Scotland needs economic as well as political power

While political structures are important, what really matters is the distribution of wealth and power.

The Scottish Labour Party conference tomorrow will debate a motion on federalism that takes Labour much further than it has ever gone before in devolving political power away from London. The Scottish Government may soon fire the starting pistol for another referendum on independence. Both of these developments are obviously important, but they mean little if we don't also address economic structures.

The UK constitutional convention called for in the motion to the Scottish Labour Party conference is the brain child of Jon Trickett MP. He was in Glasgow last Friday, addressing trade unions on how he wants to take the convention forward, drawing his inspiration from the constitutional convention that drove the devolution agenda in Scotland, rather the more usual government commission. 

He said:

"In my mind, our socialism requires three things:

1. a federal solution for Britain which breaks up the centralised power of the British Westminster elite and hands decision making about local matters to local people;
2. redistribution of wealth and power so that we can rebuild a socially just country based on a strong economy in every region and nation and not just in a few affluent areas;
3. the cooperation and solidarity between all the parts of the country which will mean the pooling of common resources to make sure that there is more equity.

So this is why the Labour Party is committed to a constitutional convention. It’s because the political structures aren’t working any more. Instead, they have been a primary factor in the long-term decline of areas outside of London and the South."

However, his key point comes in this paragraph:

"Political reform is necessary. But it is not sufficient to solve our problems. As I’ve said, it does not change the economic structures which have allowed our regions and nations to be left behind.

We cannot solve this problem with just more devolution of political power on its own because we also need fundamental change to the way our economy works."

The Red Paper Collective has expanded on these themes in their latest publication on Progressive Federalism. Jon's introductory chapter builds on his theme of addressing economic power. My chapter 'Scotland is not our local' makes the case for double devolution of power from Westminster to local communities, something Jon Trickett reinforced in his Glasgow speech. John Foster shows just how little economic power resides in Scotland. Even the small foothold we had has largely disappeared since 2005 as the table below shows.

Other authors show how much more we could achieve if we focused on taking democratic control of our economy, developing a real industrial strategy, including energy and renewables.  Using taxation powers to build a better education system and other public services. And finally, using the powers that should be devolved post-Brexit as an opportunity for radical reform.

The bottom line is when we focus simply on political structures, we are missing the bigger picture. Unless we challenge the economic structures that control Scotland's economy - political structures; independence, federalism or unionism, will count for very little. That's why a wider look at power through a constitutional convention is a meaningful initiative.

You can discuss these issues at the Revitalise/Red Paper conference fringe meeting on Saturday 25th February at The Royal George Hotel, Perth, starting at 12:30pm.

Increasing the state retirement age is the wrong solution

We are generally living longer at that means the cost of the state pension is rising. Does that mean the State Pension Age (SPA) should go up and up - or is there another way?

That's the question being addressed by John Cridland's state pension age review, visiting Edinburgh today. They published an interim report last October and are planning to publish their recommendations in March.

They are looking at the period after 2028, which excludes the planned changes before then and the controversy over transitional arrangements, including the issues raised by the WASPI campaign. Although it does highlight the importance of communication and transitional provisions in future.

There are three pillars to the review.

The first is Fairness. As most people probably understand, pensions are no longer paid from the National Insurance Fund - today's pensions are paid for by today's taxpayers. Intergenerational fairness is therefore something the review has to consider.

A key issue in Scotland is that life expectancy is 1.3 years shorter than the rest of the U.K and also worse than most European comparators. This might lead to the conclusion that the state pension age should be lower in Scotland. However, differences in life expectancy within Scotland are much greater than the differential with the rest of the U.K. Social class, income and health remain the main reasons for a shorter life. We also need to recognise the quality of life in retirement. 

The second pillar is Affordability. Spending on the state pension is projected to rise from 6.1% of GDP today to 7.2% in 2040s (an extra £20bn at today's prices.). This is largely driven by an ageing and larger population. The relative value is also rising due to the 'Triple Lock', which adds around 0.3% of GDP.

The number of people above the SPA per 1000 workers is also rising. This is called the Dependency Ratio by economists - a very poor and inaccurate descriptor that always irritates me.

We are of course living longer and the review has an interesting slide that shows how every projection since the fifties has underestimated this trend.

The third pillar is Fuller Working Lives. There has been a noticeable trend for people to work longer, even past the SPA. 1.2m people now take their pension and continue working. The reasons for this are not always positive and many are doing different job or working part-time. What gets less coverage is the increasing number retiring early, again not always for positive reasons. Ill health and caring responsibilities - one in nine people now have a family caring role.

Responses to the review consultation have highlighted the role of carers, ill health, burnout, help for older workers and healthy life expectancy. As always plenty of issues for the review to take into account, but fewer solutions.

It's a big issue for public service pensions because the normal retirement age in these schemes is now linked to the state retirement age. As I pointed out today, this means workers in demanding jobs are expected to work well past the age when they can realistically perform their duties.

The answer apparently is that we need to consider changing jobs in the run up to retirement. However, this assumes that such jobs exist and that employers are prepared to fairly consider older workers. John Cridland mentioned B&Q, which is at best is the exception that proves the rule. We spend a lot of time and effort developing younger workers, perhaps we should consider a similar approach for older workers?

In addition, as a recent TUC report shows, barely half of 60-64 year olds are economically active and half a million people within five years of SPA are too ill or disabled to work.

The problem for reviews like this is that their remit encourages silo thinking. Many of the issues identified in the review have little to do with the retirement age. They reflect inequality in the workplace and in society more generally. Raising the retirement age will affect low income workers the most. This is because they have the greatest difficulty in saving for a private pension. High income workers will be able to build up a private pension, which will enable them to take early retirement before the state pension takes effect. The average Scottish local government worker has a pension in payment of just £3,750. This means they might save the taxpayer some social security benefits, but they won't contribute to the higher tax revenues - a common justification for raising the pension age.

Compared to the rest of Europe, the UK has been the most aggressive in raising the SPA. The solution in this review isn't simply to increase the pension age yet again. We need to address a range of broader workforce reforms rather than rely on this crude and unfair mechanism.

Why the robot workplace damages workers and their organisations

Obsessive and unnecessary recording and reporting at work increases costs and places undue stress on staff. Coupled with new monitoring systems, workers are being turned into robots, before they are actually replaced by them.

Two different discussions with members, one private sector employer and another in an NDPB (quango), highlighted for me the waste that can develop when employers allow reporting systems to spiral out of control.

The story was similar in both organisations. Workers told me that they spend a quarter and a third of their time providing reports on what they are doing, in different formats, to different parts of the management structure. The main departments responsible for generating these reporting demands have grown exponentially, while front line staff are under huge pressure, coping with increased demands on delivering the service.

(Drakalogia)

What particularly irritates staff in the NDPB, is that they take the same data and have to input it into the computer system and then put parts of the same data into two different spreadsheets. There is no smart systems working, or any indication that management have any insight into the waste this approach causes.

Looking at the annual reports of both organisations, I can see no qualitative evidence that all this reporting has had any noticeable impact on their public reporting. It is a regular feature of Audit Scotland reports that there is insufficient data to judge this and that. In the public sector this is sometimes used as an excuse for expanding data collection. It's a point we often make in response to Audit Scotland reports and something they ought to reflect on.

Taking this one step further, we have John Harris in the Guardian writing about a novel and new film on the fictional (for now) Circle Corporation, whose leaders want privacy and autonomy to count for almost nothing. Workers are under constant monitoring and a system of endless appraisal by their peers, who feed into a system called Participation Rank – or PartiRank, for short.

The details of their online and offline lives are judged according to “an algorithim-generated number” that measures their activity. “It’s just for fun,” a company high heidyin tells the story’s principal character. But, of course, it isn’t, it's just one more example of the passive-aggressive ways of Silicon Valley that appears to be spreading to Scotland.

Both my examples involve administrative jobs. However, similar intrusive work monitoring takes place in the huge warehouses run by online retail giants, and driver deliveries. Sports Direct and Amazon are well known examples, and there was a story last week that one in ten workers in another retail warehouse had been so ill that they had to be sent to A&E.

I have long been irritated at the use of the phrase 'human capital'. It's as if HR departments feel they need some numbers to put them on a par with the finance department. Even I had a phone call the other day from a company wondering why I hadn't taken up their invitation to 'get on board' with the 'science' of HR metrics. After a five minute lecture from me about the difference between people and robots, they probably regretted the call! I see one company is trying to sell robots to undertake care tasks. I am sure our long suffering elderly care service users, just can't wait for this quality interaction!

The latest buzz highlighted by Harris is 'people analytics'. Some systems are straightforwardly intrusive: Worksnaps, takes repeated screenshots of workers’ computers, count their mouse-clicks and take webcam images. BetterWorks uses a Facebook-like application that depends on employees publicly posting their supposed workplace goals, and regularly issuing “cheers” and “nudges” to their colleagues. “In the office of the future,” says the chief executive of the company responsible, “you will always know what you are doing and how fast you are doing it". I can't wait!

There are now tracking apps for phones that can log the whereabouts of staff 24 hours a day. A US-based company called Humanyze (really!) is working with British businesses including a high street bank and the consulting firm Deloitte, as well as parts of the NHS. They say: “Humanyze’s badge can track physical activities in real time, capture ‘nonlinguistic social signals such as interest and excitement’ without recording actual words, locate wearers and their proximity to other wearers, and communicate with other electronic devices.”

Harris concludes: "Judging by the way the idea is sold, the people responsible, for reasons that speak volumes about the tech world’s endless naivety, they see it as a kind of super-efficient utopia. Anyone with a grasp of what makes us human should surely recognise it for what it is: Stasi capitalism, apparently furthering its dominance at a terrifying speed, with only the faintest murmurs of protest."

There is another way for those employers who recognise that their workforce consists of diverse talented individuals who want to do a good job. A study by the ILM has found that more than half (53%) of employees would consider leaving their job if the structure and culture of their organisation didn't change. According to the research, lack of employee empowerment is the root cause of much dissatisfaction in the workplace.

Nearly three-quarters (74%) of staff surveyed said they wanted more freedom in their roles, but a third (34%) said their work was overly regulated, and that they were forced to work within overly controlled structures. 64% of staff surveyed said they struggled to do 'fit in' with their organisation. Despite two-thirds (66%) of employees wanting to have a greater say in their everyday working lives, just 24% said they felt their line managers fostered collaboration.

John Yates, group director at ILM, said overly authoritarian workplaces should be “a thing of the past, people today want to work for flexible, fun and friendly organisations. Organisations need to be flexible, allowing employees to pursue career ambitions and manage conflicting home life pressures as much as possible, and encourage creativity – injecting passion and new ideas into the workplace.”

I can think of a growing number of organisations that need to recognise this and change their systems, behaviours and culture - urgently!

We should all be pension geeks now

All of a sudden, pensions are rarely out of the news. From changes to the state pension, through to transparency of investment charges and outright fraud. Largely as a result of auto-enrolment, thousands of workers are now in pension schemes and those approaching retirement have complex decisions to take as a consequence of pensions liberation.

Today, I was at the annual TUC pensions conference, probably the best of its kind, covering the full range of pension policy issues facing schemes across the UK.

Paul Nowak, Deputy General Secretary of the TUC, set the scene. Big issues for unions include improving auto-enrolment, a success, but weaknesses need to be addressed. Pensions adequacy in DB and DC schemes - there are no 'gold plated' schemes for most workers. The state pension needs to be protected and restricting access should be resisted. Intergenerational inequality, particularly for young workers facing insecure jobs and poverty wages is covered in a new TUC report today. Finally, stronger unions mean better pensions, so we must continue to organise to secure better pensions for all.

Richard Harrington MP, the UK pensions minister, highlighted the gap between the state pension and what most people need for a comfortable retirement. This means occupational pensions have a lot to do, around £10,000 a year (£250k pensions pot). He accepted that the move from DB to DC schemes has shifted responsibility from employers to employees, who need to take much greater interest in their own pensions. Auto-enrolment has been a success, although smaller employers still have much to do. When contributions reach 8%, cost may be an issue, but the benefits have to be promoted. He recognised difficult issues including adequacy and access - these will be addressed in the forthcoming review.

He referred to coming Green Paper on DB pensions. Issues for that review include consolidation of schemes to reduce costs and widen investment opportunities. The way pension funds are valued and inflation proofing. The role of the Pensions Regulator, fairly light touch compared to FCA, as Philip Green case illustrates, do they need more powers? Perhaps he should look at equality of treatment between dividends and payments into pension schemes! He noticeably avoided answering a question on that point!

Government is also working on better consumer protection. Consolidating guidance bodies and tackling scams. The Pensions Bill in parliament is also addressing the master trust issue. Overall, his contribution was well received, certainly in listening mode, even if he ducked some of the difficult issues on adequacy and the state pension.

Ian Baines from Nationwide, presented a case study on how they improved adequacy of their DC scheme with higher employer and employee contributions. An impressive communications campaign persuaded more staff to pay more to get more out of their pension.

Steve Webb, former pensions minister, talked about pensions and the self-employed - bogus or not. Latest figures show only one in seven in a pension scheme. Self-employment now covers large numbers of people who would have been employees in the past. He argues that Class 4 NI contributions could be redirected into voluntary pension schemes, similar to auto-enrolment for employees. Of course the problem could also be reduced if we ended bogus self-employment.

Labour peer, Patricia Hollis, covered sex discrimination, quoting Scottish Widows research - the problem for women and pensions is that their lives do not mirror those of men. For example, half of women end pension contributions at childbirth. She was particularly critical of pensions liberation, which is being used to clear problem debts. She recognised gains from auto-enrolment, but the low pay threshold and rules on aggregating employment, has hit women harder than men. She called on the government 2017 review to tackle discrimination against women by introducing a blended product between savings and pensions.

Daniela Silcock from the Pensions Policy Institute talked about what information people need about pensions. In an interesting approach, she looked at information needs at different times of life, from childhood to adulthood to approaching retirement and finally in retirement. Research shows that better financial education results in a significant improvement in financial capability. Even numeracy levels are low in UK.

The afternoon session started with an examination of the impact of pension liberation. Ignition House have undertaken detailed research with more than a one thousand participants, focusing on middle income pension pots. The publicity did generate an initial sense of excitement, but also concern that savers might make wrong decision - 'pensions are a minefield' was the most common response. However, there is also a short-term, optimism bias, with a tendency to ignore risk or develop confirmation bias.

People are also struggling to cope with the plethora of information available, although there was good awareness of the Pension Wise advice service - even if few used it, although those that did found it useful. Very few used a professional advisor, beyond an initial consultation. There were issues of trust and past poor experience, coupled with high cost and advisors unwillingness to deal with smaller pension pots. Most people in the study failed to make a decision, those who did took a lump sum, viewing it as cash to spend today, not a lifetime decision. They had limited idea of how the balance is invested and what the charges are. This included some frighteningly risky investments. The research indicates some sensible reforms, but the bottom line is that this is just too complex for most people.

The session on DB schemes highlighted the huge numbers that still rely on these schemes. They are not as badly funded as many claim - First Actuarial calculate a £270bn surplus in DB schemes. Gilts plus actuarial valuations need to be challenged, as they significantly overestimate liabilities. Shock headlines need to be challenged as they are often used to soften up employees.

The final sessions focused on the review of the state pension age by John Cridland. He is coming to Edinburgh this month, so I will cover that issue in a separate blog. I sadly missed what looked like a fascinating debate between John Kay and the Investment Association on active fund management costs, but my blog on the recent FCA report covers the issue.

As you can see there's a lot going on in pensions. The message from this conference is that we all need to take a lot more notice of what's happening. We should all be pension geeks now!