Councils facing the squeeze

Audit Scotland produces a useful annual overview of local government and the 2013 version is published today 'Responding to Challenges and Change'. It primarily sets out the financial challenges facing the service in 2013. Not surprisingly there is not much good news for Scottish councils.

 
The key metric is the Scottish Government funding settlement to local authorities for 2013/14 at £9.9 billion, a decrease of about 0.2 per cent in cash terms or 2.2 per cent in real terms. The ongoing Council Tax freeze is being covered by increased charges for services - a regressive measure on top of a regressive tax cut. At the same time cost pressures are rising, particularly fuel costs. Demand pressures are also rising as councils support people most affected by economic recession, welfare reform, and the effect on services of the ageing population. Achieving savings to address all of this will become progressively more difficult.

 
The Scottish Government views local government as being at the heart of public service reform through Community Planning Partnerships. However, Audit Scotland believes that there is a long way to go before the full potential of community planning will be realised. Councils will also have to cope with Police and Fire reform, adult health and care integration, welfare reform and many other changes during the year.

 
On shared services, Audit Scotland remains of the view that significant savings in the short term are unlikely from sharing services. It suggests that instead of looking for economies of scale councils should look for economies of skills through sharing expertise. This is a point I made to the Scottish Parliament’s Local Government and Regeneration Committee in oral evidence yesterday.

 
The paper emphasises the importance of good governance and the role of councillors. More worryingly they highlight weaknesses in basic accounting systems and controls and under-resourcing of internal audit. Management delayering means that in about a half of councils the chief financial officer is below director level. There are also delays in updating standing orders and other financial controls. This is the second time Audit Scotland have highlighted concerns about basic controls and is a reflection of the staffing pressures finance departments are under.
The number of staff directly employed by councils has decreased by about 6.4 per cent since 2010, a reduction of 25,800 people or 14,100 full-time equivalent (FTE) posts. The lowest staffing level since 1999. Actually it is worse than these figures because 34,500 jobs have gone from councils since the 2008 crash. 

Since 2010, about 9,400 local authority staff left on voluntary early release at an average cost of £35,600 per person and at an aggregate cost over the two years of £335 million. Audit Scotland is undertaking a study of early release and is particularly critical of some senior officer retirements. Councils are also urged to ensure that workforce plans are up to date and to take a longer-term view in line with service plans, ensuring that they have sufficient skills and capacity.

Since the prudential borrowing code was introduced, the overall level of net indebtedness increased by around 40%, from £9.1 billion to £12.9 billion. I am not sure 'indebtedness' is the best way to describe this as it is borrowing that they can finance through revenue in accordance with the prudential code. However, despite financial pressures the overall level of reserves increased by £0.21 billion (14%) compared with the previous year and totalled £1.68 billion at 31 March 2012.

 
This paper is a useful overview of the finances, workforce and assets of Scotland's councils. It starkly sets out the challenges facing local government and should be essential reading for anyone interested in Scotland's councils.

How to strengthen joint working across services

I was in parliament today giving evidence to the Local Government Committee on public service reform and shared services in particular. With half the panel from the voluntary sector it did rather focus on their legitimate woes, but perhaps missed the wider reform issues in the Committee's call for evidence. There is more to local government than the care sector.

There was a good debate on the barriers to collaboration of the sort identified in the Christie Commission report. In my view we are only just moving away from the big top down shared services model that seeks to separate front and back office services. It may be yesterday's fad, but a lot of effort and resources have been wasted chasing a model that doesn't work. In our written evidence we show why, with many examples of failure.

This failed model does highlight other barriers to greater cooperation. All too often reform is planned in high level groups far removed from the staff who deliver services or the communities who use the service. There is good evidence that shows a link between staff engagement and user satisfaction. Projects have often been too large and as the LGIU study shows small really is beautiful. We need to design services from the bottom up using Systems Thinking and other approaches.

Procurement is another barrier. There is too much emphasis on contracts and not enough on agreements that avoid the complexity of EU procurement rules. The care sector is a good example of procurement that is introducing marketisation, fragmentation and a race to the bottom in quality of care. Best Value is becoming almost entirely focused on cost. However, the big charity sector doesn't do it's case any favours with silly comments about in-house retrenchment. With 35,000 fewer council workers in Scotland since the crash it certainly doesn't feel that way! We also need to distinguish between big delivery providers in the third sector and community engagement. They are not the same thing!

Another barrier is the absence of a staffing framework for organisational change. We constantly reinvent the wheel at national and local level. Staff would be more willing and able to work collaboratively if this was resolved. In our written evidence we have outlined what might be included in such a framework. There were some good points about the need for different approaches by staff working in disadvantaged areas and this type of flexibility might be achievable within a framework.

There were complaints about officials 'doing things' to communities and not being flexible enough. The Christie Commission identified many of the statutory barriers to joint working but little has been done to address the different performance management and statutory duties that officials have to abide by in their own silos. There is limited capacity in some disadvantaged communities to engage in the way middle class, mostly rural areas have with community development. Although even then good examples are limited. Officials are accountable for public money and, 'I was being flexible', is not in my experience a successful defence in a disciplinary hearing when it all goes wrong. Not to mention being summoned to a committee of MSPs to explain their actions!

So my plea to the committee is to focus on some practical measures to improve joint working rather than chase shadows. Better service design by engaging with staff, reform procurement practice, common statutory duties and support a workforce framework. Then we might get the sort of joint working across the public sector that the Christie Commission envisaged.

Poverty and constitutional change

I was at the Poverty Assembly in Glasgow today taking part in a panel debate on constitutional change. A lot of agreement on what’s required to tackle poverty, somewhat less on the constitutional approach required to achieve it! 

My central point was that poverty will not be addressed in Scotland unless we make inequality the central dialogue of public policy. Social justice should be about creating a Scotland based on equality and solidarity. This requires properly funded public services and a progressive tax system. Certainly by taxing the wealthiest and cracking down on tax dodging, but also a dialogue with all Scots that social justice costs and it is all our interests to contribute more towards achieving a fairer society. Scandamerica is not only fantasy politics, it’s also fundamentally dishonest. 

In response to a range of questions on pensioners, wages, education and personalisation, I found myself having to point out that many of the policy solutions could happen now, with existing powers. What’s missing is the political will. On that basis I remain sceptical that all will be solved with additional powers or independence – we need something more.  

If electable politicians are not pursuing these policies then it’s because they don’t believe the public is yet at that point. Yes Scots may be more egalitarian, but not by that much. As one of my colleagues pointed out, in the last social attitudes survey the greatest support for public ownership in the UK is in South-East England. So we need to win broad public support for a fairer Scotland, if we are to use additional powers effectively. 

I do have to confess that there is one aspect of the debate that does irritate me. In order to make the case that Britain is broke and the UK will not reform itself, it appears necessary to exaggerate inequality and denigrate everything that past Labour governments have achieved. One delegate told me over coffee that London is the most unequal city in the world and one speaker came very close to making the same point. Sorry, but no it isn’t. Cities like Delhi, Mumbai, Johannesburg and Washington DC have equally wealthy individuals and nothing like our welfare state. We should remember that there is no Office of National Statistics in most developing countries, citizens don’t complete records and the poor frequently die unnoticed. 

The last Labour Government did a lot to tackle child and pensioner poverty. Through pension increases, tax credits and much more, pensioner poverty in Scotland fell from 33% to 15%. Child poverty fell from one in three to one in four.  I covered more of this in my article in this month’s Scottish Left Review so I will spare everyone a long list.

 

By all means let’s have a debate about universal services, but don’t let it overshadow the importance of targeted financial and other support for those living in poverty. Feel free to make a pitch that an independent Scotland will be a socialist nirvana, although you might show us the roadmap to getting there. But please don’t claim that nothing has been achieved by Labour politicians, who may not have got it all right, but they did make a difference to the lives of many.

Financing the homes Scotland needs

I was speaking at the Scottish Federation of Housing Associations conference today. These are tough times for housing associations with the Scottish Government housing budget spread even thinner and the UK Government's welfare reform creating havoc for housing finance. Scotland needs new homes and I was presenting a paper I prepared for UNISON Scotland, with SFHA assistance, that shows how we might finance at least some of them.

Mary Taylor, SFHA Chief Executive, starkly set out the challenges for housing associations in Scotland. Housing grants now bear little relation to the cost of building houses after the grant cut leaves at least a £30,000 gap per house. Overall funding to all housing projects has on average been reduced by 53% since 2010. Some housing associations have struggled on using reserves and cross subsidy, but even that has a limited shelf life. Rents are also going up above inflation while wages are being cut in real terms. Housing associations are losing experienced staff and there is a knock on impact on the construction sector. I would commend the SFHA campaign document Keeping Homes Affordable for more detail on what's happening in the sector.

Our proposal is to use Scottish council pension funds to invest in much needed affordable social housing. Preliminary discussions with housing associations have shown keen interest in the plan which could potentially unlock many millions of pounds for building new homes.

At a time of tight public finances, with £11 billion of Scottish Local Government Pension Fund (LGPS) assets currently invested overseas, it makes sense to switch investment to socially useful projects like housing. The LGPS currently invests a massive 45% of its £24 billion funds in overseas equities. We believe that scheme members, many of whom are UNISON members, want to see money invested ethically and to benefit local communities. If we can invest in arms and tobacco companies - we can invest in houses.

Since we initially developed the idea others including Greater Manchester pension fund, John Smith Institute and the Future Homes Commission have all proposed using pension funds for housing. Richard Murphy of Tax Research put it more starkly:
“At a time when conventional pension fund investment policy is simply guaranteed to lose people money in the UK because of inept management, market corruption and excessive charges why aren’t pension funds being invested in things that we really need, like housing, where the payback over a period of, say, 25 years is exactly the sort of return a pension fund needs?"

We have discussed the idea with housing associations and propose developing initial projects to test the idea with one or more local authority pension funds. They offer stable, long term investment with a low risk of failure. If we have success with initial projects it could potentially lead to many millions of pounds for housing at a time when it is desperately needed. There may also be a role for government in supporting the initiative through guarantees, financial support or establishing housing development funds at Scottish or local level.

In summary, we have £billions generated in Scotland invested in overseas companies rather than where it is most needed. This idea could provide a secure return for pension funds and build the houses we desperately need. Let's get on with it!



 

Corporation Tax and Independence

There is an interesting sideline to the Budget that impacts on the constitutional debate. There is at least one point that the respective chancellors, John Swinney and George Osborne agree on, and that is the Laffer Curve. They both believe that if we cut Corporation Tax, revenues will increase and businesses will come flocking to our shores.


As I have written elsewhere I remain bewildered as to why John Swinney believes in this right wing economic nonsense. No surprise of course that George Osborne does – but does he really?

Buried away in the Budget is the OBR forecast for tax receipts.

You can see from this table that receipts from Income Tax and National Insurance are forecast to increase in line with the predicted increase in economic growth. However, Corporation Tax is forecast to fall despite the fact that Corporation Tax receipts always go up disproportionately in a recovery.

If Osborne really believed in the Laffer Curve then the forecast receipts would be at least £56bn and probably a lot higher. Of course we know that receipts have dropped since the last cut and that’s exactly what will happen this time. Companies are sitting on a £600bn+ mountain of cash reserves. What they need is confidence to invest and that needs consumer confidence in a growing economy - not one that is being strangled by pay cuts and job insecurity.

John Swinney might like to look at these numbers carefully. If a true believer like George Osborne has no confidence in his ideology, what does this mean for the finances of an independent Scotland committed to the same policy?



Hat tip to Richard Murphy for spotting the table.

Budget 2013 - we will need to drink a lot of beer

A predictably grim budget from a Chancellor whose predictions are almost always wrong.


The most astonishing wrong prediction came early in the speech. The revised OBR estimate for growth has halved in just four months since the last prediction in December, down to a mere 0.6%. This is the longest recovery from recession ever, entirely due to his austerity economics.

A neutral budget is just what Scotland doesn’t need, we needed an aggregate increase in spending. It also isn’t doing anything for the nation’s finances. On a quick calculation Public Sector Net Borrowing between 2011/12 and 2015/16 is now set to be £245bn more than planned in the 2010 spending review. He can obfuscate between debt and the deficit but this is the hard cash reality.

As expected he shifted cash from revenue to capital. We are told that Scotland will get an extra £176m over the next two years as a result of the Budget. The deal will see a £279m increase in capital investment, but there will be a cut in day-to-day spending of £103m. However, even this modest capital benefit doesn’t kick in until 2014/15. The DEL table 2.4 in the Red Book shows a cut in Scotland’s Capital DEL from £3bn this year to £2.6bn.

Of course revenue cuts continue every year after that while the capital spending is a one off. Capital spending also has many leakages from the Scottish economy as the money is not all spent in Scotland and the profits can be siphoned off abroad. Revenue spending is much more likely to be spent locally, supporting the local economy. His dodgy employment estimates have been highlighted elsewhere as owing more to reclassification and underemployment than any real improvement in the labour market.

A further cut in Corporation Tax is another example of throwing good money after bad. We know that the last cut didn’t work as revenues dropped. UK businesses are holding a record £650bn in their bank accounts. Its business confidence that is missing and that largely depends on consumer confidence.

In Scotland, particularly if you work in the public sector, any confidence you had has taken a big kicking. A further year of real pay cuts with the 1% pay policy, followed by a 1.4% hike in your National Insurance contributions in 2016. This only applies to those who have been thrifty enough to make provision for retirement by paying into a decent pension scheme. Many public sector workers are already facing a big hike in pension contributions this April, so the UK government seems hell bent on wrecking good pensions and discouraging workers from making proper provision for retirement.

There is also another hidden public spending cut here. Public sector employer contributions will rise by 3.4%. In local government alone my very rough calculation is that this could add up to an Osborne stealth tax of around £140m. You can more than double that when you include the rest of the public sector.

On top of all that the Red Book says: “The Government will seek significant further savings through reforms to progression pay in the Spending Round”. Apparently this is because some staff continue to receive ‘pay increases’ through these arrangements. This fundamentally distorts the purpose of increments or progression pay. The rate for the job is the top point of the scale. New staff are usually appointed at the bottom of the scale and progress through annually while they are learning the job. It is in effect deferred pay not an annual pay rise. These are also contractual provisions not discretionary annual pay rises and we have taken legal action against employers who have sought to tamper with our members contracts and will do the same again if we have to.

The overall effect of the budget is regressive and I suspect when the detail is picked through it will be found to be even more so. And that’s before the millionaires tax cut kicks in April. A £42,500 tax cut for someone with a £1m income, double the average wage just as a tax cut. And don’t be fooled by the tax dodging rhetoric, the measures announced are very modest as the real experts have already spotted.

Of course to be fair we are getting a penny off a pint of beer – if it is passed on to consumers. The average public sector worker will need to drink about 58,000 pints to get their cash back!

Hydro Nation - rhetoric and reality

The Water Resources (Scotland) Bill has completed its parliamentary stages. It includes a duty on ministers to report to Parliament every three years on how it is ensuring the maximum value is being taken from Scotland’s water resources. This is the legislative teeth to back up the Scottish Government’s Hydro Nation agenda – making use of the abundance of water in Scotland.

The legislation was largely uncontroversial as the final proposals fell somewhat short of the grand rhetoric when the First Minister announced the idea in the legislative programme. The trade unions argued for a more radical approach, particularly to the governance of the initiative. As UNISON Scotland’s submission said:

“This does not mean that we should cling to the status quo. The water trades unions have published a paper, ‘It’s Scotland’s Water’ that highlights other public service models that demonstrate that a more democratic structure can deliver a more efficient, socially responsible and more accountable public water service. It is in this context that we believe that a new governance model is needed to take forward this vision for Scotland’s water. Scottish Water is a big part of that structure, but it should not be running it.”

However, even the trade unions recognise that while the Bill was something of a damp squib, it did at least entrench Scottish Water as a public service. No small achievement given the heavy privatisation lobby. This lobby is supported by the European Commission that is working hard to undermine water as a public service.

A practical example of Hydro Nation is Scottish Water being a partner in an 18-turbine wind farm in Angus to help cut its own £40 million electicity bill. Scottish Water is planning to be a partner in the 18-turbine wind farm to help cut its own £40 million electicity bill. The planned development at the Backwater Reservoir near Kirriemuir has the potential to generate up to one-third of the utility's energy requirement. Chris Banks, commercial director at Scottish Water, said: "As one of Scotland's biggest consumers of electricity, the generation of renewable energy on appropriate sites is a natural fit for Scottish Water. We want to become increasingly energy efficient while helping to meet Scotland's ambitious renewable energy targets. That's why we are exploring the feasibility of renewable energy development on suitable Scottish Water land."

Another example is the installation of a turbine into its pipe network which will reduce the amount of electricity it will need to use. The turbine, which is capable of producing 600Mwh of electricity each year, is located in a strategic trunk water main at Denny, near Falkirk. The technology, known as Difgen, can be installed where the flow of water needs to be controlled by installing a pressure reducing valve. A turbine recovers the lost pressure and turns it into energy.

Despite these new responsibilities Scottish Water is still focused on the core utility business and it continues to perform well. Even the pro-privatisation Water Industry Commission CEO said in the latest report: “We are pleased to report that Scottish Water continued to perform well in 2011-12, with all areas achieving a rating of ‘on track’ or better.”

Bills in Scotland are expected to be about £50 below the average paid by households in England and Wales to private water companies even after this year’s 2.8% increase in water charges. This was the first increase for four years and is all the more noticeable because of the Council Tax freeze. Douglas Millican, chief executive described the increased charges as, “a fair deal for our customers in these challenging economic conditions. These charges are helping to pay for the current £2.5 billion investment programme which is delivering the investment that Scotland needs in its water infrastructure while providing thousands of construction jobs.”

A good example of this investment is in Glasgow as Victorian ­sewers are to be upgraded in the biggest regional investment in sewage works for more than a century. The Greater Glasgow waste water network will undergo a £250 million, five-year improvement programme to stop sewage polluting the Clyde and ­connecting waterways. Drivers trying to get around Glasgow may be less impressed by the roadworks!

Finally, the benefit of a public water service is spreading down to England. Bernard Matthews has become the first business customer in England to switch its water supplier to a Scottish provider, in a three year deal with Scottish Water’s Business Stream.

  Crossposted at Utilities Scotland.

Tax and spend in an independent Scotland

There has been a lot of interest in the leaked John Swinney memorandum setting out the financial consequences of independence and the Better Together campaign was quick to publish an annotated version.  The main charge is the disparity between what they have been considering privately and what they have been spinning. Well shock horror, no great surprise there for any government. The interesting point when you read it in full is the similarity with the detail in the Fiscal Commission report..

So let’s examine some of the key points.

They are anticipating the risk of public sector job cuts, pressures on pensions and welfare and admit that no additional public spending would be possible. Almost all the credible analysis of the current numbers, including last week's GERS, says that an independent Scotland would face a similar budget deficit to the UK. In the short term we would probably be slightly better off, but in the medium term we would be dependent on volatile oil prices. The private recognition that Scotland’s share of UK tax receipts is projected to fall from 9.9% to 8.8% is something that they don’t mention in public and is a significant drop, even allowing for the unreliability of projections. However, there is nothing new in the overall analysis, even if the candour in this paper is welcome and realistic.

In this context it would be wise not to make too many bold promises about eradicating child poverty and supporting universal services unless you are prepared to have an honest debate about taxation. I haven't seen much evidence of that yet. The paper says: “We will need to be mindful that these pressures could reduce the resources available to provide additional public services”. This reflects the greater pressures Scotland faces from demographic change and that this risk is currently shared across the UK.

The paper recognises that Scotland would face huge costs in setting up a separate state, including £600m for a new tax service. In public they have played this down, but this is self evident. Of course there would also be a share of the resources used to pay for existing UK services, but the paper at least recognises that there are overall net costs in this process.

I was particularly interested in the section on the proposed monetary union, something I have written extensively about in the Red Paper and elsewhere. There is a recognition that Scotland will have to keep within agreements and that will constrain monetary and fiscal policy. I understand the political strategy behind reassuring people by sticking with Sterling, but the constraints on economic policy are substantial. You do wonder if this is John Swinney’s way of restraining some other Cabinet colleagues on spending, if not the rhetoric! John Kay has set out the other options in some detail in the Scotsman and in his chapter in a new book, ‘Scotland’s Future’. By the way, this is well worth a read whichever side of the debate you are on.

The section on defence is interesting in that it accepts that that a lower defence budget must be assumed. That is of course sensible, but doesn’t quite chime with the noise around 15,000 soldiers in Scotland. The SNP do try and have their cake and eat it here. One of the big advantages of an independent Scotland is fewer defence commitments and therefore less spending. But, and it’s a big but, you equally have to accept the consequences for jobs in the defence industry.

Mind you the Better Together campaign is lumbered with Philip Hammond. I sometimes wonder if he is secretly supporting independence as he strengthens the Yes campaign with every utterance. And that’s before Trident replacement comes into play, one of the Better Together campaign’s greatest burdens. Jim Murphy was frankly woeful on this in his BBC Good Morning Scotland interview.

So, overall the leaked memorandum was a good day for the Better Together campaign as it does highlight many of the financial challenges facing independence. However, it is mostly an issue of presentation. There is little in the paper that others have not highlighted and it is at least comforting that the Scottish Government is being more realistic - even if only in private.

 

 

Cross posted at Red Paper

Third sector delivery of public services

The Third Sector has made a significant and growing contribution to the delivery of public services in Scotland in recent years. The question in the context of public service reform is the scale of that contribution.

The Third Sector description in Scotland is used to define a range of organisations that are neither part of the public sector nor part of the profit making sector. They include voluntary, charities, social enterprise, mutuals and co-operatives. They range from small local voluntary groups to semi-commercial organisations who behave in a very similar way to profit making companies. Mutual provision is also a much abused phrase in Scotland. It can mean anything from a commercial social enterprise to greater public consultation. For example, NHS Scotland is described by the Scottish Government as a ‘mutual’ when they are actually describing a form of user engagement.

The Scottish Government is supporting the development of the third sector in Scotland to the tune of £73.5 million Over the next three years. In England Third Sector delivery is promoted by the government as part of their privatisation agenda in local government and the NHS. In Scotland it is part of the public sector reform debate through administrative action, although the Procurement and Community Empowerment Bills could play a legislative role.

While there is widespread support for the sector the problems arise with the emphasis on developing the sector as a method of outsourcing public services, rather than genuine community additionality or in the private sector. Contrary to the myth of public sector dominance, nearly a third of the Scottish budget is spent in the private and third sectors. Nearly half of Third Sector income comes from public contracts.

Further involvement of the Third Sector in public service delivery could lead to the marketisation of Scotland’s public service structures on the English model. Some at commercial end of the sector view this as their goal. Others in the sector recognise that this will simply result in a race to the bottom in service quality as commercial companies replace the better Third Sector providers. The taxpayer ends up paying for a huge contracting bureaucracy that delivers a second rate service.

There is a further risk that service delivery becomes fragmented with wasteful duplication of functions, including support roles. This is what happened in 19th Century Scotland and the solution was local government! Third sector governance models vary significantly, but none of them are a substitute for democratic accountability through the ballot box.

Some very bold assertions are made for Third Sector delivery of public services. There are of course good examples of innovative delivery and some excellent partnerships with in-house providers. However, there is actually little hard evidence for the assertion that Third Sector is always better. Even the UK government research for the DoH admitted: “The benefits of the social enterprise model are not always clear, not only to potential commissioners, but also to staff and stakeholders.”

Studies in social care found no significant difference in outcomes between care homes in different sectors. The argument that decentralising control and introducing competition improves performance has been questioned in several international studies. In essence there are a range of factors that drive better service delivery and the ownership model is not the key determinant.

Third Sector delivery is often justified on the basis that it liberates the workforce. The Christie Commission recommendations are also misquoted on this point. Contract shackles on Third Sector delivery are just as inhibiting as command and control management styles in the public sector. Christie actually supported bottom up design of services on systems thinking principles and this is just as achievable in the public sector.

There is also little ‘liberation’ when the workforce is subjected to cuts in pay and conditions and forced to deliver a second class service to meet financial cuts. Some Third Sector providers have as poor an employment record as the commercial sector and have been captured by a managerial elite leaving the organisation far removed from their founding charitable principles. The quality end of the sector refuses to be dragged into this race to the bottom, but the financial pressures are enormous.

So the Third Sector does have a role in the delivery of public services although I would be more impressed if greater efforts were made to expand social enterprise in the private sector. But lets not make exaggerated claims for what it can achieve or kid ourselves that in many cases it is simply being used to drive down costs. This leads to a commercial race to the bottom and a fragmented public service model that pleases no one.

NHS Norwegian style

I met a delegation of Norwegian trade unionists today, including Asbjorn Wahl author of 'The Rise and Fall of the Welfare State'. We have welcomed a number of these visits in recent years because they are interested in our NHS structures and in particular how we keep marketisation at bay. In Scotland we often look to Norway and Scandinavia more generally for inspiration, so it makes a change to able to show them a model they would like to replicate in Norway.

Their hospitals are administered on the trust model and I was able to offer some advice on how we challenged the inefficiencies inherent in this model. The huge administrative waste     in running contracts, marketing and other pseudo commercial functions divert scarce resources from healthcare in Norway as they did in Scotland before we abolished them.

Where I believe we can learn from them, is their integration of social and primary care at the local authority level. Although they pointed out that this still creates problems between acute and primary care. Of course they have local councils representing real local communities rather than our large scale regional authorities. Visitors from Norway are always astonished when you tell them how big our councils are.

While there is a natural tendency to talk up the strengths of our NHS model it is important that we are honest about the weaknesses. Our local NHS structures have a huge democratic deficit and only limited community engagement. They noted the difference between the BMA's view of direct elections and ours! Senior doctors don't do democracy in Scotland, or I suspect elsewhere.

We also have to recognise that we haven't cracked health inequality. I argued that this is less an issue for the NHS and more for wider social policy. They also recognise the groundbreaking work of the Spirit Level in understanding that more equal societies do better on every count. They start from a better place than us in addressing this issue.

As always it is a pleasure to meet colleagues from other countries and from Scandinavia in particular. While we have more to learn from them, it makes a welcome change to be able to offer some advice on how to address the weaknesses in their system.

   

Local government pensions

Today I was in Lerwick on the Shetland Isles talking at the branch AGM about changes to the Scottish Local Government Pension Scheme. This is latest, and probably the most scenic, of a number of meetings in recent weeks on this issue.

The first legitimate question members should ask is why are you here talking about a new scheme less than four years since the current scheme was implemented? Our scheme is well funded, far better than most other pension schemes, and we had an agreement on sharing any future costs. Fair question and the answer is that no one in Scotland - government, employers or unions instigated this. It is an unwarranted interference from the Treasury, using primary legislation in a way that we have not seen before.

The main change is a move from a final salary to a career average scheme (CARE). Instead of the pension being calculated on salary in the final year of service it is calculated each year and then the annual 'pots' are aggregated. In general, this type of scheme benefits those who have a flatter career path as against those who get promotions at the end of their career. However, the devil is in the detail and key issues for the negotiations will be the annual revaluation of the 'pots' and the accrual rate.

The next big change is bringing the normal retirement age (currently 65 for men and women) into line with changes in the state retirement age. This will be very challenging for many jobs in local government and the wider family who use the scheme. We can consider  a flexible early retirement scheme, but that will have a cost that would have to be paid by everyone, including those who don't want or can't afford to retire early.

There are a range of other provisions that we will be reviewing and these are set out in the current Scottish Pensions Bulletin (see our web site). One of those is the governance of the 11 funds that administer the scheme. At present the committees that manage these funds are made up entirely of councillors and that will have to change to meet the new UK and EU statutory requirements. The funds have assets of more than £24bn and there are legitimate questions to be asked about how these funds are invested. For example, 45% of them are invested in overseas equities rather than in UK or Scottish economy. We may also need to question why we need 11 separate funds in Scotland and could they be more efficiently managed in a different way.

At this stage we are seeking members views on the broad options we should be considering. At the next stage we should have some costed options so members can balance, say early retirement with other benefits and what it will cost in contributions. We hope to have an outline proposal by around June and a full membership ballot in August.

At all of the meetings I have done in recent weeks members have raised a range of legitimate concerns about how all this will impact on their pension. It is after all the biggest investment they make. What really irritates members is stupid politicians and newspapers talking about 'gold plated pensions'. The average Scottish local government pensioner is receiving £4,700 per annum - barely bronze plated! They are also contributing to their retirement cost, unlike some employers who moan about pensions, yet expect the taxpayer to fund their employees retirement benefits, while paying themselves huge pensions.

Our members in Scottish local government have stood up and defended their pensions. They are fortunate as a consequence to have a better pension than the government planned for them and they won't pay the pensions contribution 'tax'. They have always been prepared to pay their fair share of the cost of pensions, but they won't be lectured by the irresponsible fat cats who got the economy into the mess we are in today.

Procurement action on tax dodging

Today I was speaking at the Holyrood conference on sustainable procurement. The Scottish Government has been consulting on a Procurement Bill. It was going to be a 'sustainable' Procurement Bill, but the 'sustainable' was dropped and the consultation focuses primarily on the processes of procurement.

However, all is not lost, as Part IV of the consultation does recognise the wider purpose of procurement to deliver economic, social and environmental benefits. UNISON Scotland's response to the consultation covers several of these including: workforce protections, blacklisting, Scottish Living Wage, sustainable procurement and tax justice. The main focus of my presentation was tax justice.

At a time of massive public spending cuts it is outrageous that some £120 billion of tax is not being collected. The Scottish share of that would be more than a quarter of the total Scottish budget, every year! The UK Government should be doing more with stronger anti-tax-avoidance legislation, more tax staff and greater transparency in company accounts. The Scottish Government can also play its part by encouraging companies to change their ways through procurement.

The Scottish Government could start by improving transparency through extending the scope of Freedom of Information to all public contracts. The Procurement Bill should set out some general principles including a clear statement that public bodies should have regard to the tax status of companies bidding for contracts.

The detail would be in regulations and guidance and would cover issues such as an independent assessment of a companies tax record including convictions and actions by the HMRC on aggressive tax avoidance. This should include the historical track record of companies as that is the normal way of evaluating likely performance in future. Not a popular proposal with the Big 4 accountancy companies, but we must be consistent here. We should also make country by country reporting a condition and debar companies registered in tax havens. A number of PFI contract companies would be covered by this. There could also be higher accountancy standards and disclosure provisions.

There is considerable cross party support for action to tackle tax dodging. SNP, Labour and Liberal Democrat MP's have supported a Westminster motion on the issue. This reflects public opinion as shown in a recent Christian Aid public opinion survey, which found that 80% are angry about firms not paying their fair share of tax and a third are boycotting companies over it. Even the Chief Secretary to the Treasury Danny Alexander has said, ‘Taxpayers’ money should not be funding tax dodgers."

Scottish Government ministers have indicated support for this approach in the Forth Bridge procurement and there is an international movement of public bodies taking action. Cities like Paris, Malmo and Helsinki are inserting procurement clauses and closer to home, the City of Hull is moving in the same direction.

At today's conference, Catherine Stihler MEP updated us on progress with the EU review on procurement. As anticipated it is going slowly and this is one factor causing the delay with the Scottish Bill. There was also some concern from procurement professionals over their capacity to deal with further criteria. There certainly is a shortage of staff and therefore capacity does need to be expanded and clear practical guidance produced to minimise the workload.

I suspect action at UK level will be the predictable 'light touch' regulation, therefore the time is right for Scotland to act against tax dodging companies. They need to understand very clearly that if you want to chase the taxpayer pound you have to pay your taxes like everyone else.

Best Value policing

Last night we held an event in the Scottish Parliament for Police Staffs. The main purpose was to present the report by Stewart Research on Police Civilianisation in Scotland.

This report sets out the role of police staffs in Scotland and how it has developed over the years in response to the changing police landscape. Partly in response to the need for a more cost effective service, but also to improve productivity. Police Staffs bring specialist skills to the police in corporate roles, administrative support and in operational roles. The functions that a police officers generic training does not cover.

The statistical aspects of the report chart the reduction in numbers of police staffs as their roles are taken over by police officers, often at twice the cost. It also draws comparisons with the position in England and Wales where police staffs constitute 34% of the police workforce compared to 24% in Scotland and falling. There are also significant regional variations within Scotland. This all means that Scotland has the most inefficient police forces in the UK. If the current plans are implemented police staffs could fall to as low as 18% of the force, taking it back to the 1970s.

To this outdated police culture we now have absurd political targets for maintaining police numbers. A target that is being met by substituting police staffs by police officers, taking them off their proper operational roles. The new national police force that starts this April has been lumbered with these targets and that means the Chief Constable is not able to decide on the right balance of roles in the new force.

At the meeting we also emphasised the statutory Best Value duty on the Scottish Police Authority and the Chief Constable. A duty that it will simply be impossible to meet because the political target for police officer numbers is self evidently incompatible with this duty.

The position is not helped by the confusion in roles between the SPA and the Chief Constable. My colleagues George McIrvine and Gerry Crawley gave several examples of the problems this is causing. Police staffs are being left in limbo with the new force coming into existence in only a few weeks time.

UNISON Scotland has run many events at the Scottish Parliament over the years. This was undoubtably one of the very best. Not only did we have a well researched case, but those arguments were supported by around 50 police staff who attended the event. They gave a powerful personal  testimony to the chaos this policy is causing across Scotland. A significant number of MSP's attended the event including most members of the Justice Committee. They were clearly shocked at what they heard and I understand the issues were followed up at First Ministers Questions today.

There are two key actions the Scottish Government needs to take. Firstly, make it clear to the SPA that they are a scrutiny body, not a service delivery organisation. Secondly, drop the political interference over police numbers and allow the Chief Constable to decide on a balance staffing structure. That will enable him to meet his statutory duty of Best Value and deliver a police service that we can all be proud of.

Devo-UNISON

Yesterday UNISON Scotland launched its latest contribution to the constitutional change debate, 'A Fairer Scotland - Devolution'.

In the first 'A Fairer Scotland' paper we set out our approach to constitutional change. In common with much of the trade union movement, UNISON has not as yet taken a stance on the referendum itself. Instead the union has challenged all parties to the debate to explain how their preferred option will match UNISON’s priorities as laid out in ‘A Fairer Scotland’.

The latest document opens up a debate which has so far focused on fiscal issues and argues that new devolved powers for the Scottish Parliament are essential to create a Fairer Scotland and improve the lives of working people. We start from the principle of subsidiarity, the idea that matters should be handled by the smallest (or, the lowest) competent authority. Although we also recognise that others powers could be devolved because we would want to do things differently in Scotland, without undermining the principle of solidarity across the UK.

On this basis we make the case for devolving employment matters including, health and safety, public service pensions, employment regulation and equalities. We believe devolving energy would enable the Scottish Parliament to play to Scotland's generating strengths, while maintaining a democratic say in the UK market mechanisms. Devolving elections, data protection, consumer rights and others, largely tidy up anomalies in the current settlement. In total it adds up to a major shift in legislative powers to Scotland.

While we think it is long overdue that more focus is placed on powers, we have not ignored fiscal powers. We argue that all property taxes should be devolved together with income tax including the power to vary the rate in bands. This could include National Insurance as the link with contributory benefits is becoming increasingly weak and government needs to see the full impact of their taxation policy on people’s incomes.

We also accept that business taxes should remain at UK level. Tax competition is wrong in principle and in any case will be constrained by tightening EU rules in this field. The same applies to consumption taxes (primarily VAT) as EU rules don’t allow variable rates in the same state. There is a stronger policy element to fuel duty, tobacco and alcohol taxes, but given the integrated nature of the UK it is hard to see how these could be set differently in Scotland.

We support fiscal devolution not because of any perceived 'moral hazard' in a parliament not raising the money it spends. But rather because under the current arrangements Scotland is pulled, at least financially, by English approaches to public services that have little support in Scotland.

Devolution also doesn't stop at Holyrood. At a time when there is increasing concern over the centralisation of services in Scotland, it is important that the constitutional role of local government should be recognised in any discussion over devolved powers. Local authorities should have a stronger statutory basis, gaining greater control over their finances including business rates and there should be less ring fencing of council grants.

It is for the Scottish Government to set out the independence 'offer' in their White Paper later this year. Equally the pro-devolution parties need to set out what voting No means in terms of extended devolution and that is the focus of our latest paper. The status quo is not an option for the vast majority of Scots.


Crossposted at Red Paper