I attended a seminar organised by the High Pay Centre last night on the new public company pay regulations introduced two years ago. Speakers were Vince Cable who lead those changes when he was in power, and Ben Chu of The Independent, with the former promoting his new book “After the Storm”.
Vince covered some past history and his current concerns. That included a comment that interest rates were now lower than they had ever been before – indeed since Babylonian times according to Andrew Haldane of the Bank of England (who recently published an interesting paper on that subject), and it was not clear how that situation would change soon. But interest rates will clearly have to go up again. He suggested that the Tory attack on the fiscal deficit was too aggressive and it might squeeze the economy too much.
Vince also focussed on the housing problem – a chapter in his new book is called “The British Housing Obsession” and is well worth reading. He highlights how the house construction industry is now dominated by the big listed companies (Persimmon, Barratt, Berkeley, Bovis, et al) with smaller builders disappearing, social housing construction declining and with little “self-building” as in other countries. His comment on the “Help to Buy” scheme was that it was like pouring paraffin on the fire, and that housing policy in general is a disaster. You can see exactly why the big housing companies are making hay at present.
He claimed the legislation on pay (more disclosure and votes) he introduced did have some effect. But admitted it has not had enormous impact. He could not be too aggressive on pay because he was concerned that the managers of public companies would simply take them private if they felt threatened. He was keen to tackle the issue of high ratios between low and high paid in companies, and supported the concept of managers having to consult employees on pay.
He discussed the banking crisis and the subsequent legislation to tackle bankers behaviour. Indeed apparently he had been offered the chance to join a new bank that was being set up, but after he had looked at the obligations he would be taking on decided against it.
In response to a question on directors taking into account the views of employees and others, he said the Companies Act is very enlightening on this issue but he was not sure many company directors had read it. He’s probably right there.
After collecting a signed copy of his new book, which at a quick glance is certainly worth reading, I spoke briefly to Vince. The last time I had done so was outside the Houses of Parliament when the Northern Rock problem was in the news. I disagreed with him them on what should be done about it, but I agree with many of his subsequent actions on such matters as pay and his comments on the housing sector are certainly worth studying.
Roger Lawson
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