A sense of vindication...and fear

Jonathan Portes, Director of the National Institute for Economic and Social Research and ex-chief economist at the Cabinet Office has a masterly piece 'The coalition's confidence trick' in this week's New Statesman. I'm not providing a link because as many people as possible should buy the mag and support good journalism; I can assure you it will be money well spent. But here's a flavour...

Portes systematically rebuts the coalition's case on the timing of deficit reduction. For me, this is the key paragraph:

"...with regard to confidence and the threat of higher interest rates, and despite a very large deficit, interest rates were low and stable at the time of the 2010 election; government borrowing was as cheap as it has been for decades. There was no market panic. In the run-up to the election, senior economists in government, including me, were worried that an inconclusive result would lead to market jitters or worse. But we were wrong; even during the fraught negotiations to form the coalition, both gilt yields and the pound were remarkably stable".

The STUC has stressed this point time and time again over the past year but still the coalition sticks to the 'UK is the next Greece' scenario. Sure others have taken them on; Martin Wolf of the FT has been consistent on this and a number of international voices (Krugman, Stiglitz etc) have weighed in. But this is first piece I've seen which comprehensively links last year's big cons to Gideon's more recent claims that falling gilt yields through the summer prove markets regard the UK as a 'safe haven' due to the coalition's fiscal policy.

Portes is appropriately dismissive of this nonsense; explaining that as gilt yields fall, so do stocks and sterling - 'Low long-term interest rates reflect economic weakness and a lack of market confidence in the prospects of the Uk economy'. (He even chucks in a lovely graph of yields on UK ten-year gilts since '94 which I intend pinching with my lovely new snipping tool).

Noting that Gideon refers to his Nobel Prize winning critics as being on the 'outer fringe of the international debate', Portes concludes with the observation that 'this argument ['slower pace of consolidation combined with policies to support growth'] is neither radical nor old-fashioned Keynsianism, nor is it in anyway unorthodox. It is just standard, common-sense macroeconomics; or, just more simply, common sense'.

Yep, its Gideon who inhabits the lunatic fringe.

Stephen Boyd - STUC

5 annoying things about the Scottish Government's Corporation Tax Discussion paper

Had to get some things off my chest while I’m in the process of compiling the STUC’s comprehensive response to the Scottish Government’s discussion on corporation tax published this week. I have found the following aspects of the paper most annoying:

1       The sophistry

You say ‘introducing an attractive, competitive corporation tax policy’ ; I say ‘reducing the contribution to the common weal of currently cash rich, non-investing, often ethically dubious corporations’.

They all do it I know and in this respect the paper is no better or worse than the majority of Government consultation/discussion papers. Still annoying though.

2       The contempt for the discipline of economics & the knowledge accrued through its study over a couple of hundred years

Yes, economists have an awful lot to answer for but, y’know, economics has taught us some important stuff about the way the world works. It has not taught us that, “The key driver of economic growth in the long-run is the private sector”; a mind-bogglingly absurd sentence and perhaps the silliest ever to appear in a Government consultation paper.

One paper cited in support of the economic benefits of reducing corporation tax is described, ridiculously, as ‘seminal’. It is not. The Market for Lemons is seminal. On the Impossibility of Informationally Efficient Markets is seminal. The General Theory is seminal. Hell, it would be silly not to acknowledge that Friedman’s the Role of Monetary Policy is seminal. You might have issues with the author but it’s undeniable that the paper had a massive influence on the future development of the discipline. Lee and Gordon’s 'Tax Structure and Economic Growth' did not; it is not seminal. Why pretend that it is?

3       Asserting as fact that which is highly contentious

“Corporation tax is one of the chief levers that any government can use to promote growth, investment and jobs over the long run. It is also a vital source of competitive advantage in an integrated, flexible global economy, helping to attract new businesses, key corporate functions and highly skilled jobs”.

Is it a ‘chief lever’? Is it a ‘vital (or, more importantly, sustainable) source of competitive advantage’? Does reducing corporation tax really help to attract ‘key corporate functions and highly skilled jobs’? The paper utterly fails to provide compelling evidence in support of any of these propositions.

4       Misleading references

The rest is just annoying -  this is bad. Struggling to make sense of data attributed to the ‘World Bank’, I clicked on the lengthy non-World Bank link provided (pg 24). Lo and behold the paper referenced isn’t actually published by the World Bank at all; it’s from the American Enterprise Institute, a bastion of Republican economic wing-nuttery still striving to prove the Laffer Curve (gloriously described today on Twitter by Nouriel Roubini as the ‘most erroneous and laffable garbage ever hypothised’). The AEI tortures World Bank data in an effort to uniquely demonstrate that the US has the highest effective rate of corporation tax in the OECD and the Scottish Government serves this up as evidence. Incredible.

Oh how I wish I could be in the room at the next meeting of the FM’s Council of Economic Advisers when Joe Stiglitz is presented with this ‘evidence’...

5       The assumption that entrepreneurs know best about the development of economic policy

I’ll blog separately on this issue soon so I’ll keep this brief. If the Government wants advice on selling cheap sportswear then it should go to Tom Hunter. If it wants to learn about fitting exhausts it should go to Tom Farmer. If it wants to consider how sustainable economic growth might be maximised over the longer-term then, yes, it should speak to these people. But it should do so with a healthy scepticism and recognition that civic voices must also be heard. It is a demonstrable truth that entrepreneurs have a propensity and, it often appears unlimited capacity, for spouting abject nonsense about matters economic.

The words of Paul Krugman ring very true: “...economics and business are not the same subject and mastery of one does not ensure comprehension, let alone mastery, of the other. A successful business leader is no more likely to be an expert on economics than on military strategy...the next time you hear business people propounding their views about the economy, ask yourself, Have they taken the time to study this subject? Have they read what the experts write? If not, never mind how successful they have been in business. Ignore them, because they probably have no idea what they are talking about”.

Full response to the discussion paper in due course. Before departing I’ll quickly note a couple of things. First, to be fair, the paper does acknowledge that reducing corporation tax is not an economic cure all which puts it in a different bracket from the loony right think tank stuff on this subject (which makes the AEI reference all the more bizarre). Second, how Labour must regret their disgraceful, mystifying opposition to the modest Supermarket Tax proposals which conceded so much ground on ‘competitiveness’ (competitiveness? Retail? Lordy...) that credible opposition to these Corporation Tax proposals will be very difficult to achieve.

Stephen Boyd - STUC

PCS Scottish Launch “WELFARE – An Alternative vision”

All Welcome- PCS Scottish Launch “WELFARE – An Alternative vision”
Thursday 28th July (6,30pm), STUC , 333 Woodlands Road, Glasgow.

PCS has taken a leading role within the trade union movement in voicing
concerns about welfare policy, and in campaigning to defend and strengthen
the welfare state.

As a union representing nearly 100,000 staff delivering welfare, PCS has an
obligation not only to our members, but to those who use it – including our
future, current and former members and their families too.

PCS members take pride in the welfare state, and they want a welfare state
that provides a decent standard of living for the retired, the unemployed and for
those unable to work, and that rewards them fairly as public servants.

Over the past 30 years the concept of welfare has been under attack. As
governments have stopped pursuing policies of full employment they have
sought to pass the blame for unemployment to the individual.

Now the government’s £18 billion welfare cuts will damage the welfare state
as a safety net that ensures a decent standard of living for those unable to work.
We have no wish to return to the welfare state of the late 1940s: it reflected the
social attitudes of its time (especially towards women and disabled people).

However, the welfare state did establish the principle of ‘social insurance’
giving people the security of knowing that if they become unemployed, ill or
disabled, and when they retire they will not be in poverty. If people need to
care for children, disabled or elderly relatives then they too should be guaranteed
a dignified income.

These principles are the hallmarks of civilised society – we need to make the
case for welfare for the 21st century. Our case is set out in a pamphlet which looks at the past, present and future of welfare and we hope it starts a new debate about the sort of welfare and society that we want.
 

JOIN IN THAT DEBATE THIS THURSDAY AT THE SCOTTISH LAUNCH OF THE VISION AT THE STUC, 333 WOODLAND ROAD, GLASGOW (6.30PM START)

Lynn Henderson - Scottish Secretary - PCS

Wick Wants Work Wins Work for Wick

Congratulations to all those involved in the Wick Wants Work Campaign   following the Government announcement that the HMRC office in Wick will remain open for another two years.

This is not only a victory for common sense but also one for effective community campaigning, in this case led by the PCS and supported by Thurso and Wick TUC .  Only last April we welcomed the Wick Wants Work Campaign to Congress and they contributed to trhe debate, along with a number of other civic organisations and partners, sharing our view for a "Better Way" , an alternative to the coalition's slash and burn approach to deficit reduction.

On the first day of Congress, in a strong contribution from Hamish Drummond from the PCS it quickly became clear to delegates just how ludicrous the coalition Government's decision to close the HMRC office in Wick was.

The Congress in Ayr provided Wick Wants Work with the chance to bring their campaign south and campaigners took every opportunity to raise the profile of what has ultimately turned out to be a shining example of trade union and community campaigning producing results and protecting jobs.

The visit allowed campaigners to engage with politicians from the UK and Scottish Governments, affiliated trade unions, other local TUCs and a number of other visitors to Congress.

We should remember that an HMRC presence in Wick is only guaranteed for two years but this provides a foundation for PCS and  Wick Wants Work to build a case for a permanent future for HMRC workers in the north of Scotland.

The STUC, working with local TUCs will continue to support campaigns to protect jobs and services in communities throughout Scotland and the success of Wick Wants Work serves as a reminder of the important role that trade unions have, not just in the workplace but also in our communities and throughout our society.

Once again congratulations to all  involved in Wick Wants Work.

Ian Tasker
STUC

A Better, Safer Way for Young Workers

Guest Blog, Laura Connor, Thompsons Solicitors

Work related ill health and injury cost the UK economy billions every year yet many employers continue to place their workers at risk by failing to meet their statutory obligations to protect their health and safety.

The CBI report that workers took 180 million sick days in 2009 with 30 million of those related to ill health and injury caused by work. The direct cost to employers of these work related incidences was £3.7 billion with an additional £31.5 billion being paid out in compensation payments to those made ill or injured by the failures of their employers.

Thompsons and the STUC have always shared the view that the majority of incidents in the workplace resulting in death, injury or ill health are easily preventable and it is incomprehensible, given the economics of health and safety failures as outlined above, that the current coalition Government is slashing the budget of the HSE by 35% over 3 years.

Young people are historically at significant risk of suffering workplace injury or being made ill by their work although recent figures published by the HSE show a significant reduction in fatal and major injuries since 2007/08.

The question that arises is how much that reduction is related to enlightened employers grasping the importance of providing health and safety training for young workers or, and this is the more likely given the recession, there are less people under 25 years of age in employment, therefore less opportunity for them to be killed injured or made ill by their work.

Employers may continue to moan about the cost of ill health and injury but for work related conditions and incidents the answer is in their own hands. It is vitally important that all workers continue to be protected in the workplace, especially young people. Far too many young lives are ruined as a result of workplace accidents and, in the worst cases, they may be extinguished and never be allowed to participate and contribute to society.

Unfortunately many young people are not aware about the legal assistance that is available through their union.

At the 71st STUC Annual STUC Youth Conference Thompsons organized an informal meeting with delegates to discuss how we could help the Youth Committee promote the importance of good health and safety awareness, provide a platform for young people to share their views on workplace health and safety and encourage young workers to raise health and safety concerns with their trade union.

From those attending it was clear delegates from all sectors - public, private and voluntary had experience from their own workplaces or sectors where they felt their employer does not support them. In one case a primary school teacher had been assaulted by a pupil in the course of her work. Unfortunately physical and verbal abuse against young workers is not uncommon as identified in research undertaken at Queen Margaret University as part of ongoing work between the Scottish Centre for Healthy Working Lives and the STUC.

If you have any concerns, contact your union for advice. Thompsons offer their union clients, and their members, advice on most legal issues. As a young worker, you should not feel threatened or in any way inferior to those who may be older or more experienced than you. You have the same legal rights as every other worker. Austerity is not an acceptable excuse for unfairness or breaches of health & safety laws. Make sure your voice is heard and do not accept that which is unjust.

It would be good to hear from others who have similar concerns…..




Laura Connor, Thompsons Solicitors
info@stuc.org.uk

http://www.thompsons-scotland.co.uk/

OBR Financial Sustainability Report: ConDems lick their lips…

On Wednesday the Office for Budget Responsibility publishes its first Financial Sustainability Report which will ‘present long term projections for public spending and tax revenue, describe the public sector balance sheet, and set out summary indicators of the long term sustainability of the public finances’.

The FT reports today that ‘after years of delay, the Government will give the first glimpse of what the UK’s public finances would look like if the UK were a listed company such as Marks and Spencer or BT’.

The consequence?

‘Counting the future liabilities of the accrued pension rights for public sector workers and the future costs of private sector finance initiative projects will inflate the apparent liabilities of the state and send the calculated assets of government deep into the red’.

Pensions alone could add between £800bn and £1200bn to the estimate of current government liabilities, depending on the discount rate chosen. PFI will account for tens of billions more. This is surely a disaster for an economy at ‘risk of becoming the next Greece’? Er, no. As the FT goes on to say:

‘Experts welcomed the new transparency but cautioned that the new liabilities shown did not represent debts that had arisen out of the blue. Future assets, such as the ability to collect tax and imprison people who refuse are not counted in the new balance sheet’.

Carl Emmerson of IFS is quoted:

‘Unlike in Greece, where a new Government uncovered significant new debts that had been brushed under the carpet, any additional liabilities shown under new accounting rules are known and discussed’.

I usually stay very well clear of the forecasting business but here’s what I think will happen on Wednesday:

The OBR report will estimate liabilities in line with FT predictions above. Ministers and their supporters will immediately claim the report as additional evidence to support austerity. They will not miss the opportunity to present the report as signalling a new era of Government transparency and more evidence of the secrecy and profligacy of their predecessors.

Although the outlook for the UK’s long-term financial sustainability will not change with publication of the report expect a frenzied reaction designed to leave the uninformed with the impression that spending cuts and pension reform (wage cuts) are unavoidable if the UK is to avoid the fate of Greece, Ireland, Portugal, Spain and now Italy.

What will be the response of the markets to the report? I think they will shrug. Of course, by the Government’s own logic, any new information confirming a significant deterioration in the public finances should provoke a negative reaction in the markets. But the markets know very well that what Carl Emmerson argues above is true and that the OBR report changes the UK’s relative fiscal position not a jot. I also think that those who consistently invoke the markets as a justification for austerity will do as they always do – ignore what the markets are actually saying today in order to focus portentously on what they might say tomorrow.

Meanwhile, the new labour market stats also published on Wednesday morning will be cherry picked and the stream of shocking economic data pointing towards very low or even negative Q2 GDP growth ignored or dismissed.
That is my prediction.

Stephen Boyd - STUC

A little masterpiece of political economy

The latest Fraser of Allander economic commentary published a fortnight ago did not make for happy reading. Its analysis confirmed the views consistently expressed by the STUC through the first half of 2011: the recovery is weak to non-existent and the headline stats do not begin to tell the full story of what is happening in the labour market. Not good.

However, a pleasant surprise awaited those who managed to stick with the commentary to the end; an outstanding article on ‘The Governance of Scotland’s Ferries’ by Professor Neil Kay, Department of Economics, Strathclyde University. This is a little masterpiece of political economy – in six short pages Prof Kay manages to catalogue the failures of policy since devolution, describe the dangers that lie ahead and propose sensible solutions rooted in a deep understanding of microeconomic analysis, EU competition law (the great bogeyman of Scottish ferry policy) and the needs of our island and peninsula communities. Marvellous stuff, if ultimately depressing in the story it tells about policy development under devolution. 

Professor Kay has been a regular commentator on ferry policy over the last decade, contributing in depth to the seemingly endless stream of Government consultations and parliamentary inquiries. His contributions (which can be found on his website http://www.brocher.com/ ) are offered as a ferry-using peninsula resident who happens to have much relevant expertise. Has Government welcomed this public spirited contribution? Not likely. Perhaps the most disillusioning moment I’ve experienced in the Scottish Parliament was to hear the term ‘academic’ being used pejoratively by Ministers against Prof Kay and other interested researchers during a debate on tendering back in 2005. Disgraceful. 

Nevertheless, Prof Kay has continued to provide valuable insights into the shambles that is ferries policy. I can’t improve on Prof Kay’s FoA article so would simply encourage people to take a look. The following quotes do not tell the full story but provide a flavour of where bad policy has left us and the nature of the dangers that lie ahead: 

“The…more dangerous scenario is that eventually Calmac loses its contract to another EU bidder. At this point, if there was a coherent regulatory framework in place as for other essential services then at least there is potential to guard against problems from moral hazard, adverse selection, opportunistic behaviour, technical or financial failure on the part of the incumbent operator. But obviously these safeguards would have to be in place before the tender process takes place, you do not start re-writing the rule book once the game has started and you are worried about who is winning, just as you do not start looking for an operator of last resort when you need them to start tomorrow”. 

..and 

“There is a debate to be had, and reasoned arguments on both sides, as to whether most of the Scottish ferry network should be run by a single state owned holding company or whether most of it should be in private hands, much of it awarded through public service contracts. There is also a debate to be had, and reasoned arguments on both sides, as to whether or not some routes should be tendered separately rather than as part of the main Calmac bundle, effectively to institutionalise cherry picking and bring in a degree of oversight by government. Indeed these very debates were encouraged in the current Scottish Ferries Review. The problem is that the debates are irrelevant, a waste of time and even counter- productive since they are not predicated on a real understanding of commercial logic and interests, let alone what EU law permits and prohibits in this context. In the absence of coherent oversight the market will provide its own solutions and one of the first lessons students learn in Economics 101 is that you cannot just rely on crossed fingers to ensure that private interest aligns with the public interest” (my emphasis). 

I’ll say it again, read the full article. 

The ferries debacle reflects some wider problems with policy development under devolution. These include: 

• The inability or unwillingness to treat issues of profound importance to Scotland’s fragile peripheral economies in a serious fashion – Prof Kay highlights the fact that Western Ferries now has an unregulated monopoly of vehicle services on Gourock-Dunoon. He asks, not unreasonably, whether the Scottish Government would let a private operator have an unregulated monopoly of tolls on the Forth Bridge?
• The extreme credulity of officials in the face of private sector companies and their lobbyists. Of course Western Ferries are motivated by the public interest. What else could possibly motivate them? 
• The selective application of microeconomic analysis – when the STUC and others sought German style wage subsidy programmes at the start of the recession, the full weight of the Government’s analytical resources is thrown at us to show that high deadweight costs render such programmes inadvisable. But when standard economics strongly suggests that a regulated state ownership is the most appropriate model, the economics are dropped. All we get are vague statements about the need to ‘test the market’ whatever that is supposed to mean. 
• Despite our devolved Parliament’s founding principles of openness, accountability, the sharing of power and equal opportunities, it still appears very, very difficult for civic minded individuals (organisations too?) to influence the policy process to any meaningful degree – no matter their level of expertise.  

That said, Prof Kay is trying once again. He currently has a petition before the Scottish Parliament which ‘calls on the Scottish Parliament to urge the Scottish Government to support the setting up of an independent expert group to consider and recommend institutional and regulatory options for issues relating to the provision of competitively tendered Scottish ferry services under EC law’. You can find it here. The background information contained therein is another beautifully concise summary of the failure of policy to date.
  
I do have some concerns over ‘expert groups’ and believe it is usually necessary to balance the experts with civic interests who tend to be more accomplished at seeing the bigger picture. The same goes for any future regulatory authority. But it is a good petition which deserves a fair hearing. 

As the Scottish Government's ferries review proceeds towards the completion of a ‘ferries plan’ which will help determine the structure and quality of ferry services for the next couple of decades, let’s hope that the powers that be start to listen to the Professor.

Stephen Boyd - STUC

The strange and selfish world of employer lobbying

Interesting piece in the business pages of today's Glasgow Herald, 'Spending Cuts are top threat to SME sector' (pay-walled) which reports a survey of SME's (small and medium sized enterprises) by RSM Tenon. With 18% of respondents identifying it as the most pressing threat to their business, 'spending cuts' replaces 'cash flow' as the top concen of the SME community.

The authors cite the direct loss of public contracts and the detrimental impact on consumer confidence as the primary mechanisms through which spending cuts translate into problems for SMEs. Hardly original observations but accurate nonetheless; the STUC has always argued that the coalition's war on demand would adversely impact all sectors of the economy.

Worth noting in this context that the bodies which purport to represent SMEs remain gung-ho supporters of austerity ( I would give the Federation of Small Business a partial exemption here - for all their faults they do engage on an entirely different level to the other employer representative oragnisations in Scotland) . I spend a reasonable amount of time in the company of these people and I have not once heard any senior employer rep in Scotland acknowledge the impact of cuts on SMEs - or for that matter, larger firms. Not once. Instead I hear only blanket adulation for coalition ministers, support for their risible plan for growth, dutiful repetition of Gideon's 'Uk is the next Greece' line (yep, they're still at it) and all the usual Government/household equivalence fallacy of composition hysterics.

They act as if things are going swimmingly. Not the case. To emphasise the awfulness of current economic performance, let me thrown in a couple of graphs:

From todays' NIESR monthly estimate of GDP growth which forecasts that the UK economy grew by only 0.1% in 2011 Q2. With 0.5% GDP growth in Q1 cancelling out the 0.5% contraction in 2010 Q4, the NIESR is in effect forecasting that the economy has grown by only 0.1% in the 9 months to June - this is an appalling performance by any standards and one that cannot lead to a sustained fall in unemployment.

Second chart, courtesy of Duncan's Economic Blog, shows the weakness of production and manufacturing output in Q2. Together with weak PMI data for services and construction this seems to confirm that the NIESR's forecast is likely to be accurate.

Depressing.

Of course none of this matters to employer bodies whose priorities remain 1) rewriting history around the origins of our current troubles and 2) arranging economic and social affairs in order that the proceeds of growth continue to be funnelled unmolested to their larger members (no pun intended). Having vigorously promoted an extreme deregulatory agenda for the past couple of decades, they react with great indignance to any suggestion that they might, just might, bear some responsibility for the crisis.

No surprise then that policy which undermines the prosperity of small firms is of so little consequence. But maybe policymakers, particularly those who claim to aspire to a fairer distribution of wealth, should stop paying them so much attention?

Stephen Boyd - STUC

Food for Thought: Trade Union Strategies for Marketing

Historically, it is not very often, if at all, that the words – or principles – of trade unionism and marketing are used or seen together.  Trade unionists often blanch at the thought of marketing, sometimes seeing it as linked to the corporate world only.

Marketing isn’t necessarily always a full-page advertisement in a newspaper, a TV commercial, or a sports team sponsorship that costs a fortune.  In its basic sense, it’s about ‘selling’ or ‘persuading someone to buy’ something.  In the case of trade unionism, the product is not usually something concrete in the first instance.  However, there are many aspects which make it highly valuable, and therefore, extremely marketable.

Unions offer members and workers the opportunity to have better terms and conditions, increased access to learning, a safer work environment – to name but a few.  In the case of union learning, for example, unions are ‘selling’ workers the basis for a better life, better skills, better career prospects, increased confidence and the potential for a healthier wage-packet. 

Some people instinctively feel that trade unions can only make negative contributions in the workplace, while others instinctively appreciate that trade unions are there seeking to add value.  Marketing and communications are key functions, requiring specific skills, which help to address this lack of understanding and get our messages out to our publics.  By employing marketing and communication skills, the roles of union reps and activists can be enhanced and become more effective.  Marketing - and increasingly, Social Marketing through Twitter and Facebook – are of integral part to the success of any campaign.

Across the country, budgets are being squeezed, poked and slashed from every angle.  Money allocated to marketing is sometimes the first to go.  Indeed, the April 2011 IPA/BDO Bellwether Report* reveals that marketing budgets were “revised down” (or in other words, cut!) for the second consecutive quarter in response to public sector spending cuts and rapidly rising cost pressures.

Competing pressures for trade unions means we need to work together to reduce the costs of marketing and communications. Members can reap the benefits through our hard work, time and effort in negotiating on their behalf to bring the many facets of marketing together creatively and strategically for all of our campaigns.  In the future, they will remember that “the union did this for us” which will, in turn, raise the profile of individual union brands and the trade union movement as a whole. 

An article that appeared in the Journal of Marketing Communication** in 2009 said, “Once, we thought that comparing advertising and public relations was a bit like comparing apples and oranges.  While they both belonged to the broad general category of communications, they looked and sounded different and were even very different in practice.  Then in the 1980s, someone suggested fruit salad...The educational approach to date has largely focussed on changing what already exists.  That is, what is the best way to combine the apples and oranges we already have, rather than what is the best way to make fruit salad (Kerr, 2009).”   

This insight can also be applied to marketing and trade unions.  To ensure maximum effect and achievement of our aims, trade unions must use a combination of many different methods of marketing: careful branding, press releases, case studies, public relations, integrated social media, etc.  We need to pinpoint measures of our successes and think of integrated, long-term strategies as a better way forward to meet our objectives.  By thinking strategically, and in combining individual union campaigns with the aims and objectives of the STUC’s Better Way campaign, we can get our messages out – and have them be heard.  The key to achieving maximum impact is maintaining a positive, consistent and highly visible profile – and to proactively add value at every opportunity.

Jennifer Payne, STUC

*The Bellwether Report is researched and published by Markit Economics on behalf of the Institute of Practitioners in Advertising (IPA). First published in July 2000, it features original data drawn from a panel of around 300 UK marketing professionals and provides a key indicator of the health of the economy.

** Kerr, G., (2009) Apples, oranges and fruit salad: A Delphi study of the IMC educational mix, Journal of Marketing Communication, vol. 15, nos. 2-3, April-July 2009

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