No, I wouldn’t buy second hand wallpaper from this man

You could be forgiven for thinking that the Chancellor Gideon George Osborne had drafted his conference speech with the sole intention of keeping us Better Way bloggers busy. I mean, where to start?!

Hoping that others better placed than me will cover issues around universality and benefits, I’ll concentrate on the following sections for now:

GO Quote 1 “Britain had one of the highest budget deficits in the world and no credible plan to reduce it. This at the very moment when fears of high budget deficits had plunged the entire European continent into crisis. For the first time in our history, the nation's credit rating was at risk. And adding to this toxic mix, was the fear that the hung parliament would lead to a weak government. Within fifty days we had restored confidence at home and abroad in Britain's ability to pay its way in the world with a bold emergency Budget”.

It is so very, very tiresome having to rebut this nonsense on a daily basis but rebut we must.

Prior to the election, markets did not believe that Britain had ‘no credible’ deficit reduction plan. Far from it; the markets had reacted with benign indifference to the 2008 Pre Budget Report (when the scale of the collapse in revenues first became apparent and when the Chancellor introduced a modest – much too modest – stimulus package), the March 2009 Budget, December 2009 PBR and March 2010 Budget. At the end of April, as the election campaign was at its most frenzied and uncertainty reaching a peak, markets were pricing the UK as very credit worthy indeed.

It is demonstrably false to claim, as the ConDem’s routinely do, that the UK was on the verge of a Greek style crisis. See STUC paper ‘Avoidable, Unfair and Regressive’ for the stats and explanation of why the UK is a very different case from Greece (and Ireland, and Portugal, and Spain).

You know, what is really curious here is that a proud market fundamentalist such as Gideon, should choose to ignore the price signals the market was sending. But there is method in his madness - price signals prior to the election confirm that markets regarded the UK as a safe haven.

GO Quote 2 “For look at Ireland, and Greece, and Portugal, and you will see that the dangers have not passed. Every day as Chancellor I see alerts telling me of risks around the world. That we meet here, in Britain, in an atmosphere of relative calm not raging crisis is a measure of what we have achieved together over these first five months. The world has confidence in the plans we have set out. Vigilant at all times we remain — but there is no panic, no daily dread of the bond market, no paralysing fear that our credit rating could be lost, no immediate danger of a deathly spiral of higher interest rates”.

Show me the way to go home. I’m tired and I want to go to bed. But we must continue to rebut. We must.

There was no panic. There was no sign of imminent panic. The bond market was calm. There was no prospect of a ‘deathly spiral’ of higher interest rates. Gilt yields were low and falling prior to the election.

Please do not take my word for it. Read Martin Wolf who is chief economics commentator at the Financial Times. He is not a socialist. But he is always worth reading:

“Markets have also been remarkably relaxed about funding these deficits: interest rates on index-linked gilts have been 1 per cent, or less, for more than a year; the yield on 10-year gilts has remained below pre-crisis levels and is now close to 3 per cent; and spreads over German bunds have been 1 percentage point, or less, throughout the crisis.

“The government argues that borrowing costs have been contained only because of its commitment to austerity. In fact, spreads over bunds have stabilised since February and fallen by just 0.2 percentage point since the election. This suggests that the coalition’s strong fiscal stance has brought modest credibility gains. What would have happened if Labour had won we cannot know.”

But we can guess. Given that they were ‘remarkably relaxed’ before the election, and that Labour had a (much too) ambitious deficit reduction plan in place, I think we can safely assume that the markets would once again have reacted with benign indifference to a Labour victory.

GO Quote 3: “Imagine, if I were to stand up in the House of Commons in two weeks time and say: I'm cancelling the deficit plan. I agree with Ed Miliband.Let's delay the tough decisions. Let's borrow more. Let's go on adding to our debt. Imagine if I said that. Now imagine what would follow. The market turmoil. The flight of investors. The dismay of business. The loss of confidence. The credit downgrade. The sharp rise in real interest rates. The extra debt interest. The lost jobs. The cancelled investment. The businesses destroyed. The recovery halted. The return of crippling economic instability. Britain back on the brink”.

Rebut, rebut we must continue to rebut.

Perhaps the reaction might be as dramatic as Gideon suggests if he simply stood up and cancelled the plan. On the other hand, what if he stood up and said something along the following lines?

‘I Gideon Osborne now accept that the economic recovery is extremely fragile and that current survey evidence points towards very low or possible negative growth in quarter 3 2010. There has been a sharp dip in business and consumer confidence since the emergency budget in June. There is no prospect of the private sector delivering employment growth to replace jobs losses in the public, private and voluntary sectors if I pursue the June plan. Indeed, if we continue with this plan we will ConDem the UK to years of high unemployment, stagnation and deflation.

‘Therefore, I renounce my June plan and postpone consolidation until next year. I will not place figures on future consolidation plans because I will now ensure that they are contingent on strong and stable growth. We will not continue to run deficits of 10-11% but equally we will not be content with high unemployment, low growth and low revenues. If necessary we will introduce another modest stimulus but this will be inevsted in areas that will boost long-run sustainable growth e..g. education and infrastructure’.

You get the idea. Would markets not deem such an approach more credible than the cuts of 25-40% across Govt departments currently proposed by Gidders? Implied in all his interventions is the belief that markets are rewarding austerity and punishing expansionary policy. This is the opposite of the truth.

GO Quote 4: “And let me take head on this completely false argument that delaying the cuts will somehow make them smaller and easier. The truth is exactly the reverse. Britain has a £109bn a year structural deficit. Let me tell you what a structural deficit is. It's the borrowing that doesn't go away as the economy grows, and we have £109bn of it. It's like with a credit card. The longer you leave it, the worse it gets. You pay more interest”.

My head is sore. Please I must sleep.

The structural deficit is a theoretical construct. Its size depends on the assumptions you make in calculating it. The only reason the structural deficit increased between the PBR in December 2009 and the June Budget is because the assumptions changed. What is abundantly clear is that the actual economic position had improved: unemployment was falling, revenues had increased above forecast as had growth.

And then we come onto the household budget model of the economy stuff so beloved of the ConDems and Thatcher before them. But here I lose all patience and hand you over to those who have covered this already.

GO Quote 5: “Here are two sides to this argument. On one side there is the IMF, the OECD, the credit rating agencies, the bond markets, the European Commission, the Confederation of British Industry, the Institute of Directors, the British Chambers of Commerce, the Governor of the Bank of England, most of British business, two of our great historic political parties, one of the Miliband brothers, Tony Blair, and the British people. On the other side is Ed Miliband and the trade union leaders who put him where he is. The national interest or the vested interests”.

Aha! Roused from my stupor of robotic rebuttals by the presentation of a lovely big open goal!

The IMF, OECD, EC, BoE, financial market insiders, ratings agencies (Holy Jaysus, he’s still citing ratings agencies), CBI, CoC....AYE WEE MAN, THAT’LL BE THE SAME CABAL WHICH ONLY THREE YEARS AGO WAS ARGUING THAT INNOVATION HAD REMOVED RISK FROM THE FINANCIAL SECTOR...WHO THOUGHT THAT DEREGULATED FINANCIAL CAPITALISM WOULD MAKE US ALL RICHER...WHO THOUGHT THAT THE SELF INTEREST OF INDIVIDUALS AND CORPORATIONS WOULD PROVIDE FOR MARKET STABILITY...JEEZ...

In any case, it’s not strictly true:

·         OECD has been inconsistent – one minute praising austerity (in one report last spring they even suggested quick and substantial increases in interest rates!) the next fretting about falling demand;

·         Yes, only last week the IMF praised the emergency budget plan but it has also published reports arguing that the UK is not the basket case of ConDem legend. It has also argued for postponing consolidation until next year. It has argued that ‘maintaining aggregate demand’ is the best remedy for high unemployment ;

·         As outlined above, it is highly misleading to invoke the bond market in support of ConDem policy;

·         Yes, Mervyn King supports the pace and scale of fiscal consolidation proposed by the ConDem’s but he has also called for a debate on the balance between tax rises and spending cuts; and,

·         Most of British business – that will be those businesses not reliant on public contracts, or likely to be affected by lower demand or too bloody narrow minded to see the true nature of what’s coming?

Giddyman thinks the unions are a vested interest. Seems that the CBI and Chambers of Commerce are independent voices of reason with no axe to grind?

GO Quote 6: “Together, Vince and I have started to open Britain for business. Labour's jobs tax abolished. Regulations scrapped. Common sense brought to health and safety. National Insurance cut for any new business in our regions. Corporation tax cut next year, and the year after that, and the year after that – and the year after that”.

Over seven long years at the STUC I have endlessly rebutted the myth that UK businesses are over-taxed and over-regulated. In my innocence, I thought the banking crisis would make people reconsider the positive role of regulation in an advanced economy. Some hope. The UK is lightly regulated. Too lightly regulated; our system practically forces UK firms down low road competitive strategies. This is bad for workers, communities and the environment and it is also very bad for long-run sustainable growth.

Corporation tax? Well the proof of the pudding...but worth remembering that the effective rate on UK corporations is well below the headline rate. It is fantasy to argue that these cuts will unleash a wave of private sector investment of sufficient scale to compensate for stripping demand out the economy through cuts and regressive tax rises. If the corporation tax cuts achieve anything at all it will be to further increase the proportion of GDP extracted by the corporate elite.

All in all it was a disgraceful speech. Aggressively selective and misleading, Osborne is confident that a compliant media will continue to keep people in the dark. He is correct unfortunately. Which is why our campaign is so important. The enthusiasm is obvious every time we present the STUC’s analysis of the Budget plans and our alternative economic agenda. We must continue to build on it.  

Stephen Boyd

Ed Miliband sets the tone for Labour

So a new Labour leader and not the Miliband we were expecting. What should we make him? Well he made his first speech as leader today and I have to say I was pleased with some of the things he said.

The speech was called ‘The New Generation’ and was not subtle in its message that Ed Miliband represents a break from the past. It also tried hard to position the Labour Party as representing a new generation in Britain with a different take on the world. And in this, I think he did a good job.

Personally I found some of the lines appealing like:
This generation wants to change our society so that it values community and family, not just work, because we understand there is more to life than the bottom line’

This tries hard to tap into the ‘flexible working culture’ and speaks to the desire that so many have to effectively balance their work with their family life. Finding a way to balance these competing demands is a real effort and one which I see consuming so many of my friends and family, particularly when their children are small. So with this, Ed struck a chord with me.   

He also spoke of the opportunity that exists to make a change.

As we emerge from the global economic crisis, we face a choice: we can return to business as usual or we can challenge old thinking to build the new economy we need.

Not revolutionary lines, I accept but an import sign all the same, that rebuilding Britain’s economy does not have to mean rebuilding the same inequalities and the unfairness that existed in the past.

But the question I really wanted answered was how much does Ed sign up to the Better Way Campaign? Well, I think he is definitely moving in that direction.  But I will let you decide for yourself. Here is what he had to say on the deficit and the Coalitions’ plans:    

I am serious about reducing our deficit.

But I am also serious about doing it in a way that learns the basic lessons of economics, fairness and history.

Economics teaches us that at times of recession governments run up deficits.

We were too exposed to financial services as an economy so the impact of the crash on the public finances was deeper on us than on others.

We should take responsibility for not building a more resilient economy.

But what we should not do as a country is make a bad situation worse by embarking on deficit reduction at a pace and in a way that endangers our recovery.

The starting point for a responsible plan is to halve the deficit over 4 years, but growth is our priority and we must remain vigilant against a downturn.

You see when you cancel thousands of new school buildings at a stroke, it isn’t just bad for our kids, it’s bad for construction companies at a time when their order books are empty.

It’s not responsible, it’s irresponsible.

When you deprive Sheffield Forgemasters of a loan, a loan from government which would be paid back, you deprive Britain of the ability to lead the world in new technology.

It’s not responsible, it’s irresponsible.
 
And when you reduce your economic policy simply to deficit reduction alone you leave Britain without a plan for growth.

It’s not responsible, it’s irresponsible and we should say so.

No plan for growth means no credible plan for deficit reduction.

And nor should we reduce the deficit without learning the basic lessons of fairness.

We must protect those on middle and low incomes. They did nothing to cause the crisis but are suffering the consequences.

I say the people who caused the crisis and can afford to do more should do more: with a higher bank levy allowing us to do more to protect the services and entitlements on which families depend.

And we should learn the basic lessons of history.

After 1945, we had the biggest debt we have ever had.

That generation cut the deficit but they had a bigger vision: for a new economy and a good society.

True patriotism is about reducing the debt burden we pass on to our kids.

But Mr Cameron, true patriotism is also about building an economy and a society fit for our kids to work and live in.

You were the optimist once but now all you offer is a miserable, pessimistic view of what we can achieve. And you hide behind the deficit to justify it.

Helen Martin - STUC

A Better Way...for Better Pay.

A Better Way...for Better Pay.

On 1st October 2010, there will be a new category created in the National Minimum Wage that will cover Modern Apprenticeships. This legislation will set a new Apprenticeship National Minimum Wage at £2.50 per hour for young apprentices (under 19-years-old) and for those who are in the first year of their apprenticeships.

This includes payment for time spent training off the job.

While the move by Government to include Modern Apprentices within the National Minimum Wage framework is a step in the right direction, surely £2.50 per hour is morally substandard?  Being paid at £2.50/hour for a working week of 40 hours equates to £100 per week, which works out to be just £5,200 per year.

The Joseph Rowntree Foundation recently found that a single person in the UK today needs to earn £14,400 (before tax) to afford a “basic but acceptable standard of living”.  Getting paid £5,200 per year comes nowhere close to meeting the needs of a basic lifestyle, risks poverty and exclusion and increases the likelihood of increased drop out rates.

There is a danger that employers will choose to set the apprenticeship wage at the minimum.  Apprentice rates should reflect the job done – if an apprentice does a full-time job, he or she should be paid fairly for it. Think about it: a Modern Apprentice on the new Apprenticeship National Minimum Wage would be required to work 111 hours per week just to earn the recommended £14,400 annual salary!

The vast majority of Modern Apprenticeships are undertaken by young people between the ages of 16-24, and it is essential that our young workers are given fair remuneration for their positive contributions to their employers.

The STUC supports a ‘Living Wage’ in Scotland of at least £7.15 per hour for all workers, including Modern Apprentices.

From 1st October 2010 the new National Minimum Wage rates and age bands will apply:
·    £5.93 - the rate for workers aged 21 and over
·    £4.92 - the 18 - 20 rate
·    £3.64 - the 16 - 17 rate
·    £2.50 – the rate for apprentices who are either under 19 or in the first year of their apprenticeship


The STUC began a new Modern Apprenticeship Project in June 2010 to develop and increase trade union activity and engagement with the Modern Apprenticeship programme in Scotland.  Tommy Breslin is the Development Officer responsible for the Modern Apprenticeship Project.  He can be contacted on 0141 337 8152 or at tbreslin@stuc.org.uk.

The IMF – inconsistent, ideological and wrong

Yesterday the International Monetary Fund stated that the UK economy was ‘on the mend’. Apparently ignoring a wide range of surveys which show confidence collapsing around the time of Osborne’s June Budget, they myopically declared that there is ‘no evidence of a double-dip recession’. The ConDems were understandingly gleeful over this ringing endorsement of their Budget strategy.

And yet, only a fortnight ago, in a joint report with the ILO, the IMF stated that the one thing necessary to tackle low growth and high unemployment was for Governments to ‘maintain aggregate demand’. Reconcile these positions if you can.

At the start of the month, the IMF found that the UK could borrow an additional £700bn before the public finances entered crisis territory. The UK has significantly more ‘fiscal space’ than genuine crisis countries such as Ireland and Greece. Markets bear out the IMF's position with current prices confirming that the UK’s debt challenge is nothing like the scale of that facing Ireland, Greece and Portugal. But yesterday the IMF argued that ‘the government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability’. Evidence please?

So despite some welcome signs that a long overdue challenge to dominant orthodoxy may be underway within some IMF departments, its default position still appears to be the Washington Consensus.

It is certainly true that large swathes of the media (the execrable Nick Robinson in particular) continue to invoke the IMF as the ultimate authority on economic affairs. Does its record warrant such esteem? Well, here are some chestnuts from the IMF’s 2006 annual report; published less than a year before the credit crunch started in earnest:

• ‘Directors noted that the rapid growth in recent years of credit derivative and structured credit markets had facilitated the dispersion of credit risk by banks to a broader, more diverse group of investors, making the financial system more resilient and stable’.

Resilient and stable? Just how wrong can you be?!

• ‘While cyclical changes could well expose weaker segments and pockets of financial markets, the Board considered that these were unlikely to pose systemic risks….regulators should place greater reliance on the self-correcting forces of financial markets’.

Self-correcting? With the help of a multi-trillion public bailout perhaps.

• ‘In March 2006, an IMF team visited Dublin to update the 2000 Financial sector Assessment Program (FSAP). The team found that Ireland’s financial system remained robust but recommended some improvements to the supervisory framework, including upgrading stress testing, strengthening on-site supervision of insurers, and enhancing public disclosure requirements for insurers’.

Robust? Some improvements? Irish workers are now paying a very heavy price for the IMF’s ideological bias.

Of course, the IMF’s historic failures have been well documented by Joe Stiglitz and others. The IMF was pivotal in establishing a model of globalisation that led to pervasive instability, moderate GDP and productivity growth, greater inequality between rich and poor nations, greater inequality within rich nations and lower social mobility across the developed world. Its lamentable failure in dealing with the Latin American and East Asian financial crises of the 1990s led directly to the global reserve system of today; a primary cause of the 2008/09 crisis and an ongoing source of poverty and instability. You could write a book on the IMF’s failures but thankfully Stiglitz got there first.

But its ok – the IMF thinks the ConDems are doing a good job. I guess we can all relax.

Stephen Boyd

Martin Wolf on premature tightening

Martin Wolf, chief economics commentator at the Financial Times has had a very good crisis although it’s important to clarify that he and the STUC would differ on many substantial points of policy. For example, Mr Wolf would prefer to see spending cuts account for a much higher proportion of future fiscal consolidation than tax rises.

However, that Mr Wolf is, I think, the most effective critic of ConDem economic strategy is again confirmed by his latest FT piece on ‘the risks of premature tightening’.

Unfortunately the piece is probably behind a paywall - yes, we do spend £40 a year on an FT subscription – so here’s a quick and I hope fair précis:

·         Mervyn King should be admired for his intellect, integrity and bravery in taking his case to the TUC;

·         Mervyn King argues that the ConDem spending cuts are necessary because 1) market reaction to rising sovereign debt can turn quickly and 2) other countries have embarked on consolidation exercises that are even more ambitious than the UK’s; and,

·         Mervyn King is wrong.

Indeed, Mr Wolf does a very neat job in filleting the case presented by the Governor to the TUC. He endorses the STUC’s position that the UK public finances cannot credibly be compared to those of Greece. He ridicules the ConDem suggestion that ‘borrowing costs have been constrained only because of its commitment to austerity’ by providing a range of statistics to show that market markets’ view of the UK have changed little since the election.

Most importantly, Mr Wolf puts a compelling case for consolidation plans to be flexible and contingent on how the economy recovers. Such plans, he explains, would be far more credible than current strategy which, if the economy continues to stagnate and unemployment remains high, represents ‘political suicide’.

I wonder how the Chancellor might react to Mr Wolf’s article...adopt that condescending look and mutter ‘deficit denier’? He doesn’t have the arguments to offer much else. Given the strength of the case presented by Mr Wolf and others and the poverty of the ConDem response, it’s reasonable to speculate that the ‘consensus’ the Government claims on cuts might soon be entering its death throes.

Stephen Boyd

Calling all Lib Dems

The STUC today wrote an open letter to all Lib Dem MSPs and MPs in Scotland. Their conference begins tomorrow in Liverpool and we hope that Scottish Liberal Democrats will join us in rejecting calls by George Osborne and Nick Clegg to remove an additional £4 billion on top of the £11 billion that they have already taken out of the welfare budget.   

In our letter we condemn Nick Clegg’s comments that welfare payments should be “an engine of mobility...rather than a giant cheque written by the state to compensate the poor for their predicament," and we make the point that with long-term unemployment on the rise there simply aren’t enough jobs to go around.

Here is an extract from our letter:

STUC is receiving a very clear message from its own members particularly its disabled members, not to mention our sister organisations in the Scottish Campaign on Welfare Reform. People are becoming increasingly fearful for their futures and increasingly angry as it is insisted ‘that more people must find work’ when so little is being done to tackle unemployment.  Figures released this week by STUC showed a 132% increase in long-term unemployment across Scotland with the highest regional increase of 475% being recorded in the Scottish Secretary’s own constituency.

It remains the fact that benefit payments in the UK are low compared to most other countries, income inequality is stubbornly high and work is not the automatic route out of poverty that it should be with the incidence of working family child poverty on the increase.

Two thirds of the UK welfare budget goes to those above working age, with just one third being spent on those of working age and children.   Whilst fully supporting the pledge to safeguard elderly benefits, STUC is horrified to contemplate the cuts that will be borne by the others.

The letter ends by calling on Scottish Liberal Democrats to join us in our Better Way campaign in order to ‘buttress the most draconian attack on welfare in a generation.’

Along with the open letter the STUC also unveiled its campaign banner which is a humorous depiction of the respective roles of David Cameron and Nick Clegg. The banner is currently hanging on the outside of the STUC building and is designed to raise awareness of the Better Way Campaign and challenge the myth that there is no alternative to the Government’s cuts.

Helen Martin – STUC.

Glasgow University’s List of Shame

The Herald today reports details of a leaked document from Glasgow University that sets out in very stark terms how the University intends to make savings in its budget between now and 2012/13.

In this document the University has ranked each of its departments into four categories. The departments with the highest international rankings become ‘invest’ departments, where the University will focus its funding to become a world leader. The next departments down become ‘improve’ departments that will not receive any additional funding. Below that is ‘reshape’ departments, which are likely to see their budgets downsized and finally there are ‘remove’ departments where courses will simply no longer be offered. Included in those earmarked for removal are adult and continuing education, anthropology, dermatology, nursing and social work.

What is surprising about this document is not that Glasgow University is considering how it might make £20 million a year of savings, unfortunately that is the financial situation the University finds itself in, due to decisions being made at a national level. No, what is surprising is the way Glasgow has determined what is of value and what is not.

Academia has long resisted the pull of pure, unadulterated market forces. Instead universities have prided themselves on placing the pursuit of knowledge and a drive for excellence as their raison d'être. But in this document Glasgow simply sees itself in economic terms and this perhaps marks the beginning of a significant shift in the set up of university education across Scotland.

In this approach, Glasgow has allowed international league tables and survey results to dictate completely and absolutely the courses they offer and the level to which that course is funded. No other value is considered. This is why we can see something like adult education being placed right at the bottom of the list. It’s true that this sort of course is not as glamorous as some of the others offered at the University and it certainly doesn’t bring in large research grants and international acclaim. But that does not mean that it is without value. Adult education opens the University’s doors to the wider community. It gives people the opportunity to keep learning throughout their careers and to raise the level of their skills and is therefore of great value to the learner and contributes to the Scottish economy through increased skills levels. The University, therefore, is wrong to disregard it so out of hand.  

And this is what is so hard to stomach about this document – the callous nature of it all. By ranking their departments in this way, based only on the views of surveys and league tables, not the thoughts and opinions of learners and staff who are present in these departments today, the University has sent a clear message about who and what they value and why.  

The University says they are only beginning the process and nothing has been decided yet, but if this is a sign of things to come, I can only feel sympathy for the staff and students whose contribution the University has dismissed so outright.

Helen Martin- STUC.

Mervyn King at the TUC

Stephanie Flanders provides a fair analysis of Mervyn King’s speech to the TUC. She correctly describes the Governor as being ‘factually accurate but a little disingenuous’ for claiming that the ConDem’s plan to reduce the deficit is ‘a more gradual fiscal tightening than in some other countries’.

As Stephanie points out, no other major economy is implementing an austerity package that compares with the speed and severity of the ConDem plan.  Yes, Greece and Ireland are going further (not by much) but their fiscal position cannot credibly be compared to that of the UK.

Interesting also to hear the Governor refer to his recent meeting with the STUC. Our regular meetings with members of the Monetary Policy Committee are fascinating affairs and you do get the impression that members genuinely appreciate hearing the trade union perspective on developments within the labour market.

Just a shame they don’t always act on the intelligence we provide. It’s remarkable to recall that one member of the Committee was calling for an increase in interest rates as late as September 2008…

Lies, damned lies - and extracting simple messages from complex statistics

Beware the over simplification of statistics, especially when carried by the right wing press in the middle of TUC conference. The Telegraph is one of many which carries the result of Office of National Statistics research into public and private sector pay. ”Myth of the underpaid public sector worker” it screams following up with a report entitled “The trouble with the public sector is bone-idle staff”. Nice.
According to the research described as “the first comprehensive analysis of the pay divide by Britain's national statistician”, the average weekly salary for public sector workers in April last year was £539, compared with £465 in the private sector and their pensions are better too.

Yet reference to ONS figures collected over many years for public and private sector pay rises show that neither has significantly outstripped the other over a time frame or ten, twenty or even thirty years.
How can that be so? Unless public sector pay has always been better (and no-one seems to be arguing that) how can this disparity be explained?

Consider the simplistic example below

You work in a small office next door to another small office. You are paid £30,000 (significantly more than the public sector average). The other person in your office is paid £20,000 (approaching half of public sector workers earn this figure or less). The office next door also has two people undertaking the same tasks for the same pay. The average pay in each office is £25,000.

One day it is decided that your co-worker should move next door – even though they will continue to work with you in the same way. Despite a few problems, work continues unabated until you are summoned by management to be told that you are uneconomic because average pay in your office has risen to £30,000 (from £25,000) whilst average pay in the next door office has fallen from £25,000 to £23,333. Your pay hasn’t increased but your office average has at the same time as that of the next door office has reduced.
A more complex version of this is at play when changes in relative public/private earnings are considered. Over the past few decades a whole range of catering, care, cleaning and other work has been contracted out. And as the example above illustrates, as soon as you transfer low paid staff from public to private sector you increase the relative pay averages in the former.

Even though they are hardly over-paid, many professionals in public service receive more than the average wage. So the immediate effect of increasing the proportion of teachers, nurses and police in the public sector workforce is to increase public sector pay relative to private sector pay.

Of course there are still some care workers, cleaners and catering staff directly employed in the public sector. And on average their pay is better than in the private sector (but very often below the Living Wage). Some also benefit by making contributions along with the employer to modest pension schemes. (The benefit is of course shared as these are precisely the schemes which will in the future limit the payout from the public purse for elderly benefits.) Paying above poverty wages for these workers does increase the public sector pay bill – but would we have it any other way?

And there’s a final factor. Although the introduction of the minimum wage should have seen a bit significant jump in private sector earnings it has been at least offset by the clustering of minimum wage pay in certain professions – retail and hospitality being the largest. The consequence, along with the weakening of the manufacturing sector is a growing army of low paid private sector workers anchoring private sector pay and significantly increasing wage inequality.

It would be so much more straight-forward of course if we could compare like with like. But which private sector profession would we choose to compare to the pay of a teacher or a nurse such that we could elicit meaningful results?

No-one has come up with an answer to that, because it is not that simple.

Dave Moxham - STUC

Neither big nor clever

The Cameron - Osborne cabal undoubtedly comprises highly ideological right wingers who relish demonstrating their robust pragmatism by making the poor poorer. But I don’t think anyone could claim that they’re daft. The Scottish Tories? Well...


Two exhibits for the prosecution. First in today’s Scotsman, Alex Johnstone fulminates against trade unions having the audacity to fight the cuts because...’The economic problems we're facing were caused by the Labour Party and the Labour movement, which Mr Crow is a part of. People needed to be standing together during difficult times like these, rather than making unpleasant threats.’

I know they don’t like trade unions but blaming us for the banking crisis seems a bit rich. And I really can’t remember the ConDems trying in anyway, shape or form to establish the consensus on fiscal consolidation to which his last sentence appears to allude? They just went straight ahead and announced the emergency Budget.

Second exhibit. On GMS today, Murdo Fraser MSP, Scotland’s foremost comedy supply sider, twice claimed that the UK’s ‘public finances’ were the worst in the developed world. Whichever way you look at it, this statement is plain wrong. I know he likes to keep things simple but do you really think Murdo has confused the deficit (which incidentally is not the highest in the developed world) with the public finances as a whole?

The STUC is currently trying to build the already considerable capacity of the trade union movement to engage on economic issues by running a series of workshops and training courses for reps. We’re aiming to tailor courses to the needs of individual affiliates or groups of workers.

Maybe if the Scottish Tories ask nicely we’ll run one for them.

Stephen Boyd

A genuinely illuminating discussion about deficits and stimulus

American macroeconomist Brad DeLong (Professor of Economics, Berkeley, ex-Clinton administration) on US political phone-in show the Washington Journal. For those interested in our current economic situation, it’s gripping viewing. Honest guv! Yes, Prof DeLong speaks exclusively about the US but his arguments have much wider relevance.


Five minutes in he outlines the two valid reasons why it might be appropriate to worry about large Government deficits: inflation and the ‘crowding out’ of productive private investment. Brad explains why both are so irrelevant in the current context that they might as ‘well be in the gamma quadrant’. Quite. He goes onto explain, in compelling detail, why the Obama administration’s response to the Great Recession has been inadequate.

Perusing the web I’ve seen references to similar, if not quite so lengthy, US TV pieces involving Paul Krugman, Yves Smith and others. And yet I can’t recall a single instance since the start of the credit crunch when British TV has afforded an economist (of any political persuasion) the opportunity to develop a coherent overview of the crisis and the government’s response and then take questions. The narrow and highly political coverage provides cover of sorts for an administration relying on a credulous public to swallow its line on the deficit.

Disgraceful really.

Stephen Boyd

What is going on with Boris Johnson?

Boris Johnson seems to have become the voice of reason in the Tory Party. I can’t really believe I have just written those words but I keep seeing him coming out against the Tory Government saying things that I actually agree with!


A couple of weeks ago we welcomed Boris to the There is a Better Way campaign when he came out against Tory plans to curb the deficit by cutting deeply into public spending and instead held up Ed Ball’s approach as the more sensible way forward.

Boris even came out against bankers bonuses calling it a ‘combustible contrast’ if public sector workers lose their jobs while witnessing ‘the spectacle of the banks doling out hundreds of millions of pounds in Christmas bonuses to the very people who, collectively if not individually, were responsible for the financial crisis.’ Wise words indeed from an unlikely ally.

And last week Boris came out again against his own party this time in relation to the cap on immigration. Boris correctly states that this cap is ‘likely to have a significant negative and disproportionate impact on London and put the economic recovery at risk by creating skills gaps and placing London at a competitive disadvantage in the global competition for talent and inward investment.’

Again we find ourselves in agreement but we believe the negative consequences of this policy are not just limited to London.

Scotland depends on highly skilled migrant workers coming from outside the EU and needs people to move and settle here, bringing skills and expertise that adds to that of the domestic labour force.

The cap on migration causes issues for businesses operating in sectors where there are skills shortages, and places pressure on our public services, particularly the NHS where migrant workers are playing a particularly valuable role. It also places enormous strain on our universities which will not be able to maintain the current number of lecturers coming from outside the EU, never mind access visas for the new talent they wish to attract.

A cap on migration will affect our competitiveness at a global level and puts at risk inward investment from companies wanting to relocate to the UK. It may also increase the likelihood that some businesses will leave the UK, which is certainly to the detriment of British workers.

Boris Johnson recognises these things which is why he has come out against his party’s policy.

The Government, however, don’t want to see the risk they are taking. Instead they are blinded by ideology and a rhetoric that says immigration is a bad thing and refuses to see the contribution that migrant workers make to this country.

The cap on migration is just another example of how the Tory Government will hold firm to a policy regardless of whether it works and even when there is a united opposition against it.

But all we can do is try to make them see sense, even if it means agreeing with Boris.

Helen Martin – STUC