Jeremy Corbyn's maximum wage: It would pose some problems but at least he's heated up the debate

It's only a few short weeks before AGM season gets underway, and remuneration reports are sure to reveal a fresh batch of absurd pay packages that simply can't be justified on economic grounds

Jeremy Corbyn has suggested a pay cap for top bosses (PA)

Could Britain really enforce a maximum wage in addition to the minimum wage?

Amid mounting, and justified, concern about the glaring gulf between those at the top and those at the bottom, Labour leader Jeremy Corbyn has suggested doing just that.

In many respects it is a seductive idea, one that might find considerable support in a country in which a self serving clique of top people have conspired to push up boardroom pay to ridiculous levels, without being able to show that high CEO pay is in any way linked to economic or corporate performance.

The problem with it is that practicalities would likely conspire to get in the way.

To enforce a maximum wage you would either have to legislate for a cap, or use the taxation system to impose a de facto one, as was more or less the case in the 1970s.

Were you to do that, some people would inevitably leave in search of uncapped wages, depending on the level at which you set the cap.

We might be glad to be shot of some of them. Imagine a world in which Fred Goodwin had pursued his banking ambitions overseas to escape a British wage cap. We might be £40bn plus richer as a nation.

But some of them we might want to keep. And, in an effort to do that, companies would likely oversee the creation of an entire industry aimed at getting around the cap.

The other point to make is that people who earn a lot pay a lot of tax that pays for schools, and hospitals, and benefits and a whole lot more besides. According to HMRC 27 per cent of UK income tax is paid by the top 1 per cent of earners.

Could these people stand to pay a little more? Almost certainly. Should they? The moral case is hard to fault. But would the UK exchequer benefit much in raising the top rate of tax from its current 45p? That has long been the subject of a rather fierce debate.

What is certainly paying dividends right now is what the HMRC has been doing of late: taking a more aggressive approach to enforcing the tax rules that are on the table and making sure wealthy people pay what they owe. It is this that led, for example, to the shutting down of a scheme that saw several high profile people making a tax profit by "investing" in building empty data centres in the North East of England.

An alternative, and one that might stand more chance of succeeding in reducing the glaring inequality that blights Britain is to limit the ratio between what those at the top are paid compared to what the typical worker on the shop floor makes.

There are already examples of this in operation. John Lewis operates one to calculate its executives’ pay, and no one argues that John Lewis is anything other than an extremely successful and well run retailer.

For some reason its executives seem to manage quite well without the need for £1m plus packages of free shares to incentivise them to improve profitability, such as the ones M&S, a rather less successful retailer, recently handed to its top people.

Another example of capping pay of those at the top comes from, believe it or not, the USA where the National Basketball Association has what is called a max contract.

This restricts what star players can earn as a percentage of the overall salary cap allocated to each team (it is based on a percentage of league revenues).

There are certain exceptions that can push star players’ wages higher (and teams can bust the salary cap if they pay a luxury tax). This is also an organisation where the minimum wage for the lowliest rookie comes in at over $500,000 in a country in which the effective federal minimum wage for ordinary workers is barely more than $7.

Which leads to another point: raising pay at the bottom could be just as effective at reducing inequality as reducing it at the top. Maybe even more so.

Imposing a John Lewis style ratio system nationally would also require some serious thought first.

As critics have noted, one problem with ratios is that it is that they can make John Lewis look little better than Goldman Sachs simply because of how much Goldman Sachs pays its average worker.

Mr Corbyn's suggestion of a hard cap on wages has, predictably, taken quite a bit of flak. But where it has value is in the way it has re-heated the debate about top people’s pay just a few short weeks after the High Pay Centre (which quite likes ratios) declared January 4 to be fat cat Wednesday. That was the day on which the average FTSE 100 CEO had made what the average British worker makes in a year. That's worthwhile ahead of a corporate AGM season that will reveal yet more absurdity at Britain’s top companies.

Mr Corbyn has not only stimulated the debate again. He has also thrown a harsh spotlight on how limp the proposals for reform that have been tabled by Theresa May are. They amount to little more than tinkering with a system that is broken.