On Thursday, Siobhain McDonagh, Labour MP for Mitcham and Morden, led a Commons debate on the UK’songoing housing crisis on the back of our new High Pay Centre report exposing the shocking scale of pay inequality among the UK’s biggest housing firms.
The report shows that the ten FTSE 350 housebuilding companies spent £150m on executive pay last year. The median pay award for these firms’ CEOs was £2.113m, producing a pay ratio with the average UK construction worker of 89:1.
The worst offenders were all in the FTSE 100: Persimmon (1561:1), Berkeley (331:1), Taylor Wimpey (126:1), and Barratt (113:1).
We also found that it would take the average UK construction worker 92 years to pay for the average UK house price and 19 years to save for the deposit. But the average FTSE 350 housebuilding company CEO could buy 28 houses outright in 1 year and, over 92 years, 2,576 homes.
It’s worth pointing out that the housing crisis is, of course, the result of nearly forty years of structural policy and market failure in land use, the planning system, council housing, and affordable homes. But our findings raise serious questions about the value that these companies are delivering
for wider society.
Our report shows that’s wrong with corporate capitalism and why public trust in the UK’s most prestigious firms is so low. Such inequality is wrong in and of itself. It’s just one example to show why the UK’s current economic and political settlement is unsustainable.
Housing is supposed to be a public good, not just an asset for a handful of lucky executives, who happened to be in the right place at the right time, to feather their nests.
The housing crisis and the role of the housebuilding firms in it shine a spotlight on the basic problem. Companies should be run in the interest of society and not just to produce value for shareholders or payouts for executives.
Homelessness is a national embarrassment. As the Public Accounts Committee recently showed, the government is failing to meet its target of 300,000 new homes per year by a country mile. Over a million people are on a housing waiting list. Tens of thousands of families are trapped in temporary accommodation and thousands are in B&Bs.
Further, housing share prices have been artificially propped up by the inflationary effects of George Osborne’s Help to Buy scheme.
Let’s be fair. Reducing pay inequality in big corporate firms will not solve these problems alone. But pay inequality shows that the culture and priorities of UK corporate governance are misplaced.
Reducing CEO pay would show that UK business has the right priorities and that its interests are aligned with those of wider society.
Dr Ashley Walsh is Head of Policy and Research at the High Pay Centre. All figures in this blog are fully referenced in their report.
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