The U.K. must avoid over-taxing “highly-paid” executives or it risks losing investment to other countries, said the Confederation of British Industry’s outgoing director-general.
“After the tax increases of the past year, the take-home pay of a U.K. executive now ranks way below that of someone receiving similar compensation in just about all competitor jurisdictions,” Richard Lambert said in London today in his last public speech as head of Britain’s biggest employers’ group. “This is a problem.”
Controversy over bonus payments to executives has focused particularly on Britain’s banks, with Prime Minister David Cameron saying on Jan. 17 that his government is holding detailed talks with lenders over pay and pressing for lower payouts. Barclays Plc Chief Executive Officer Robert Diamond told lawmakers on Jan. 11 that his bank would “exercise restraint” on bonuses.
Lambert said the issue of taxing executive compensation is “not just for the City of London,” adding that “business investment in the U.K. will suffer if highly-paid individuals drift elsewhere for tax reasons.” Still, there should be “a greater emphasis on long-term performance as opposed to short-term shareholder value,” he said.
Lambert, a member of the Bank of England’s Monetary Policy Committee between 2003 and 2006, said the current level of inflation is a “serious concern” and he sees interest rates rising later this year.
He also said the government has not focussed enough on policies to support the economic recovery.
It’s been “single-minded -- some might even say ruthless -- in its approach to spending cuts,” he said. However, it “has not been nearly so consistent and focused when it comes to policies that support growth” and “it’s taken a series of policy initiatives for political reasons, apparently careless of the damage that they might do to business and to job creation.”