The financial outlook for most people in the UK has never been gloomier, with consumer confidence now weaker than in the darkest days after the global banking collapse. Already hampered by a decade of austerity and the fall-out from Brexit, the UK economy is now caught in a maelstrom of dire straits as record-busting inflation throws the brakes on post-Covid recovery.

Living standards are expected to fall at the fastest annual rate since the mid-1950s, according to estimates earlier this year from the Office for Budget Responsibility, and will take until at least 2024 to return to pre-Covid levels. The squeeze on household incomes has led the tax and spending watchdog to slash its growth expectations for this year to 3.8 per cent, down from a previous estimate of 6%.

All of this is happening at the same time as the scale of income inequality in the UK gets wider. A report published yesterday by the High Pay Centre – an independent think-tank focused on improving the lives of people on low-to-middle incomes – shows that UK chief executives’ remuneration is on track to exceed employees’ median earnings by more than before the pandemic.

The rate of disparity dropped sharply during the onset of Covid as strict lockdown measures shut down large parts of the economy and cut the profit-related bonuses that make up a high proportion of chief executives’ pay. Looking at the 350 largest companies listed on the London Stock Exchange, the High Pay Centre found that the ratio fell to 44:1 during the 12 months to December 31, down from 53:1 the previous year.

However, looking at the 69 companies that reported in the first quarter of 2022, that trend is apparently going into reverse. From an average of 34:1 a year earlier, the ratio of executive pay to that of median-wage workers at these companies rose to 63:1.

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The UK has evolved into a deeply unequal society in recent decades as typical pay for CEOs surged from around 10 to 20 times that of the average worker at the beginning of the 1980s to a staggering 119:1 for a FTSE 100 chief executive in 2019. Strict disciples of market-forces ideology argue this is an essential feature of the capitalist system as the greatest amount of money flows to those who work harder, smarter and more productively than everyone else.

Is the person at the top truly 40, 80 or 100 times more valuable to their organisation than those who carry out the day-to-day business? Many corporations obviously believe so. The pandemic and subsequent labour market shortages supposedly laid bare the importance of front-line staff, yet still corporate culture reverts to type.

Regardless of viewpoint on that specific question, there is a growing body of evidence that to maximise income and wealth for everyone – both the better-off and those who have less – there must be meaningful checks on wealth and income inequality.

At this point it’s important to point out that not all inequality is bad. A study in 2015 by the World Bank found that a certain amount boosts GDP in developing economies by allowing wealthy entrepreneurs to invest more. Similarly, research from 2017 by the International Monetary Fund found that, in moderate levels, inequality can benefit growth in mature economies.

The latter was based on a 0-100 scale known as the Gini coefficient, where zero means everyone has the same income and 100 means just one person has it all. In countries with an index level below 27, inequality spurred growth.

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Unfortunately, the UK’s most recent Gini index value comes in at 34.4, well beyond the threshold where inequality becomes harmful. Its economic toll begins by undermining educational opportunities for children from poorer backgrounds, making them less productive employees, and ranges from there into the erosion of health and wellbeing, increased crime, and the depression of per capita income.

The High Pay Centre has put forward a number of proposals to promote a more even distribution of income, which according to its research is favoured by the majority of the population. Among other things, these include legislation to require worker representation at company board level, the introduction of mandatory profit sharing for all employees, and moves to give shareholders a binding vote on directors’ remuneration reports.

Such notions are widely dismissed in the business world as far too radical but, after decades dominated by financial crises, a global health disaster and now the most challenging inflationary environment in nearly half a century, it’s time to be much braver and think about building a more equal pay model.

“Neither pay stagnation nor the cost-of-living crisis are unavoidable,” the High Pay Centre said. “Both are the result of political choices.”

The question is where the impetus for any change in direction might come from. Chancellor Rishi Sunak’s hapless Spring Statement, which is expected to let hundreds of thousands more people slip into poverty, was decidedly lacking in imagination.

Touted as the “biggest personal tax cut in 25 years”, various relief measures announced in April are only coming into effect at various stages further down the road. The only immediate assistance on offer was a derisory £200 loan to put towards surging energy bills, which will have to be repaid.

Soaring poverty and inequality will hamstring the economy and is therefore bad for everyone, be they in the top 1% or the bottom 99% of earners. Business owners, whether billionaires or small retail investors, need a population that can afford the stuff they are selling. In what is shaping up to be an intractable downward financial spiral, fresh thinking is desperately overdue.