The highly respected and certainly not right wing, Financial Times columnist Martin Wolf presents a pretty devastating analysis of the Scottish Government’s planned currency union. He argues that it would be folly for the rest of the UK to enter into such an arrangement voluntarily and advises Scots against it as well.
Mark Carney, governor of the Bank of England, diplomatically stated last week that currency arrangements post independence “would be a matter for the Scottish and UK parliaments”. However, Wolf argues that as the person responsible for monetary stability, he has a duty to advise on the implications because the BoE would have to operate the union. Learning from “optimal currency area” theory and the recent painful experience of the eurozone, he argues there are two conditions for success.
1. A banking union with common supervisory standards; access to central bank liquidity and lender-of-last-resort facilities; common mechanisms for “resolving” banks in difficulty; and a credible deposit guarantee scheme. This would probably be accepted by the Scottish Government, or at least by John Swinney who has said as much in interviews.
2. Shared fiscal resources and arrangements. This is the big stumbling block, as it undermines the case for independence. If you can’t set your own taxes, what’s the point?
Of course Wolf is not the only person to point this out. I would modestly point to my own chapter in the ‘Red Paper on Scotland 2014’ and an earlier article in Scottish Left Review and a Red Paper pamphlet. In today’s Scotsman, Brian Wilson makes a typically robust swipe at the concept, highlighting unusual common ground with Jim Sillars, who is equally robust in his new book. The pro-independence Cuthbert’s have also argued against the currency union in their paper.
Wolf is of course primarily looking at the issue from a rUK perspective, but this is important because it takes two to negotiate and the Scottish Government claims such an arrangement is in the rUK’s interest as well. He adds another key lesson - a central bank responsible to several governments is accountable to none. As the rUK generates 90% of UK GDP the rest of the UK could insure Scotland, but Scotland could not insure the rest of the UK. As Wolf puts it, “This could not be a relationship among sovereign equals.”
This debunks the claim in ‘Scotland’s Future’ that: “An independent Scotland will be able to decide our currency and the arrangements for monetary policy.” Wolf describes this as ‘nonsense’. Even worse, Wolf argues that it would be necessary to impose fiscal discipline on Scotland, while the rUK would need to retain the ability to use fiscal policy in crises, as it did in 2008 and 2009.
He concludes, “It would be folly for the rest of the UK to enter a union with an independent Scotland voluntarily, having seen what has happened inside the eurozone. But, if it did indeed agree to do so, it would have to be on the basis of a view of its own interests. It must be an asymmetrical union. The BoE would remain subject to the law of the rest of the UK. It would not contain regional representatives. It would have sole responsibility for prudential regulation. Above all, the rules of the union would impose fiscal discipline upon Scotland. But such discipline would essentially be voluntary for the rest of the UK.”
“If I were Scottish, I would not dream of accepting such an arrangement because it would be far more unequal than the present one. But it is the only arrangement the rest of the UK should accept in return for participating in a worse monetary union than today’s. Mr Carney could not say anything like this. But the Scottish people should not be allowed to believe they can have whatever kind of currency union they want. It would find another and far bigger partner on the other side of the table.”
The currency we use is not an academic side issue in the constitutional debate. It is the basis for a credible monetary and fiscal policy. Plan B is long overdue!
Wednesday, 5 February 2014
Tuesday, 4 February 2014
Pensions and Independence - the unanswered questions
ICAS - the professional body for Chartered Accountants has returned to the fray on the subject of pensions and constitutional change.
They published a useful introductory paper on pensions and constitutional change last year and I blogged a commentary here. Since then the Scottish Government has published a paper ‘Pensions in an Independent Scotland’ and the White Paper. The aim was to reassure voters that their pensions will continue to be honoured in an independent Scotland with continuity of systems and regulation. I published a commentary on this here.
ICAS has had a further look at these publications and has identified a number of areas of concern:
• There remains no clear plan as to how the Scottish and UK Governments will engage with the EU on how to minimise the impact of the cross-border funding rules on defined benefit schemes carrying deficits, which become cross-border schemes, in the event of independence.
• The three year transitional period being discussed by the Scottish Government for addressing pension deficits held by new cross-border schemes is likely to be wholly insufficient as many UK employers currently fund scheme deficits over a much longer period.
• We have further questions about the feasibility of an independent Scotland sharing pension protection arrangements with the UK while establishing a separate pension regulator.
• We anticipate additional complexity than is currently acknowledged in relation to whether an individual’s entitlement to a state pension at the date of independence would sit with an independent Scotland or with the UK. Similar issues arise in respect of entitlement to a pension from an unfunded public sector pension scheme.
David Wood, Executive Director, Technical Policy and Practice Support, said
“These Scottish Government papers have provided useful additional detail in relation to pension regulation and provision in an independent Scotland but some of our key questions remain unanswered. While we recognise that it will not be possible to answer every question prior to the Referendum, nevertheless important questions remain on how legacy issues will be resolved and new arrangements will be implemented.”
On public services pensions ICAS believes that these questions need answering:
• What should the criteria be for determining which government would be responsible for the pensions of individual members of unfunded public sector pension schemes - for example, members of the Armed Forces Pension Scheme; the NHS in Scotland Pension Scheme and the Principal Civil Service Pension Scheme?
• What other transitional arrangements would be needed to successfully migrate responsibility for scheme members living in Scotland at the date of independence, including member communications?
• How does the Scottish Government propose to define “living in Scotland at the date of independence” or “country of residence at the date of independence” for the purpose of determining responsibility for paying the pension of members of an unfunded UK scheme? Issues of citizenship may be relevant here as they would be in relation to the State pension.
• What amount or reimbursement would the Scottish Government seek to negotiate from the UK Government by way of providing pensions for those with “accrued” entitlement to a pension from an unfunded UK scheme?
For UNISON members the allocation of costs for 'unfunded' or 'pay as you go' schemes is an important issue - primarily for the Scottish NHS scheme. While we have the global liability figure in UK government accounts, this is fairly meaningless. I am surprised that the UK government has not asked GAD to undertake a more detailed analysis of this.
Reimbursement is not an issue for local government as the funding is already devolved and independence would make little difference. In fact UNISON has argued that this should be fully devolved to Scotland. In our private sector schemes, separating the funds could be a way around the EU rules. However, in some cases this could leave quite small schemes that may not be viable, or at the very least more expensive to run. In pension investment, bigger is usually better.
Both sides in the independence debate should recognise that pension security will be an important issue for many voters. It is their deferred pay and represents a huge investment for many workers. This ICAS report raises further important questions that deserve proper answers.
They published a useful introductory paper on pensions and constitutional change last year and I blogged a commentary here. Since then the Scottish Government has published a paper ‘Pensions in an Independent Scotland’ and the White Paper. The aim was to reassure voters that their pensions will continue to be honoured in an independent Scotland with continuity of systems and regulation. I published a commentary on this here.
ICAS has had a further look at these publications and has identified a number of areas of concern:
• There remains no clear plan as to how the Scottish and UK Governments will engage with the EU on how to minimise the impact of the cross-border funding rules on defined benefit schemes carrying deficits, which become cross-border schemes, in the event of independence.
• The three year transitional period being discussed by the Scottish Government for addressing pension deficits held by new cross-border schemes is likely to be wholly insufficient as many UK employers currently fund scheme deficits over a much longer period.
• We have further questions about the feasibility of an independent Scotland sharing pension protection arrangements with the UK while establishing a separate pension regulator.
• We anticipate additional complexity than is currently acknowledged in relation to whether an individual’s entitlement to a state pension at the date of independence would sit with an independent Scotland or with the UK. Similar issues arise in respect of entitlement to a pension from an unfunded public sector pension scheme.
David Wood, Executive Director, Technical Policy and Practice Support, said
“These Scottish Government papers have provided useful additional detail in relation to pension regulation and provision in an independent Scotland but some of our key questions remain unanswered. While we recognise that it will not be possible to answer every question prior to the Referendum, nevertheless important questions remain on how legacy issues will be resolved and new arrangements will be implemented.”
On public services pensions ICAS believes that these questions need answering:
• What should the criteria be for determining which government would be responsible for the pensions of individual members of unfunded public sector pension schemes - for example, members of the Armed Forces Pension Scheme; the NHS in Scotland Pension Scheme and the Principal Civil Service Pension Scheme?
• What other transitional arrangements would be needed to successfully migrate responsibility for scheme members living in Scotland at the date of independence, including member communications?
• How does the Scottish Government propose to define “living in Scotland at the date of independence” or “country of residence at the date of independence” for the purpose of determining responsibility for paying the pension of members of an unfunded UK scheme? Issues of citizenship may be relevant here as they would be in relation to the State pension.
• What amount or reimbursement would the Scottish Government seek to negotiate from the UK Government by way of providing pensions for those with “accrued” entitlement to a pension from an unfunded UK scheme?
For UNISON members the allocation of costs for 'unfunded' or 'pay as you go' schemes is an important issue - primarily for the Scottish NHS scheme. While we have the global liability figure in UK government accounts, this is fairly meaningless. I am surprised that the UK government has not asked GAD to undertake a more detailed analysis of this.
Reimbursement is not an issue for local government as the funding is already devolved and independence would make little difference. In fact UNISON has argued that this should be fully devolved to Scotland. In our private sector schemes, separating the funds could be a way around the EU rules. However, in some cases this could leave quite small schemes that may not be viable, or at the very least more expensive to run. In pension investment, bigger is usually better.
Both sides in the independence debate should recognise that pension security will be an important issue for many voters. It is their deferred pay and represents a huge investment for many workers. This ICAS report raises further important questions that deserve proper answers.
Wednesday, 29 January 2014
Higher education and independence
Higher education is already largely devolved. However, there are many uncertainties for higher education in the independence debate, not least what impact it will have on funding. Universities are a very important part of the Scottish economy and they operate in a global marketplace.
I was speaking today at the ESRC seminar on Higher Education and Independence. I outlined UNISON's approach to the constitutional debate as set out in our publications, Fairer Scotland and Fairer Scotland - Devolution.
I focused on a number of issues that concern staff working the the sector. In the main they revolve around funding for universities. Important sources of income for Scottish universities come from students from the rest of the UK who at present pay tuition fees at similar levels to those in the other parts of the UK. The Scottish Government claims they will be able to continue to levy these fees, despite EU rules that forbid direct discrimination against other EU countries. This of course assumes that Scotland will be a member of the EU. I don't doubt that Scotland will be an accession country, the issue is on what terms. The rebate would certainly be lost and that would have an impact on public spending that funds free education.
Not surprisingly this was one of the hot topics at today's seminar. Mike Russell was not convincing on this point, but he fairly pointed out that Scotland is only in this difficulty because of the marketisation of education in England. On the other hand speakers did point out that marketisation is not absent from Scottish universities in terms of overseas students and loans.
UNISON is a strong supporter of free tuition. However, we have to recognise that it has not improved access to higher education for those from disadvantaged areas. When student support is taken into account, students from disadvantaged backgrounds face similar levels of debt to students in England when they graduate. Universities can do more here, but it is also a reflection of our unequal society.
The other income concern relates to research funding. At present Scotland does proportionately well from the UK research spending allocation. Scotland has 8% of UK GDP, but get 13% of research funding pot. There is also a question mark over UK charities research funding that is equally important to Scottish universities. We should also remember that pressure on research funding globally is not limited to constitutional change. Alastair Carmichael also made some strong points on the benefits of the integrated UK research framework. It is national government's that fund research, international funding collaborations are not funded on the scale of the UK system.
A plus for Scottish universities from independence may be an immigration policy that reflects Scotland's needs, rather than the south-east of England. That may enable Scotland to attract even more overseas students on top of the 40,000 who already come here. Alastair Carmichael attempted to rain on that claim at today's seminar, but in my view not very convincingly. Scottish universities have already suffered from UK policy changes. For example, there has been a halving of students from India.
There are over 21,000 non-academic staff in Scottish universities and large numbers of atypical workers. At present the core pay and conditions are negotiated at UK level, so independence may require a new bargaining structure in Scotland. Nothing new in that for us, but we would be opposed to local bargaining as a replacement. Any view of pay is of course coloured by the current dispute. The 1% offer contrasts unfavourably with the big pay increases senior staff in universities are awarding themselves. If Scottish universities want to be taken seriously about inequality, they should start by addressing pay inequality in their own institutions.
Other workforce issues of concern to our members include the use of zero hours contracts and casualisation; the 14% gender pay gap; and low pay including the Scottish Living Wage. The funding issues above clearly have an impact on how these issues will be addressed if Scotland votes for independence, although there are currently significant reserves and the workforce costs are falling as a percentage of income. Funding hasn't been a barrier to top staff pay!
University governance has rightly been a focus of recent reports and legislation in Scotland. University leaders try to posit a conflict between good governance and accountability with institutional autonomy. Scottish universities should not be captured by a managerial elite and stronger governance is needed to stop the drift in that direction.
That leaves the issue of pensions. Our members are covered by several pension schemes at present. For those in the LGPS, independence will have little impact as it is already a separate Scottish scheme. For those in the USS there is a concern about having to split the scheme or tackle the deficit immediately due to EU rules. Bigger pension schemes are generally more effective so this would be an issue for a separate scheme even if transitional arrangements could be agreed with the EU over the deficit. Obviously, this is only an issue if Scotland and the UK is in the EU!
This series of seminars funded by ESRC are hugely important to the constitutional debate. They offer one of the few opportunities for objective analysis in the current debate. I would particularly recommend the film the project has made that captures the views of young people. It is very powerful.
HE may be devolved, but that doesn't mean constitutional change won't impact on the sector. However, learning is delivered by people not robots. So don't forget the workers!
I was speaking today at the ESRC seminar on Higher Education and Independence. I outlined UNISON's approach to the constitutional debate as set out in our publications, Fairer Scotland and Fairer Scotland - Devolution.
I focused on a number of issues that concern staff working the the sector. In the main they revolve around funding for universities. Important sources of income for Scottish universities come from students from the rest of the UK who at present pay tuition fees at similar levels to those in the other parts of the UK. The Scottish Government claims they will be able to continue to levy these fees, despite EU rules that forbid direct discrimination against other EU countries. This of course assumes that Scotland will be a member of the EU. I don't doubt that Scotland will be an accession country, the issue is on what terms. The rebate would certainly be lost and that would have an impact on public spending that funds free education.
Not surprisingly this was one of the hot topics at today's seminar. Mike Russell was not convincing on this point, but he fairly pointed out that Scotland is only in this difficulty because of the marketisation of education in England. On the other hand speakers did point out that marketisation is not absent from Scottish universities in terms of overseas students and loans.
UNISON is a strong supporter of free tuition. However, we have to recognise that it has not improved access to higher education for those from disadvantaged areas. When student support is taken into account, students from disadvantaged backgrounds face similar levels of debt to students in England when they graduate. Universities can do more here, but it is also a reflection of our unequal society.
The other income concern relates to research funding. At present Scotland does proportionately well from the UK research spending allocation. Scotland has 8% of UK GDP, but get 13% of research funding pot. There is also a question mark over UK charities research funding that is equally important to Scottish universities. We should also remember that pressure on research funding globally is not limited to constitutional change. Alastair Carmichael also made some strong points on the benefits of the integrated UK research framework. It is national government's that fund research, international funding collaborations are not funded on the scale of the UK system.
A plus for Scottish universities from independence may be an immigration policy that reflects Scotland's needs, rather than the south-east of England. That may enable Scotland to attract even more overseas students on top of the 40,000 who already come here. Alastair Carmichael attempted to rain on that claim at today's seminar, but in my view not very convincingly. Scottish universities have already suffered from UK policy changes. For example, there has been a halving of students from India.
There are over 21,000 non-academic staff in Scottish universities and large numbers of atypical workers. At present the core pay and conditions are negotiated at UK level, so independence may require a new bargaining structure in Scotland. Nothing new in that for us, but we would be opposed to local bargaining as a replacement. Any view of pay is of course coloured by the current dispute. The 1% offer contrasts unfavourably with the big pay increases senior staff in universities are awarding themselves. If Scottish universities want to be taken seriously about inequality, they should start by addressing pay inequality in their own institutions.
Other workforce issues of concern to our members include the use of zero hours contracts and casualisation; the 14% gender pay gap; and low pay including the Scottish Living Wage. The funding issues above clearly have an impact on how these issues will be addressed if Scotland votes for independence, although there are currently significant reserves and the workforce costs are falling as a percentage of income. Funding hasn't been a barrier to top staff pay!
University governance has rightly been a focus of recent reports and legislation in Scotland. University leaders try to posit a conflict between good governance and accountability with institutional autonomy. Scottish universities should not be captured by a managerial elite and stronger governance is needed to stop the drift in that direction.
That leaves the issue of pensions. Our members are covered by several pension schemes at present. For those in the LGPS, independence will have little impact as it is already a separate Scottish scheme. For those in the USS there is a concern about having to split the scheme or tackle the deficit immediately due to EU rules. Bigger pension schemes are generally more effective so this would be an issue for a separate scheme even if transitional arrangements could be agreed with the EU over the deficit. Obviously, this is only an issue if Scotland and the UK is in the EU!
This series of seminars funded by ESRC are hugely important to the constitutional debate. They offer one of the few opportunities for objective analysis in the current debate. I would particularly recommend the film the project has made that captures the views of young people. It is very powerful.
HE may be devolved, but that doesn't mean constitutional change won't impact on the sector. However, learning is delivered by people not robots. So don't forget the workers!
Tuesday, 28 January 2014
Energy savings and exposing the switching sites
This is Big Energy Saving Week – an intensive information campaign that will urge people across the country to take advantage of cost-cutting schemes that could save them hundreds of pounds a year.
The advice is free, and can be obtained from any CAB or from www.bigenergysavingweek.org.uk or the campaign phoneline 0808 808 2282. In addition, local CABs are holding information events all week in communities across Scotland. Full details of all local events are available on Citizen Advice Scotland's Big Energy Saving Week page.
Launching the campaign, Citizens Advice Scotland’s Chief Executive Margaret Lynch said:
“Fuel poverty is one of the main issues that people bring to the CAB service. The bills keep rising, but peoples’ income levels struggle to keep up. As a result many households get into debt, and others have to make the choice between eating and heating. The good news is that help is available. There are many good schemes around. Some offer financial help, others help you insulate your home so you don’t have to use as much energy."
Scottish CABs also report that complaints about methods and techniques of gas and electricity sales rocketed sevenfold last year. The findings reflect problems with mis-selling and doorstep selling in the industry, which led to substantial fines for several energy suppliers in 2013.
Another way of cutting energy bills, all be it taking the long view is community energy. Ed Davey, the Climate Change Secretary, has launched a £10m Urban Community Energy Fund to kick-start projects in England that could see one million homes supplied with electricity from “home-made” generation by 2020. Neighboring households are being encouraged to group together to apply for the funding, which could pay for solar panels, wind turbines or hydro-electric generators that could save families hundreds of pounds a year in fuel bills. Self evidently, £10m is not going to go far, so this looks like a bit of a gimmick.
Meanwhile, Co-op energy has had a long overdue pop at the energy switching websites. Ramsay Dunning, group general manager, claimed that sites “funnel” people towards companies that have agreed to pay commission if a customer is sent their way. He said, “Switching sites increase prices to customers. They are taking a lot of money out of the system now. They also have a tendency to mislead customers. Customers go to them thinking they are getting impartial advice and they are getting the whole market, every product in the market. They are not, they are getting those with commercial deals - unless they have discovered how to wind their way through the switching sites.”
This has sparked outrage from switching sites that like to portray themselves as customer champions. One of them interviewed on the BBC could not have been more evasive when asked difficult questions. Co-op energy argue that there should be an independent switching site run on a not for profit basis. An excellent proposal and credit for going where other energy companies feared to tread.
Crossposted at Utilities Scotland
The advice is free, and can be obtained from any CAB or from www.bigenergysavingweek.org.uk or the campaign phoneline 0808 808 2282. In addition, local CABs are holding information events all week in communities across Scotland. Full details of all local events are available on Citizen Advice Scotland's Big Energy Saving Week page.
Launching the campaign, Citizens Advice Scotland’s Chief Executive Margaret Lynch said:
“Fuel poverty is one of the main issues that people bring to the CAB service. The bills keep rising, but peoples’ income levels struggle to keep up. As a result many households get into debt, and others have to make the choice between eating and heating. The good news is that help is available. There are many good schemes around. Some offer financial help, others help you insulate your home so you don’t have to use as much energy."
Scottish CABs also report that complaints about methods and techniques of gas and electricity sales rocketed sevenfold last year. The findings reflect problems with mis-selling and doorstep selling in the industry, which led to substantial fines for several energy suppliers in 2013.
Another way of cutting energy bills, all be it taking the long view is community energy. Ed Davey, the Climate Change Secretary, has launched a £10m Urban Community Energy Fund to kick-start projects in England that could see one million homes supplied with electricity from “home-made” generation by 2020. Neighboring households are being encouraged to group together to apply for the funding, which could pay for solar panels, wind turbines or hydro-electric generators that could save families hundreds of pounds a year in fuel bills. Self evidently, £10m is not going to go far, so this looks like a bit of a gimmick.
Meanwhile, Co-op energy has had a long overdue pop at the energy switching websites. Ramsay Dunning, group general manager, claimed that sites “funnel” people towards companies that have agreed to pay commission if a customer is sent their way. He said, “Switching sites increase prices to customers. They are taking a lot of money out of the system now. They also have a tendency to mislead customers. Customers go to them thinking they are getting impartial advice and they are getting the whole market, every product in the market. They are not, they are getting those with commercial deals - unless they have discovered how to wind their way through the switching sites.”
This has sparked outrage from switching sites that like to portray themselves as customer champions. One of them interviewed on the BBC could not have been more evasive when asked difficult questions. Co-op energy argue that there should be an independent switching site run on a not for profit basis. An excellent proposal and credit for going where other energy companies feared to tread.
Crossposted at Utilities Scotland
Friday, 24 January 2014
Why Scottish Labour needs a new vision for 2016
Scottish Labour’s electoral recovery continues with yesterday’s Scottish Parliament by-election win in Cowdenbeath. However, in 2016 the party will need to develop a new narrative and polices to attract the voters it needs to form a government.
In 2011, Scottish Labour suffered a major electoral defeat and the hands of the SNP who mobilised a coalition of voters far in excess of those who back their raison d’être, independence. The response, through the Review of Labour in Scotland, made important reforms to the party’s organisation. These included the election of a Leader of the Scottish Labour Party, CLPs based on Scottish Parliament constituencies and a belated devolution of the relevant sections of the rule book. The party’s organisational focus is important, but to win in 2016 the party also has to win the battle for ideas to mobilise a similar coalition of voters as the SNP achieved in 2011.
There will always be those in Scottish Labour who will argue for a ‘steady as she goes’ policy. We are winning so let’s just carry on doing more of the same. Yes, Scottish Labour is winning. The 2012 council elections returned many more Labour councillors and they lead half of Scotland’s councils, mostly in coalitions. Recent by-election victories in Dunfermline and Cowdenbeath confirm that trend. However, on closer analysis it has to be recognised that this has largely been achieved by capturing the disaffected LibDem vote - the SNP share of the vote has not fallen significantly. This means the SNP is retaining as voters that share of their vote, probably as much as one-third, who do not support independence.
To win in 2016, firstly Scottish Labour has to retain the transferring LibDems. At present they are probably voting Labour because they oppose independence, but will that still hold good when politics returns to normal after the referendum? Some are voting tactically in seats where it is a two horse race, others are looking for a new electoral home after the betrayal of Nick Clegg in entering a coalition with the Tories. That decision created even more problems for the LibDems in Scotland than in England.
Scottish Labour should also not abandon SNP voters who share many of the party’s values - not just those who don’t support independence. After the referendum there may well be an element of politics as normal for them as well – whatever the outcome. Some Scottish Labour and SNP activists can be painfully tribal, but it would be wrong to assume that this transfers down to all their voters!
Labour’s Scottish Policy Forum holds its first meeting this weekend, starting the process that will lead to the 2016 manifesto. One of the benefits of the referendum is the policy focus on Scotland and that should help educate Scottish Labour’s policy process. Groups like the Red Paper Collective, Scottish Fabians, the socialist societies and others have already contributed ideas that we should look at carefully.
The affiliated trade unions have given some initial thought to the issues that Scottish Labour should stand on in 2016 and this week STULP has published Bringing Scotland Together – A Workplace and Community Agenda. This paper sets out 13 ideas that we believe could build the sort of voter coalition that Scottish Labour needs after the referendum dust subsides. This manifesto suggests a range of common sense policies to close inequality gaps, provide better opportunities to promote inclusion and prevent isolation amongst both young and old, bring public service staff closer to their communities, and to improve the living conditions of middle and low income Scots.
So let’s celebrate electoral success, but also recognise that we need to work on new policies and a narrative that captures the imagination of a majority of Scots by 2016.
In 2011, Scottish Labour suffered a major electoral defeat and the hands of the SNP who mobilised a coalition of voters far in excess of those who back their raison d’être, independence. The response, through the Review of Labour in Scotland, made important reforms to the party’s organisation. These included the election of a Leader of the Scottish Labour Party, CLPs based on Scottish Parliament constituencies and a belated devolution of the relevant sections of the rule book. The party’s organisational focus is important, but to win in 2016 the party also has to win the battle for ideas to mobilise a similar coalition of voters as the SNP achieved in 2011.
There will always be those in Scottish Labour who will argue for a ‘steady as she goes’ policy. We are winning so let’s just carry on doing more of the same. Yes, Scottish Labour is winning. The 2012 council elections returned many more Labour councillors and they lead half of Scotland’s councils, mostly in coalitions. Recent by-election victories in Dunfermline and Cowdenbeath confirm that trend. However, on closer analysis it has to be recognised that this has largely been achieved by capturing the disaffected LibDem vote - the SNP share of the vote has not fallen significantly. This means the SNP is retaining as voters that share of their vote, probably as much as one-third, who do not support independence.
To win in 2016, firstly Scottish Labour has to retain the transferring LibDems. At present they are probably voting Labour because they oppose independence, but will that still hold good when politics returns to normal after the referendum? Some are voting tactically in seats where it is a two horse race, others are looking for a new electoral home after the betrayal of Nick Clegg in entering a coalition with the Tories. That decision created even more problems for the LibDems in Scotland than in England.
Scottish Labour should also not abandon SNP voters who share many of the party’s values - not just those who don’t support independence. After the referendum there may well be an element of politics as normal for them as well – whatever the outcome. Some Scottish Labour and SNP activists can be painfully tribal, but it would be wrong to assume that this transfers down to all their voters!
Labour’s Scottish Policy Forum holds its first meeting this weekend, starting the process that will lead to the 2016 manifesto. One of the benefits of the referendum is the policy focus on Scotland and that should help educate Scottish Labour’s policy process. Groups like the Red Paper Collective, Scottish Fabians, the socialist societies and others have already contributed ideas that we should look at carefully.
The affiliated trade unions have given some initial thought to the issues that Scottish Labour should stand on in 2016 and this week STULP has published Bringing Scotland Together – A Workplace and Community Agenda. This paper sets out 13 ideas that we believe could build the sort of voter coalition that Scottish Labour needs after the referendum dust subsides. This manifesto suggests a range of common sense policies to close inequality gaps, provide better opportunities to promote inclusion and prevent isolation amongst both young and old, bring public service staff closer to their communities, and to improve the living conditions of middle and low income Scots.
So let’s celebrate electoral success, but also recognise that we need to work on new policies and a narrative that captures the imagination of a majority of Scots by 2016.
Lies, damn lies and government statistics
It’s not been a good week for government statistics. Police crime data, NHS waiting lists and now, daftest of all, a claim that pay is going up faster than inflation.
This is of course a UK Government spin release, not an official ONS data stream. What they have done is to argue take-home wages increased by at least 2.5% once tax cuts were taken into account. That is slightly more than the Consumer Prices Index (CPI) inflation rate of 2.4% in the year to April 2013.
This is simply a case of picking the statistics that make your case and ignoring those that don’t. Including tax cuts and not benefit cuts and taking CPI rather than RPI are the most obvious examples. Even RPI doesn’t fully reflect the increased cost of essential purchases that low paid workers have to focus on, as we have highlighted.
Labour's shadow treasury minister Cathy Jamieson got it right when she said: "These highly selective figures from the Tories do not even include the impact of things like cuts to tax credits and child benefit which have hit working families hard. Under the current government, real annual wages had fallen by £1,600 since 2010 and figures from the Institute for Fiscal Studies showed that families are on average £891 worse off as a result of tax and benefit changes since 2010".
The respected IFS also pointed out on R4 this morning that the average weekly earnings index showed wages rose, "quite a lot less quickly than inflation in the most recent months". Their own analysis suggested that, "if the recovery takes off and continues as expected, people will start to see their incomes rising by 2015... but they will be well below where they were six or seven years ago".
This is the same analysis we have seen from the Office of Budget Responsibility medium term forecasts for pay growth. Again we covered this data earlier this month.
As I set out in an article in the Scotsman, British workers have experienced the longest real wage pay squeeze since 1870. Inflation has risen faster than wages for almost 43 months. The share of the economy going on wages continues to decline. In the 1960s and 1970s, up to 61 per cent of the economy went on wages. Since the 1980s, it has never gone above 56 per cent. These small percentages make a big difference to our living standards. It is no coincidence that, for the first time, we have more in-work poverty than out-of-work poverty.
The problem for government spin doctors is that workers can read their own pay packets and supermarket bills. So they know this is just mince!
This is of course a UK Government spin release, not an official ONS data stream. What they have done is to argue take-home wages increased by at least 2.5% once tax cuts were taken into account. That is slightly more than the Consumer Prices Index (CPI) inflation rate of 2.4% in the year to April 2013.
This is simply a case of picking the statistics that make your case and ignoring those that don’t. Including tax cuts and not benefit cuts and taking CPI rather than RPI are the most obvious examples. Even RPI doesn’t fully reflect the increased cost of essential purchases that low paid workers have to focus on, as we have highlighted.
Labour's shadow treasury minister Cathy Jamieson got it right when she said: "These highly selective figures from the Tories do not even include the impact of things like cuts to tax credits and child benefit which have hit working families hard. Under the current government, real annual wages had fallen by £1,600 since 2010 and figures from the Institute for Fiscal Studies showed that families are on average £891 worse off as a result of tax and benefit changes since 2010".
The respected IFS also pointed out on R4 this morning that the average weekly earnings index showed wages rose, "quite a lot less quickly than inflation in the most recent months". Their own analysis suggested that, "if the recovery takes off and continues as expected, people will start to see their incomes rising by 2015... but they will be well below where they were six or seven years ago".
This is the same analysis we have seen from the Office of Budget Responsibility medium term forecasts for pay growth. Again we covered this data earlier this month.
As I set out in an article in the Scotsman, British workers have experienced the longest real wage pay squeeze since 1870. Inflation has risen faster than wages for almost 43 months. The share of the economy going on wages continues to decline. In the 1960s and 1970s, up to 61 per cent of the economy went on wages. Since the 1980s, it has never gone above 56 per cent. These small percentages make a big difference to our living standards. It is no coincidence that, for the first time, we have more in-work poverty than out-of-work poverty.
The problem for government spin doctors is that workers can read their own pay packets and supermarket bills. So they know this is just mince!
Wednesday, 22 January 2014
Jobs data welcome but underlying trends could impact on economic recovery
Today's improving unemployment figures are welcome, but there remains worrying underlying trends that could impact on the economic recovery.
Unemployment in Scotland has fallen to its lowest level for almost five years with the number of jobless falling by 25,000 between September and November to 176,000. The unemployment rate fell by 0.9% over the quarter to 6.4%. Employment in Scotland increased by 10,000 over the three months to November, to stand at 2,559,000. The latest figures showed an average rate of 7.1% for the whole of the UK. Just above the Bank of England's target for considering interest rate increases.
Despite this positive data we should remember that there is still along way to go. The employment rate remains below its pre-recession peak and unemployment is well above pre-crisis levels. Austerity economics has been the main factor in this dreadfully slow recovery from the recession and the personal price continues to be paid by many working people. Another indication that growth is likely to remain slow is that average weekly earnings growth, at just 0.9%, remains well below the level of inflation.
The STUC has also raised a note of caution. “Today’s release also provides reasons to be cautious about the strength of the labour market recovery. The fall in unemployment this quarter is more attributable to people leaving the labour force than to people finding jobs. The increase in full-time jobs over the last year is also disappointing with only 8,000 more created. Progress in tackling youth unemployment is painfully slow with the 16-24 rate falling by only 0.9% over the year. The Scottish employment rate remains 4.1% below its peak of July 2008 and the unemployment rate 2.4% higher. Today’s figures, while welcome, provide no cause for complacency”.
Another worry is productivity, as highlighted in the analysis by Duncan Weldon at Left Foot Forward. Output has fallen by 4.4% since early 2008 and is around 15% below the previous trend. Despite the severity of the recession unemployment rose much less than many feared, it is assumed because employers cut wages and hours rather than jobs. This means we could expect weak job growth as growth returns.
However, this hasn't happened leaving what economists call the productivity puzzle – output is still 2% below its peak but the number of people in work is higher. This means we have all generally become less productive at our jobs over the last five years or there was been some sort of change in the composition of the labour market. Needless to say, the latter is more likely to be correct. Whilst more people in are in work, they are more likely to be lower productivity jobs than in they were in 2008. Like low wage growth this does not bode well for the speed of economic recovery.
So while today's figures are heading in the right direction, we should be wary about how changes to the composition of the workforce will impact on the recovery. That has to be based on quality jobs, paying higher wages.
Unemployment in Scotland has fallen to its lowest level for almost five years with the number of jobless falling by 25,000 between September and November to 176,000. The unemployment rate fell by 0.9% over the quarter to 6.4%. Employment in Scotland increased by 10,000 over the three months to November, to stand at 2,559,000. The latest figures showed an average rate of 7.1% for the whole of the UK. Just above the Bank of England's target for considering interest rate increases.
Despite this positive data we should remember that there is still along way to go. The employment rate remains below its pre-recession peak and unemployment is well above pre-crisis levels. Austerity economics has been the main factor in this dreadfully slow recovery from the recession and the personal price continues to be paid by many working people. Another indication that growth is likely to remain slow is that average weekly earnings growth, at just 0.9%, remains well below the level of inflation.
The STUC has also raised a note of caution. “Today’s release also provides reasons to be cautious about the strength of the labour market recovery. The fall in unemployment this quarter is more attributable to people leaving the labour force than to people finding jobs. The increase in full-time jobs over the last year is also disappointing with only 8,000 more created. Progress in tackling youth unemployment is painfully slow with the 16-24 rate falling by only 0.9% over the year. The Scottish employment rate remains 4.1% below its peak of July 2008 and the unemployment rate 2.4% higher. Today’s figures, while welcome, provide no cause for complacency”.
Another worry is productivity, as highlighted in the analysis by Duncan Weldon at Left Foot Forward. Output has fallen by 4.4% since early 2008 and is around 15% below the previous trend. Despite the severity of the recession unemployment rose much less than many feared, it is assumed because employers cut wages and hours rather than jobs. This means we could expect weak job growth as growth returns.
However, this hasn't happened leaving what economists call the productivity puzzle – output is still 2% below its peak but the number of people in work is higher. This means we have all generally become less productive at our jobs over the last five years or there was been some sort of change in the composition of the labour market. Needless to say, the latter is more likely to be correct. Whilst more people in are in work, they are more likely to be lower productivity jobs than in they were in 2008. Like low wage growth this does not bode well for the speed of economic recovery.
So while today's figures are heading in the right direction, we should be wary about how changes to the composition of the workforce will impact on the recovery. That has to be based on quality jobs, paying higher wages.
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