Iain MacWhirter; a response

There was time, not so long ago, when the op-ed pages of the Glasgow Herald were actually worth reading. Commentary by experienced, knowledgeable journalists such as Alf Young regularly enlightened the reader on the big political, economic and social issues of the day. You might not always agree with the writer but investment in reading the piece was usually rewarded with some stimulation of the intellect.

No longer. As journalistic capacity declines with circulation, the tone of the op-eds becomes increasingly shrill. Provocation, not enlightenment, seems to be the order of the day for hitherto thoughtful writers.

Take renowned journalist and political commentator, Iain MacWhirter who today is responsible for the subtly titled piece, ‘Madness to go on strike over pensions’.  There has been much to admire about Mr MacWhirter’s writing over the years and recently he has been particularly effective in holding political and financial elites to account for their moral degeneracy and managerial hopelessness before, during and after the banking crisis. He has been less effective – embarrassingly so at times – on the wider economics of the crisis; a point I’ll return to later.

A recurring theme for Mr MacWhirter over the last year has been attacks on public sector workers and the Scottish public sector as a whole in which he has repeated a number of the tired myths so beloved of the Serious People of the Scottish right, to whom Mr MacWhirter appears increasingly anxious to ingratiate himself. Therefore, Mr MacWhirter’s criticism of striking public sector workers hardly comes as a surprise.

With characteristic elegance, today’s piece misrepresents both the trade union position and wider pensions issues. Public sector workers we are told have an ‘exaggerated sense of their own grievance’ and an ‘inability to see the situation in the round’. Unions are apparently invoking Upper Clyde Shipbuilders and the General Strike of 1926. Public sector workers are the only group of workers that are still ‘well organised’. Weirdly, Mr MacWhirter thinks the Tories have chosen the ‘battlefield’ of public sector pensions to defeat Bob Crow of the RMT a union which organises primarily in the private transport sector.

I have sat through numerous meetings of the STUC General Council and other gatherings of senior trade unionists in Scotland during which the pensions issue has been discussed. I have heard no invocations of struggles past but I have heard an awful lot about the wider economic and social context facing workers across the economy. I have certainly discerned a ‘sense of grievance’ but always rooted in a deep understanding of the pensions delinquencies visited on private sector workers by employers and government.  It may come as a surprise to Mr MacWhirter but private sector unions (yes, there are still large parts of the Scottish private sector with high union density) are solidly behind this action; they know more than anyone else that all workers suffer from the race to the bottom on pensions.

More than anything, I have witnessed trade unions anxious to explain their case as they did in this week’s Sunday Herald. I do not have the space to do so again here but after reading Mr MacWhirter’s article I would refer readers to the following for some much needed balance Nigel Stanley of the TUC; Nicola Smith, Dave Watson of UNISON Scotland; and for those of you with the time, the TUC response to the Hutton Review here.

Suffice to say that Mr MacWhirter completely ignores some key issues such as the reforms introduced by the previous Government which reduced the value of public sector pensions by around 10% and the present Government’s decision to replace RPI with the lower CPI to uprate pensions in the future; a reform which will further reduce the value of public sector pensions by 15%.

Similarly, Mr MacWhirter chooses to ignore the consequences for the recovery of further reducing real wages in a fragile economy for a significant section of the workforce.  This point has been cannily taken up by the Scottish Government who, to be fair to them, have consistently stressed the importance of buttressing demand throughout the economic crisis. They know that stripping more demand out the economy with the output gap and unemployment high and the bulk of spending cuts yet to bite, is potentially catastrophic

Rather pathetically for a big boy who has been mixing in the political world for some decades, Mr MacWhirter anticipates receiving ‘hate mail’ in response to this piece. This couldn’t be a pre-emptive attempt to undermine reasonable responses could it?  I can assure our unexpectedly timorous friend that this response has not been written in hate; only frustration and disappointment.

However, given Mr MacWhirter’s intellectual confidence and haughty dismissal of opposing views, I do feel justified in ending this response by reminding readers of a couple of his recent faux pas on the economy…

Example 1: on 29 September 2008, at the very height of the banking crisis, Mr MacWhirter argued that, ‘There are already rumours that the Bank of England will cut interest rates by half of one per cent later this week…this will push inflation through the ceiling – which is exactly where the Government wants it to be’.  

Push inflation through the ceiling?! Now for anyone with a passing interest in economics this risible attempt at sophistication was always ridiculous. The economy was collapsing round about us in late September 2008 and there was no prospect of cuts in interest rates feeding through into rocketing inflation. The imperative at the time was to stop the recession ( which we now know began in spring 2008 – many of us knew this at the time) becoming a depression and a massive monetary response was necessary – as I think most reasonable people on left and right can agree on.

Worth pointing out that the Bank did indeed cut interest rates from 5% to 4.5% in October 2008; to 3% in November and to 2% in December. Rates continued falling to reach 0.5% in March 2009 where they have remained ever since. This massive monetary response to the recession was boosted from March 2009 by a programme of Asset Purchases (or ‘quantative easing’).

What happened to inflation?

Yep, as interest rates were cut, inflation fell – as to be expected in a recession. Since autumn 2009, inflation has risen largely due to the pound’s depreciation (a good thing); higher than anticipated inflation has since been sustained by rising commodity prices and, more recently, the VAT rise.

But cutting interest rates in autumn 2008 did not lead to higher inflation! Mr MacWhirter clearly has no understanding of basic macroeconomics let alone the quirks of a liquidity trap.

Example 2: In writing about the Edinburgh Book Festival in August 2010, Mr MacWhirter wrote another strange piece on the economic views of Noble Prize winning economist Joe Stiglitz and Scottish historian Niall Ferguson. He seems to believe that Prof Ferguson was advocating an approach of ‘trying to solve the debt by piling on more debt’. Now, I didn’t hear Ferguson speak in Edinburgh but I have read his FT pieces over the last few years and he has never promoted a programme of fiscal expansion in response to our current situation. Quite the opposite. Maybe he was just trying to wind Mr MacWhirter up.

But, again, the main problem with this piece is Mr MacWhirter’s crushing ignorance of economics and economic history.  ‘In the end, the stimulus offered by both Stiglitz and Ferguson is the old solution of trying to solve a debt crisis by piling on more debt. It didn’t work in Japan and I don’t see why it should work here’.

Oh my Lord, where to start. First, the UK is not, and was not, in a debt crisis. We are in a crisis of low growth and high unemployment. It gets so, so boring rebutting this nonsense that I can only refer to our previous work.

Secondly, it didn’t work in Japan because it wasn’t tried. See the work of Paul Krugman, Adam Posen and others.

Third and most importantly, Mr MacWhirter, when a country has weak or no growth, when unemployment is high, when interest rates are already up against the zero bound (meaning contractionary fiscal policy cannot be offset by expansionary monetary policy; unless its QE but, wait a minute, you don’t like that either), when there is little prospect of further currency devaluation, when our main trading partners continue to have weak domestic demand, when real wages are falling at their fastest rate since the 1920s (I could go on)…how do you get out of a crisis of low growth and high unemployment? Eh?

In breezily dismissing the views of a world renowned centrist economist (Mr MacWhirter describes Stiglitz as ‘left-wing’; for a Nobel Prize winning economist maybe but not in the usual Scottish sense) Mr MacWhirter displays the same hubris of which he has quite correctly accused bank executives. I’m sure he is well enough read to know what hubris leads to. Maybe he should stick to politics.

Stephen Boyd STUC
Twitter @stephenboydstuc

Christie Commission: Look out for strong values and long term innovation. Not budget quick fixes.

Though Campbell Christie, ex-STUC General Secretary, is a friend and a former colleague, I have no advanced notice of the contents of his report which will be launched on Thursday this week.  It would seem that through one source or another both the Holyrood magazine and the Glasgow Herald have!

I have feared for a while that the media and many commentators may be underwhelmed by the recommendations.  Almost since its inception, there has been a growing implication, hardly discouraged by the Scottish Government, that Christie's findings will in some way provide guidance on how the Cabinet Secretary for Finance should approach his diminishing budget and public spending crisis in the next two or three years. That was not Christie's brief, nor could it ever have been.

Indeed what is clear, and consistent with the line of inquiry adopted by the Commission when STUC met with it, is that its impressively qualified members have taken seriously their actual brief - to provide a road map for reform, through being long term and radical in their outlook.

This will be no ‘privateers charter’. Those who would change the nature of public service provision to the marketised or 'enabling state' model will be disappointed.  All indications are that the Commission will recognise the state as the key provider of public services, albeit buttressed by an innovative voluntary sector.  If Christie’s plans reach fruition cross agency working between PSOs and a bottom up approach to service delivery involving both users and public service workers will be the key.

Inevitably, at the same time as localism is championed, we will see recommendations for more shared services - the amalgamation of particular functions between local authorities or between different public service providers.

A word of warning is required here.  Shared services can work … sometimes.  But they are no panacea, often the imagined savings are delayed or do not appear at all, and there is a real risk that by ghettoising particular parts of public service delivery from others, work is shunted around, but less systematic and non 'problem-solving' approaches proliferate.

Headline news is that  the Commission will demand a major shift towards early intervention and that social and economic justice will be driven more deeply into the ethos and, importantly, into the evaluated outcomes for public service organisations.  To achieve this we need the right type of regulatory regime - clear and well-defined but not prone to increasing transaction cost.  I also predict that the Commission will recognise that farfrom flirting with the nonsense touted by the right wing that public services are a ‘drag on the economy’.  The real value of the sector to growth will be heralded.

Above all, I hope and trust Christie has some positive things to say about public service workers.  It is no exaggeration to say that, along with public service users, our workers are the key to effective service redesign.  They know what works and what does not and, more importantly they very often know why.  But a worker who is fearful for their job, undervalued and undertrained and whose pay and pensions are under attack is less likely to be able to help us think our way into improvement.

Value the worker and much which is positive will follow.

Grahame Smith
Scottish Trades Union Congress

More IMF'in nonsense

I really can’t be bothered running through all the reasons why the only reasonable response to the IMF’s endorsement of the coalition’s economic strategy is unconcealed derision. Anyway, already did it here last September.

But I would add that all is not what it seems...Understandably, the instinctive reaction of the IMF’s critics is to do what I did in the linked blog above: describe the ideological nature of the Fund, its risible record as a forecaster, the times events have revealed its assessments to have been stupidly, incredibly wrong and list the many occasions on which its prescriptions have led to disaster.

Thing is though, the IMF has published a lot of good stuff in recent months; honest, it really has. And its current wonkish policy work is incredibly hard to reconcile with country reports like the one it has issued today on the UK.

Examples? Take the IMF World Economic Outlook published in October 2010. Chapter 3 poses the question Will it hurt? The macroeconomic effects of fiscal consolidation. There is little in here to console the Osborne’s of this world. Among the conclusions:

•  Fiscal consolidation typically has a contractionary effect on output. Quite.

• Reductions in interest rates usually support output during episodes of fiscal consolidation – can’t happen in the UK in 2011 with interest rates already up against the zero bound.

• A decline in the real value of the domestic currency typically plays an important cushioning role by spurring net exports and is usually due to nominal depreciation or currency devaluation – very unlikely to happen here; Sterling depreciated by 25% prior to the fiscal contraction with vefry limited benefits.

• Fiscal retrenchment in countries that face a higher perceived sovereign default risk tends to be less contractionary. However, even among such high-risk countries, expansionary effects are unusual. Well, the UK was always a low default risk and the second sentence says it all.

The IMF has also produced a number of excellent ‘working papers’; papers which are not yet full IMF policy but which are informing its policy development. Have a look at this on Inequality, leverage and crises if you don’t believe me. Olivier Blanchard, the Fund’s chief economist has worked with Joe Stiglitz and others to try to shed some light on the failures of macroeconomics as a discipline. The IMF even organised a joint event in the summer of last year with the ILO on the Challenges of Growth, Employment and Social Cohesion which resulted in this excellent report.

So why does the Fund continue to toe the orthodox line in its assessment of UK Government policy? Stephanie Flanders hints at the truth in a blog responding to today’s events:

“Impeccable sources have told me there was considerable concern among senior IMF economists last year at the pace of the coalition's plans to cut the deficit. However, political negotiations at the highest level meant that these concerns did not get expressed in public”.

When the IMF will adapt its political interventions to align with its current policy work is anybody’s guess. But its record suggests that we could be in for a very long wait.

Stephen Boyd - STUC

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.