Date published: 08 September 2018
George Parker, Political Editor
Executive pay and unrepentant bankers symptoms of system; Bankers still have sense of ‘cultural entitlement’; Growing public anger is fuelling extremism
Justin Welby, the Archbishop of Canterbury, has warned that Britain is facing a “crisis of capitalism”, citing excessive executive pay and unrepentant bankers as symptoms of a system that was teetering on a precipice.
Mr Welby claimed that many in Britain’s economic elite had failed to learn the lessons of the 2008 financial crisis, that bankers still felt a sense of “cultural entitlement” and that market capitalism was in peril.
“Things could go very seriously wrong,” the former oil executive told the Financial Times in an interview, warning that growing public anger about inequality was fuelling extremism in many parts of the world.
“It can turn very, very strongly against business,” he said. “So you can get a snap back of the elastic, which is not good for business or for society because it’s a revenge regulation.”
“It’s more than a crisis of capitalism, it’s also a national crisis.” The archbishop said the country faced a moment of choice, and that a new moral dimension had to be introduced into Britain’s economy before it was too late.
Shifting the debate about fairness in Britain
Mr Welby, speaking over sandwiches and a banana at the Anglican Communion’s headquarters in west London, was reflecting on a week which saw him enter Britain’s growing political debate about fairness in modern Britain.
The cleric was a member of the “Prosperity and Justice” commission, set up by the left-leaning Institute for Public Policy Research, but inevitably he became the focus of attention when its radical report was published on Wednesday.
We were growing the form of capitalism that had lost any contact with a moral foundation. I don’t think we have learnt the lessons
“Welby wealth tax storm,” blazed the Daily Mail’s front page headline, as the media digested an agenda which proposed big increases in company taxation, higher taxes on people receiving inherited wealth and a £10,000 state-funded “universal minimum inheritance” to help all 25-year-olds start a business or buy a home.
The 62-year-old head of the 90m worldwide Anglican communion had feared the worst, including criticism from the rightwing press that he was a lefty clergyman indulging in hand-wringing politics.
“My Eeyore tendency told me it was going to be a painful day,” he said. Had it been? “No — it’s been really encouraging,” he beamed. “People have been engaging with the issue and not just reaching for the nearest knee-jerk quote.”
Inequality and stagnant wages the defining challenges
One of the notable features of the IPPR report was the way in which politicians and media across the spectrum — including the pro-Conservative Daily Mail — engaged with its analysis of the deep problems facing the British economy and its prescriptions.
Indeed issues including wealth inequality, stagnant real wages for ordinary workers and poor levels of social mobility have all been identified as defining challenges of the age by politicians across the political spectrum.
Theresa May, Britain’s Conservative prime minister, arrived in Downing Street in 2016 vowing to address “burning injustices” in society, while Labour’s Jeremy Corbyn has promised measures to address inequality.
But Mr Welby and his 21 fellow commissioners believe time is running out and that so far the policy prescriptions have failed to measure up to the scale of task in hand.
He says he had hoped that Britain’s economic elite would learn the lessons of the financial crash. “We were growing the form of capitalism that had lost any contact with a moral foundation,” he said. “I don’t think we have learnt the lessons.”
Mr Welby had previously criticised a “culture of entitlement” in the banking sector and said he was disappointed that it remained. “I don’t think it’s changed,” he said. “I think that a sense of cultural entitlement always existed, to some point.”
The former oilman, who sat on a cross-party banking commission which tried to draw the lessons of the crash, recounts a meeting with a “very senior banker” in 2014 who claimed he had taken to heart what the archbishop had said about excessive pay.
“He said that back in 2007 many of us were on eight-figure salaries — ie over £10m,” the archbishop recalls. “He said: ‘If you look around this room, there’s not one of us who’s getting paid more than £5m a year.’
“You just thought, OK, that is significantly less, but I’m not sure you quite got the point. “Surely there’s a point where people have got enough.” Mr Welby says excessive pay is a product of a market failure, in this case shareholders not putting the long-term interests of the company first.
Millennials represent hope for future
The IPPR report proposes more diverse boards, increased worker representation and simplified executive pay packages linked to “key drivers of long-term value” such as innovation and productivity, not just share prices.
“Where you have these huge pay differentials, you are going to fail to motivate people further down,” Mr Welby said. “You’re going to fail to contribute to the common good and a society that is not contributing to the common good become more and more unequal.
“All the evidence is that it then becomes more and more unstable; that cannot be good for business as a whole.”
Mr Welby, who worked in the oil industry for 11 years, says the IPPR report suggested a mixture of state interventions and market mechanisms — such as promoting competition — to effect change.
However, he hopes that a generational shift could help. “When you look at the millennial generation, it has a very significantly stronger commitment to the common good — from all the attitude survey we have — than the baby boomers.”
Before he heads off for talks with fellow bishops from around the world, Mr Welby accepts he was putting himself in the political line of fire this week. But he believes his purpose has been achieved. “Perhaps a report like this can create the mood,” he said.
“Perhaps it can change the thinking space, which is what it’s trying to do, and that can enable people to act more effectively, rather than feeling imprisoned by the system in which they find themselves.”
Link To FT.com: https://www.ft.com/content/268ff106-b1f7-11e8-99ca-68cf89602132
Copyright The Financial Times Limited 2018
© 2018 The Financial Times Ltd. All rights reserved. Please do not copy and paste FT articles and redistribute by email or post to the web.