For the record, MPs were unpaid until the radical Liberal chancellor David Lloyd George found them £400 a year in 1910, the annus mirabilis of progressive taxation when LG faced down the Lords. According to the National Archives ready-reckoner, that £400 is worth £22,824 today – so MPs on £65,738 have achieved a steady real-terms pay rise.
Ministers have done less well. Pitt the Younger got £5,000 a year as PM in 1800, a sum worth £160,000 today, but £292,000 in 1850, more stable times. The pay was increased to £10,000 in the 1930s when, according to the reckoner, it would be worth £396,000 in today\’s funny money.
Thanks to Brown\’s unilateral cut and his own 5% further cut, Cameron gets £142,000, including his MP\’s salary.
Comparing money across time is not all that easy a thing. Should we just calculate, as above, by the straight old inflation rate?
Well, we can, but that doesn\’t really give us the right idea. For, at least since the invention of this capitalism thing, we\’ve also had rising living standards in general, economic growth in general. This leads, quite naturally, to the thought that we\’ve had rising real wages over time.
So there are a number of alternatives: note that none of these are perfect. We\’re making ranging shots at judging which is the best number to use, not plumping for one or other method which is precise.
The above simply inflation one is the worst of our alternatives. For many reasons but perhaps the most important is that we\’re simply ignoring the fact that everyone\’s standard of living has risen since 1800, or 1910, or 1930. And as a good lefty like Michael White would be happy to agree, a goodly chunk of the point about wages is not the absolute value, but the value relative to everyone else.
We can also use in relation to GDP (ie, what\’s the wage as compared to the total economic output of the country, adjusted for population) and so on, but probably the best, when we\’re looking at incomes, is to upgrade by the rise in average incomes. So, for example, if average incomes have risen by 1-2% above inflation, as they pretty much have done, over the couple of centuries, then we should be upgrading those income figures by that 1-2% above inflation.
One reason why even this isn\’t perfect is that this would take no account at all of a change in the distribution of incomes. Recall in Jane Austen that £3,000 a year made one very wealthy indeed landed gentry so £10,000 as PM was way, way out in the very tippy top of the income distribution. Not equivalent at all to that £160,000 which is about the top 1% today isn\’t it?
To use these various different measures, there this great little site.
The results are that £400 in 1910 is more like £145,000 now. £5,000 in 1800 is around £3,500,000 now and £10,000 in 1930 is £1.7 million now.
Which means that, in relative terms, MPs are about right now (pay plus expenses isn\’t far off £145,000) while the Prime Minister is grossly underpaid.
Another way of looking at it: That £5,000 in 1800 if considered as a capital sum was enough, when invested, to produce a solidly upper middle class income forever. £200 a year or so*….as compared to a Naval Post Captain\’s wages (without prize money of course) of some £140 a year**. That £10,000 in 1930 similarly treated would give £400 a year in perpetuity, again a solid upper middle class income. You would need a capital sum of that £2 million and above to be providing top quintile income from investments today (top quintile household income starts at £80k today ish).
So another way of thinking about this is that back then the PM was paid the capital sum, each year, necessary to have that upper middle class lifestyle for life. Today he\’s paid that upper middle class lifestyle amount as income each year that he\’s PM. A very different amount indeed.
*Assuming 4% interest which isn\’t far off gilts in those days
** Guestimated from Bligh being reported as getting £70 a year as a Post Captain on half pay.