BRIAN CURRIE and TORCUIL CRICHTON

Alistair Darling has dismissed calls for a high pay commission to monitor income levels and limit top pay in the public and private sectors.

The Chancellor, who has been accused of continuing light touch regulation of the financial sector amid signs of a bonus culture returning to the banks, said that he was "not persuaded" by the plan.

The idea for a group that would mirror the work of the Low Pay Commission, set in 1997 to advise on the minimum wage, came from left-wing pressure group Compass, a coalition of campaigners, union leaders and academics.

The group, closely associated with Dagenham MP Jon Cruddas, suggested, among other ideas, imposing a maximum pay ratio, where the top earner at a firm would never earn more than a certain multiple of the lowest earner.

Compass criticised the Financial Services Authority for diluting an earlier commitment to curtail "out of control rewards" for promoting risk-taking. In a statement, Compass said: "We need a high pay commission to review pay at the top. It should consider proposals to restrict excessive remuneration, such as maximum wage ratios and bonus taxation, to provide the just society and sustainable economy we all want.

"We also need the government to take the moral lead by setting reasonable pay structures within our public bodies and, last but not least, within our publicly-owned banks."

However Mr Darling rebuffed the idea out of hand. Speaking after visiting an HM Revenue and Customs collection centre in Cumbernauld the Chancellor said: "I'm not persuaded by that. I think the best way of deciding pay is between employers and employees. They have to decide what they can afford, what's the going rate for the job."

He added: "I think government has a role in preventing undesirable behaviour which is why I was making the point over the weekend that we have got to end the practice whereby bank traders, for example, were incentivised to take risks that eventually brought banks to their knees and taxpayers had to pay a price for that.

"So I think government does have a role in discouraging behaviour which can be damaging to the economy but I think wages and salaries ought to be best negotiated and all the evidence is that it's best done between employer and employee."

There was, however, a role at the other end of the scale, for low pay, and in 12 years the government had introduced and increased the national minimum wage and tax credits, said Mr Darling.

Mr Darling declined to say if he had any message for Sir Fred Goodwin, the former chief executive of RBS, who was sighted at the weekend in Edinburgh for the first time since the controversy over his pension. "My interest is in ensuring RBS works its way through to recovery," he said.