60,000 Scots cheats to lose sickness benefits…

Sadly this was a front page headline in the Herald on Saturday 11 February.

It has become wearisome in the extreme over recent years to observe the growth in pejorative tabloid headlines directed at benefit claimants. But to see the Herald stoop so low is particularly galling.

On Saturday, 60,000 people who find themselves falling on the 'wrong side' of new medical tests on work capability awoke to find themselves classed as ‘cheats’. They are nothing of the kind. They are people who have previously been judged to be eligible for incapacity benefit - normally following in depth medical examination but who are now being judged by different criteria. It is the system which has changed, not them.

In reality of course, the new DWP Work Capability Assessment has already thrown up thousands of injustices and will continue to do so, relying as they do on assumptions that each day is the same for someone who is sick or disabled and resting far too heavily on the presumption that the labour market is fair to those with limitations on work capability, access issues or hidden disabilities.

There is a sensible and hopefully positive debate to be had about how state, employers, health professionals  unions and others can work together to stop people falling out of the workplace through Ill health and how adjustments can be made to support people into work. Neither knee-jerk attacks on benefits nor ill-judged newspaper headlines will help.

Dave Moxham

The Best Western’s response to the BNP

The STUC met with senior members of the Best Western GB hotel group on the 3 Feb 2011. This meeting was organised to discuss one of their member hoteliers allowing their facilities to be used by the BNP for their annual conference in December. The Best Western group were quick to engage with us on this issue and took very seriously the concerns that we raised.

A positive discussion was had and the STUC is clear that this incident resulted from a decision taken by a single hotel without consultation from Best Western. We are confident that the vast majority of the group’s independently owned and managed hotels would have declined business from the BNP. We have also received assurances that no such booking would ever knowingly be accepted through Best Western’s central reservations team.

In general the STUC is pleased that Best Western has taken this issue seriously and we are confident that they have handled the situation with the individual hotel in a robust manner. We are also comforted that the steps taken by Best Western on this occasion will help them avoid a situation where their facilities are used by the BNP or other extremist groups in the future.   

As a result we look forward to continuing a good working relationship with the Best Western group.

Helen Martin -STUC

Increase in Modern Apprenticeships

Last week’s budget from the Scottish Government included a welcome increase in the number of Modern Apprenticeship places that are available in Scotland.  The number of Modern Apprenticeships was raised by 25% from 20,000 to 25,000.  

Modern Apprenticeships are the key access points of the labour market for young people who are not going on to full time further or higher education, yet it does not reflect the demographics of the Scottish population.  

Only 27% of 16-25 year olds on Modern Apprenticeships in Scotland are women, 0.6% are disabled and BME people account for only 0.9% of apprentices.

The latest unemployment figures show the rise in the youth unemployment in Scotland for the last quarter has been driven by the rise in unemployed young women. The rate is five times higher for young women than young men: 5.9% for women compared to just 0.8% for men.

Attracting women to the Modern Apprenticeship Programme is only part of the solution.  The programme is heavily segregated by gender, leading to long-term economic problems associated with occupational segregation.  Increasing the representation of women in ‘non-traditional’ frameworks will go some way to plug the skill gaps and shortages expected in many of Scotland’s key economic sectors, such as engineering.  It will also ensure that a demand-led labour market can utilise skills from the widest pool of talent. Therefore, this will ensure sustainable economic growth and at the same time, address long-term unemployment that many young women (and men) will face.

Unions have a crucial role to play in ensuring that the barriers that prevent full access and participation in the Modern Apprenticeships Programme for young women are addressed.  Furthermore, the low participation from BME young people and disabled young people is worrying, as is the lack of information available on the uptake of apprenticeships from lesbian, gay, bisexual and transgender (LGBT) young people. Unions need to ensure that employers are encouraging participation from all sections of the community and that all young people can access Modern Apprenticeship opportunities.

Useful links:

·        www.scottishunionlearning.com/apprenticeships

·        http://www.closethegap.org.uk

Tommy Breslin - Scottish Union Learning

Does it matter who owns the Scottish economy?

Guest Blog: John Foster, Emeritus Professor of Economics, University of the West of Scotland

The past decade has seen a remarkably rapid shift in the ownership of Scotland’s economy.[i] 

Just ten years ago firms described as ‘based in Scotland’ in Scottish government statistics dominated manufacturing.  Taking the top manufacturing firms employing over 250 people, these ‘Scottish based companies’ contributed 60 per cent of the combined turnover.  By 2005 this share had shrunk to 40 per cent.  By 2010 it was down to a little over 30 per cent.  And it is these larger firms which have access to export markets and contribute the great bulk of Scotland’s research and development. 

Figure 1 Manufacturing firms employing more than 250 workers

Percentage of turnover contributed by Scottish based firms

Scottish Government Corporate Statistics 2010 Table 2

Taking a broader look at all the bigger Scottish registered companies, in services as well as manufacturing, it is clear that there has been a major shift in ownership and control over the past decade.  In 2004 the Royal Bank of Scotland’s ‘Wealth Creation in Scotland’ examined the value added contributed by the top 100 Scottish registered firms and concluded they provided 56 per cent of the Scottish total.   A closer examination of the share ownership of these companies revealed that most were in fact either subsidiaries of non-Scottish companies or largely controlled by investment banks and fund managers from outside Scotland. 

Figure 2 Top 100 biggest Scottish registered companies

Percentage of value added contributed by firms owned by

Scottish families/Scottish trusts, UK and

external institutions, UK holding companies, diversified

UK financial institutions, external holding companies

Less than 5 per cent of value added was contributed by firms entirely owned from within Scotland, either by trusts, local authorities or families.  Almost 50 per cent of the total ‘value added’ was from firms dominated by major British and US fund managers, 10 per cent came from subsidiaries of British companies, 18 per cent from subsidiaries of overseas companies and 15 per cent from companies dominated by UK financial institutions. 

By 2010 even this level of external control had moved forward a further stage. 

The Scottish registered companies which previously had dominant shareholdings from outside Scotland had almost all become subsidiaries of either UK or overseas companies – and the small share of value added from ‘Scottish owned’ firms had shrunk even further. 

Part of the explanation is provided by the takeover of the two banking giants, the Royal Bank and the Bank of Scotland.  But it is only part.   There is also a long list of companies which over these six years had been subject to external takeover – ‘sold on’ to external purchasers usually at the instigation of the big institutional investors looking for a quick turn-around on their investment. 

The scale of the change is further confirmed by a longer term comparison using the method developed in the 1970s by John Scott looking at changes in ownership over a much longer time period from the beginning of the century.  This involved taking the 62 biggest Scottish registered non-financial companies.  Comparing John Scott’s biggest companies for 1974 and the biggest for 2004 a major shift is indicated – with many more companies being externally-owned subsidiaries in 2004.  Looking at these same companies in 2010, the number of subsidiaries had again grown by nine.  There had also been a big fall, from 18 to 6, in the number of firms with two or more shareholders controlling between 10 and 50 per cent – which were usually either family-owned firms or firms dominated by  large external shareholders.  Furthermore, five of the 2004 subsidiary companies, those controlled by external holding companies, had ceased trading.

Table 1 The 62 non-financial Scottish registered firms with highest turnover

	1974	2004	2010
Wholly-owned subsidiary	7	26	29 (and 5 of the 26 dissolved)
Exclusive majority: one interest owns over 50%	11	11	7
Shared majority: more than one interest with over 50% combined	2	2	1
Exclusive minority: one interest owns between 10% and 50%	19	3	5
Shared minority: more than one interest owning between 10% and 50%	26	18	6
Limited minority: more than one interest owning between 5 and 50%	4	2	9

These rapid changes fit into a wider pattern at international level.  The banking crisis and world recession has produced a major consolidation of production in the hands of the biggest companies.  The market capitalisation of the biggest 500 firms globally increased by 50 per cent in one year between May 2009 and May 2010 to $23,000 billion.[ii]  While this increase may be partly attributing to improved share values and inflation, it is at least in part the result of mergers, bankruptcies of weaker firms and the acquisition of increased market share.  The reported strategy of large firms in industrial countries has been the purchase of rivals to consolidate markets rather than investment in new plant where demand remained stagnant.

Does it matter ?

How far, then, does it matter that, as part of this wider process, the ownership of Scotland’s economy is rapidly moving under the control of giant companies based outside Scotland?

The main argument in favour of external ownership is that it gives smaller economies access to capital, research and development, industrial knowledge and skills that would otherwise not be available.  As in China, this can be used to secure technology transfer and the creation of a skilled labour force that can facilitate indigenous industrial growth.

Does this match Scotland’s current situation ?

The answer here would seem to be No.

First, strong state intervention and support is necessary to secure technology transfer and the development of indigenous firms with the competitive strength to trade internationally. This has certainly been the case in China.  In Scotland it has not. In the 1950s and 60s a large number of branch plans, mainly from the US, were established with state subsidy and encouragement.  But there was only limited state support for related indigenous development and the incoming plants had only very limited supply links with the local economy. Most were closed during the economic crises of the 1970s and 80s leaving little behind them.  A second generation of branch plants in electronics was established in the 1980s and 90s, again largely US-owned, using Scotland as an export platform into Europe, and importing most of the component parts of their computers and mobile phones.  Almost half of this capacity was closed after the dot.com bust of 2001.  Hence, unless lessons are learnt from this process, particularly that any spinoff from external investment requires very strong public policy and direct intervention in production, it would seem unlikely that external capital would bring long term developmental benefits to the Scottish economy. 

Second, the current shift to external ownership is not principally about bringing in new investment and knowledge.  It is primarily about changing the control of what already exists. 

In manufacturing this leads to the loss of head office functions and often research and development as well.  It can also lead to fast and unpredictable closure.  Once markets and brands have been secured, external owners will tend to close overseas capacity in face if market contraction and consolidate production wherever costs are lowest.  Such closures usually have highly detrimental effects for the wider economy. Large indigenous Scottish manufacturing companies tends to have dense local supply networks.  They are also the companies with the power to export. Smaller firms, those with less than 250 employees, are reliant on them.

Moreover, most current acquisitions are not in manufacturing but in services. Many of the biggest have been of privatised utilities.  These utility companies often enjoy continuing subsidies from government and a semi-monopolistic position with regard to consumers – as in energy, transport and communications.   Here the rationale for external takeover is simply to consolidate market share and gain access to steady revenue streams in a sector where the level of profitability is consistently higher than that in manufacturing.  Very little is brought to Scotland in terms of technology and research and development.  Much is lost in terms of income that could otherwise be invested locally.

As well the direct impact on the economy, there is also a more indirect effect: on the formation of economic policy.  External acquisition and control, either directly or through the effective control of companies by major external investors, changes the way in which economic influence is exercised at the level of government.

Earlier in the twentieth century, when Scotland was a leading world producer in shipbuilding and heavy engineering, dominant firms used their influence over governments in a fairly coherent way to secure public investment in the productive infrastructure.  The development of hydro-electric power in the 1930s would be one example.  Another would be the Clyde Valley Plan of the 1940s – even though that was within a far more public sector oriented environment.

Managements dominated by institutional investors seeking short-term ‘shareholder value’ do not act in the same way.  A particularly blatant example was provided by the Royal Banks ‘Wealth Creation in Scotland’ report itself - which exercised a powerful influence over the Scottish Executive and the 2004 edition of its economic policy document ‘Smart, Successful Scotland’.

Wealth Creation in Scotland adopted a strongly neo-liberal and anti-public sector position.  It argued that Scotland had grown its own ‘global companies’ through the privatisation of transport, energy and communications and needed to extend privatisation further to education, health and water.  Privatisation created a steady income stream for private capital which in turn enabled the levering in of further capital from the banking sector - which could then be used for external acquisitions.  The report argued that over the past fifteen years this process had facilitated the creation of global companies for Scotland, companies which by 2004 had 80 per cent of their investment outside Scotland.

In retrospect it was a quite crazy way of developing Scotland’s own productive economy.  It effectively called for state subsidies for bankers to make profits from investing Scotland’s scarce and precious resources outside the country – in companies that very quickly became vulnerable to external takeover themselves.  Much of the recent switch in ownership resulted directly from such policies.

 Yet the neo-liberal policy nexus created by the intermediaries representing these firms, the investment bankers and lawyers that represent them, managed to exclude other perspectives, particularly those which would have involved more public sector intervention.  Indeed, the public sector got the blame for the poor state of the economy and ‘squeezing out private enterprise’.

Unfortunately, despite the debacle of 2008, these arguments remain – precisely because the corporate grip of their proponents has become stronger.  Conversely, the actual need for public sector intervention also becomes ever more apparent. There seems no other way restoring the productive economy than sustained public sector intervention. Simply looking at the powerful productive synergies at regional level which have made Germany the present-day leader in technology and high value exports, it is clear that the public sector has always played a central role and continues to do so.  A pattern of industrial ownership, in which the local government controlled Landesbanks hold long-term stakes, has anchored companies to regional economies and permitted the long-term development of supply and research inks with other companies.  This has been complemented by major companies and utilities in which the state held a major stake.  The same applies, with local variations, to France.  By contrast, the ‘Anglo-Saxon model’ of short-term shareholder value ownership by increasingly large and piratical investment funds directly militates against comprehensive regional planning.[iii]

Despite all the claims, there is no conclusive evidence that the private sector innovates or increases productivity faster than the public sector – if anything the contrary.[iv]  Key breakthroughs in technology over the past generation, such as the RB211 Rolls Royce engine or the INMOS computer chips, were developed under public ownership. The combined resources of Scotland’s privatised utilities and its still unprivatised health and education sectors, all of which draw on public income, could potentially provide markets and the reservoir of knowledge necessary for the redevelopment of the productive economy and the establishment of new areas of manufacturing excellence. 

Otherwise, the outlook is bleak.  The next five years will see much tougher global competition – and in Scotland even more takeovers and closures.[v]

---

[i] This article builds on the research originally conducted in 2004-5 by Sandy Baird, Richard Leonard and John Foster and published in the Fraser of Allander Quarterly November 2004 and Scottish Affairs, Winter 2006-7

[ii] Financial Times Survey of Top 500 Global Companies, 28 May 2010

[iii] A special issue of Economy and Society (November 2009, Vo.38/4), introduced by C. Lane and G Wood, reviews the debates following the research published by Peter Hall and David Soskice, Varieties of Capitalism (Oxford 2001) and Bruno Amable, The Diversity of Modern Capitalism, Oxford 2003.

[iv] Malcolm Sawyer and Kathy O’Donnell, A Future for Public Ownership, 1999 attempts industry to industry comparisons and finds publicly-owned companies have a marginally better rate of productivity increase.

[v] Daniel Shaefer’s feature in the Financial Times 19 January 2011 makes clear the intensity of competition now developing in high value engineering between German and Chinese producers.

 

This blog is a condensed version of a public lecture, ‘Does Ownership Matter in the Scottish Economy?’ delivered by Professor Foster at Glasgow Caledonian University  on 2 February 2011

Small change, big difference

With youth unemployment at 17.9% and demand for Modern Apprenticeships outstripping supply (BT recently had approximately 24,000 applications for 221 Modern Apprenticeships), it is essential that public resources are effectively increasing the number of Modern Apprenticeships available.

Experience has proved that long-term youth unemployment severely damages the life chances of thousands of young people and undermines the social fabric of our society. Youth unemployment has long-term and enduring social consequences for our society.

The STUC believes that direct public investment in youth job creation and enhanced training and learning opportunities for young people is essential to tackle the scourge of youth unemployment.

Evidence confirms that ‘Modern Apprenticeships’ are a powerful method of providing Scotland’s young people with high-quality training which leads to industry recognised qualifications and meaningful employment. Public procurement can be a powerful tool in tackling youth unemployment by ensuring that contractors provide training through Modern Apprenticeships that will equip young people with the skills to good long term employment.

Catherine McKinnell, Newcastle North MP, has introduced the ‘Small Change, Big Difference’ Bill at Westminster. This Bill aims to ensure that public procurement processes are utilised to create more Modern Apprenticeship jobs within the private sector. The Bill receives its second reading on Friday, 11^th February.

Catherine McKinnell has also submitted an Early Day Motion at Westminster on ‘Apprenticeships and Skills Training’, which has been signed by 87 MPs so far, 17 of which are Scottish MPs. It supports the assertion that public procurement processes can and should have a positive impact on the employment prospects of those seeking to undertake a Modern Apprenticeship.

Increasing opportunities for Modern Apprenticeship jobs is an essential part of the work of many trade unionists, and it is vital that we continue to build on this.

A section of the Scottish Union Learning website has been developed to provide further information on Modern Apprenticeships in Scotland.  This can be accessed at www.scottishunionlearning.com/apprenticeships.

Tommy Breslin- Scottish Union Learning

Unions engage with Modern Apprenticeships

Following up on the blog – ‘Unions contributing to the development of the Modern Apprenticeship Project’, there are a number of ways in which trade unions can get involved with the Modern Apprenticeship Project.

Scottish Union Learning is developing a bank of case studies of trade union engagement with the Modern Apprenticeship programme. We already have a number of positive studies where union involvement in the programme is providing constructive results. If your branch is involved with Modern Apprenticeships, we would like to hear from you.

To gauge the levels of involvement and understanding of Modern Apprenticeships, we are also undertaking an online survey of union reps. We are interested in hearing from you, even if you do not know much about Modern Apprenticeships.  It is an on-going survey and the results will be published later in 2011. If you have 10 minutes to spare and would like to participate in this survey, please visit www.surveymonkey. com/s/modernapprenticeshipproject.

Young and new workers are vulnerable in the workplace, and it is therefore essential that Modern Apprentices are made aware of their rights as employees. We have developed a sub-section of the Scottish Union Learning website which provides information on the workplace rights of Modern Apprentices.

This website is a useful resource for those working with Modern Apprentices, those considering becoming a Modern Apprentice and those already on a Modern Apprenticeship. It can be accessed directly at www.scottishunionlearning.com/apprenticeships.

Scottish Union Learning has also developed an online forum dedicated to Modern Apprenticeships.  To register and participate in the forum, visit forum.scottishunionlearning.com.

If you would like further information on the Modern Apprenticeship Project, contact Tommy Breslin, Development Officer, at tbreslin@stuc.org.uk.

Tommy Breslin- Scottish Union Learning

The Witchdoctor

Inevitably there has been a flurry of commentary to mark the centenary of the birth of Ronald Reagan born 6 February 1911.

Much of it recalls his commitment to the Laffer Curve; the proposition that cutting taxes will increase revenues due to the incentive effects unleashed on the economy. Despite the overwhelming evidence accumlated against it, supply side economics has proved the most durable of economic shibboleths. Why? Well as Paul Krugman has pointed out, any argument that says cutting the tax contribution of the rich and powerful is good for the economy is pretty much guaranteed a permanent constituency. It is also comforting for the lazy and/or intellectually insecure (Institute of Directors please step forward!); economics is a technical subject that very many people (myself included) find difficult. But why bother when tax cuts can be prescribed for each and every economic ill?

I didn't catch all of the BBC 4's Storyville: Reagan an American Idol last night but I did catch some of the section on economics. After so many years of reading about him, it was fun to observe the bold Arthur Laffer pontificating on the wonders of Reaganomics. He didn't disappoint. His delivery was as frenzied as his beliefs were undiluted. It's worth a look to contrast with, for instance, Simon Johnston's careful demolition of the orthodoxies which underpinned the adminstration and undermined long-run US growth.

Of course, the Laffer Curve, trickle down economics, call it what you will, is one of the great zombie ideas: it doesn't matter how often it's killed by evidence, it just keeps on getting up and mouthing its simplistic nonsense - usually through the mouths of business lobbyists.

For anyone interested, the best rebuttal of the myth of Reagan's economic success is Krugman's Peddling Prosperity (he also has a go at Clinton's 'strategic traders'). There was also an interview with Yves Smith at the weekend explaining why Reagan was bad for the US and why he was never actually interested in free markets; only enriching his business buddies. Well worth a look. And try this if you're looking for a soundtrack...

Stephen Boyd - STUC

Unions contributing to the development of the Modern Apprenticeship Project

Scottish Union Learning has launched a Modern Apprenticeship Project aimed at increasing union capacity within Scotland’s Modern Apprenticeship programme. Modern Apprenticeships can offer positive access to employment for young people and the opportunity for mature workers to change or re-engage in their chosen career path.

Unemployment for those aged 18-24 years old was 17.9% for Scotland in the three month period Sep-Nov 2010, which is a problem of deep concern to trade unions.  Modern Apprenticeships are clearly a positive method in helping to tackle the issue because they can provide a rare opportunity for young people to earn while learning new skills.  They also provide the employee with an industry recognised qualification combined with on-the-job experience.

Trade union engagement with this programme is essential.  There are a number of workplaces in which unions are involved with the development and running of the Modern Apprenticeship programme. We believe these workplaces to be better paid with better completion rates.  There is also high progression from a Modern Apprenticeship post to permanent employment.

Increasingly, unions are driving at encouraging employers to start up Modern Apprenticeship programmes with guaranteed jobs on successful completion. This is not only good for the employees, the employers and the unions, but it is also good for Scottish society.  We cannot afford to fail successive generations of young workers.

Whatever the outcome of the Scottish elections in May, it’s clear that Modern Apprenticeships will still be an important tool in tackling increasing youth unemployment.

A section of the Scottish Union Learning website has been developed to provide further information on Modern Apprenticeships in Scotland.  This can be accessed at www.scottishunionlearning.com/apprenticeships.

Tommy Breslin - Scottish Union Learning

Coalition Government's first attack on employment rights

Lord Young of Graffham may not have managed to hold on to his position as enterprise advisor to the Coalition Government following his “we have never had it so good” comments but his legacy should be of great concern to trade unions, their members and their families.

On 27^th January the Department for Business Innovation and Skills launched the publication Resolving workplace disputes – A consultation. Despite the sentiments on the website that the purpose of the consultation was to seek views on how to develop a more effective and user friendly Employment Tribunals service it is nothing more than an attack on the rights of workers.

If we were ever in any doubt that this is a business-friendly, low regulation Coalition Government then this consultation serves as a stark reminder of the Government’s contempt for working class people.

Before his departure Lord Young hinted that he was minded to extend the qualifying period for unfair dismissal from one year to two but the consultation goes much further and proposes;

• introducing costs for taking claims against employers to tribunal,
• an increased use of pre-claim conciliation through ACAS,
• automatic financial penalties for employers breaching employment rights,
• extending the types of cases where judges can sit alone to include unfair dismissal cases,
• removing the general requirement for tripartite panels in the Employment Appeals Tribunals;
• reviewing the formula for calculating employment tribunal awards and statutory redundancy payment limits – we can assume that this will be downwards.

If these changes are introduced this would strike right at the heart of our employment tribunals, a tripartite system that relies on the skills and experience of trade union and employer representatives in addition to legally trained judges.

These proposals are not just about cost savings - they will make it easier for employers to dismiss workers and make it harder for claimants to access justice.

At the same time as this attack on workers rights the Government launched their long awaited Employers Charter.  Apparently the balance of rights has tilted too much in favour of the employee.  Yes, this really is the view of the Government taken from the Number 10 website and their 11 point Charter aims to redress this.

In the absence of any mention or advice for workers, the STUC has developed its own Better Way Charter for Workers Rights to outline how we would expect workers to be treated in the Big (but hardly fair) society the coalition is promoting.

Ian Tasker - STUC