Raymond, you miss the point of the campaign. A High Pay Commission would look at remuneration and consult with employers groups, trade unions, etc. for the purpose of ensuring that rewards do not incentivise excessive risk taking.

In response to comment left by Steve Bell (London):

You state that; 'This seems a very vague campaign with no clear outcomes. Would this mean that premiership footballers pay would be curbed?'

In my view, it would only be right and sensible to make the remit of the proposed High Pay Commission the subject of debate. I anticipate that it's remit will be clearly defined, reasonable and appropriate.

I don't think anyone would argue that Premiership Footballers had a role in the recent economic crisis. However, I am certain that many would agree that highly paid financiers and associated finance professionals did!

I work in corporate finance, a profession where the rewards for success are high. If I don't succeed I earn a much lower base income and would probably get fired. I am a partner in the firm, so have no security of employment. I cannot understand this initiative from Compass, as it is the policy of envy and dumbing down. As I believe Tony Blair once said society does not succeed by hammering the rich. The employed rich (subject to definition of “rich”) pay a significant portion of their incomes in taxes, unlike non-doms (nil) and business owners when they sell their businesses (18%). This initiative seems to be targeted at bankers but what about highly paid footballers, TV entertainers or so-called celebrities. By all means regulate banks to control risk, but forcing pay down or excess taxation on the individual is not the answer.

Greedy bankers argue that they need obscene bonuses to attract the 'best' or they will go elsewhere. Can someone please tell me where they will go? The whole world is aparently suffering as a result of their greed, so who the hell would have the means, let alone the desire to employ failed bankers?
These bankers are workers just the same as you and me, that's all. Not gods - just workers with a vastly inflated opinion of themselves.
They created this financial mess in the first place through their ineptitude - then claim they are the 'best' and demand a bonus!!! Unbeleivable.
If they don't do their best, then they should be sacked. Now there's an 'incentive' for you.

I agree with Jon and Steve.Jon's interesting list only scartches the surface about the corruption of NEw Labour
Itis allover very well to express outrage about the bonus culture. But what about the pay of footballers which is in many ways far more culturally damaging?
For their pay is directly linked to their vulgar behaviour on and the pitch
I noticed that one of the signatories is Margaret Moran who is standing down as MP for Luton. WEll quite. She was also a member of Labour Housing Group who never lived in social housing. But I digress.
The problem with this worthy campaign is tht it comes in the aftemathof the credit crunch and appears to be opportunistic rather than principled. It is also far too late. THe Tories would remove any restrictions regardless of the cosmetic changes they promise.

One of the missing names is Ken Livingstone who loudly proclaimed th e need to keep
financial services in London whatever the cost.He has been silent of late except when it comes to cheap slogans.

I am afraid that many of the initiatives of Compass are just that - too late.

This seems a very vague campaign with no clear outcomes. Would this mean that premiership footballers pay would be curbed? With a high top tax rate would the best players move to Spain/Italy where no caps (and lower top tax rates) would allow these very mobile workers to move elsewhere. Quality of life for all those who follow football woudl be reduced.

There is a risk that other mobile and competent workers mvoe. Why should hedge fund staff nto move to lower tax jurisdictions with no high pay curbs and trade over the internet. Their spending int he UK woudl also be lost.

This campaign strikes me as envy and is missing the point that we shoudl be more worried about pensions funding, particularly for the public sector where we are makign commitments which are far in excess of the private sector and being non funded are storing up pain for taxpayers for the next 50 years!

Why will the Government (and the next Tory one) ignore such worthy and reasonable demands? Because the increasing links between the State and Business are growing all the time - to the detriment of those outside this privileged circle.

And of course a growing number of shareholders, employees and many Pension Funds rely on the profits established by the above cross over - and will vote accordingly in elections. The last Tory Adminstration way not the last to reward themselves with profitable positions as advisors, Consultants and Board members on the very companies they had been working so closely with while in government.

Here is how well just some of the Class of '97 have done for themselves
since they left the Government to such popular acclaim!:

Ex-health secretary Alan Milburn has been a Director of Covidien (healthcare product provider) and advised Bridgepoint Central (Venture Capitalists that finances Private Health Co).

Ex-health secretary Patricia Hewitt has been a 'special consultant' to Alliance Boots and advised Cinven (Private Hospitals and Healthcare) group.

Sally Morgan (Tony Blair aide) then a director of Southern Cross (largest Care Home mamager in the UK) and an adviser to Lloyds Pharmacy.

Ex-Home secretary John Reid is a consultant to private security firm G4S.

Ex-Trade and Industry Secretary has advised Consolidated Contractors, a multinational oil and construction company.

Anji Hunter (Blair aide) later a Director of communications for BP.

Sir Michael Barber (Head of Blair's Public Services 'Delivery Unit') is now an "expert partner" with McKinsey.

Sir Kevin Tebbit (Ex-Ministry of Defence Permanent Secretary) afterwards joined the boards of two companies that make helicopters for the MoD.

And with the Nationalisation of so many key industries and Public Control of Utilities - it wil be the market and Shareholders who will be calling the tune of Government (whatever their origin) and not polite signatories - however well intentioned.