Amidst all the fury about bankers receiving bonuses at banks which have been bailed out by the taxpayer, other well-paid professionals such as lawyers & accountants have been keeping their heads well down.  They have benefited from being partners in a private partnership – the joy being that private partnerships and private companies do not disclose their pay so the tabloids can’t have a field day at their expense.

The general counter-argument to all this public anger has been that companies need to pay global rates to attract and retain high-quality staff, backed up by the fact that shareholders own the companies and if they approve high pay packages then nobody else has the right to object.

The problem with this erudite defence is that its proponents are missing the simple fact that we live in a democracy where each adult has one vote.  The votes of the working class count the same as the votes of the wealthy – and the former vastly outnumber the latter.  Come the next General Election all the Labour Leader has to do is promise that, if elected, he will introduce legislation to cap executive pay (say at 20 times the lowest paid employee of a company) and Labour will suddenly be a real threat to actually win power.  People are so angry at what they view to be the sheer unjust nature of the pay gap between the lowest and highest paid in our society that they are likely to ignore all reasoned argument about driving talent abroad and vote to stick it to the Plutocrats.

The recent example of Spain provides a good illustration of what is likely to be the thin end of the wedge.  The newly-elected government has moved to cap the pay of executives and directors at banks which took government aid during the economic crisis.  Pay is capped at €600,000 a year (including pension benefits) and there are no bonuses.  When it becomes clear that this move does not actually cause a mass exodus of bank executives from Spain then politicians in other countries are going to realise that the global labour market is a myth which has been perpetuated by executives looking to ratchet up their pay.  Where are all these Spanish bankers going to find jobs?  Who wants to hire an executive who ran his bank into the ground?  The supposed global market for talent hasn’t exactly snapped Mr Fred Goodwin up.

Note that an adult working a 35-hour week and paid the minimum wage in the UK earns £11,066 a year – executives wouldn’t have to spend too long thinking about how they would scrape by on £221,320 annually before they started to engage with the current Conservative government to find a not-too-painful way of narrowing the gap between them and their lowest-paid employees before the 2015 election.  They could also try to highlight the amount of tax they pay and see if that helps to take some of the heat out of the debate. It took Spain’s new government precisely six weeks to cap pay.