Labour leadership challenger Owen Smith has proposed new limits on private sector pay for government contractors

Mark Sands
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Labour MP Owen Smith Launches His Leadership Bid
Labour will choose a new leader on September 24. (Source: Getty)

Labour leadership candidate Owen Smith is facing questions over his proposals for a new “high pay commission” to explore new pay ceilings for the private sector.

In a speech today, Smith will promise to explore whether to install maximum pay ratios between top and average earners for private firms doing public sector work.

While he has yet to define what any limits would look like, business groups have questioned the thinking behind the proposal.

A British Chambers of Commerce spokesman said: “Introducing maximum pay ratios for private sector providers of public services could create a barrier to entry for small businesses into public procurement, at a time when there is a general consensus that SMEs ought to be better represented in that sector.

"It could mean that only large companies, with sufficient resource, could undertake such contracts.”

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And an Institute of Directors spokesman added: “The IoD has been one of the leading voices in the business community calling for big companies to moderate executive pay in the face of shareholder and public anger, but a maximum pay ratio is a step too far. The Government must make sure it gets value for money for taxpayers from outsourcing, but that doesn’t extend to telling companies how much they can pay.”

Smith's high-pay plan comes alongside a raft of measures to boost the wages of lower-paid workers, including more a stronger role for the Living Wage Foundation in the setting of minimum pay.

Smith is not the only politician to have targeted executive salaries, Theresa May launched her campaign to replace David Cameron with a pledge to tackle excessive pay, while Michael Gove's abortive bid also included a promise to limit inappropriate wages.

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Speaking in Milton Keynes, Smith is expected to say : “For the last six years British workers have experienced a perfect Tory storm of falling wages, the watering down of workers’ rights and cruel cuts to social security.

Resulting in the sharpest fall in living standards ever recorded for low paid British workers,” Smith said.

“In the face of this onslaught, what's desperately needed is not more slogans, but a clear plan of action which offers solutions.”

It comes after Smith yesterday launched his manifesto for workers. Addressing a trade union members and council workers in Camden, Smith revealed a 25 point plan for reform including a stronger role for unions.

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