Fiscal framework has the potential to make or break the new devolution settlement.

Deputy First Minister should refuse to sign up to Fiscal Framework unless the right block grant adjustment can be agreed.

 

STUC General Secretary Grahame Smith today warned that key new powers enshrined in the Scotland Act could become a poisoned chalice if the Fiscal Framework currently being negotiated between the Scottish and UK Governments fails to meet the ‘no detriment’ principle as agreed by the Smith Commission.

 

The STUC has been an advocate for strong additional powers for the Scottish Parliament, particularly in the area of taxation.

 

“However, we have always been absolutely clear that the value of the new powers, particularly those relating to new welfare spending and tax raising, were dependent on an appropriate Fiscal Framework.  We recognise that negotiations between the two governments are sensitive and ongoing, but there has been far too little public debate on this issue.

 

Over the next couple of weeks we will be assessing three key elements of the Fiscal Framework all of which will impact on the calculation of the Scottish Block Grant in years to come:

1. How, will the Scottish block grant be adjusted to take account of additional spending flowing from the devolution of new powers - primarily welfare?
2. What mechanisms will be put in place to allow the block grant to be adjusted to reflect specific UK and Scottish Parliament spending decisions where they have a direct impact on the finances of the other body.
3. Following the initial adjustment of the block grant to compensate for the devolution of taxes to the Scottish Parliament, what method of will be used for block grant adjustment in future years.  How will this impact in Scotland?
    
4. Today we make comment on the impact of the devolution of new taxes, primarily income tax and raise serious concerns that if the method applied for year on year adjustments to the block grant is not right, very severe detriment could result.  This would call into severe question whether the Scottish Parliament should accept the new tax powers.
5.  
   “We have reviewed some of the relevant literature on this subject and conclude that Scotland could find itself disadvantaged to the tune hundreds of millions in a relatively short space of time if the wrong method is applied and that this figure could reach the billions over a longer time period.
    
   “In this context, it would be completely wrong for the Deputy First Minister to sign up to a mechanism for block grant adjustment which would structurally disadvantage Scotland. It would also be entirely wrong for the Scottish Government’s political opponents to characterise an appropriately firm bargaining position as the Government ‘dragging of feet’ on new powers. The Fiscal Framework is absolutely central to the impact of further devolution and it would be entirely wrong to sleepwalk into a bad deal.”
    
    Fiscal Framework
    

1. The STUC has argued, in a view taken during the referendum and prior to the ‘Vow’, Smith Commission and subsequent Scotland Act, that the Fiscal Framework surrounding the new powers over tax and spending had the potential to ‘make or break’ the new devolution settlement.
2. This concern is amplified by the nature of the powers finally agreed for transfer; the transfer of income tax powers isn’t balanced by a sufficiently wide basket of other tax powers.
3. Key factors include the fact that Scotland’s share of the UK total income tax revenue is below its population share due to the concentration of high income tax earners in London and the South East of England; and that the Scottish population is predicted to grow more slowly than that of the rUK.
4. The ‘no detriment’ principle is very difficult to apply and remains the subject of varying interpretations.
5. The three key questions are.

1.  How will the Scottish block grant be adjusted to take account of additional spending flowing from the devolution of new powers - primarily welfare?
2. What mechanisms will be put in place to allow the block grant to be adjusted to reflect specific UK and Scottish Parliament spending decisions where they have a direct impact on the finances of the other body.
3. Following the initial adjustment of the block grant to compensate for the devolution of taxes to the Scottish Parliament, what method of will be used for block grant adjustment in future years.  How will this impact in Scotland?
    

1. This paper deals with the third of these questions and concludes that, if the wrong adjustment method is adopted, severe reductions in Scottish Parliament revenues can be predicted which would infringe the ‘no detriment’ principle and call into question whether the devolution of income tax as laid out in the Scotland should be accepted by the Scottish Parliament.
2. The year one calculation is reasonably simple.  The Block grant will be increased by the quantum of spending currently attached on the UK responsibilities to be devolved and then decreased by the amount of revenue the Scottish Parliament would have raised if it already had the new tax powers – primarily income tax.
3. The calculation for following years is far more complicated and outcomes are very sensitive to the methods applied.
    
   No detriment and the devolution of powers
    
   The STUC recognises that the Smith Commission’s recommendations on ‘no detriment’ are subject to variable interpretation and can be applied in different ways.  In the STUC’s view, the application of ‘no detriment’, as it relates to the calculation of the future block grant, are:
    

1. The initial adjustment to the block grant to reflect changes in tax and spending powers should be revenue neutral. For the tax revenue component of this, the initial calculation should be a deduction from the Scottish block grant of the sum that will be derived from the newly devolved Scottish taxes.
2. The adjustment in subsequent years should allow for different impacts where Scottish Parliament tax and spending policies differ from that of the UK Parliament.  This implies that if Scottish tax revenue should rise or fall consequent to policy decisions to alter rates or thresholds; or if there are differing levels of economic growth, the benefit/detriment should be retained by the Scottish Parliament.
3. The adjustment in subsequent years should employ a method which guarantees (as closely as is possible) that had there been no changes in policy or variation in relative growth, the block grant deduction would retain maintain parity with the tax raised in Scotland through newly devolved taxes.  In short, if there is no difference in economic performance or tax rates between Scotland and the rest of the UK, public spending in Scotland should be no higher or lower than under the current funding framework.
    
   Thus, the principle of ‘no detriment’ as it applies to the adjustment of the block grant to reflect the devolution of tax revenue streams is maintained initially and in future years without impacting on the principle that the effect of differing fiscal policy decisions should impact on the Parliament which takes such decisions.
    
   Indexing options
    
   Clearly, the revenue derived from taxation will differ year on year.  Over a period, revenues can be expected to increase as a consequence of overall growth.  Thus, in most years, the quantum of both UK and Scottish income tax should increase, leading to an increase in revenue for the Scottish Parliament from income tax and a larger deduction in the block grant reflecting overall growth in tax receipts. 
    
   The initial adjustment figure is a lump sum, which requires no formula save an agreed figure for what constitutes the Scottish share of income tax receipts (principle a).
    
   Subsequent adjustments cannot be made using the same method otherwise the calculation would fail to recognise potential policy variations (principle b) and therefore a formula is required by which changes in UK tax receipts and Scottish tax receipts can be reconciled with the appropriate deduction to the block grant.
    
   The STUC has reviewed the currently available literature on methods of adjustment[1] There is more than one way in which this future adjustment can be calculated. Remembering that the overall figure might vary as a consequence of different growth rates or tax policy, it is still possible to predict how the various methods for the adjustment would impact on the revenues of the two parliaments assuming no divergence in policy or growth (principle c).
    
   All of the options for indexation retain the same Year 1 adjustment figure as is consistent with principle a), but take a different approach to how the increase in the block grant deduction is calculated.
    
   Option 1 – Level deduction (population share of rUK change in tax receipts is added to baseline deduction each year)
    
   This option would calculate the additional amount by which the block grant is to be reduced by each year based on Scotland’s population share of the change in comparable tax receipts in the rest of the UK (rUK). 
    
   This method would create a disparity between the block grant deduction and the increase in Scottish Parliament income tax receipts. This is because Scottish income tax receipts are lower per capita than across the UK as a whole (largely driven by the concentration of higher rate tax-payers in London and the South East).  Scotland accounts for 8.3% of the UK population but 7.3% of UK income tax receipts, the annual block grant deduction will therefore be greater than the growth in Scottish income tax receipts – even when income tax receipts are growing at the same rate in Scotland and the rest of the UK.  This indexation method therefore guarantees that even when Scotland matches the economic performance of the rest of the UK its budget will be smaller than that provided under the current funding framework.
    
   This breaches the no detriment principle outlined earlier that the effect of the devolution of income tax should be revenue neutral, assuming comparable growth rates and non-divergent tax policy.
    
   The effect of using this method would be that, over a period, Scotland’s public spending relative to the rUK would be significantly damaged.
    
   Option 2 – indexation against relevant UK tax receipts in the rUK
    
   Option 2 would index the annual block grant deduction to the overall increase in comparable tax revenue in the rUK.  However, as rUK population growth is expected to exceed Scotland’s, the annual block grant deduction will, over time, exceed the growth in Scottish income tax receipts – even if per person receipts in Scotland and the rest of the UK grow at the same rate. 
    
   Scotland does not have key devolved powers such as migration policy, which might enable it to proactively increase its population relative to rUK. This method of indexation therefore also conflicts with principle c), that all other factors being equal, Scotland’s relative fiscal position should not deteriorate. 
    
   Option 3 – indexation against relevant UK tax receipts in the rUK adjusted for population growth
    
   The best, and in the STUC’s view, fairest approach, is to index the initial baseline adjustment to the growth in relevant rUK tax receipts (Option 2) but to make a subsequent  adjustment taking into account the change in relative population growth between rUK and Scotland.  In the case of income tax, this would mean indexing the initial block grant adjustment to the growth in per person income tax receipts in the rest of the UK.
    
   This method gets closest to compensating for the disparity in tax base between Scotland and rUK which is [largely?] a consequence of UK macro-economic and fiscal policy; and the predicted slower rise in Scotland’s population relative to the rUK, a trend the Scottish Parliament does not have the powers to substantially influence.  It means that if income tax receipts per person grow at the same rate in Scotland and rUK, and tax rates are the same in both countries, public spending in Scotland will be exactly the same as it is under the current funding framework.  This therefore achieves the Smith Commission’s no detriment principle
    

 

Appendix 1

 

Level Deduction Worked Example	Year 1	Year 2
Rest of UK Income Tax Receipts[2]	£145 billion	£167 billion (15% growth)
Scotland – Income Tax Receipts[3]	£11 billion	£12.7 billion (15% growth)
Block Grant Adjustment (BGA)	£11 billion	£13 billion
Impact on Scottish budget (Scottish Income Tax – BGA)	£0	-£300 million
Calculation for the BGA in year 2 is as follows Year 2 BGA = Year 1 BGA + (Scotland’s population share[4] of change in rUK receipts)) Year 2 BGA = £11 billion  + (9.1%* (£167bn - £145bn))

 

Indexed Deduction per capita Worked Example	Year 1	Year 2
Rest of UK Income Tax Receipts	£145 billion	£167 billion (15% growth)
Scotland – Income Tax Receipts	£11 billion	£12.7 billion (15% growth)
Block Grant Adjustment (BGA)	£11 billion	£12.7 billion
Impact on Scottish budget (Scottish Income Tax – BGA)	£0	£0
Calculation for the BGA in year 2 is as follows Year 2 BGA = Year 1 BGA * Growth in rUK Income Tax Receipts per capita, multiplied by Scottish population growth Year 2 BGA = £11 billion  * (1.15/1.06) * 1.06   Notes For simplicity, the calculations assume that the population grows at the same rate in Scotland and the rest of the UK (0.6%). In this case, tax receipts per head would also grow at the same rate in Scotland and the rest of the UK and indexed deduction and indexed deduction per capita yield the same result.

 

The above examples illustrate the differences between the level deduction and  indexed deduction methods under the assumption that population growth is similar in Scotland and the rest of the UK.  However, latest population projections indicate that Scotland’s population is expected to grow less quickly than in the rest of the UK. In this case, if tax receipts per capita grew at the same rate in Scotland and the rest of the UK, Indexed Per Capita Deduction  would ensure that Scotland’s budget is no better or worse off following the devolution of income tax whilst Indexed Deduction would not. This is because even if per person receipts in Scotland grow in line with the rest of the UK, aggregate receipts may not due to slower population growth.


Dave Moxham

---

[1] http://scotfes.com/2014/11/20/how-should-the-barnett-formula-be-adjusted-to-reflect-devolved-taxes-a-question-of-allocating-risk-wonkish/

https://mail.stuc.org.uk/OWA/redir.aspx?C=a634f6d5f5d041809fb2c62cc7188360&URL=http%3a%2f%2fwww.ifs.org.uk%2fuploads%2fpublications%2fconferences%2fpresentations%2fPhillips_Scottish_Finance_Committee.pdf

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/economic-affairs-committee/the-devolution-of-public-finances-in-the-united-kingdom/written/21826.pdf

[2]GERS, Table 3.1. Rest of the UK is defined as UK minus Scotland.

[3] ibid.

[4]ONS2013-14 population estimates for UK and Scotland. Rest of the UK calculated as UK minus Scotland.

No Racism: Refugees Welcome Here

The St Andrew's Day Anti-Racism March and Rally this year has the theme 'No Racism: Refugees Welcome Here.' The rally will take place on Sat 28th Nov, Assemble 10:30am Glasgow Green. Below is a Guest Blog from Alastair Pringle, Equality and Human Rights Commission on the importance of this March.

Communities across Scotland have long played a proud and welcoming part in offering shelter to those seeking asylum. Our history of fairness, dignity and respect are shown in the recent outpouring of public support for helping those in need fleeing across Europe.

The Equality and Human Rights Commission has written to the Governments at Holyrood and Westminster to offer our assistance and expertise as they develop plans to tackle the current refugee crisis. We, in towns and cities all over Scotland, have a role to play. We must demonstrate that refugees are welcome in this country, that we will support their inclusion in our society to make it a more diverse and tolerant place. This should be in keeping with the international laws for the right to asylum which must always be upheld.

Article 14 of the Universal Declaration of Human Rights prescribes that everyone has the right to seek and enjoy asylum in other countries, provided it is appropriately invoked. The Equality and Human Rights Commission will support efforts that welcome refugees and protect their human rights.

Together, we need to recognise and challenge any attempt to discriminate against refugees, directly or indirectly. This might mean we need to look critically at our own actions and those of our friends, families, colleagues and neighbours. It might mean we have to challenge and speak out against hurtful language or deeds. It also might mean that our public services need to look again at how they provide essential health, care, education, employment and support services to these groups of people who come to Scotland seeking a safe and secure future.

We should continue to show compassionate leadership on this matter, reflecting our influence and the extent to which we benefit culturally and economically from migration so we can let the world know that refugees are welcome here.


Alastair Pringle
Equality and Human Rights Commission

Refugees Welcome Here

The St Andrew's Day Anti-Racism March and Rally this year has the theme 'No Racism: Refugees Welcome Here.' The rally will take place on Sat 28th Nov, Assemble 10:30am Glasgow Green. Below is a Guest Blog from John Wilkes, Scottish Refugee Council on the importance of this March.  

Scottish Refugee Council is proud to support the STUC’s important annual Anti-Racism march.

The theme of this year; No Racism: Refugees Welcome Here tells the story of how the refugee crisis in the Middle East and the Mediterranean has become a central issue for Europe in the last few weeks.

Until recently, the refugee crisis wasn’t on many people’s radar. That was until the heartbreaking image of three-year-old Alan Kurdi whose lifeless body was found washed up on a Turkish beach was shown across the world.
Alan’s [inaccurately reported as Aylan] five-year-old brother and mother also drowned on that perilous trip across the Mediterranean.

This Syrian family is not the first and sadly will not be the last victims of what is the worst global humanitarian crisis since the Second World War. Desperate men, women and children are risking their lives every day in a bid to reach safety.

However this image has galvanised public support and empathy and forced the UK Government into long overdue action. Scotland has been central to this and the Scottish Parliament and Government have shown great leadership on the response that is needed and continue to put pressure on the UK Government to do more. Scottish Refugee Council has experienced much of the positive compassion, generosity and support from the Scottish public at a scale rarely seen in our 30 year history.

Thousands of people across this country are saying loud and clear that they welcome refugees. These are not just empty words, but are being put into action.
But we’re also very aware of those who wish to play on people’s fears and who are using this as an opportunity to voice their racist views towards those seeking safety on our shores.

We need to speak up for refugees, address people’s genuine concerns, and stand up to those exploiting this refugee crisis to spread racism and divide people.

Scotland is ready and willing to play its part in welcoming refugees. We must remember that they are people just like us with their own hopes and fears. They are ordinary people living through extraordinary circumstances. Let’s make sure that all refugees are welcomed irrespective of race.

Scotland can be a beacon for how we treat refugees. Say no racism: refugees are welcome here.
Thank you for showing your solidarity with refugees today.

For more information on the developments on the crisis and to register your own offers of help please visit www.scotlandwelcomesrefugees.scot


John Wilkes
CEO of Scottish Refugee Council

Why the Scottish Parliament should demand a Legislative Consent Motion and refuse to comply with aspects of the Trade Union Bill

Calling for the devolution of employment law alone, is not a sufficient response to the Trade Union Bill

The STUC advocates the devolution of workplace protection law to Scotland.  This includes employment law, health and safety, equalities, minimum wages and of course the regulation of trade unions.

This position is supported by the SNP, but currently opposed by the Labour Party and by the TUC.

This blog is not primarily about the rights and wrongs of that policy.  However, the most commonly cited reason for opposing it is that it would presage a ‘race to the bottom’ in which the different legislatures competed to lower employment  regulation to gain competitive advantage and/or that it would provide encouragement or pretext to the UK Government to introduce different protections on a regional basis in England. 

The STUC rejects this view on three grounds.  Firstly, there is no evidence that the current Government in Scotland - nor its most likely replacement - would seek to lower workplace protection here (surely the opposite is true?).  Secondly, the Westminster Government already possesses the powers and majority required to introduce such regional variations if it so desired.  Thirdly, Northern Ireland already has a number of devolved workplace protections and neither of the feared outcomes has ensued.

It is also undeniable that, were trade union regulation already devolved, we would not be subject to the vicious Trade Union Bill currently being rushed through Westminster.

But arguing for the devolution of workplace protection is an insufficient response to the Trade Union Bill.  This is for two reasons.

Firstly, time is not on our side.  The Trade Union Bill if passed will become law in March/April of next year, whereas there is no prospect of the devolution of employment law in the near future.  Had theTories not been elected with a majority in May 2015, and had we successfully convinced Labour to support our position, things might have been different. But that’s not where we are.

Secondly, even if employment protection was devolved, or indeed if Scotland were independent, it would still be necessary for us to campaign against the Trade Union Bill. This would be partly as an act of solidarity, but also because no sensible analysis of the way in which the UK economy and labour market works could fail to understand that the way in which employment and trade unions is regulated in the UK would have a continuing impact in Scotland.

So, whilst the STUC will continue to campaign for the devolution of employment protection, the question is what do we do in the here and now?

Obviously, we continue to work with Scottish MPs in their efforts to defeat or amend the Bill at Westminster and obviously, we work to unite as many people in Scotland as we can to oppose it.  But our key priority in the week ahead is to explore what the Scottish Parliament can do.

The case for a Legislative Consent Motion (LCM)

The first thing the Parliament can do is demand that aspects of the Trade Union Bill are subject to an LCM  – the process whereby parts of the Act if passed would only be applicable in Scotland with the agreement of the Scottish Parliament. The aspects in question would be:

·      the clause in the Bill determining that public sector bodies should not offer ‘check-off’ facilities to their employees (the system whereby employees, if they wish they can pay their union dues directly from their salary); and

·      the part of the Bill which forces UK public sector funded bodies to give an account of the amount of facility time they offer to union reps (paid time off to represent members) and, the empowers the UK Government  to cap the amount of time public sector bodies offer  if it deems it ‘excessive’.

The UK Government has justified these provisions on the grounds of ‘saving taxpayers money.’ Of course, the real purpose is to attack public sector unions but even this Government cannot say that.

Crucially, the Government has not said it with wants to do away with payroll deductions per se.  It is not banning their use for charity giving, pension payments or cycle lease schemes. Neither is it banning payroll deduction schemes for union dues in the private sector.

The same is broadly true on facility time.  The Government is not banning facility time, nor does it want the power to limit its use in the private sector.

Essentially it does not want (or dare) to interfere with agreements reached between employers and employees in the private sector, particularly where these might be contractual.

Thus, we are facing a discriminatory piece of legislation in which some workers will have rights that others will not.

By applying this legislation in a non-universal way, the UK Government is openly admitting that these parts of the Bill are about what public money may, or may not, be used for rather than whether the concepts of payroll deductions or agreed facility time agreements are wrong per se.

I am no constitutional lawyer, but it seems to me that this introduces a number of complications and a clear problem relating to the spirit of the devolution settlement.

Now, as it happens, quite a lot of public sector employers make money out of check-off (unions pay for the service) and Government analysis of facility time shows a positive benefit to business, but this is not really the point.
The point is that the taxpayers’ money that the UK Government is looking to ‘save’ IS NOT ITS MONEY! This is not just a matter of principle, but of fact. At the point that resources are devolved to the Scottish Parliament or indeed raised through devolved tax-raising powers, it is a matter for our Parliament , and our Parliament alone to decide how to spend it.

It is important to be clear that the question about whether a Legislative Consent Motion is required does not simply centre on whether an act passed by the UK Government might impact on the way the Scottish Parliament may deploy its resources. To use a topical example, if the UK Government were to use its reserved powers on abortion to change the time limits for terminations, it would matter not a jot whether the Scottish Parliament wished NHS Scotland to do differently.  The law is reserved and the law is the law. No LCM would be required.

But if the UK Government were to maintain the legal right to a termination at a certain point in pregnancy, but that that such terminations could not be provided by the Scottish NHS, this I think would be viewed differently.  At least it should be viewed differently.

This is effectively what the UK Government is proposing in relation to the parts of the Trade Union Bill. Nick Boles, the Minister in charge, has confirmed that under the provisions of the Bill the NHS in England will be able to tell the NHS in Scotland how it can and cannot spend its money in relation to facility time and check-off.  This effectively means that the UK Health Minister can tell the Scottish Parliament what it can or cannot do with respect to its own resources.

The question of whether an LCM is required revolves around whether the legislative competence of the Scottish Parliament is affected.  In his blog Alan Trench argues that the Trade Union Bill involves no such interference. 

I’m not so sure.

Take a hypothetical example - though a good one!  As far as I can see, the Scottish Parliament would currently be empowered to enact legislation providing that all public service employers under its control MUST offer facility time, or check-off etc. to its employees.  This power would have to be limited to areas of its devolved competence (i.e. where it was the employer or had ultimate administrative competence) and it could not be extended to cover non-government employers as this would breach reserved employment legislation.

If the Trade Union Bill were to be enacted as currently written, the Scottish Parliament would no longer be able to do this. NOT because it was forced to comply with a universally applied law (i.e. the general banning of all payroll deductions or facility time) but because a law had been written that specifically banned it from using its resources in that way. To my mind, the Scottish Parliament should be looking into this issue very closely indeed. At the very, very least it should be the subject of debate on Tuesday.

If no Legislative Consent Motion

Presuming that the above argument is wrong, what should the Scottish Parliament do?

Irrespective of whether it breaches the letter of the devolution settlement, these parts of the Trade Union Bill surely breach its spirit. 

Therein lies the case for the Scottish Government to state its clear intention not to comply with these clauses. Local government in Scotland has already done so, and there is a very strong case for local government in England and Wales to do the same.

In practice, this would mean refusing to publish details of how facility time was used and how much was spent on it; refusing to cap facility time if the UK Government demanded it; and refusing to abandon check-off.

We do not yet know what the penalties for such an action would be. Although surely any such penalty must be proportionate to the ‘offence’? If, say, a local authority were to refuse to abandon check-off, and was able to show that by so doing it was actually saving the tax-payer money because it would lose revenue by stopping it, how punitive might a penalty reasonably be?

In any case, many will take the view that the penalty is immaterial because the principle is too great.

This returns me to the first part of this blog.  The devolution of workplace protection is a policy the STUC advocates, but alone it not an adequate response to the Trade Union Bill because the threat we face is more immediate and is a matter of principle.

By clearly stating its intention to refuse to comply with the clauses of the Bill, the Parliament can make a clear statement about its own legislative and administrative integrity and lay down a challenge to the Westminster Government which would resonate across the UK.

 

 

 

 

 

 

 

On the irony of being in London to campaign against the Trade Union Bill during Living Wage week

The new Living Wage rate was announced on Monday and Living Wage week has involved a range of campaigning activities, including events rightly recognising the progress made by some employers in paying the wage, which provides ‘a low cost but acceptable standard of Living’. 

The phrase ‘low cost but acceptable’ makes me uncomfortable, though I am required  to use it often.  People could certainly be forgiven for failing to get very excited about the fact that between 300 and 400 employers in Scotland should be lauded for reaching those dizzy heights in the payment of their staff.  However, whilst 1 in 5 of the working population are still being paid a wage which by this definition allows for a ‘lower cost and unacceptable standard of living’ (i.e. poverty) – needs must.

The irony is that reliance on Minimum Wages and campaigns for a decent Living Wage are mainly necessary because successive governments have legislated away or failed to support meaningful trade union power.  I use the words ‘trade union power’ advisedly, knowing that for some this conjures up images of all powerful trade union bosses and ‘one out-all out’ 1970s memes.  The media has done an effective job over decades of caricaturing trade union activity so that simple phrases throw up negative connotations. However, trade union power matters.

People will disagree about when exactly trade union power was at its height.  Union membership peaked in the late 1970s and many would argue that the 1974-1979 was the pinnacle of trade union strength.  Here is the graph of income equality in the UK since 1961.  Fairly clearly, inequality is at its lowest when trade union strength is at its greatest.

 

There is another way of looking at the figures and trend, which describes union membership as a proportion of the working population and sees it peaking earlier.  This graph correlates trade union membership with the share of income of the top 10%.  It is a different way of looking at the same phenomenon.

 

Now it is not suggested, by me at least, that trade union strength is the only factor which relates to income inequality.  For sure, the attacks on the social security system, which began with Thatcher and have been continued, are a fundamental driver of poverty and inequality as was the destruction through the 1980s of a range of industries which previously provided decent ‘middle’ wages for working class people.

But union power matters and the primary reason it matters is probably less to do with union membership levels per se (though that’s important) and more to do with the incidence of collective bargaining in the economy.  This graph gives a Europe-wide picture of the correlation between income inequality and collective bargaining.  With France and Belgium which have vastly different levels of trade union membership (Belgium relatively high, France very low) both performing far better than the UK on the gini coefficient, but both sharing similar levels of collective bargaining.

It is therefore important to understand the Government’s current attack on trade unions to be aimed at further undermining our collective bargaining power.  The Government calculates that it can achieve this by attacking union capacity through reducing time off for reps and wrapping unions in red-tape meanwhile undermining the potential for, and the effectiveness of industrial action.

However hard we campaign (and we will) for a decent statutory minimum wages and however persuasive we are about the advantages to employers of setting a positive example (and we will be).  There is no more important factor than maintaining and enhancing trade union power.  Opposing the Trade Union Bill is the first step.

Dave Moxham

 

Opposing the Trade Union Bill in Parliament - guest blog Ian Murray MP

Ian Murray MP, Labour Shadow Secretary of State for Scotland, along with Stephen Doughty MP, outline the Labour Group's opposition to the Trade Union Bill in the UK Parliament, and the joint campaigning against it.

There is a grim irony to the fact that the Tory Government’s Trade Union Bill coincides with the 100^th anniversary of the death of Keir Hardie, a hero of the workers’ movement and the man perhaps most responsible for forging the close links between the Labour Party and the Trades Union movement that endure to this day. As my colleague Stephen Doughty MP, Labour’s lead spokesperson on this Bill, has stated, Labour MPs will oppose every aspect of this pernicious Bill with every sinew.

 

Since Hardie’s era, the Labour Party has built on the foundations he established and developed a close relationship with the Trades Union movement, based on mutual interest, reliance and support. Every trade unionist and good employer knows that businesses thrive when employees and employers work together for the benefit of the business.  Viewed in this context, the Bill is not just an affront to civil liberties; it is a devious and dishonest attempt to rupture that relationship and to place workers and employers at loggerheads. As Jeremy Corbyn has said, it infringes international labour rights and conventions. What’s more, it is just bad legislation: transparently partisan, poorly conceived and porously drafted.  

 

This Bill has so many holes that it is difficult to choose which thread to pull on: arbitrary turnout and voting thresholds that, had they been applied at the General Election, would have seen many Tory MPs fail to get elected, and which will, if enforced, have a disproportionate impact upon women seeking parity of pay and conditions. A profusion of petty regulations to smother unions in red tape, and changes to political funding which could undermine successful campaigns such as the Hope not Hate, or UNITE’s “Fair Tips" and USDAW’s “Freedom from Fear” campaigns. A self-serving redefinition of “essential” public services. Finally, absurd restrictions on facility time, and the abrogation of check off, a proposal that former Lib Dem MP, Danny Alexander – hardly a totem of the Trade Union movement – previously dismissed as pointless and open to legal challenge.  In essence, we are dealing with a full-frontal assault on the Trades Unions and Labour movements.

 

The Government’s justification for the Bill is utterly spurious. They argue the need to reduce the incidence of industrial action – citing the recent rail strikes in London as an example. However, and as Alan Johnson MP pointed out when the Bill was debated at second reading, industrial action has declined significantly over the past 30 years. Since 2010, an average of 647,000 days have been lost, compared with 7,213,000 lost in the 1980s and these proposals would not have prevented the London Tube strike or that CWU postal strike that had huge turnouts and massive support.

 

Labour has led the charge against this Bill and I have been working very closely with the Shadow BiS Team on this issue, and with Stephen Doughty MP, who has been taking the Bill through Parliament.  We have tabled over 70 amendments to try and derail the Bill.  As well as opposing the Bill overall, in areas where we believe it to direct contravene of the devolution settlement, we have taken a more focused approach, tabling amendments to protect workers across the UK form its worst aspects.  In its assault on workers’ rights and entitlements, this Bill is no respecter of boundaries and borders, and while the Bill is itself divisive, we must show solidarity in opposing it.

 

That is why Labour’s amendments apply equally to every part of the country: the Greater London Authority; English local authorities; and the devolved administrations in Wales, Northern Ireland and Scotland. SNP MPs have already supported many of these amendments, and we welcome their support.  

 

If we are to defeat this Bill, as I believe we can, we need collective action across the UK. The Supreme Court judgement on the abolition of the Agricultural Wages board in Wales has given us grounds for hope. Carwyn Jones, Labour’s First Minister in Wales, is vigorously opposing the Bill as infringing on devolved policy, and is poised to demand a Legislative Consent Motion, for which the above ruling provides legal precedent, should the Government proceed regardless.

 

In Scotland, our Scottish Labour leader Kezia Dugdale MSP has urged all Scottish local authorities to agree a motion of non-compliance, and every Labour-led administration in Scotland has done so. We need everyone else to follow suit and the Scottish Government to encourage them to do so. We also need the Scottish Government to table their own LCM, and to state clearly and unequivocally that they will not abide by any Bill that affects the devolved settlement in Scotland. This Bill encroaches upon devolved public services so a Scottish LCM is both necessary and justified.

 

The Trade Union Bill is part of a wider Tory agenda to curtail rights and quell dissent; an agenda which encapsulates the charities gagging bill, fees for employment tribunals, the dilution of individual rights, the undermining of collective rights, and cuts to legal aid. All those who believe in democratic rights and sound industrial relations have a duty to oppose it.   We are doing all we can in the Parliamentary process and we welcome the support of the STUC and member unions.  What this Tory Government forgets is what we have always known: that effective trade unions are good for employees, good for businesses, good for jobs and good for the economy.  This Trade Union Bill is an all out assault on them all.

 

STUC General Secretary at SNP conference

On the morning of Saturday 17^th October, Grahame Smith our General Secretary got to his feet, delivered a speech to SNP conference and received a standing ovation. It was described as an ‘historic’ moment.  STUC leaders haven’t tended to be sought for, or to seek out, prime platform spots at the SNP conference.

The subject was the Trade Union Bill and the SNP took the unusual step of suspending their Standing Orders to allow Grahame to speak in the debate, on a motion proposed by Chris Stephens MP and seconded by Roseanna Cunningham MSP. 

Now, to be sure, for me as a veteran of student, Labour Party and trade union democracy, it seemed an odd procedure.  But that is a matter for the SNP.  For us it represented an opportunity to speak to the party of Government, supported by at least half of the Scottish population (and of trade union members) on the greatest existential threat to our movement for a generation, during a debate on a motion which was completely opposed the Bill.  Grahame also used the opportunity to raise the highly concerning current threat to the Scottish steel industry.

It is however, a decision that has been criticised. A number of trade union and Labour activists took to social media to accuse the STUC of ‘endorsing the SNP’ ‘abandoning Labour’ and ‘naively falling into an SNP trap’.

The argument (I think) goes thus.  The SNP are a right wing, anti-trade union party masquerading as the opposite.  By speaking during one of their debates the STUC has effectively endorsed them and in so doing damaged Labour.

Just for the record, the STUC is a not a political party affiliated organisation, most of its unions are not affiliated to Labour and probably fewer than half of its members pay the Labour levy. The STUC has spoken at Labour Party conferences for as long as anyone can remember, and last week, Grahame spoke at the Green Party conference.  Were a similar invitation to be received from, say, the Tories, I would be recommending that we accepted, though I wouldn’t be able to guarantee that the assembled delegates would like what they heard!

It is certainly true that the SNP was keen to highlight the fact that Grahame was speaking at the conference and that a key theme of the weekend was, as a number of journalists noted, a clear attempt to connect with working class voters. On the Trade Union Bill, their MPs are pledged to vote out the whole Bill, and are working closely with the STUC, TUC and Labour MPs to effect its defeat.  The Scottish Government opposes the Bill in its entirety (including, incidentally the political fund clauses even though it might be to their advantage);  is investigating whether an argument can be made for a Legislative Consent Motion, and is considering how it can refuse to co-operate with legislation if it is enacted.

It should be recognised and applauded, that Scottish Labour, including Labour councils have gone somewhat further than this.  Some have already stated their intention to refuse to comply with aspects of the Bill such as caps on facility time; the removal of the right of employees to pay their union dues through the payroll; and the use of agency workers to break strikes.  The Green Party has adopted a similar view.

This is enormously welcome and, whilst the primary aim at this point is to defeat the Bill, the STUC will continue to press all parties, including the SNP, to support a non-compliance position, if this nasty Bill in enacted.

This approach reflects a wider one, which will continue.  When the SNP Government does things which we disagree with, we will say so - as we did, last Wednesday when we criticised the First Minster on youth employment figures.

But what we won’t do is to pass up the opportunity to work with the Scottish Government in areas of broad agreement, nor with the SNP on our key priority campaigns.

There are some, on all sides of the party political divide in Scotland who would like the STUC to fight a proxy battle on their behalf to do damage to the other.  Our members and their interests are implicitly seen as acceptable collateral in a bigger war for political power.

This isn’t going to happen.

 

Dave Moxham

Is youth unemployment at a 10 year low?

On Sunday's Marr Show (at 37.00 mins), Nicola Sturgeon, First Minister stated that "youth unemployment is at its lowest level in a decade". If true, this is surely good news. People worry about youth unemployment for very good reasons. Like all varieties of unemployment, it is a terrible waste of resources for the country as a whole and expensive to the public purse. Periods of unemployment, particularly if prolonged, do significant damage to a young person's future life chances. There is a duty therefore on politicians of all stripes to ensure interventions on the subject are evidence-based and precise.

So is the First Minister correct? Well, she referred to the 'level' not the rate of youth unemployment so let's start with the latest (published 16 September) numbers drawn from the Annual Population Survey:

Chart 1: Youth unemployment, level (000s), Scotland 2004-March 2015

On the 18-24 years measure [note: I've chosen to focus on the 18-24 years group but have included information on the 16-17 sand 16-24 groups for completeness. All the arguments presented below hold true for both 18-24 and 16-24 groups. The 16-17 group is a special case as we shall see] it is clear that unemployment remains significantly higher than it was a decade ago: the latest figures, covering the April 2014-March 2015 period, confirm that 51,000 young people were unemployed compared with 36,000 during the period April 2004-March 2005. The last time the figure was lower than 51,000 was in the July 2008-June 2009 period when 18-24 years unemployment was 46,000. 

However, focusing on the level (i.e. the number of young people unemployed) isn't very illuminating. If for the sake of argument the economically active population aged 18-24 had doubled over the decade then a figure of 51,000 would represent a very decent outcome (i.e. a much lower rate) . So it makes sense to look at the rate:

Chart 2: Youth unemployment, rate (%), Scotland 2004-March 2015

The current 18-24 years rate of 14.5% is 4.1% higher than it was a decade ago; it was last lower in 2008. 

The above measures are based on the Annual Population Survey which are the most reliable statistics available for employment/unemployment/inactivity by age in Scotland. The APS is based on a sample size four times larger than the Labour Force Survey from which the headline figures we hear discussed each month are drawn. However, ONS also publishes an 'experimental' series of data on employment and unemployment by age. This series has the advantage of being more up-to-date (the latest figures cover the May-July 2015 period) but ONS are careful to apply the following strong caveat: "These estimates are derived from the same data source as the headline figures, but due to the relatively small samples sizes and subsequent sampling variability, the figures should be used with caution and are designated as experimental statistics".

The STUC has in the past taken issue with the Scottish Government using these statistics whilst failing to note the caveat. But do the experimental statistics support the proposition that youth unemployment is at its lowest level in a decade?

Chart 3: Youth unemployment, level (000s), Scotland, 2004-2015 (experimental series)

Even on this measure, 18-24 years unemployment is currently higher than it was a decade ago (54,000 compared to 47,000). However, this is a more volatile series and the number of 18-24 year olds unemployed increased by 9,000 between March-May 2015 and May-July. So if the First Minister had been speaking to Marr before the latest statistics were published on 16 September, her statement would have been technically correct on this measure. Perhaps the error is simply attributable to a short lag in updating official advice/Ministerial lines.

What does the unemployment rate from the experimental series reveal?

Chart 4: Youth unemployment, rate (%), Scotland, 2004-2015 (experimental series)

The current 18-24 rate of 14% compares to a rate of 12.9% exactly a decade ago. However, as with the level above, the rate did drop to 11.8% earlier this year. So, again, it would have been technically accurate to argue before the latest statistics were published in September that youth unemployment on this measure was lower than a decade ago.

It would have been possible but to have done so would have been more than a bit mischievous. As the charts above show, both the level and the rate fell during the period between 2004 and 2007 hitting lows of 32,000 and 8.8% respectively in Nov-Jan 2007. Surely a more accurate gauge of progress is to compare current performance against pre-recession peaks/troughs not an entirely arbitrary time period of a decade?

But does any of this really matter? Is the unemployment rate really an effective gauge of the position of young people in the labour market? I would argue it isn't and would refer people to this excellent 'heretical' post by Mike Campbell for an explanation as to why. As he points out, the unemployment rate measures the proportion of economically active (in work or looking for work) young people who are out of a job. The denominator is not the whole population aged 18-24. Economic activity amongst this age group is always relatively low because so many are in full-time education. Many young people looking for a job will also be in full-time education. If the number of unemployed young people remains constant, and the numbers going into full-time education increase, this would show as an increase in the unemployment rate.

So what more do we know about young people in the labour market in Scotland in 2015? 

Chart 5: Employment, Unemployment and Inactivity, rates (%), Scotland 2004-2015

The gradual fall in unemployment since 2012 is mainly attributable to rising inactivity; the increase in employment has been extremely slow although the very latest statistics - not yet sufficient to show a clear trend - are more encouraging. If the rising numbers of inactive young people simply reflect more entering full-time education then this it is clearly not a trend to fret about unduly. If however more young people are simply leaving the labour market altogether and not engaging in education or training then the Scottish Government - and the rest of us - should be extremely concerned. 

Chart 6: Inactivity rate (%), Scotland, 2004-2015

The huge leap in the 16-17 year olds inactivity rate almost certainly reflects the higher numbers staying on at school. We know that the number of 16-19 years olds not in education, employment or training has fallen significantly over the last decade. Of more concern is the 18-24 years group. Rising inactivity might simply reflect higher numbers in full-time education (and not looking for a job) but I'm unaware of official statistics we can draw on here.

But the slow increase in employment is a concern. It is unambiguously the case that fewer young people are in work than a decade ago whilst the employment rate for the over 50s has increased significantly. There is a worry that young people are being squeezed out of entry level jobs. We also know that young people are much more likely to be on a zero hour contract or paid less than the national minimum wage or the living wage. The under-25s will not benefit from the introduction of the 'National Living Wage'.

In conclusion, the First Minister was incorrect to state that youth unemployment is lower than a decade ago although it is certainly possible that, when the new statistics are published tomorrow, this may become true. My concern is that by focusing only on unemployment, and being guilty of using what at best are incomplete and out of date statistics, the First Minister is in danger of leaving the impression that young people's situation in the Scottish labour market is improving much more rapidly than is the case. One day politicians may start using labour market statistics with due care and precision. We're not there yet.

Stephen Boyd
STUC