A bit of a consensus is emerging about the ‘Fred the Shred’ pensions debacle. On the one hand, people find Goodwin’s determination to hold onto his pension inexplicable and obscene, given the misery his bad decision-making is causing. On the other hand, there is a strong suspicion that Government ministers are using Fred-baiting as a useful way of avoiding more difficult discussions about the overall crisis, or as a way of currying favour amongst Labour activists.
No one would call Sir Fred a deserving cause but the row reinforces a growing public concern about just desserts. The laissez faire attitude to massive rewards espoused by, among others, Tony Blair and Peter Mandelson, is no longer fashionable. The old orthodoxy (and when I say ‘old’ I mean spring 2008!) was that for the state to interfere in how the private sector rewards people would be counter productive and, anyway, in a free-market what you earn is, by definition, what you are worth.
There would be huge problems about Government trying to decide who deserves what salary across the whole economy. Having said which, at a time like this, it is corrosive to public morale to be confronted by people being paid thirty or forty times more than their fellow hard-working citizens. It may be better to address mega-salaries as a whole rather than ministers being pressured to determine the pay of every senior executive.
We all hope that Gordon Brown, Barack Obama and other world leaders find a way of tacking the immediate economic crisis. Even if they do, though, there can be no return to the excesses of the past. Unless we are to saddle our children and grandchildren with an impossible burden, the baby boomer generation is going to have to work harder, save more, consume more carefully. One of the symbols of life in this new world may be that it is hard to justify ‘super wealth’. This might lead us to explore new ideas which balance personal freedom with social solidarity.
For example, how about saying that those who earn, say, over £250,000 have to give a quarter of the income earned above that amount (over and above the tax they pay) to a charitable cause. This way the rich still have motivation to get richer but now it is a socially benign motivation (to help their favoured good cause) rather than simply looking like greed. And, given the problems of tax evasion, the rich would be less inclined to try to avoid such an obligation. It’s one thing to try to fool the taxman, it’s another entirely to welsh on your duty to society.
Fabian Wallace-Stephens (Foresight Lead)
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