Scottish Labour's Clause 4 moment - socialism and patriotism

Well that’s the Scottish leadership election over. There was at least a real debate about ideas and strategy and Neil Findlay’s campaign ensured that we didn’t get the coronation the system usually delivers. Neil also delivered ideas of substance and generated energy amongst party members that I haven’t seen for a long time.

From Jim Murphy’s initial announcements it would appear that we are about to get some internal constitutional change.

Jim wants a ‘Clause 4’ moment, although it’s actually Clause 2 in the Scottish Labour Party rules. Yes, I know I’m a pedant. Not in this case for some New Labour policy purpose, but to bring Scottish Labour ‘closer to the centre of Scottish life’. The strategy appears to be aimed at dispelling the myths about ‘London Labour’, stoked by the actions of the UK party during Johann Lamont’s leadership.

Many in the party will welcome this strategy as long overdue. Even in government there was an unwillingness to shout about the different approaches we took in Scotland in areas like the NHS and education policy. If a Scottish solution to Scottish issues is to mean anything, then differentiation is fine.

He set out five principles for this new aims and values statement.

The new Jim starts by using the ‘s’ word. Socialism isn’t something he talks a lot about, so that’s a positive start. The new socialism is to be linked with patriotism because our, “political faith grew out of something deeper which is ingrained in our Scottish character”. This is apparently, “A belief that we stand together, look after those who need our help, and make sure that everyone gets a fair shout”. I'm not sure that these are uniquely Scottish characteristics, even if the examples are Burns poetry, highland clearances and New Lanark. Welsh Labour might take issue with us claiming Robert Owen as our own, he was after all Welsh – but we get the drift.

Then we get a bit about solidarity across the UK that is complementary to and not in conflict with the Scottish national interest. He says, “We will declare ourselves a party that represents Scotland first, in the community of the UK and the world, and where, as Scots, we work with others to achieve the potential of all”. That seems a reasonable position for a party of devolution to take.

He then asserts, “the total devolution of policy making in devolved areas”. Impossible to disagree with, as the existing Clause 15 already delivers precisely that. Recent policy disagreements with the UK party have been over reserved issues like the Bedroom Tax.

His fourth principle seeks to commit Labour to a “permanent and powerful Scottish Parliament”.  Given the somewhat lukewarm commitment of a few Westminster MPs over the years, this is an eminently sensible approach and in keeping with the founding principles of Scottish Labour.

Finally, we get the big policy vision; “we will renew our historic mission for a more equal and fairer society where power, wealth and opportunity are more fairly shared amongst our fellow Scots and our fellow human beings around the world”. I might question the ‘more fairly’ as a bit weak, but again the direction of travel is fine.

As a trade union official, I am all too familiar with the new CEO arriving with a glossy new mission statement. It’s a tried and tested management strategy aimed at setting a new tone and direction. As Scottish Labour members are fed up with the ‘London Labour’ label, most will be willing to give this approach a fair wind. A draft in January for consultation will give an opportunity to turn some of the more esoteric phrases into meaningful language.

Jim ended his speech in very unNew Labour style, by taking us back into Labour history. To the 1888 founding conference of the Scottish Labour Party no less. His speechwriter should perhaps have checked with the Keir Hardie society, because the great man didn’t actually chair that conference, even though he was the driving force behind it. It was chaired by RB Cunninghame Graham who of course went on to be the first President of the SNP - so maybe he was best air brushed out on this occasion!

Jim was however a bit selective in his list of Scottish Labour policy during this period. The founding programme also included the nationalisation of the railways and other means of transit (waterways and tramways) the banks, the land, all mineral rights and the abolition of the House of Lords and all hereditary offices. Now that’s a real Clause 4 moment!

Overall, the aim of emphasising the ‘Scottish’ in the Scottish Labour Party is not a bad strategy as long as we don’t lose the socialism with the patriotism. Because it is socialism that distinguishes Labour from other social democratic parties and we should never forget that.

Time to take action on pensions

There are some big changes to our pensions next year. The Scottish Local Government Pension Scheme changes next April and the UK government is allowing transfers out as a lump sum. In addition, new governance arrangements should ensure that the £24bn in Scottish funds are invested more effectively for the benefit of members.

I was at UNISON's annual pensions seminar today that brings together pensions champions from local government funds across the UK. While the Scottish scheme is separate from its England and Wales counterpart, there are a number of common concerns.

There are huge variations in the performance of funds across the UK. We simply don't know the true cost of investments and there is not even an agreed set of key metrics so we can compare funds. One speaker gave an insiders explanation of how asset managers try to hide the true costs. He gave us a frighteningly long list! I particularly liked (not) private equity firms who charge the firms they invest in to put one of their staff on the board, which of course reduces the financial performance of the company and therefore the return to pension funds. There are also a range of conflict of interests in the value chain that again add to costs.

Some firms are trying to put Non Disclosure Agreements (NDA) around cost data, which just demonstrates that they have something to hide. We should be saying, we will not appoint asset managers that want to hide costs. They are anyway subject to FoI in the LGPS. Evidence from the transparent Dutch market shows that a 40% reduction in fees is possible. The published data the Dutch have is amazing and has been the key to driving down costs. Trustees should be asking their Custodian Fund Accountant, who have most of the data

There was a useful explanation from the Law Commission in England (the law on this point similar in Scotland) of fiduciary duty and what factors you can take into account in ethical investment decisions. In my experience, trustees are given a very narrow interpretation of this because fund managers are not keen. In fairness, the case law is based on some bad factual cases. The Law Commission report shows how you can ethically invest legally using due process. Many decisions can be given a financial gloss and even non-financial factors can be taken into account if you follow the process outlined in their guidance. They also recommend some changes to local government investment regulations that we will need to look at. In particular, confirming that funds should be invested in the interests of the members - not what the councillors think is in the best interests of the council!

A key issue is again getting quality data. We should be tagging unethical firms on the investment database so that the fund is notified anytime asset managers invest in them. A number of speakers in the final panel highlighted how effective activist share action can be in promoting ethical investment. Also on issues like executive pay that has spiralled out of control in many firms. The TUC has developed trade union voting and engagement guidelines and organisations like Share Action are also running effective campaigns.

From next April, all members in funded schemes will be able to take their pension pots from age 55. What many people don't realise is that they will pay tax at their marginal rate on 75% of their pot. We will need to watch out for pension scams and develop rigorous procedures to ensure members get proper advice. There is also a risk that some funds could suffer negative cash flows. The government says they don't expect many to do this in quality schemes like the LGPS. Although interestingly the government hasn't allowed members in pay as you go schemes like the NHS to take out their pot, because that would be a cost to the government!

The coming year is going to be a busy one for union pension representatives at every level.

Why 40,000 lost council jobs may only be the tip of the iceberg

More than 40,000 jobs in Scottish local government are at risk over the next five years if austerity economics continue.

Today's 'The National' newspaper carries a story quoting my estimate of the likely job losses in Scottish councils. It's a headline because the current budget round is highlighting the massive scale of cuts each council is having to consider next year. The numbers are frighteningly huge in cities like Edinburgh and Glasgow, but proportionately the story is the same across the country.

So before anyone accuses me of scaremongering, I would point out that our estimates in the past have sadly been pretty accurate. I also suspect 40,000 may, if anything, be an underestimate. We know that nearly 40,000 jobs have gone from Scottish local government since the crash. We also know from the OBR and IFS analysis of the Autumn Statement that some 60% of the cuts planned by the ConDems at UK level are still to come. Given that there is to be no real change in the Barnett formula, you don't need to be a mathematician to see that our numbers add up.

Of course the Scottish Government could stop dumping the largest share of the cuts onto local government. However, that seems unlikely because that would require them to reduce health spending and politicians aren't that brave in the run up to elections. Even if it is council cuts that contribute towards the bed blocking that are causing so many problems in our NHS. They could also use the income tax powers they have and the new ones. However, as we also know from today's Audit Scotland report that only one civil servant is allocated to work on income tax, that seem pretty unlikely as well.

While we welcome the attempt to find a cross party consensus on local government finance through another commission, the Council Tax freeze continues. That's £2.5bn which could have been used to save services, rather than give handouts to wealthy households. On top of that we have the small business bonus that has cost a fortune without a scrap of evidence that it has created any jobs. We also need to remember that even if we do fix local government finance that is only a small proportion of council revenue.

Councils also have choices to make. Edinburgh's plan looks like another exercise in shifting the deck chairs around the Titanic. The loss of experienced staff, including middle managers, is becoming a real problem and one that even Audit Scotland has commented on in past reports. In many councils, inexperienced and quite junior staff are being asked to make decisions that could have serious consequences for councils and individual service users.

Today in Glasgow, staff and service users are protesting at the decision of Glasgow City Council to slash and burn mental health services in the city, currently provided by GAMH. It is rank hypocrisy for the council leader to announce his council's commitment to promote the living wage through procurement on one day, when the next day his council is planning to shift a service from a good living wage wage employer to another that doesn't. Quite apart from the blatant breach of the statutory requirements under s52 of the Local Government in Scotland Act.

So, while councils and the Scottish Government can rightly be accused of poor choices, the core problem is austerity economics as delivered by George Osborne. As I outlined last week in a commentary on the Autumn Statement, this is not just taking public services back to the 1930's - it is also damaging the unbalanced economic recovery. If we don't change course after the 2015 General Election, 40,000 jobs may only be the tip of the iceberg.

 

 

The real chill in the Autumn Statement

A budget package in December may not be Autumn, but it certainly had a real chill for those least able to afford its consequences.

This was a classic Osborne budget statement. Massive real cuts, sugar coated by handing back a few pennies in the form of announcements on the NHS and infrastructure. Yes, Scotland will get £129m of Barnett consequentials from the NHS announcements, but this goes nowhere near making up for the real cuts ahead. This chart from the Office of Budget Responsibility makes it perfectly clear where public spending is going.

Public spending in the UK will be the lowest for 80 years, not quite the dark ages, but back to the dark years of the Great Recession. Danny Alexander told us yesterday that there were 'smallish' cuts to come. Today, we got the truth from the OBR, who say:

"Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices. Around 40 per cent of these cuts would have been delivered during this Parliament, with around 60 per cent to come during the next. The implied squeeze on local authority spending is similarly severe."

This is also an entirely home grown consequence of the failure of austerity economics. The OBR also tell us that real earnings will not return to pre-crisis levels over the next five years after a continuous fall since the crash. Pay freezes, low paid new jobs, low incomes of the involuntary self-employed are behind the apparently improving unemployment figures. This is the reason why tax revenues have not grown sufficiently, and public borrowing has increased despite draconian public spending cuts. This infographic from the JRF shows just how the low paid have taken the brunt of pay cuts. And it's public sector workers who take the biggest cuts yet again.

Osborne told us proudly that he has halved the deficit. But in 2010 he told us that it would have gone by next year. Instead he has borrowed more than Labour as this chart shows.

In any case the budget deficit is the wrong target. The UK's main deficit is in investment and equality. We need a massive programme of public investment in social care, public transport, housing, child care and education, which will tackle the investment and decent work deficit. Then we need labour market policies to ensure that the fall in labour’s share of national income in the past decades is reversed, and the recovery is wage-led rather than debt-led. Household debt will grow faster than previously forecast until it’s larger than before the recession. In simple terms, take care of full employment, decent pay for women and men, equality, and sustainability, and the budget will take care of itself.

If you were in any doubt about the political strategy behind the Autumn Statement, have a look at this distributional analysis.

The top 10% will vote Tory come what may to protect their tax cuts that are threatened by Labour. The big losers are again at the bottom, the 'dog end voters in the outlying regions' as one Tory MP put it. Osborne’s economic policies have been deliberately designed to shift money from the poorest to the richest. Research from the London School of Economics has found that the changes he has introduced to benefits and income tax have seen the poorest five per cent lose income while the top one per cent have gained.

Austerity economics have been a massive failure as the numbers behind today's statement show all too clearly. A short term housing bubble is the only fig leaf he has left to get past next year's election But there is also a challenge for the opposition parties and Labour in particular. There has to be a clear dividing line on economic policy. Austerity is the Tories cover for their real political goal of reducing the size and role of the state - it should not feature in the policy of a party with a democratic socialist mission.

 

 

Why Scotland and the UK should oppose TTIP

Politicians can be so fixated by the benefits of free trade that they are missing the real dangers of the Transatlantic Trade and Investment Partnership (TTIP).

TTIP is a series of trade negotiations being carried out mostly in secret between the EU and US. In my view TTIP is primarily about reducing the regulatory barriers to trade for big business, things like food safety law, environmental legislation, banking and labour regulations. It is, as John Hilary, of War on Want, said: "An assault on European and US societies by transnational corporations."

I was giving oral evidence to the Scottish Parliament's European and External Relations Committee last week on TTIP. It's not often in parliament that I find myself on the same side as the NFU, but that just demonstrates how broad the coalition concerned about TTIP is.

There is an argument, put forward by an academic lawyer at the committee, that we are worrying too much. There can be no provisions in the treaty that are outside EU competences and the EU has no powers to direct how, for example, our health service is organised. With respect, this academic view of the law is simply naive.

There are plenty of examples of states signing up to similar treaties only to find corporations challenging their democratic decisions. Australia over tobacco control and Slovakia over health insurance, highlights just two in the health sector. There are over 500 of these cases being heard across the world at present. It's not just the actual legal action that matters. The threat of legal action can result in 'regulatory chill' with risk adverse law officers worrying about any radical action that might result in a legal challenge. Scotland's recent Procurement Act and the living wage was one recent example of this effect. That Act also has provisions to tackle aggressive tax avoidance. Just imagine the plane loads of US corporate lawyers flying in to Edinburgh if TTIP was in place!

Effective challenges to the EU also have to come from the member state and for Scotland that means the UK. In England they are creating a US style privatised health service, so would they really complain to the EU to save Scotland's very different approach?

Some MSPs pursued the idea of a 'good TTIP' with us. I'm afraid that I don't hold out much hope for that. There are already very few trade barriers between the U.S. and the UK, so it's deregulation and privatising public services that interests rapacious American corporations. From a UK perspective there is little economic evidence of the benefits. When officials claim gains in the range of £4bn to £10bn, you know they are just making the numbers up. Even these figures take no account of job displacement and a further shift from wages to capital.

At a minimum TTIP a would have to unequivocally exclude public services, possibly using the positive list approach to avoid definitional problems over what a public service is. There should be no common regulatory standards, because the US ones are generally too low. Enforcement procedures that are in TTIP a should include all the ILO standards, particularly the ones that the U.S. hasn't signed up to, such a collective rights.

But the biggest issue is removing any Investor State Dispute Settlements (ISDS). These mechanisms give judicial protection only to foreign corporations and allow their massive legal departments to tramp all over democratically elected governments. In this way they would be able to reduce our food safety rules, privatise the NHS, challenge the Scottish Living Wage and weaken environmental regulations on issues like fracking.

If a 'good TTIP' like this was on the table, I strongly suspect the US would just walk away. That's fine, because that is just what the EU should be doing now.