ASLEF Drives Forward Modern Apprenticeships

ASLEF has successfully negotiated a new Modern Apprenticeship in

Customer Services for school leavers with First ScotRail. This will be First ScotRail’s first recruitment drive for school leavers since the rail industry was privatised.

This Modern Apprenticeship programme is a partnership between ASLEF, Skills Development Scotland and First ScotRail.

Skills Development Scotland has provided funding towards the training costs of the apprentices.

The recruitment drive will see 12 new Modern Apprenticeship posts created. The young people who undertake this opportunity to earn and learn over an 18-month period will, upon successful completion of their Modern Apprenticeships, gain guaranteed permanent posts with First ScotRail.

In addition to undertaking the SVQ Level 2 Modern Apprenticeship in Customer Services, the apprentices will also embark on a Duke of Edinburgh Award which will provide them with the opportunity to work directly with communities and go on an outward-bound team building course.

ASLEF will also utilise the Rail Union Learning Centre at Stow College to provide the apprentices with career building skills such as CV writing, completing job applications and interview skills. Jim Baxter, ASLEF Project Worker, said, “We see this not only as a benefit to the apprentices and the trade unions within the rail industry, but also to the rail industry itself.”

For information on Modern Apprenticeships in Scotland, contact Tommy Breslin, Development Officer, at tbreslin@stuc.org.uk

www.scottishunionlearning.com/apprenticeships

The worrying durability of crank ideas

There are some ideas which should put their proponents beyond the bounds of sensible policy debate forevermore. The best example is supply side economics (encapsulated by the Laffer curve and the foundation stone of Reagan’s ‘voodoo economics’): the proposition that in each and every circumstance, tax cuts always pay for themselves and therefore do not need to be offset by spending cuts. There is no evidence in support of this proposition and libraries full of evidence to the contrary.  Anyone subscribing to supply-side economics – step forward the Institute of Directors, Taxpayers Alliance and most of the Tory party! – should be summarily banished from any forum from which they might, just might, influence public policy in Scotland.

Another such idea, one that resurfaced just this week in COSLA’s shameless submission to the McCormac review, that should be labelled ‘CRANK’ and quickly consigned to the policy dustbin is performance related pay for teachers. This exhibits all the characteristics of a classic zombie idea: it is murdered time and time again by the sheer weight of evidence rallied against it but somehow still manages to get stagger back to its feet. How interesting that it is COSLA offering the helping hand.

Just over two years ago, one of Scotland’s most renowned entrepreneurs was to be found on the front page of the Sunday Herald pontificating (through a ‘spokesman’ of course) on the merits of introducing performance related pay into the Scottish education system. What sound evidential basis underpinned this strident call? Er, well…’everywhere else in the world, from commerce to government is subject to incentivisation. Why not teaching?’

Convinced? Me neither. Did the entrepreneur stop to consider where performance related pay actually works and where it fails or was it a case of ‘it exists therefore it must work’? Did he even think about the assumptions underlying his case? Of course, he didn’t – he is extremely wealthy and therefore indulged; even when spouting demonstrable nonsense. We in the trade union movement are however forced by prevailing orthodoxy to be somewhat more rigorous; so let’s provide COSLA and our buccaneering entrepreneur with the benefit of our hard work.

As with most management issues – and this is fundamentally a management issue – it makes sense to turn to the doyens of evidence based management, Stanford professors Jeffrey Pfeffer and Robert Sutton. What they have to say on this might surprise some people:

‘Merit pay for teachers is an idea that is almost 100 years old and has been subject to much research’. Wow. However, ‘before revealing the results of all that research…we can illustrate how you can figure out if merit pay will or won’t work, and the conditions under which it will or won’t, simply by listing the assumptions inherent in virtually all teacher pay-for–performance plans’. Shockeroonie!  The Profs are asking us to think about a situation logically and suggesting that the process might reveal some important truths! Hard taskmasters these boys.

Anyway, what are the assumptions to which they refer (quoting at length here which  always makes me a bit uncomfortable – buy the profs’ books people! Money well spent I can assure you):

• Teacher motivation is a, perhaps the, determinant of student learning and achievement. (Because merit pay is focused on teachers and administrators – not, for instance, on parents or even students – the presumption must be that teachers and other school personnel are the primary causal agents in learning);

• Learning can be measured reliably and accurately by a test given once a year, or less (success, as defined by these plans, is almost always assessed by standardised test scores).

• Teachers are motivated largely, or at least significantly, by financial incentives; so pay for performance will induce greater and more effective effort.

• Teaching is a solo activity – there is little interdependence with others in the school. Many plans reward only individual teachers; there is no incentive to cooperate or share with others; and some plans reward teachers for hoarding knowledge in a competition with peers.

See anything wrong with these assumptions? The profs list a few rather obvious problems:

• Is teaching likely to be a career choice for those motivated primarily by financial reward? Really?
• How important is teacher motivation to student achievement? Some other factors likely to exert not inconsiderable influence on achievement include: teacher skill (unaffected by merit pay), parental involvement, the child/student’s home environment, the quality of facilities and resources, parental education and income and so on.
• Is peer support and learning from colleagues important in affecting teacher performance? If so, will incentive structures which necessarily undermine cooperative working harm the quality of teaching? Think about it.
• What are the consequences of measuring and rewarding student performance on a set of standardised tests?

As the Profs conclude, ‘You don’t have to read the evidence from literally decades of research to spot the problems with merit pay for schoolteachers. That evidence shows that merit pay plans seldom last longer than five years and that merit pay consistently fails to improve student performance. The very logic of merit pay for teachers suggests that it won’t do what it is intended to do, or do it very well. Moreover, the signal that all that matters is student test scores and the provision of rewards for improving those scores provides an incentive for some teachers to game the system’ (i.e. it provides a very strong incentive to cheat. Research into the effectiveness of merit pay systems led directly to the dismissal of several principals and teachers in Chicago).

The profs argue that the use of financial incentives is a subject filled with ideology and belief – and that many of those beliefs have little or no evidence to support them. They note that many of the best performing companies have relatively flat pay distributions – ‘by sending the signal that performance is a collective, not just an individual, endeavour, those companies are more likely to induce thought, creativity and effort on the part of their people’. Merit pay is likely to work only where the tasks are readily learned and have little or no interdependence with other employees, where it is easy to measure and monitor quality and where employee goals are unambiguous and one-dimensional. The classic case of a merit pay system that worked was Ed Lazear’s study of Safelite Glass in Columbus, Ohio – installers of automobile glass. It is difficult to imagine an enterprise further removed from the education of our young people.

Before sounding off about matters on which they are hopelessly ignorant, perhaps COSLA and our entrepreneur friend should have interrogated both the intellectual foundations and real world successes of performance related pay. The story revealed would be somewhat different to the oh-so-predictable conclusion that performance related pay systems should be inflicted on the education system. In most modern workplaces, characterised by complexity and high levels of interdependence, there is no evidence to show that performance related pay achieves anything beyond incentivising bankers to disguise risk as value creation. On the contrary, research on motivation at work emphatically confirms the 50 year old dictum of psychologist Frederick Herzburg: if you want people to do a good job, give them a good job to do.

And isn’t it interesting that those who continually preach austerity for the public sector would happily saddle the education system with the enormous transaction costs of designing, implementing, monitoring and evaluating a performance related pay system of extremely dubious benefit.

We desperately require a new way of dealing with policy cranks in Scotland. You believe in the Laffer Curve? OK, then go away silly person and never return. You are embarrassingly ignorant -  and we do not allow embarrassingly ignorant people anywhere near public policy. You believe in performance related pay for teachers? Then you have clearly not taken the time to consider even the basic logic of your argument. You are lazy and dangerous. Go away. Read a book. And leave policy development to those with a concentration span of more than 10 seconds.

Stephen Boyd - STUC

The Truth about Internships

Many politicians from across the political spectrum are starting to highlight internships as a reasonably good solution to the problem of youth unemployment.  After-all they help businesses by giving them an extra pair of hands and they help young people gain some much needed experience and show a ‘can-do’ attitude to other potential employers. So while everyone might prefer full-time, paid, permanent employment, internships are increasingly being seen as a valid starting point in a young person’s career, particularly young graduates.

Behind all of this thinking, there is a general assumption that if you employ someone and call them an ‘intern’ you don’t have to pay them and you can ask them to do pretty much whatever you want. Many interns end up working long hours and taking on a significant amount of responsibility, despite receiving little more than travel expenses and in many cases no remuneration at all.

But this assumption is simply untrue.

There is no reason to believe that minimum wage legislation does not apply to interns. If an intern is carrying out work of value for the employer, the likelihood is they should be being paid. Basically an unpaid internship is legitimate only if it involves shadowing and other such learning activities, the minute it begins to look like a job within the organisation employment rights kick in – even if the intern has signed a contract saying they will accept only expenses.  

Today the National Union of Journalists won a case which illustrates this precise point.   

The NUJ and Thompson’s Lawyers supported the case of Keri Hudson, 21, who had worked as an unpaid intern at the My Village Website in late 2010.

The tribunal heard that she had worked each day from 10am – 6pm and had personally been responsible for, and in charge of, a team of writers, training and delegating tasks, collecting briefs, scheduling articles and even hiring new interns. Despite this the company had told her she was not eligible for any pay because they considered her an intern.

In her evidence Keri Hudson said she had been asked when the site was taken over by TPG Web Publishing Ltd if she would stay on and work for the new company. She was assured her pay would be fixed. After 5 more weeks she was informed she would not now be receiving a payment for the work she carried out – she resigned and took out a grievance.

The tribunal found she was a worker in law even though she didn’t have a written contract and was therefore entitled to be paid at least the National Minimum Wage and holiday pay.

This case shows that interns have rights and employers should not simply assume that they don’t.

This is not the first case of its kind and unions across the UK have been challenging the use of unpaid interns for a number of years now. Despite this there is a general misunderstanding about the law and how it applies to interns on the part of employers and interns are often unaware of their rights at work.

For more information on the rights of interns see the TUC’s dedicated website www.rightsforinterns.org.uk

Helen Martin- STUC  

The Royal George Hotel and the BNP

On the subject of fair hotels, it has been brought to our attention that the Royal George Hotel in Perth recently allowed the BNP to use their conference facilities to launch their Scottish manifesto.

The STUC will be writing to the Royal George Hotel in order to find out how they came to take a booking from the BNP and whether they are likely to take a booking from this organisation again in the future.  Depending on their response, we will then consider whether it is appropriate to ask our affiliated trade unions and their members to undertake a boycott of this hotel.

From a quick look at the hotel’s website it is apparent that the Royal George is also often used as a conference venue by the Conservatives and the Lib Dems. So we will also consider writing to these political parties to make sure they are aware of the situation and to ask them to consider using an alternative venue in the future.

Helen Martin- STUC.    

Fair hotels

Check out the Irish trade union initiative to drive some fairness and trade union recognition into the hotel sector in Ireland. The ICTU is promoting the use of union organised hotels both for union events and for personal use by union members.

Hotels in Scotland continue to be one of the least unionised sectors with consequential low pay and, often, poor employment practices.  In the worst cases ‘per room’ pay rates are used to effectively circumvent minimum wage legislation and even where experiences are better, the Living Wage of £7.15 per hour is the exception rather than the norm.

STUC will shortly be publishing a checklist for progressive organisations which wish to inquire about the pay and employment practices of hotels before deciding where to site major events and conferences.

Meanwhile the Irish are well ahead of the curve.  Make sure you stay in a fair hotel next time you visit Ireland.

http://www.fairhotels.ie/

Dave Moxham

STUC

Your rights as a Modern Apprentice

Scottish Union Learning has now published a new pamphlet called ‘Your Rights as a Modern Apprentice’.

New employees in any workplace are vulnerable and should be made aware of their rights.  There is a need for Modern Apprentices to be aware of issues pertinent to their new roles as employees, particularly for younger workers who may be experiencing the world of work for the first time.

This important pamphlet provides information on workplace rights to which all Modern Apprentices in Scotland are entitled. The pamphlet may be useful to all those who are undertaking, or considering undertaking, a Modern Apprenticeship. It may also be useful to union reps that have Modern Apprentices within their workplaces.

The pamphlet provides answers to important questions including:

·        What is a Modern Apprenticeship?

·        What do Modern Apprenticeships offer?

·        What are Everyday Skills?

·        What are Modern Apprentices entitled to?

·        How much do you get paid?

There is also information on how to join a union, support for redundancy, and terms and conditions of employment.

‘Your Rights as a Modern Apprentice’ can be downloaded from the Scottish Union Learning website by visiting http://www.scottishunionlearning.com/files/MAP/MAP-Your-Rights-Apr-2011.pdf.

To request paper copies and further information on the Modern Apprenticeship Project, email Tommy Breslin at tbreslin@stuc.org.uk.

The Wrong Plan for Growth?

“…Yet the contrast between this political certainty and the underlying nature of the problem is a stark one. In the policy debate, the term ‘regulation’ lacks a commonly agreed definition, and the causal link between an increase in regulation and lower economic performance is at best crudely described….The policy positioning is largely devoid of convincing empirical support – as if it were so obvious as to need no justification. It is hard to think of any other area of government policy where the gap between public policy assertions and an evidence base is wider”. Deiter Helm, Oxford University

Put a business lobbyist together with 1) another business lobbyist or 2) a journalist or 3) a politician and you can be sure that the chat will soon turn to the ‘burden’ of regulation, ‘red-tape’ or bureaucracy – call it what you want – constraining the economy, lowering economic growth and generally making life miserable for the Randian superheroes of the entrepreneurial class.

Take a brief look at any of the manifestos for the Scottish Parliament elections and you could be forgiven for believing that the business lobbyists are correct; the burden of red-tape must indeed a major barrier to economic development in Scotland if our politicians are to be believed. I know from years of experience that to challenge the consensus on this topic is to invite ridicule. That Scotland as part of the UK is an over-regulated economy is treated as a revealed truth; a fact that requires to be asserted, never justified.

Some of us thought the banking crisis – manifestly a crisis (at least in part) of weak regulation – might provoke an open debate on the role of government regulation in an advanced economy. We were wrong. If anything, the hand of the red tape warriors has been strengthened. How did it come to this?

Well, the regulation of the economy is a boring and technical subject. It’s also a slippery one. Regulation’ is used as a catch all for very different issues: regulation of the workplace (minimum wage, health and safety, employment protection), regulation of the environment and the regulation of utility industries. It is the first of these (but also the second – they don’t understand the third) that tends to animate the business lobbyists. But they are rarely specific; by and large complaints about red-tape are general in nature, probably because lobbyists understand that the minimum wage and protection from irresponsible employers are actually quite popular with the public.

This approach is apparent in the Coalition’s Plan for Growth; a plan predicated on the assumption that the UK is hugely over-regulated (and over-taxed). In announcing his recent Budget the Chancellor argued that the UK’s competitiveness had slipped and that we had been overtaken by other countries – specifically Germany, the Netherlands, Denmark and Finland. The evidence cited? The World Economic Forum’s Global Competitiveness Report 2010-11.

Does this Report support the Government’s approach? No, it doesn’t. Indeed, it suggests that the deregulatory, low tax approach is exactly the wrong way to go if we want to improve competitiveness (let’s assume for the moment that the validity of the concept of competitiveness isn’t very dubious – which it is) in a similar fashion to the Germans, Dutch, Finns and Danish. We are already under-regulated in comparison to these nations and we are also lightly taxed.

For my sins I’ve now read all 501 pages of the Report and the fruits of my labour are now available in the STUC report, The Wrong Plan for Growth? Budget 2011, the Global Competitiveness Report and the dangers of formulating policy on a false premise which can be found here.

Problem is that there seems to be no political appetite whatsoever for an evidence based discussion on these issues. Wonder why?

Stephen Boyd - STUC

The Future of Manufacturing Industry in Scotland

On the first day of Congress 2011 in Ayr, the STUC published a discussion paper on the Future of Manufacturing in Scotland. The paper will form the basis of campaigning activity over the coming year and a web discussion forum will be establishd in the near future to enable debate about the report's recommendations. The STUC welcomes, and will respond to (serious) comments. The full report can be found here. This is the introduction:

An interesting thing started to happen after the financial crisis swept the globe in autumn 2008… politicians at Scottish and UK level started to talk seriously about manufacturing again. Indeed, a genuine commitment to examine how Government at all levels might more effectively support and nurture manufacturing has since been apparent in election manifestos and a blizzard of related policy papers has emanated from Whitehall and Brussels.

This fundamental rethink of economic and industrial policy is long overdue. The ‘financialised’ economic model, pursued with particular vigour in the US and UK, failed on both economic and social grounds: the narrow focus on finance and the primacy given to financial market participants in the development and implementation of policy led to a lop-sided economy; one prone to systemic crisis. Also, the model didn’t as was often claimed, lead to greater prosperity for all: it generated moderate GDP and productivity growth, an exponential rise in income and wealth inequality and a decline in social mobility.

And yet, the opportunity for genuine and substantial change already appears to be ebbing away. A full four years have now passed since problems first emerged in the US housing market but there has been no structural reform or effective re-regulation of the financial sector and the banks’ business models remain largely untouched. Incredibly, the influence exerted by financial insiders on economic debate and public policy appears undiminished.

The STUC believes that a reinvigorated manufacturing sector is a necessary component of a new, fairer and more sustainable economic and social model. Contrary to prevailing economic orthodoxy, there is no reason whatsoever that this cannot be achieved through a mix of clever and focused Government intervention together with reform of the financial sector to ensure that it supports rather than undermines the productive economy. Other advanced economies have managed to maintain far higher levels of manufacturing employment than the UK.

Scotland benefits from a skilled, productive and committed manufacturing workforce and many outstanding manufacturing businesses across a range of sub-sectors. Scottish manufacturing has experienced a stronger and quicker recovery than services. The STUC believes with the correct policy framework in place, manufacturing can continue to grow; both nominally and as a share of the Scottish economy.

The purpose of this paper is to provoke debate and discussion about the nature and shape of potential levers to support the growth of manufacturing in the years ahead.

STUC Congress 2011 Speeches - Economy and Industry

Speech moving Composite A There is a Better Way - Growing the Economy and Creating Jobs, delivered by Anne Douglas, Prospect and STUC General Council - 18 April, STUC Congress 2011

Congress, we meet almost exactly a year since the coalition government took office. The General Council was under no illusions about the nature of this government and we quickly moved to explain why deep and rapid cuts to public spending would be a disaster for the economy. Of course the Government didn’t listen – to us or anyone else for that matter.

Instead they proceeded with the emergency Budget of June last year followed by the Spending Review in October which confirmed a package of spending cuts without precedent in an advanced and solvent nation.

All through this process, Ministers acted as if growth and jobs would be unaffected – indeed they often had the audacity to argue that cuts would boost employment. They refused to learn the lessons of economic history, which tell us that cutting in a crisis will lower growth and increase unemployment. Ministers appear to believe, on the basis of nothing more than ideology, that reducing the size of the state will necessarily unleash a wave of private sector investment.

As we predicted, this smug, evidence-lite approach is proving hugely detrimental to the economy. The Office for Budget Responsibility – established by this Government – reported on the state of the economy at the time of the Budget last month. How had their forecasts changed since their last report in October?

·                     They now expect GDP growth to be lower;

·                     Inflation to be higher;

·                     Employment to be lower;

·                     Unemployment to increase on both claimant count and ILO measures;

·                     The balance of payments to worsen;

·                     Average earnings to decline; and,

·                     Household disposable income to decline.

And these last two points are particularly important. Even the Governor of the Bank of England has acknowledged that real wages are likely to be no higher in 2011 than they were in 2005. The last time real wages fell over a period of 6 years was the 1920s.

So –

·                     Real wages are falling;

·                     Household incomes declined in 2010 for the first time since 1981;

·                     Growth forecasts are being revised down;

·                     Unemployment is high and widely predicted to rise – and to remain high for at least the next couple of years;

·                     Long-term unemployment is stubbornly high;

·                     Long-term youth unemployment is still rising;

·                     All forward looking indicators of consumer confidence are collapsing; and,

·                     Understandably given collapsing demand, the private sector can’t see sufficient investment opportunities to plug the gap.

And Congress, all this before spending cuts begin in earnest. In these circumstances we simply have to ask where are jobs and output growth are going to come from?

The Government’s latest response is simply pathetic: A Plan for Growth based almost exclusively on business tax cuts and deregulation; a plan developed on the most spurious of evidence and one guaranteed to further embed the economic and social model which imploded so spectacularly in the banking crisis.

The Government has claimed that its spending cuts and unfair tax rises are ‘unavoidable’; with utter shamelessness, they have claimed that austerity is fair and progressive. They have claimed that we are ‘in this together’.

The General Council firmly believes that their programme is entirely avoidable, unfair and regressive – we have set out our case in detail; we have watched with little surprise but some dismay as Ministers have embarrassed themselves trying to respond to our arguments.

Congress the General Council will

·                     continue to develop positive alternatives – just today we have published a significant new piece of work on the future of manufacturing;

·                     we will continue to expose the dogma and ineptness of coalition economic policy.

This composite shows that:

·                     there is a better way on tackling the deficit – through fair and progressive taxation and forcing the super rich and corporations to face up to their taxation responsibilities;

·                     It shows there is a better way to sustainably grow the economy and create good jobs.

Congress, I ask you to support.

On the Tory Manifesto

The Scottish Tories published their manifesto yesterday. My time is limited this morning so I really can’t do more than offer some rough and ready thoughts on the Growing the Economy and Creating Jobs section…which starts with this jaw droppingly awesome paragraph:

“With an economy heavily dependent on the financial services and public sectors, Scotland more than anywhere else has suffered from, and is experiencing the lasting effects of, the failure of the financial regulatory regime created by the last Labour Government at Westminster and the problems stored up by its overspending. Worse, Scottish businesses and jobs have been hit severely by the recession, which owing to Labour’s failure to support business and address welfare dependency, lasted longer in the UK than anywhere else in the G20”.

Let’s break this down…

‘experiencing the lasting effects of, the failure of the financial regulatory regime created by the last Labour Government at Westminster’

Didn’t the Tories have something to do with the creation of the regulatory regime? Perhaps Annabel might tell us exactly which deregulatory moves the Tories opposed? Sorry, but I can’t recall vocal Tory opposition when the FSA was handed a duty to ‘promote’ the industry it was meant to be regulating. However I can recall many occasions when Tory MPs screamed red-tape and business burdens when the Labour Government made any attempt to regulate (no matter how inadequate).

And are the Scottish Tories seriously arguing that the banking crisis was simply a consequence of poor regulation? Didn’t structure have something to do with it - the growth of ‘too big to fail’ financial conglomerates able to exert excessive influence over the economy and political system? How were such institutions ever to be effectively regulated? What about performance pay systems that incentivized risk taking? What about the abject failure of corporate governance? What about the growth of the unregulated shadow banking system? What about the role of the auditors and credit rating agencies? What about the wholly unsustainable business models pursued by people who knew they would not have to pay for systemic collapse? Scottish Tories, please remind me of your record on each of these issues!!

‘the problems stored up by its overspending’

Please no, not again.

Look, reasonable people will continue to disagree about the Labour Government’s handling of the public finances. It is an entirely respectable intellectual position (although I disagree with it) to argue that in the last years of its administration Labour should have been seeking to run a surplus. It is a preposterous position to argue that the current deficit - and the rise in stock of debt over the last couple of years -  are attributable only to the Labour Government’s mismanagement.

I have nothing more to add on this question except to pose this question: knowing what we know about the Tories at Scottish and UK level, is it reasonable to assume that, faced with the Labour Government running a surplus, their reaction would have been to applaud Labour’s sound management of the public finances? Or do you think that maybe, just maybe, they would have screamed for the money to be ‘returned’ through tax cuts? Yep, exactly.

“Scottish businesses and jobs have been hit severely by the recession, which owing to Labour’s failure to support business and address welfare dependency, lasted longer in the UK than anywhere else in the G20”

A quote from the German polymath Frederich Schiller has been doing the rounds since the banking crisis – ‘against stupidity the gods themselves contend in vain’. You can see why. I’m tempted to leave it there but I will say this:

In terms of the fall in output, it might be fair to argue that the recession lasted longer in the UK than anywhere else in the G20. However, if this statement is left to stand unchallenged, the inference is that the recession was somehow worse in the UK. This is manifestly untrue: the rise in unemployment in the US was much more rapid, steep and enduring (though this is likely to change as a result of ConDem policy). The impact in the Eurozone periphery was, and is, obviously much, much worse than what happened in the UK.

That unemployment didn’t rise to the levels anticipated given the fall in output is attributable to the policy response from the Labour Government which introduced (wholly inadequate – this is beginning to read as a defence of Labour’s economic record. It isn’t ) fiscal stimulus and active labour market interventions (Future Jobs Fund) to help people back into work. This is why growth was strong in the first half of 2010. This is why unemployment was falling. This is why the deficit fell by over £20bn between the December 2009 PBR and March 2010 Budget.

I’m baffled about the link between the ‘failure to address welfare dependency’ and the length of the recession. The recession hit harder in the UK because we were over-reliant on financial services and property sectors. End of.

Oh dear, I’ve spent all this time and we’re still on the first paragraph. Time to press on. The Tories next turn their fire on the SNP Government…

“it has not delivered fully on its pro-business rhetoric and it has failed to see the need to take some tough, “big picture” decisions, such as the need to call time on unsustainable borrowing and rebalance our economy from the public to the private sector”.

The Scottish Government doesn’t borrow. Therefore, I have to assume it’s an attack on the Scottish Government’s record in opposing ConDem cuts. If so, it reflects, once again, the nakedly ideological position of the Tories: the private sector will necessarily grow because the public sector is being cut. The evidence to support this proposition is non-existent.

The manifesto then goes on to laud the measures – cuts in corporation tax etc – being undertaken at UK level. The STUC is currently developing a paper in response to the Budget and will return to these issues at a later date. Let’s focus on the Scottish issues. Here’s a belter:

‘and in the most recent Budget, we secured £26m of stimulus for business’

Wow. Stimulus. They actually used the word. Not support. Not assistance. Stimulus. Is Annabel Goldie a closet Keynesian? Surely not…

The next section is on supporting enterprise and is concerned almost exclusively with the need to increase business start-ups. Scotland’s low rate of entrepreneurial activity is routinely cited (by all the main parties) as a primary reason for comparatively weak economic performance (if indeed you accept that our performance is comparatively weak).

This is, not to put too fine a point on it, nonsense. I’m with Ha-Joon Chang, the renowned development economist who argues,

“if effective entreprenuership ever was a purely individual thing, it has stopped being so at least for the last century. The collective ability to build and manage effective organizations and institutions is now far more important than the drives or even the talents of a nation’s individual members in determining its prosperity”.

Quite. Spending a lot of money in order to boast that the rate of business start ups has improved is utterly pointless. Building world leading, innovative, well managed organizations is much more important but also much more difficult. And the urge to pander to the small business community is something Scotland’s politicians appear unable to resist.

Interesting also that the Tories will ‘place a new duty to promote economic growth on all public agencies and require them to report on the positive – and negative – impacts that the decisions they have taken have had on economic growth’. This is plain daft on a number of levels: how can such an assessment be credible – particularly in the short-term, or even over the life of a single Parliament? The majority of growth enhancing investments made by, for instance, Scottish Enterprise are long-term. Note that the Tories are arguing that agencies must report on the impacts decisions ‘have had’ on economic growth; not ‘will have’.

Next up, we have all the usual nonsense on business rates – again, something that all parties are guilty of.

‘we will legislate to ensure that the main Business Rate poundage can be no higher than in England’

Well, to be fair, the Tories didn’t support devolution so I suppose the have the right to mock it. Suffice to say that if any of the main parties believe that Scottish businesses are being handed a genuine and sustainable advantage by cutting business rates they are living in cloud cuckoo land. The SNP’s Small Business Bonus Scheme has wasted hundreds of millions of pounds. It is not tied in any way, shape or form to job related investment. It is money that could have been invested much more productively elsewhere (Scottish Investment Bank, enterprise networks, infrastructure, education etc).

Unsurprisingly, the Tackling Red Tape section is prominent, introduced in big bold letters no doubt signaling the Tories robust approach on what they regard – in the face of all credible, international evidence – to be the biggest issue facing the Scottish economy.

The STUC has rebutted enduring myths around ‘red tape’ on many occasions over the years; most recently in our 2011 Budget Submission. I will not repeat them here.

But I can’t help being a little excited by the Tories strong – nay, overwhelming – support for the Regulatory Review Group:

• We will retain the RRG
• We will allow any voluntary, private or public sector organisatiob to refer regulations which are unduly burdensome to the RRG;
• We will take forward the RRG recommendation….
• We will strengthen Business and Regulatory Impact Assessments (overseen by RRG) etc etc

Guess what? I’m on the RRG! The Tories love me! They want to hand me more power! Or maybe they’ll kick me off…

The serious point is that the RRG will need much more resource if it is to undertake additional responsibilities. Will these resources be forthcoming at a time of austerity? And it is heartening to note that the Scottish Tories do not seem to be attracted to the risible ‘one-in, one-out’ approach to regulation being pursued by the coalition.

On Planning, the Tories propose to establish a ‘business led review’ of the system in order to raise economic growth. It is not immediately clear to me why business should lead this process; a process which is very likely to come back to bite the Tories for it is their members who are often at the nimby vanguard. Who can forget Murdo Fraser MSP striding the moors in his big green wellies whilst campaigning against Beauly-Denny?

The section on infrastructure is predictable: bring back PPP and prioritise projects of the greatest economic benefit. The proposal to tender the Calmac and Northlink routes in smaller bundles is 1) plain daft to anyone who has thought about the issues for more than 5 minutes 2) detrimental to the interests of users, workers and the communities they serve and 3) potentially very dangerous.

On Scottish Water they manage to avoid using the ‘p’ word or even the ‘m’ word (mutualisation). Instead they commit to Scottish Water becoming a ‘publicly owned Public Interest Company, free from Government control’. Get your head round that if you can. Are the Tories conceding public ownership? Or are they simply setting up an unsustainable organisation in order to privatize somewhere down the line. Voters – you decide….

Having lost the will to live, I’ll leave the public sector reform stuff to others.

Stephen Boyd - STUC

A pathetically irrelevant Budget

Spent the Budget participating in a Daily Record online forum. I was particularly taken with ‘Gasper’ who after 45 mins asked ‘if there was any news on fags?’ And the death of Liz Taylor caused a bit of a stir amongst fellow contributors. Tricky keeping up with the detail in these circumstances but it was good fun nonetheless (sorry Liz). In any case, the Chancellor’s statement is never, ever the full story (remember GB’s removal of the 10p tax rate?). Some surprising stories will undoubtedly emerge over the next few days as people work out the detail.

What did we learn from the speech?

Not much we didn’t already know. Gideon is a deregulator. Gideon doesn’t like talking about unemployment; particularly when it is high and rising as a result of his actions. Gideon couldn’t care less about vulnerable workers and the meagre protection afforded to them in the UK workplace. Gideon is an ideologue. But to the detail…

Somewhat inconveniently for a ‘Budget for Growth’ it started with a downgrade of the OBR’s growth forecast from 2.1% to 1.7% for 2011; its growth forecast for next year is 2.5% compared to the OECD’s forecast of 2.0%. The forecasts have been raised for 2013 and 2014 but, as the FT has already noted, this is a mechanical extrapolation which does not reflect anything the OBR knows about these years.

Gideon couldn’t restrain himself from repeating his usual nonsense about the public finances:

“Our country’s fiscal plans have been strongly endorsed by the IMF, by the European Commission, by the OECD, and by every reputable business body in Britain”.

We could have an interesting debate about what constitutes a reputable business body; I’m certainly intrigued to learn whether the Chancellor believes any business bodies are disreputable….step forward the Institute of Directors? Thought not…

Anyway, it’s always worth reminding folk that until very recently the IMF, OECD, employer-body axis of ignorance disparaged anyone who dared, for instance, to suggest that financial innovation might have rendered the banking system less stable. Try the IMF’s 2006 Annual Report

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’. It went on, ‘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’.

It gets worse. Here is the IMF on Ireland in 2006, ‘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’.

The IMF’s view is also very inconsistent. The STUC’s Budget Submission quotes from the extensive research published in the IMF’s world outlook published in October 2010, ‘Fiscal consolidation typically has a contractionary effect on output. A fiscal consolidation equal to 1% of GDP typically reduces GDP by about 0.5% within two years and raises the unemployment rate by about 0.3 percentage points. Domestic demand – consumption and investment – falls by about 1%. Hardly stands up as a ‘strong endorsement of coalition policy does it?

But by now Gideon was in full and rather unpleasant flow:

“Market interest rates in Greece are 12.5%, in Ireland they are close to 10%, in Portugal and Spain they are 7% and 5%. Today our country’s market interest rates have fallen to 3.6%. We have a higher deficit than Portugal, Greece and Spain, but we have virtually the same interest rates as Germany. This is our powerful monetary stimulus to our recovering economy.  Stability. Credibility. Lower interest rates. This is what we’ve achieved”.

Oh Lordy…how often must we rebut this claptrap. Anyone who wants to read a fuller analysis can find it here but for now let’s just focus on the five main reasons why the UK was never in danger of ‘becoming the next Greece’:

1.                  The UK is not in the Euro – we have control over fiscal and monetary policy; Sterling can (and did, by around 25%) devalue against other currencies and decisions can be taken without reference to the ECB and the Eurozone’s big players;

2.                  Yes, the deficit is high by international standards but the stock of debt is not;

3.                  As Gideon points out, the cost of servicing UK debt is much lower than in the countries he mentions; the costs of servicing UK debt will rise from 1.6% of GDP in 2007 to 3.1% in 2014 – Greece is currently spending upwards of 12% of GDP;

4.                  The structure of debt is very different: around two thirds of UK debt is held internally (for instance, by you and me through our pension funds) and the maturity of UK debt is much longer-term than for all other advanced nations. The UK’s debt ‘burden’ has been well managed; and,

5.                  The UK economy is bigger and more diverse than any of the other nations listed and investors can rely on our Budget data. In contrast to what was argued later, the UK is recognised as a good place to do business.

Gideon’s contention that low UK interest rates are a direct result of coalition policy is demonstrably false. Don’t take may word for it; here’s Martin Wolf, Chief Economics Commentator at the FT writing in September 2010:

“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”.

From repetition of the most enduring myths of the current crisis, Gideon fast forwarded to the main thrust of his speech; the Budget was about making the UK the best place in the developed world in which to  ‘start, grow and finance’ a business’. And boy did he trot out some well worn clichés…

“For this Budget confronts the hard truth that has been ignored for too long. Britain has lost ground in the world’s economy and needs to catch up. In the last decade, other nations have reduced their business tax rates, removed barriers to enterprise, improved education systems, reformed welfare and increased exports. Sadly the reverse has happened in Britain. We gambled on a debt-fuelled model of growth that failed. With the state now accounting for almost half of all income, we simply cannot to go on like this. Britain has to earn its way in the modern world… Britain has fallen behind many others in the world in the last decade. We’ve dropped from 4th to 12th place in the global competitiveness league”

It is no surprise that Gideon is so attached to the World Economic Forum’s Competitiveness index – it is the only international survey that suggests the UK has become more regulated over the past decade (actually to be fair, its more complex than that – but an analysis of this particular survey will have to wait for another day). As covered in detail in our Budget submission (linked above), the evidence is very clear: the UK is a very lightly regulated economy – the third most lightly regulated labour market in the developed world and the second most lightly regulated product market. The UK is the fourth best place in the world in which to do business according to the World Bank. All the references are in my submission. The veracity of the proposition that UK businesses are over-regulated and over-taxed rests only in its repetition.

So Government’s resources will be targeted at a non-problem. Indeed, most sane commentators, particularly those with any attachment all to the principles of fairness and equality would regard the UK as too lightly regulated. The UK was at the epicentre of the banking crisis because our product markets are so lightly regulated. To govern as if any oversight of the business community represents an unwarranted ‘burden’ is to ignore the lessons of economic history as well as principles of sound governance.

“In the last decade, countries like Germany, Denmark, Finland and the Netherlands have all overtaken us in the international rankings of competitiveness”.

If this is true (and we’re back to that one survey again) it isn’t because they’ve deregulated. Germany, Finland and the Netherlands all have far more interventionist economies than the UK. Denmark’s flexicurity system is an interesting comparator – yes, Denmark has similar levels of regulation to the UK but backed up by an impressively generous welfare state e.g. redundant workers entitled to 60% of earnings for two years. Can’t imagine Gideon seeking to replicate that one…

The specific policies Gideon announced hardly conflate into a coherent and credible growth strategy:

·                    £350m worth of specific regulations will go – including the Equality Act’s costly dual discrimination rules;

·                    Lord Young’s recommendations on health and safety laws will be implemented in full;

·                    The no-win no-fee legal services that prey on employers will be restricted;

·                    existing regulation will be scrutinised by the public.

Is this it?! Is this a strategy for growth that will build a ‘more balanced economy by encouraging exports and investment’? Pitiful.

I’m going to leave an analysis of the various tax measures announced because 1) the TUC and Tax Research UK will do it better and 2) I want home for my tea. But it’s clear that plans are still being developed on the assumption that cuts in corporation tax will boost growth. Never a convincing strategy it’s become irredeemably tarnished by the Irish experience. Any benefits to low and medium paid workers through the cut in fuel duty and the increase in income tax personal allowances will be more than offset by other tax changes such as January’s VAT rise and the NI rise from next month.

The resources supposedly targeted at evasion and avoidance are wholly insufficient to deal with the scale of the challenge.  Despite the bullish rhetoric, current policy is actually handing firms more opportunities to avoid and evade; key examples being enterprise zones (will just shift existing activity – no mention of the ‘deadweight’ issues that are always raised with active labour market interventions) proposals on foreign owned companies.  

A couple of points on the green agenda. The full impact of the carbon floor price will only become apparent once the Government announces its intentions in other key areas of electricity market reform such as the Emissions Performance Standard, the replacement of the Renewables Obligation with Feed in Tarriffs (plus contracts for difference) and the Review of Ofgem’s role and remit. I can’t see how Gideon can conclude that this measure alone will ‘provide the incentive for billions of pounds of new investment in our energy infrastructure’.

The additional two billion pounds of funding for the Green Investment Bank is welcome but it is disappointing that it will be unable to borrow before 2015. The GIB’s resources are almost insignificant when set against the levels of investment required to achieve a genuinely low carbon economy. Even Gideon knows the market isn’t going to deliver on this one.

All in all, the Budget sidestepped the sustainable growth and jobs challenge. The FT’s influential Lex column has noted that, -

“While the political packaging makes sense, it points the arrow of causation the wrong way. Rather than a Budget for growth, it is a Budget that depends on growth…. If the expected growth does not arrive (as many economists currently fear), then lower tax receipts will limit the government’s ability to forment any fresh growth. What then can stimulate the economy?”

Gideon has no answers. My view is that he genuinely believes his scorched earth policy on regulation will produce the desired effect. The evidence suggests otherwise. Yes, there is a theoretical rationale for what he is attempting but most normal people thought the theory had died with the banking crisis. It is now abundantly clear that bad economic theory doesn’t die; indeed it seems that coalition policy is formulated only on the basis of zombie economics: deregulation, privatisation, trickle down and the Laffer Curve.

The UK Budget is very unlikely to grow more strongly as a result of this Budget. But we can be very confident that the UK workplace will become an ever more unwelcoming, even hostile, place to more and more workers. The economy will certainly become less fair and less equal. As a result it will become more unstable and more prone to systemic crisis. Now remind me again of what provoked our current economic difficulties?

Stephen Boyd - STUC