This anecdote is rather heartbreaking, because, of course, no-one is listening. Two years on from the vote, Mrs May’s government is so embroiled in the controversial details of the Brexit deal, it has little time for anything else. The UK is more divided than at any time in recent history.

And, if anything, the income gaps have grown. Workforce wages have not recovered to the level of ten years ago, people at the lower end of the income scale are squeezed and even working people are forced to use food banks to make ends meet. At the same time the rich go on getting richer.

The average remuneration for one of Britain’s captains of industry increased by 23% last year to £5.7 million, and even the median, or middle, was up 11%. It would now take an ordinary person more than 140 years to earn as much as a chief executive takes home in one year.

Suggested reading

Too many of crony capitalism's rich don't get poorer

By Charlotte Pickles

In the US, the division is even starker. Chief executives of big US companies pocket 312 times average wages, with an average package of $19 million. Their pay rose by 17% last year compared to an increase in average wages of just 0.3%.

Pay scandals, tax avoidance and poor governance, have undermined the public’s faith in the corporate sector on both sides of the Atlantic. Top chief executives’ views are no longer trusted. The business community is seen as greedy and self-serving.

In my book, Are Chief Executives Overpaid?, I argue strongly that there is a direct line to be drawn between growing pay disparities in the UK and the US and the growth of populism, Brexit and the election of Donald Trump. Many people do not feel they are doing well from the current economic set-up and are looking for a change.

Huge pay gaps damage social cohesion and economic wellbeing for much of the population. Many of those corporate leaders earning the multi-millions have little concept of how people are struggling to get by – often in their own companies.

But it is not just a social problem. There are strong business arguments to be made against channelling the bulk of rewards to those at the top of the income tree. Our top business leaders are overwhelmingly paid in shares and share options, or are given performance targets linked to the share price. This gives them a very short-term focus on market movements. It does little to encourage long-term stewardship of an established organisation.

Suggested reading

Corporate fat cats are abusing their power

By Michael Jacobs

Some economists also suggest the short-term focus on bonuses is behind the slow growth in productivity and lack of investment in new plant and machinery, not to mention employee skills. If chief executives want to push the share price up, one way of doing so is to cut costs – workforce wages are a big part of the overall outgoings so suppressing them is a quick fix for a boss focused on the shares in his package.

If these packages are meant to incentivise executives and improve the way companies are run, they aren’t working. Chief executive pay has far outstripped the measures of company performance to which it claims to be tied. The business sector is on a par with its success in 1999, yet top pay has quadrupled since then.

So why do we reward our top bosses in this way? There are a number of factors driving remuneration packages ever upwards; some of them more spurious than others. Corporations have undeniably got bigger in recent years and now stretch across more borders. But the need to compete in a global war for top talent is not borne out by the numbers.

It is also important to recognise that many top bosses receive millions because they are greedy and encounter little real challenge to their excessive awards. The decline of union influence and the rubber-stamping of big packages by remuneration committees comprising people from the same business circles as the chief executive have allowed rewards to ratchet up.

Suggested reading

When it comes to corporate pay, who scrutinises the scrutinisers?

By Charlotte Pickles

Shareholders have been given powers to rein in top pay but have proved either unable or unwilling to do so. They cannot be expected to hold companies to account on their own, not least because pay in the fund management business is also exploding.

I would advocate the inclusion of members of the workforce on remuneration committees, boards and a company-wide vote on top pay. It would help if packages were stripped back to basics, with directors paid in cash like the rest of the workforce and forced to buy shares with their own money if investors wanted them to.

We also need to foster a different corporate ethos that has broader societal goals, instead of just using companies as cash machines to generate profits for shareholders.

In a recent TV interview, one of the UK’s top corporate bosses stalked off after being asked about his £75 million bonus. This attitude reinforces the idea that the super wealthy live in a parallel universe. If we can’t achieve a fairer distribution of income by changing the way our companies work, and people continue to see capitalism as rigged, then they will be tempted by more radical alternatives.

Executive pay is a good place to start. Thirty years ago, a FTSE 100 chief executive earned on average 20 times the salary of an average worker in his company (and it always was a him). Today the figure is 129 times. (And it’s still almost always a him.) A conventional economist would want to understand this in terms of the marginal productivity of chief executives relative to the marginal productivity of workers, and of the supply and demand of top talent.

But these explanations simply don’t fit the evidence. Measured by profits or share prices, corporate performance on average has not improved by anything like the increase in executive pay, whose rise has had no relationship to the movements of stock markets. And there is no evidence at all that such pay results from a scarcity of talent – many of those who have cleaned up over the last three decades have exhibited mediocre performance (which is why they tend to stay in post such a short time) and there is no let-up in the conveyor belt of directors waiting to replace them.

Further reading

When it comes to corporate pay, who scrutinises the scrutinisers?

By Charlotte Pickles

A much more plausible explanation for the rise in top pay is the structure of corporate governance. The remuneration committees which decide pay packages are made up almost entirely of other directors. This creates a self-serving system in which one group of directors pays another exorbitant salaries, and these then act as the ‘competitive benchmark’ for the next round. In other words, it is the power of directors as a group to set their own salaries that determines their level and growth.

Classical economics had a name for this. It was ‘rent extraction’: the appropriation of value in excess of that required to reward effort. But it was one of the ideas that disappeared when the neoclassical school – focused on marginal analysis and competitive markets in equilibrium – came to dominate the discipline. Which was rather convenient for those who took the rents.

Rent extraction derived from excessive power is most clearly seen today in the financial sector. One of the most extraordinary economic facts of recent decades has been the persistently high costs of financial services. As Thomas Philippon and Guillaume Barzot have shown, the cost of financial intermediation – what the financial sector charges the rest of the economy for its services – has barely changed over the last fifty years. Yet in that same period the productivity of these services has been transformed out of all recognition by new technologies, and the sector has become much larger.

These increased competitive pressures should have led costs to fall, as companies passed on productivity gains to their customers. What has happened instead is that the financial sector has managed to appropriate these gains for itself, resulting in consistently higher profit rates for financial firms than for the economy as a whole.

Further reading

Nomi Prins: The central banking heist has put the world at risk

By Liam Halligan

This is hard to explain in conventional economic terms, but easy in terms of power. One need only look at the money spent on political lobbying by the financial sector, and the weak regulation which has been applied to it by governments, to understand why it has been able to reward itself so handsomely.

In the digital sector too, it is power that we should be focusing on. Because while the orthodox concept of monopoly seems to apply – Google has approximately 70% of the global search engine market, Amazon has a market share across some product categories in excess of 80%, Facebook has over two billion active users globally – the term is not actually helpful.

In conventional economic analysis, monopoly should lead to higher prices. But that is not what has happened in the digital field at all – on the contrary, many of their services are offered for free, and where they do charge (such as for advertising) their prices have not risen as their monopoly position has been consolidated.

Further reading

It's time to rein in the reckless monopolies

By Ann Pettifor

Yet we should still be worried, because while the business strategy of these companies is not to maximise profits, it is to dominate markets. And not just their own markets, but the markets which will determine the shape of the future economy: digital infrastructure on the one hand, and artificial intelligence on the other. As a recent IPPR report argued, it is scale that gives these companies access to the key resource of the modern economy, data, and the ability to extract from that data the maximum value.

And just as there are serious economic implications from a financial sector chasing ever larger profits – not least the lost productivity, profits and earnings of the non-financial economy – there are serious economic implications from this extreme market power. Firstly, we need technological innovation to be as widely spread as possible, in markets that are as competitive as possible, in order to maximise its value to the economy and society.

Second, this concentration of market power is also concentrating wealth. The tech titans behind these behemoths have become fantastically wealthy as a result of their dominance. This is one of the reasons for widening wealth inequality over the last decade, and likely to be a critical cause of it over the next. Jeff Bezos, for example, is now the world’s richest man. Meanwhile the workers in Amazon warehouses are paid the minimum wage and monitored on their toilet breaks.

Further reading

Could trade unions rescue capitalism?

By Joe Dromey

Which takes us to another power relationship at work in the economy. One of the puzzles of the UK economy of the last decade is how we have managed to achieve near-full-employment at the same time as average wages have stagnated. Economists have been scratching their heads: scarcity of labour should have bid up wages. But understanding the labour market in terms of power makes it entirely explicable. The reason that average wages have been held down is that workers no longer have enough bargaining power to force them upwards.

Once upon a time, wages were determined principally by collective bargaining, in which trade unions in major companies set wage levels in negotiation with employers, and these then set the benchmark for wages in the rest of the economy. Trade unions had the power to do this because the major companies had large workforces in which it was easy to organise, and easy to threaten industrial action.

Today most of this has disappeared. As manufacturing has declined, large companies with unionised workforces have become rare. Companies have fragmented their operations into smaller sub-contracting units, making collective bargaining more difficult. In turn firms have increasingly fragmented their workforces, employing a smaller core of higher paid workers and a larger periphery of ‘self-employed’ and gig workers.

Unsurprisingly, trade union membership in the private sector has fallen precipitously, and collective bargaining with it. Few workers now feel secure enough to bargain for higher wages. The balance of power, in other words, has decisively shifted in favour of management and against workers.

Further reading

Without new foundations, capitalism will collapse

By Charlotte Pickles

Analysing the economy in terms of power – in these and other fields – does not mean abandoning conventional economic analysis. But as the recent report of the IPPR Commission on Economic Justice argues, it does mean thinking about how power can be rebalanced.

Reining in executive pay will best be achieved by changing the structure of remuneration committees – including by putting workers on them, as Labour have pledged to do – and outlawing bogus ‘incentive’ schemes which tie pay to short-term share prices. Tackling rent extraction in financial markets means resisting the lobbying power of the financial sector and regulating its profits down to reduce the costs of finance to the rest of the economy.

Curbing the market power of the digital companies will require regulatory oversight similar to that of other utilities, and preventing them from further vertical and horizontal expansion. And recoupling wage growth to economic growth means giving trade unions greater access to workforces, making it easier for workers to join unions (for example through auto-enrolment, on the model of opt-out workplace pensions), and restoring collective bargaining in low-wage sectors.

With people losing faith in capitalism and polls consistently showing public support for tackling the excesses of big business, this power-focused agenda should be of interest to both Left and Right. And encouragingly, while those on the Right have historically been like economists, uncomfortable with talking about power, that is changing. For many on both sides of the political divide, it is now impossible to imagine a competitive economy, a wider distribution of wealth and a meritocratic society without thinking about how power can be rebalanced. A consensus is forming, and it might just lead to an economy that combines justice with prosperity.

To be fair, the CEO has met his contractual targets, and so legally he’s earned his bonus. In his initial, jaw-dropping defence of the payment, Fairburn said he and his team have “worked very hard”. Well, when you put it that way; I’m sure the bricklayers and roofers and carpenters doing the back-breaking work of constructing Persimmon’s houses understand that hard work needs rewarding. In those professions, average weekly wages are around £500.[1. .‘ASHE, Occupation, provisional 2017’, Office for National Statistics, 2017]

Yet, even if we were to accept that the hard work of a CEO is so much more valuable than the hard work of those ordinary tradesmen, Persimmon’s success is in no small part thanks to you and me – through our taxpayer monies, in the form of the Government’s help-to-buy scheme. As the Guardian reported in January, in 2016, more than half of the housebuilders sales were to help-to-buy recipients. And the company’s share price, which is directly linked to the executive bonus scheme, soared as a result of the government programme. So where’s our bonus?

Fairburn isn’t the only Persimmon executive to have done well off the back of the Government’s ill-advised scheme. Mike Killoran, the housebuilder’s Finance Director, is making do with £53 million (a £24 million cut) and Dave Jenkinson, Managing Director, is taking home £38 million (£2 million less than planned). Not quite as high as Fairburn’s windfall, but when you’re counting in multi-millions, it’s all extreme.

Suggested reading

Forget the P45 stunt, the cough and collapsing stage. Her risible housing policy deserves to end May's premiership

By Liam Halligan

In fact, just this week, household bill management and auto-switching service Look after my bills published new research revealing that total FTSE 100 executive and non-executive director pay has surpassed £1 billion. We tend to fixate on CEO pay, but as Edward Molyneux, author of the research, says: “Excessive pay is becoming endemic across senior teams in business.”

This has given the wider executive network a free pass, at least in a PR sense. And that is particularly so when it comes to non-executive directorships (NEDs), those well upholstered seats around the board table.

The average NED does 27 days a year, the equivalent of just over a month’s worth of work, for an average fee of £102,591. Some earn considerably more, for example two of HSBC’s independent NEDs receive more than half a million pounds each, two of GSK’s get around £400k. In fact, total remuneration of non-executive directors across the FTSE 100 equates to more than £80 million.

So what are they paid to do? According to the Institute of Directors, the purpose of a NED is to provide “independent oversight and constructive challenge to the executive directors”. In the jargon, it’s about sound corporate governance. Which brings us back to Persimmon.

The pay package that resulted in a £100 million bonus for the CEO was agreed by the board, which means it also passed their remuneration committee. Both the board chairman and the head of that remuneration committee resigned at the end of last year in recognition that the bonus scheme had been badly designed (specifically, in lacking an earnings cap). In 2016, according to Persimmon’s annual report, chairman Nicholas Wrigley earned £210,578.

In an interview with UnHerd, the Conservative MP Jacob Rees-Mogg spoke of the “slightly clubby nature of non-executives who seem to sit on a number of boards and all tell each other how wonderful they are”. Company boards are both symptom and cause of the cronyisation of capitalism. What is a corporate scandal if not a failure of non-executive directors, as much as the executive directors, to fulfil their responsibilities? And that extends well beyond setting executive pay. Just think of some of the most recent examples:

• The massive data breach at Equifax which compromised the sensitive data of more than 140 million Americans. The credit rating agency’s cyber security standards have been deemed inadequate. What was the board’s risk committee doing?
• The £250 million accounting scandal at Tesco, which has resulted in three former executives standing trial for fraud. Shouldn’t the audit committee have clocked that?
• The Volkswagen emissions scandal, which saw the company cheat environmental standards by fitting “defeat devices” to their cars. Were the car manufacturer’s NEDs asleep at the governance wheel?

And let’s not forget the financial crash, which exposed irresponsible behaviour across the banking sector.

If successful scrutiny is asking the right questions, usually tough questions, then “clubby” corporate boardrooms are anathema to effective corporate governance. NEDs must be truly independent, genuinely outsider voices working to ensure the long-term health of the company. Yes, we should be outraged at sky-high executive pay, but we should be even more outraged at those well-heeled businessmen (in the UK, three quarters are men, in the US it’s 80%) who sign it off. It’s time to scrutinise the scrutinisers.

Suggested viewing

The Jacob Rees-Mogg interviews

By Jacob Rees-Mogg

First came the uncompromising manifesto, sharply critical of corporate excess and promising “an examination of the use of share buybacks, with a view to ensuring these cannot be used artificially to hit performance targets and inflate executive pay”.

Then came the clear warning to those running big companies that business as they knew was coming to end:

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.[1. .’A Sense of Purpose‘, Jan 2018]”

Those who do not “will ultimately lose the license to operate from key stakeholders”.

No wonder some business leaders are quietly terrified by the revivalist movement among left-wing populists that includes Jeremy Corbyn, Bernie Sanders and Jean-Luc Mélenchon.

Except those words don’t come from the Left. The manifesto was that of Theresa May’s Conservative Party. And the warning to CEOs came from Larry Fink of Blackrock, the biggest investor in the world.

When criticism of corporate short-termism and self-interest comes from such sources, it seems fair to conclude that something is up.

Meanwhile, some things are down. Business investment, for example. Companies are spending less of their money on the technology, equipment and training that will, over time, make their operations and – crucially – their people more productive.

At the Social Market Foundation, we recently calculated that the cash reserves of UK non-financial corporations stood at £660 billion in 2016[2. .’Concentration, not competition: the state of UK consumer markets‘, SMF, 17 October, 2017].

Business investment that year was around £178 billion, or 28% of that cash pile. In 2000, businesses invested the equivalent of 58 % of their cash reserves.

Even allowing for fluctuations in the business and political cycle and changes in monetary policy over that period, companies are investing less. We’re nowhere near unravelling the puzzle of dismal post-crash productivity growth in developed economies, but it is extremely hard to imagine that corporate investment decisions have no part in it.

Dismal productivity, of course, means slow, low or even negative wage growth, which in turn means that when the Corbyns and Sanders and yes, Trumps of this world tell workers in traditional industries that they’re being screwed by a rigged system, they probably have a point.

In other words, the corporate titans who wring their hands about the rise of anti-capitalist populism might stop and ponder whether their own failure to plan – and invest – for the long-term might just have helped shake the pro-business, open-market political settlement they’d come to take for granted.

At the same time as companies have been investing less, they are handing more of their cash to shareholders. Dividend payments by UK companies were almost £95 billion in 2017, up 10% on the previous year, and the latest in a string of record highs.

On a narrow reading of corporate duties and responsibilities, dividends are reasonably defensible: it is, after all, the shareholders’ money.

Much harder to defend are the share buybacks mentioned in that Conservative manifesto – surely the first time any major party referred to a relatively obscure and technical bit of financial engineering.

Buybacks, where companies use their own cash to buy their own shares on the open market, are economically inexplicable. But if you’re an executive whose remuneration package is linked to earnings per share, they’re good business, because by reducing the number of shares in circulation you bump up EPS and make yourself rich(er).

And they’re on the rise, as Charlotte Pickles explained here last month with devastating precision. Recent research from Deloitte nicely charts the trends in buybacks and investment.

What’s the answer? A lot of people talk about reporting rules, the fiduciary hoops that CEOs must jump through to keep markets and investors informed and content. Chasing good numbers for quarterly reports prevents executives taking a longer view, it is said.

After John Kay’s characteristically incisive report for the Coalition Government in 2012[3. ‘Kay review of UK equity markets‘, July 2012], the Financial Conduct Authority (FCA) stopped mandatory quarterly reporting in 2014.

Recommended reading

Corporate buyback culture is financial engineering not value creation

By Charlie Pickles

UK companies have duly started to move away from quarterly reporting: firms such as National Grid and Aviva led the way, and now 40 of the FTSE do not issue full reports every three months. In the FTSE-250, more than half have abandoned quarterly reporting. An end to short-termism? This battle is far from done. Work by Suresh Nallareddy and others at Oxford University questions whether a change in reporting periods alone can significantly alter corporate behaviour.

They found no clear evidence that moving away from quarterly reporting led to an increase in investment.

There is, then, still much to be done to persuade the people running big companies to think about more than EPS and annual profits.

Some of the answers will surely be found in other parts of the Kay Report, which also called for real change in executive pay deals, suggesting that much of the huge wealth bestowed on CEOs be locked away from them for years after their departure: that might create a real incentive to plan for the firm’s long term interests.

Breaking the curse of short-termism will require countless changes, not least in culture: “corporate social responsibility” has become a discredited PR wheeze that must sooner or later be replaced by an understanding that without a genuine sense of social duty, business will not just create its own gravediggers, it will ensure they get elected too.

But as a first step on that journey, start with CEO pay and tenure, which should be lower and longer.

“I was absolutely astonished when I discovered there was a proposal to put into law the ability of shareholders to stop these excessive payments… I thought this was a power shareholders had always had”

That’s what Jacob Rees-Mogg said when I asked him about fat cat pay packages. “What is the point of owning the business,” he continued, “if you can’t even vote down the remuneration committee’s answers?” It’s a good question, but I think it misses the point.

Last year, the British Prime Minister referred to excessive executive pay as the “unacceptable face of capitalism”. Her manifesto, a few months earlier, had pledged to change that by legislating “to make executive pay packages subject to strict annual votes by shareholders”.

It’s easy to see why legislating to change behaviour – by giving the owners of capital the absolute right to vote against, for example, executive pay packages – looks attractive. Certainly, the current non-binding “say on pay” requirements – of which the UK was an early adopter, with the US following suit in 2011 –  are a damp-squib.

Research by Stanford Graduate School of Business found that, overall, “granting shareholders the right to vote on executive compensation contracts has a fairly limited impact on pay”, which helps explain why pay levels haven’t been shifted in countries that have adopted it.[1. David Larcker and Brian Tayan, ‘Say on Pay research spotlight’, Stanford Graduate School of Business, 2016]

There is the odd case – like that of the construction company Crest Nicholson –where, despite shareholders voting against a pay package, the “advisory” nature of the vote has allowed the business to push ahead regardless. But, more commonly, where a majority of shareholders has voted no, action has been taken. The real problem is that shareholders are too often asleep at the wheel, and executives disinclined to moderate their behaviour.

So, while it’s disappointing that the Prime Minster has backtracked on her manifesto promise, the real question is: why do capitalists need legislation to make them do the right thing?

The writing is on the wall, capitalists need to read it

My colleague. Henry Olson. has pointed out that the experts who were blindsided by Brexit, Trump and the wider rise of populism across the West could have foreseen the upheaval. The data was there, they just weren’t reading it. Capitalists should take note.

• Polling this month found less than half of Americans, 48%, trust business; in the UK it’s even lower at 43% – and on both sides of the Atlantic, that’s a decrease from 2017.[2. .‘Global Trust Index’, Edelman, 2018]
• Last year, YouGov polling for UnHerd found that three quarters of Britons and more than 60% of Americans believe big businesses have dodged taxes, damaged the environment or bought special favours from politicians.
• In 2016, just 24% of people in the UK and 38% of people in America trust business leaders to tell the truth.[3. .‘Trust in business leaders’, Ipsos Global Trends, 2016]

That’s pretty damning evidence that the people – those pesky individuals who sent political shockwaves reverberating through the West – are unhappy with corporate behaviour. In Britain, only those aged 65 or above are more likely to describe themselves as capitalist than socialist.[4. .‘British people keener on socialism than capitalism’, YouGov, 23 February 2016]

A hard-left Corbyn government, or socialist-styled Bernie Sanders administration, is no empty threat, it’s a very real possibility. Corbyn was a whisker away from winning last year’s UK general election, and many people, including Donald Trump’s own pollster, believe that Sanders could have won in 2016 had he been the Democratic candidate. The alternative to shareholders and executives putting their own house in order – or, to you and me, acting with integrity – is someone else doing it for them… and with a heavily anti-business bias.

Shareholders need to act

Rebuilding trust in business is, of course, going to take more than curtailing excessive executive pay – as important as that is – and at the start of 2018 we’re seeing encouraging signs that investors might just be getting it.

Larry Fink, the head of the world’s biggest fund manager BlackRock, used his annual New Year letter to CEOs to demand better behaviour.

“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential.”

BlackRock’s responsibility to its investors, Fink states, “goes beyond casting proxy votes at annual meetings”, it requires active engagement with companies. Warm words will not make the difference, but in beefing up their “investment stewardship’” team BlackRock is putting its money where its mouth is.

Another encouraging example is the shareholder resolutions filed at Facebook and Twitter this month by $200 billion New York State Common Retirement Fund and activist investor Arjuna Capital. The resolutions are aimed at forcing the tech giants to tackle abuse of their platforms. The shareholders want a detailed examination of the scope of abuse – including sexual harassment, hate speech and fake news – and an assessment of how the platforms are responding.

They also want the report to assess the financial and operational risk of “content management controversies”; which is a question other investors are likely to be interested in.

The collapse of UK facilities management and construction company, Carillion, shone the spotlight once again on fat cat corporates and their inadequate investor oversight. The Prime Minister is back on her soapbox, writing in The Guardian that: “for the first time, businesses will have to demonstrate that they have taken into account the long-term consequences of their decisions”. There’s no detail, and the Prime Minister’s track record is hardly encouraging, but it sounds ominous.

It’s time for the capitalists to get a grip and start rebuilding trust in business. That means active engagement with the companies they invest in, collective action and, ultimately, a willingness to act with their feet. The alternative, after all, is a whole lot worse.

Yesterday he was backing workers rights and today we learn that – like most of us – the Conservative MP for North East Somerset is not prepared to defend the telephone number salaries of so many CEOs of big businesses. JRM notes that the vast majority of business chiefs aren’t even risking their own capital and whenever things do go wrong in their companies – as Harriet Maltby has fumed – there’s often no or little downside for executive managers. It’s extraordinary, Rees-Mogg tells our interviewer Charlotte Pickles, that shareholders don’t already have the powers they should automatically possess to ensure sense is restored to boardroom pay.

JRM backed Trump’s controversial tax cuts package which many (including UnHerd’s Liam Halligan) have warned will largely benefit the rich and worsen the USA’s already large federal deficit. Mr Rees-Mogg’s response to those criticisms? ‘You don’t make the poor richer by making the rich poorer’ and that tax cuts can pay for themselves because – as the economist Arthur Laffer famously argued – they unleash greater risk-taking and make work more attractive. It is true that most reductions in the tax burden do increase positive economic incentives. The evidence, however, is that most tax cuts fall well short of financing themselves.

If Jacob backed the Trump White House’s tax policy he warned that the President’s protectionist instincts risked creating higher prices for American consumers and a general down-turn in world trade  which could jeopardise the last 25 years of historic progress in reducing global poverty. He said we needed to do more for the casualties of globalisation and of economic change but closing our markets to the world wouldn’t help anyone. The White House is expected to make a decision on trade relations with China very soon and because the US President’s core voters believe the companies they work for don’t enjoy a fair fight with many overseas companies, there may well be political trouble for him in not acting. Henry Olsen blogged the polling numbers yesterday.

Tomorrow in the final clip of our interview, the subject will be policy towards the tech giants and how governments should ensure that the likes of Facebook and Google are our servants and not our masters.