Jeremy Corbyn is proposing an idea unlikely to win him any friends in the City.
The Labour leader is suggesting blocking dividend payments for companies that don’t pay their employees the living wage. In a speech to the Fabian Society today, Corbyn will suggest that pay inequality is “holding back growth”:
Of the G7 nations only the US has greater income inequality than the UK, pay inequality on this scale is neither necessary nor inevitable.
Corbyn will suggest two solutions to inequality: pay ratios to make executive pay more proportionate to their employees’, and blocking dividends.
"Another proposal would be to bar or restrict companies from distributing dividends until they pay all their workers the living wage," he will say.
"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."
Corbyn’s argument is that pay inequality is actually holding back economic growth. An OECD report recently found that more equal societies are also more economically stable and have better wealth creation.
The idea has already come under fire from business, with Simon Walker of the Institute of Directors bashing it as “completely potty” and “damaging to ordinary people”.
Matthew Fell, chief of staff at the CBI, also criticised Corbyn’s plans:
The idea of politicians stepping into the relationship between a private company and its shareholders would be a significant intervention.