A review of fair pay in the public sector has suggested top executives should no longer be paid more than 20 times the wages of other staff.

An interim report by the Fair Pay Review said there was a case for a “maximum pay multiple” aimed at keeping the earnings of senior staff bound to what their employers received.

Will Hutton, executive vice-chairman of the Work Foundation, who was appointed by the government to head the review, said executive pay had been rising faster than medium and low earners, creating greater pay “dispersion” over the past decade.

“When the economy grew there were fewer concerns about fairness in general and fair pay in particular. Now the economy is under pressure, how fairly society distributes its benefits and burdens has suddenly become more pressing.

“The basic concept of tracking pay dispersion within boundaries is where concern with fair pay must lead. There is a strong case for public sector organisations having to comply with, or explain why they do not comply with, a maximum pay multiple, such as 20:1.

“This would demonstrate fairness by reassuring public opinion, address a problem of collective action across remuneration committees, and benefit organisations’ productivity,” said Mr Hutton.

The review found there were around 20,000 public sector employees earning over £117,000, while average salaries for executives were £200,000 for heads of universities, £150,000 for NHS Hospital Trust chief executives, £117,000 for local authority chiefs, £170,000 for four star generals in the armed forces and £160,000 for permanent secretaries in government departments.

Brian Strutton, national officer of the GMB, said: “This ratio is completely wrongheaded. In local government this would mean chief executives could earn £240,000 a year which is higher than most are now getting. The commission should be looking at the low pay end of the spectrum rather than the high end.”