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Is it lefty to ask why our tax pays private CEOs millions? | Zoe Williams

Westminster’s faith in the efficiency of firms taking over public services has led to vast rewards for a few at the cost of the rest

In many ways this decade is the new 80s – you wake up thinking about politics, feel angry all day and go to sleep dreaming about Ken Clarke (not in a good way). But what was depressing about being on the left, then, was how marginal the position felt: that however much the mainstream distrusted the government, and was saddened by the country as it was, the core beliefs of the Labour party were just too far gone for normal society. It felt shrill to object to privatisation.

What strikes me this time around is that objecting to privatisation is not enormously leftwing. By and large, mainstream opinion is opposed to privatising the NHS. It was opposed to selling off the forests. While much rightwing rhetoric centres on a bloated public sector, distrust of the private sector is more palpable. The idea that what the corporate sector skims off in profits, it saves in efficiency, is a cross-party Westminster axiom, but many people outside Westminster don’t appear to believe it.

So let’s just take as an example the classic New Labour manoeuvre whereby local councils started to commission services, rather than give grants to organisations that performed statutory work; it didn’t look like privatisation, as such. The business being fought over, between large corporations and small charities, did not look particularly attractive. When you look at a group in need, be they ex-convicts, the long-term unemployed or the disabled, your first thought is not “ker-ching”.

But what began as an uneventful process of “efficiency” savings has ended with a few looming providers – you could count them on the fingers of one hand – dominating the budgets of local authorities. The classic leftwing line would dictate that it would be de facto better for these services to be provided in-house. A centrist observer would say this is fine, if they are more efficient. But are they?

One Society has produced some data on pay differentials, called A Third of a Percent (this is the pay of a UK low-paid worker compared to their chief executives). They found that private firms whose main income came from the public sector paid CEOs far more than the highest paid public sector employee. So, for instance, “Serco, which receives over 90% of its business from the public sector, paid Christopher Hyman an estimated £3,149,950 in 2010. This is six times more than the highest paid UK public servant and 11 times more than the highest-paid UK local authority CEO.”

It’s hard to compare Hyman to the lowest paid Serco employee, since the bottom figure visible on the collective bargaining records is for a Docklands Light Railway passenger service agent, at £35,000. But that almost certainly doesn’t represent the bottom of the pay spine – for the period from 1 April 2009 electricians in Serco’s Integrated Services bargaining unit were subject to a pay deal with a minimum rate equivalent to £10,358 a year.

One Society is keen to point out that these aren’t like-for-like figures, since the CEO’s includes bonuses and pension. But I think it’s safe to assume that the person on £10k does not have a huge pension pot or a bonus. So the CEO is paid around 276 times the national minimum wage. Will Hutton’s fair pay review in March advised that no public sector boss should earn more than 20 times the salary of its lowest paid employee. “In contrast,” states this report, “none of the ‘public service industry’ organisations we examined paid their CEO less than 59 times UK median earnings (estimate).”

Much focus on CEO remuneration has been on the fact that their climbing salaries are not matched by any improvement in productivity, and this might be down to the fact that excessive pay dispersion has been shown to interfere with company performance. But that isn’t the point, and nor is it the point that when the lowest paid workers subsidise the highest, the taxpayer in turn has to subsidise them with tax credits, as low-paid workers can’t keep their households together. Our own senses should be enough: it is impossible for one human being to be 276 times more competent, better trained, more experienced, harder working, than another. If that’s the differential, someone’s on the make.

Not wishing to pick on Serco, since the situations in A4e, Capita and G4S are similar, these companies do, when they have a profit glitch, behave like any other big four with a stranglehold on the money supply: they squeeze suppliers. Last year, worried about local authority cuts (which of course hadn’t happened at this point), Serco sent out a letter to suppliers demanding a 2.5% reduction in costs, on the basis that, “Like the government, we are looking to determine who our real partners are that we can rely upon. Your response will no doubt indicate your commitment to our partnership”. They rescinded this after widespread outrage, but the message will have been easily recognised by anyone who’s ever objected to the working strategy of a major supermarket: we’re your conduit to the public cash cow, and you’ll do as we say.

This is nobody’s idea of a good system: that all our tax, which we pledge to alleviate the hardship of the most disadvantaged, should go into the top pockets of a handful of companies, who will then underpay their employees (for “efficiency”) and squeeze their suppliers. You don’t have to be leftwing to object to this. (But it helps.) © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds