Chancellor’s spending plans are toxic

Another Spending Review, yet more bad news for public services, the people who work in them and benefit claimants. TUC General Secretary Frances O’Grady said: ‘This is a toxic mix of bad economics, nasty politics and dishonest presentation.

‘The last thing our struggling economy needs is further cuts to spending to try to close a deficit made worse by the Chancellor’s earlier cuts. When the medicine is not working and side effects are choking the patient you need a change in treatment not more of the same.

‘Many services will be hard hit. Worst of all is a new attack on some of the most vulnerable in our society through the seven day wait and other conditions for social security payments. The Chancellor may think attacks on welfare go down well with voters, but these will lead to parents not having enough cash to feed their children.

‘And for all the talk of new investment, the truth is that the overall capital spend in 2015 will be exactly the same as the Chancellor forecast in his Budget earlier this year.’

Public service pay and jobs squeeze goes on

The Chancellor announced ‘further reductions in the number of people working in the public sector’ – a cut of 144,000 jobs. Looking at the small print of the OBR’s March 2013 report (p79), this appears to be a confirmation of the OBR projection made back at the time of the Budget. So, as they predicted, an average of 36,000 public service jobs a quarter (395 a day) will still be being cut in 2015-16 as a result of government policies, on track with their estimate of a total of 1 million job cuts from the beginning of 2011 to the start of 2018.

He also confirmed another Budget announcement, that there would be a further year’s 1 per cent cap on pay increases in the public sector, following the two or three year 1 per cent cap and two or three year freeze (depending on where you work). What this means in practice, of course, is living standards falling further and further as real terms pay cuts bite. TUC research published earlier this week showed the impact this had had on households, pushing 180,000 children with a parent in the public sector into poverty.

Seven days wait for family and housing benefits for unemployed claimants

Full information on what the new ‘seven day waiting period’ for unemployed claimants will mean is not yet available. But from what’s available so far it doesn’t look good for people who lose their jobs, or their families. The CSR policy costings document specifies that the policy will:

Introduce seven waiting days in Universal Credit for new claimants that have not had a Universal Credit claim in the past six months, where at least one person in the household is subject to conditionality. This costing assumes a 2015-16 start date for the measure.

The measure is forecast to save around £250 million a year, and is calculated on the basis that:

From April 2015 new awards of Universal Credit in each month for claimants who would be subject to conditionality are reduced by the average amount of Universal Credit claimed per claimant per week.

UC claimants ‘who will be subject to conditionality’ includes a very large group of claimants currently on Jobseeker’s Allowance and could even be taken to mean that those on Income Support (a benefit claimed primarily by lone parents with very young children), or those subject to the benefit cap, are included. Today’s announcement that lone parents will have to start preparing for work once their children are three underlines this point. People in these groups face conditions, just not to actively apply for jobs. More details on which conditionality regime this new policy will apply to is needed before we can rule certain groups out of this new process. We do know that at least those claiming Employment and Support Allowance and contributory JSA will not be affected.

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It is also not just unemployed claimants who are affected, those ‘not earning as much as the government expects them to’ will also see their income fall. This means people earning less than the NMW at 35 hours a week (or whatever their specific rule is – requirements will be less for those who are only required to seek part-time work). Households who are working, but see their income fall, will now have to wait a week to claim UC even if they remain in work with reduced hours during this period.

But the most worrying point is that Universal Credit will bring together all cash benefits into a single payment – so a delay in UC can also mean a delay in benefits currently classified as child and working tax credits, housing benefit, council tax benefits and many more. This policy sounds as if it will do far more than simply affect access to £71.70 of JSA for unemployed claimants (hard as that would be by itself) – it looks as if it is also their rent, their bills and their children’s food costs which won’t be met.

The Macroeconomics of the CSR

James Plunkett, director of policy and development at the Resolution Foundation, stated the £11.5bn of cuts for 2015/16 have been pencilled in for sometime and today was more about getting the detail than the direction of travel. James also noted:

The Chancellor needs a further £13bn in both 2016-17 and 2017-18 on top of today’s cuts in order to meet his deficit targets.

In other words, under the current fiscal framework, there is a lot more pain to come.

So the bigger questions today should be about that fiscal framework. It has utterly failed. The triple A rating has been lost, austerity has been extended from 4 years to at least 8, debt/GDP will still be rising at the end of this Parliament and the fiscal rules have either been broken (falling debt/GDP) or proved meaningless (the rolling structural deficit target).

Sources:

Public service pay and jobs squeeze goes onAlice HoodTouchstone Blog Copyright © 2013 Trades Union Congress

Seven days wait for family and housing benefits for unemployed claimantsNicola SmithTouchstone Blog Copyright © 2013 Trades Union Congress

The Macroeconomics of the CSR
Duncan WeldonTouchstone Blog Copyright © 2013 Trades Union Congress

The Great Train Robbery

Rail privatisation has failed to deliver for rail users and taxpayers; has brought in little private sector investment and private train companies are heavily dependent upon the public purse to enable them to run services, according to a new TUC- commissioned report, The Great Train Robbery – written by the Centre for Research on Social-Cultural Change (CRESC) at the University of Manchester.

And when train companies do make a profit, barely any of it is re-invested in the railways, says the study. It reveals that those firms receiving the largest state subsidies spend, on average, over 90 per cent of their profits on shareholder dividends.

This contrasts sharply with the East Coast Mainline, which is currently state run and which re-invests all of its profits into improving the service.

great train robbery network rail private investment

The Great Train Robbery looks at many of the key objectives behind the decision of John Major’s government to privatise the railways in 1994. The report questions whether any of these have been achieved:

  • Cost effectiveness – train operating companies are entirely reliant upon public subsidies to run services. The top five recipients alone received almost £3bn in taxpayer support between 2007 and 2011. This allowed them to make operating profits of £504m – over 90 per cent (£466m) of which was paid to shareholders.
  • Extra investment – the report shows how the average age of trains has risen since rail privatisation, from 16 years in 1996 to 18 years old today. Just £1.9bn was spent on rolling stock between 2008 and 2012, compared to £3.2bn between 1989 and 1993 (the four years before privatisation.)
  • Over 90 per cent of new investment in recent years has been financed by Network Rail (the taxpayer funded body responsible for rail infrastructure), and comes mainly from taxpayer funding or government-underwritten borrowing, says the report.
  • Significant upgrades to infrastructure, such as the development of the West Coast Mainline, have been paid for by Network Rail.
  • Passenger comfort – the report says while there has been a 60 per cent increase in passengers since 1994/95, there has only been a 3 per cent increase in new carriages, resulting in serious overcrowding on many routes.
  • Innovation – even where there has been private sector investment in new technology, such as Virgin’s tilting trains, it has been underwritten by the state through subsidies to train operating companies and guarantees to rolling stock leasing companies.
  • Added value – The Great Train Robbery shows how train operating companies paid Network Rail just £1.59bn in track access charges in 2012, compared to £3.18bn paid to its predecessor Railtrack in 1994. This represents an ‘indirect subsidy’ from taxpayers as train companies are getting track access on the cheap. It also means that the full extent of taxpayer subsidy is far greater than is often reported.
  • Investment in infrastructure has largely been funded through borrowing by Network Rail which now has debts of over £30bn, and is spending more on repaying this debt than on railway maintenance, says the report.
  • Competitive fares – the UK has the most expensive rail fares in Europe. Long distance, day return and season tickets are all around twice the price of similar tickets in France, Germany, Italy and Spain, which have publicly-run rail systems. Average train fares in the UK increased at three times the rate of average wages between 2008 and 2012.
  • More passengers – the report dismisses claims that privatisation has helped increase the number of people travelling on the railways.It says that passenger growth has mostly been down to rising GDP and changes in employment patterns rather than because of privatisation.

Great train robbery net profits dividends

Commenting on the report, TUC General Secretary Frances O’Grady said: ‘This study explodes the myth that rail firms are bringing added value to our railways. In reality they rely upon taxpayers to turn a profit, virtually all of which ends up in shareholders’ pockets, rather than being used to improve services.

‘Rail privatisation has not brought the improvements its cheerleaders promised – the average age of trains has increased and most new investment is funded by the state.

‘The claim that private train operators are responsible for more people using the railways must also be taken with a huge pinch of salt. Passenger growth has mirrored changes in the wider economy and is not the result of creative marketing drives by companies.

‘The government must accept that the current model is broken. Its determination to impose franchising across the network – even on the East Coast Mainline which is performing well as a nationalised service – shows ministers are ignoring the evidence of 20 years of failure.’

CRESC Director Professor Karel Williams said: ‘The privately owned train operating companies have hijacked the government’s rail reform agenda which is all about ‘getting franchising back on track’.

‘Our research shows how the franchising system allows them to distribute profits at low cost from public subsidy.

‘It would make sense to abolish the train operating companies and it would cost the taxpayer nothing if it were done as the franchises expired.

”Train and track operation could then be integrated under a new publicly-owned National Rail, operating within defined budgets over sustained funding periods.’

The Great Train Robbery says that:

  • Train operating companies should be abolished as a crucial first step. This could be achieved within the next ten years as companies have relatively short leases with contract termination points and there is no requirement for shareholder compensation when the franchises expire.
  • Train and rail infrastructure should be organised by a new not for profit company, National Rail, built around the core of Network Rail.
  • Just as with Crossrail in London, the government should introduce a business levy to raise extra funds for the railways. The report estimates this could generate £21bn a year.

BBBR_03__

UK 24th out of 33 in global race for economic growth

The UK is experiencing a slower economic recovery than 23 of the 33 advanced economies monitored by the International Monetary Fund (IMF), according to new analysis published by the TUC on 9th May.

The research, which comes as the IMF begins its two week visit to Britain today, says UK income per head – economic growth that takes account of population change – will not return to its pre-crash level until 2017.

By contrast, income per head in Germany and the US will be over 10 per cent higher a decade on from the financial crisis, while South Asian economies are set to have growth of over 20 per cent.

The TUC says the figures, which are based on the IMF’s latest GDP forecasts, reveal that the UK risks enduring a ‘lost decade of growth’, while many of its economic rivals forge ahead.

With the Chancellor identifying an economic ‘global race’ as the defining challenge for the government, the TUC report shows how George Osborne’s own strategy is causing the UK to fall behind its competitors.

The study also reveals how the UK is emerging from recession at a slower rate than at any time in its recent history.

In 1985, UK income per head was six per cent higher than it was before the 1980 crash. In 1995, UK income per head was seven per cent higher than it was before the 1990 recession. UK income per head is today still six per cent below its 2008 level.

The Chancellor cannot blame Europe for the UK’s economic woes, as the vast majority of the Eurozone’s countries are performing better, says the TUC.

George Osborne faces further embarrassment this week when he hosts a meeting of the G7 finance ministers on Friday. Only Italy are experiencing a slower recovery than the UK among G7 countries.

Recent TUC analyses of the ‘global race’ – available at www.touchstoneblog.org.uk/tag/global-race – have found that the UK is lagging behind most of its G7 competitors on exports, wage growth and manufacturing too.

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George Osborne must heed the IMF’s recent call for the UK to ease off austerity and follow the example of the US by investing in jobs and infrastructure, says the TUC.

The TUC wants to see a large jobs and infrastructure stimulus, including a jobs guarantee and an extensive house building programme to get growth and confidence back into the economy.

TUC General Secretary Frances O’Grady said: ‘We truly are experiencing a lost decade for growth.

‘While other countries are already seeing a rise in economic output, the UK won’t return to its pre-crash level for another four years.

‘The Chancellor’s commitment to self-defeating austerity has prolonged people’s suffering and put the brakes on our economic recovery – so much so that escaping a triple-recession is considered by some to be a cause for celebration.

‘Even George Osborne’s favourite economic institution, the IMF, is calling on him to change course. Without a fresh approach we will continue to trail our economic rivals and bring up the rear in the global economic race.

‘He should start learning from countries like the US whose ambitious programme of investment in jobs is helping to turn its economy around.’

Warning Signs

Reproduced with kind permission from TUC – Warning Signs

The warning signs have been there for some time. Last month one poll showed that the general public has lost confidence in politics providing solutions to the failing economy. More recently opinion polling showed antipathy to all things Europe, amplified by anxieties about a contagion of struggling EU economies.

This anti-politic dynamic gains traction from the Coalition dogma that there is ‘no alternative’ to the course they are plotting; that austerity is the natural and only response to the fiscal and monetarist challenges exerted on the global economy. It’s easier, their theory goes, for the social and economic devastation inflicted by their undiluted assault on public spending and public services to remain unchallenged if we believe it is ‘out of their hands’ and they have no choice.

One side-effect of this deliberate denial of culpability, this refusal to accept ownership of or responsibility for the outcomes of their choices as a government, is a diminishing faith in politics and politicians being seen as part of the solution. The consequence of that is democratic fracture and an increasing tendency to withdraw support for mainstream political parties – either through not voting at all or, as was demonstrated last week, by voting for what is essentially a protest party that says ‘no’ to many things, but not much about anything else, a party that stands on a platform of incoherent, impractical and inherently flawed, ill-thought policies.

This anti-politics combined with anti-Europeanism created a perfect storm for UKIP and they maximised benefit to them, aided and abetted by an increasingly eurosceptic Tory Party and an inherently right-wing media. It would be wrong, though, to suggest that their message, however superficial, didn’t resonate in some quarters with a voting public deeply frustrated by the failings of the current government and yet to be sufficiently convinced that ‘One Nation’ Labour are offering a strong enough alternative.

Bill Clinton’s eponymous, “It’s the economy, stupid!”, rings as true today as ever. Herein lies both a paradox for the Tories and an opportunity for Labour. The Conservatives of the last thirty years have retained a deliberate ambition to maintain high levels of unemployment and to limit trade union influence in order to keep wages low and to pacify the demands of workers, thus, as they see it, maximising profit, although this is ultimately self-defeating. For Labour, it should be an open goal, focusing on fair taxation, fair pay, investment in jobs and growth, including their jobs guarantee, should be music to the ears of struggling families – but swimming against the media tide to convince voters remains a tough challenge.

Whether it is by design (the Tories) or through insufficient impact (Labour) unless there is a more promising story to tell on the economy very soon we risk a growth of protest party politics that could push the UK toward a democratic train wreck that would render solutions to the economic and social challenges we face ever more unlikely.

Kevin Rowan
Head of Organisation and Services
TUC

© Trades Union Congress 2013

TUC

TUC Campaign Plan 2013: Five steps towards a future that works

TUC campaign to make case for radical economic reform
A jobs guarantee for young people, spreading the living wage across the public and private sectors, putting communities not profits at the heart of public services, and creating a stronger voice for workers in the management of companies are among the TUC’s five key campaign priorities in the run up to the general election, according to its campaign plan published on May 1st.

‘A Future That Works’ sets out five key priorities that will drive the work of the TUC over the next two years. The plan has been agreed by the General Council, which represents the TUC’s 53 affiliated unions who between them have almost six million members.

The campaign for jobs, growth and a new economy will mobilise resistance to austerity, with a series of events across the UK this summer, and will also provide a platform for advocates of pro-growth policies and new economic ideas. This will include an event with former US labour secretary and fierce critic of UK austerity, Robert Reich, who will deliver a lecture at the TUC on 21 May.

The TUC will work with and champion public and private sector employers who reach living wage agreements, as part of its campaign for fair pay and a living wage. The TUC itself became a living wage employer earlier this year.

Opposing the outsourcing and privatisation of public services will be the focus of good services and decent welfare. As well as the Save Our NHS campaign and the Action for Rail campaign to put the rail system back into public ownership, the TUC also plans to support parents and education unions against future attempts to allow state schools to be run for profit.

Having helped see off some of the government’s attacks on employment rights in the Beecroft report, the TUC will continue to press for respect and a voice at work for UK employees. The TUC aims to campaign to retain rights to paid holidays, a proper lunch break and reasonable hours at work that are under threat as the government attempts to repatriate powers back from the EU.

Finally, the TUC’s strong unions programme will train of a new generation of union reps to take the TUC campaign messages to non-unionised workers and workplaces and give a voice to a new generation of young employees.

TUC General Secretary Frances O’Grady said: ‘Margaret Thatcher’s legacy of deregulated capitalism and the cult of finance crashed dramatically in 2008. But the government is still peddling the same old busted model.

‘The government’s failed austerity drive means it could take another ten painful years just to get back to where we were before the recession.

‘Not only will the TUC and unions continue to be the backbone of Britain’s anti-austerity movement but we will also lead the call for new economic ideas.

‘We will champion and work with those who are helping to create a fairer economy – from paying a living wage to giving staff a bigger say in how their company is run.

‘As well as a decent wage, people deserve decent public services. Having overseen the fragmentation of the NHS, ministers now want to introduce the profit motive into Britain’s schools. The TUC will fight this privatisation drive, which we know the public doesn’t support.

‘The TUC is not alone in wanting radical economic and social change. That’s why we’ll be calling on communities and campaign groups nationwide to join our campaign for a new economic settlement that involves and works for the whole country.

‘The next election is likely to be fought over the economy and our living standards crisis. We want to see decent jobs, fair pay, good services and a stronger voice at work at the heart of the plan to deal with these big economic challenges.’

TUC Campaign Plan 2013: Five steps towards a future that works

TUC Campaign Plan 2013: Five steps towards a future that works

Download the plan (pdf format 5.2MB)

Local trade unions mark Workers’ Memorial Day saying “We didn’t vote to die at work”

Press release from Bournemouth, Christchuch and Poole Trades Council

Trade unionists in Bournemouth, Christchurch and Poole are calling on the public and employers to observe a minute’s silence at 12 noon on Sunday 28 April, as a way of remembering those who have died or been injured whilst at work. The call comes as as part of the TUC backed Workers’ Memorial Day.

To mark the event, the local TUC plans to stage a ceremony at the War Memorial in Bournemouth Central Gardens at midday on Sunday, accompanied by speeches and the laying of a wreath. The TUC has also written to the three local councils requesting that they fly their town hall flags at half-mast on the day as a mark of respect.

According to figures from the Health and Safety Executive, every single year over 8000 people die of cancers that are caused by their work, and another 4000 die from lung disease. In addition 800 people are killed on the roads while working and 8000 die from work-related heart problems. Last year a staggering 1.9m people also suffered an illness that was caused or made worse by their work. As a result, the UK comes 20th out of the 34 OECD countries when judged on its safety record. The TUC believes all these deaths and injuries could have been avoided if employers took the proper precautions.

Neil Duncan-Jordan, BCP TUC president said: “There is nothing more basic than having the right to go to work in the morning and return home again at the end of the day, but for a significant number of people work is a hazard to their health.
Workers expect proper protection when at work and it is essential that the government are not allowed to make further cuts to vital health and safety legislation. On Workers’ Memorial Day we will be remembering the dead, but pledging to continue the fight for the living. We certainly didn’t vote to die at work.”

Programme for Workers’ Memorial Day

11.45am Assemble War Memorial, Bournemouth Central Gardens

12noon Minute’s silence followed by the wreath laying and a brief speech

12.15pm Event ends

For more information, please email info@bcptuc.org

bcptuc-320949-5-5

Construction sector has shrunk by 10 per cent since coalition took office, says TUC

Press release from TUC

Commenting on figures released on 25th April by the Office for National Statistics (ONS), which show that the UK economy grew by 0.3 per cent in the first quarter of 2013, TUC General Secretary Frances O’Grady said:

“The Chancellor has set the economic bar so low that avoiding the UK’s first ever triple dip recession is considered good news.
”Today’s figures have taken us back to where we were six months ago, and not much further on from when the Chancellor started his austerity experiment.

“The economy is flat-lining, unemployment is growing and the much-needed rebalancing of the economy, away from financial services and the South East, has failed to materialise. It’s no surprise we face a housing shortage when the construction sector is now nearly 10 per cent smaller than when the Chancellor took office.
“The government’s economic policies are still failing on every measure that matters to people.”

TUC