PolicyLens

Methodology note

Cap organisation pay ratios at 10:1: calculation note

Scenario estimate showing gross costs, offsets and behavioural uncertainty; not an official costing.

View main policy page: Cap organisation pay ratios at 10:1

Central fiscal result

+GBP 1.2bn - Net public-finance impact in 2027-28

Low case: -GBP 0.5bn. High case: +GBP 5.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Limit highest total remuneration to ten times the lowest full-time-equivalent pay in each organisation.
  • Baseline is current law and published official data unless stated.
  • Private business costs are excluded unless they affect tax or procurement.
  • Target year is 2027-28, with later years shown separately.

Affected population

  • Unit is organisations and remuneration, not jobs.
  • Existing reporting covers quoted firms with more than 250 UK employees.
  • FTSE 100 CEO pay is a scale check only.
  • Full affected pay base needs HMRC and company data.

Gross impact

  • FTSE 100 CEO excess above 10:1 is roughly GBP 0.4bn before wider executives.
  • Central affected high-pay remuneration is scaled to GBP 3.0bn.
  • Effective PAYE, employee NI and employer NI loss is GBP 1.80bn.
  • Lower-pay rises and corporation tax offset about GBP 0.65bn.

Fiscal build-up, central case

  • Lost PAYE and employee NI: +GBP 1.35bn
  • Lost employer NI: +GBP 0.45bn
  • Corporation tax offset: -GBP 0.35bn
  • Bottom-pay tax and benefit offset: -GBP 0.30bn
  • Compliance and litigation: +GBP 0.10bn

Central net impact: +GBP 1.2bn in 2027-28.

Behaviour and pass-through

  • Low case assumes firms mainly raise bottom pay.
  • Central assumes mixed top-pay cuts and avoidance.
  • High case assumes relocation and reward redesign.
  • Outsourcing low-paid work can weaken the cap.
  • Share and partnership income can change receipts.

Phasing

  • 2026-27: +GBP 0.2bn. Design and avoidance planning.
  • 2027-28: +GBP 1.2bn. First binding year.
  • 2028-29: +GBP 1.4bn. Restructuring increases.
  • 2029-30: +GBP 1.6bn. Avoidance patterns settle.

Main source groups

  • S1: S1 BEIS: pay-ratio reporting applies to large quoted companies.
  • S2: S2 High Pay Centre: median FTSE 100 CEO pay about GBP 4.4m.
  • S3: S3 HMRC: tax and NI rates for high earnings.
  • S4: S4 Farber et al.: unions and compression reduce inequality.
  • S5: S5 DiNardo et al.: institutions shape wage distributions.