Jeremy Corbyn will show he is ready for battle with big business as he proposes barring companies from distributing dividends unless they pay the living wage, and putting in place salary curbs to stop bosses being paid many times more than workers.
Addressing Labour members, he will say inequality is bad for growth and a fairer society does better in terms of economic stability and wealth creation.
“One proposal is pay ratios between top and bottom, so that the rewards don’t just accrue to those at the top,” he will say. “Of the G7 nations only the US has greater income inequality than the UK, pay inequality on this scale is neither necessary nor inevitable.
“Another proposal would be to bar or restrict companies from distributing dividends until they pay all their workers the living wage. Only profitable employers will be paying dividends, if they depend on cheap labour for those profits then I think there is a question over whether that is a business model to which we should be turning a blind eye.”
The EU imposed a cash cap on banker bonuses after the financial crisis, but some firms have been accused of trying to circumvent the rules.
Corbyn’s suggestion goes much further by proposing that those at the top of companies would only be allowed to earn a certain multiple of those on the lowest salaries.
Companies are required to publish a single pay figure for each director in their annual reports but there is no obligation to track their pay ratios.
Will Hutton, Observer columnist and author of an independent review of fair pay delivered to the government last March, called for companies and the public sector to annually publish the five-year trend of the ratio of top pay to median pay but this has never been implemented.
Experts from the High Pay Centre estimated last year that the average FTSE 100 boss earns 150 times that of their average worker, compared with 47 times in 1998.
The idea of “living wage before dividends” has previously been floated by a Labour MP, Teresa Pearce, who wrote about the idea in a blog for LabourList in 2015.
Corbyn’s speech will focus on economic fairness but mention a number of other policy proposals, including commitment to a publicly owned railway and “democratic control of energy”, with more supply by local authorities, communities and small businesses.
He is also set to champion lifelong education service, universal childcare and a large-scale housebuilding programme.
Corbyn is giving the keynote speech at the Fabian conference that will also be addressed by a raft of senior Labour figures including London mayoral candidate Sadiq Khan, shadow energy secretary Lisa Nandy, former shadow work and pensions secretary Rachel Reeves and former shadow business secretary Chuka Umunna.
It comes as Labour put its entire defence policy, including its backing for Trident, up for review under the charge of Emily Thornberry, the shadow defence secretary, who will provide an interim report by June. Thornberry, like Corbyn, is opposed to replacing Britain’s nuclear deterrent but much of the shadow cabinet and some major trade unions are in favour of replacement.
The move to place Thornberry in charge sidelines Ken Livingstone, who has given numerous interviews in recent weeks talking of his plans for co-authoring the review. He will still be co-convenor of Labour’s Britain in the World policy commission that will consider the final report, alongside shadow foreign secretary Hilary Benn.
It appears Livingstone, who infuriated Labour MPs with his interventions on defence, is no longer considered vital to the inquiry after Corbyn replaced the previous shadow defence secretary, Maria Eagle, who was in favour of Trident, with Thornberry.
It is also understood Corbyn had been pressed by senior colleagues to remove Livingstone – who had to apologise after suggesting former shadow defence minister Kevan Jones needed “psychiatric help” for questioning his role – from the review or downgrade his involvement.
However, some Labour sources tried to claim on Friday that Livingstone had never really had the job of helping to write the policy in the first place.
In a further complication, this contradicted Livingstone’s own claim that he had voluntarily stepped down because his views coincided exactly with Thornberry’s.
Publishing her terms of reference, Thornberry said she would consult widely, encouraging the widest possible participation of party members and the public, before releasing initial conclusions in six months.
This means that Labour will be without a firm policy if David Cameron decides to call a parliamentary vote on renewing the UK’s nuclear submarines this spring – potentially as early as March.
Although the party’s conference confirmed its pro-Trident position last year, Corbyn may argue the policy is no longer valid because it is now officially up for review; he can also point to his mandate from the membership after standing on an anti-nuclear weapons platform during the leadership contest.
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