The case for Universal Basic Services

If the current crisis teaches us anything, it has to be the importance of a genuine safety net for everyone in our society and the weakness of the global economic system. COVID-19 has brutally exposed the failings of capitalism and the failure to maintain effective public services.

Now that a crisis threatens to wreck the livelihoods of those normally comfortable under capitalism, there are pleas for increased state support that were previously confined to the left. Robert Peston, writing in The Spectator of all journals, quotes a Tory minister saying; “We’ll find ourselves implementing most of Jeremy Corbyn’s programme.”

The crisis should be an opportunity to rethink our approach. Instead of a series of ad-hoc measures and bailouts without conditions, we should recognise the value of systems that provide the essentials for everyone.

For example, last December many commentators regarded Labour’s plan for a British Broadband Service as unrealistic. Today, universal, free, full-fibre broadband is an essential service for almost everyone who is trying to minimise face to face contact. Some of the opposition came from the same people who would have opposed free education or universal access to clean water in the 19^th century.  

The crisis has highlighted the case for Universal Basic Income. While there are sceptics (including me) over this as a long-term plan, there is a strong temporary case, which could add to our understanding of how it might work in the longer term. It should at least get the DWP and HMRC to cooperate with the planned Scottish pilots.

Ed Miliband makes a good case for turning statutory sick pay into employment retention pay, available to all those workers whose businesses have had to cease or reduce activity due to the crisis. If Denmark can pay up to a 75% cap – so can we.

Another idea is Universal Basic Services (UBS). Anna Coote and Andrew Percy make a case for expanding the principle of collective universal service provision in their new book. The goal as they put it is; “Acting together to help each other, and ourselves, so that everyone has access to three things that are fundamental to a successful, peaceful, functioning democracy: security, opportunity and participation.”

 Central to their case is that we must improve the quality of existing services and reach into new areas such as care, housing, transport and digital access. This is the collective ideal, which the current crisis is bringing out in many communities. The politics of individual choice and market competition leads to the actions of some supermarket customers and the spivs in private healthcare selling testing kits for just short of £300.

This doesn’t mean just using existing service delivery models - services need to be genuinely participative. This can be linked to measures that provide meaningful engagement with wider forms of democracy.

The authors take us through the benefits of UBS, concisely outlining and referencing the evidence. This is not an academic tome, it is very readable while pointing to further reading. They set out how UBS could be rolled out and address the challenges and likely responses. They cost the additional expenditure required for the services proposed at around 4.3% of GDP for a typical OECD country, less than 15% of total government spending. And that doesn’t take account of the savings brought about by economies of scale and a healthier population.

As the post-war rebuilding, 2008 financial crisis, and now COVID-19 shows, when governments decide to increase spending, it is more a matter of political choice than applying rules of contemporary economics. 

While it is right that we focus on the measures necessary to tackle the current crisis, we should also learn the lessons. There will be those on the far-right who will exploit the crisis with disinformation, conspiracies and scapegoating. We need to develop new, sustainable solutions based on social justice. A starting point is ensuring everybody has access to collective services that are sufficient to meet their needs. 

Turning climate change rhetoric into action

Despite the best efforts of industry lobbyists, the debate over whether climate change is happening is over.  In Scotland, we have ambitious targets, but targets alone don’t remove emissions from the atmosphere. For that, we need equally ambitious action plans.

The Scottish Government has recently published a new Environment Strategy. It offers some long- overdue reassurance that our environment and biodiversity will be protected and enhanced in the face of the climate emergency. It also recognises that the climate and nature crises are intrinsically linked.

Like many government strategies, it is strong on vision, has lovely infographics, and describes processes.  There are some actual plans, such as SEPA’s sector plans, expanding forestry, and re-using vacant land. Other plans don’t really have the level of activity that most organisations would recognise as an action plan. In fairness, there is a commitment to outcome pathways, but we are not there yet.

As the UK Committee on Climate Change (CCC) said, Scotland and the UK now need to "walk the talk". Not least because we are hosting COP26 in November - international experts will not be much impressed by a nice infographic. 

A key area for action is industrial strategy. We need a Green Industrial Revolution that includes a massive investment in low-carbon infrastructure. People in cold, damp homes waste over £400 on gas every year, and fuel poverty is a challenge for many households. Retrofitting homes would employ thousands of people, and the resulting health benefits of warmer homes could save the NHS millions.

A real industrial strategy, including the creative use of public procurement, will stop the reduction of emissions by simply offshoring jobs. The recent loss of contracts to manufacture turbines for a wind farm off the Fife coast demonstrates the dismal failure of the Government to link climate action and industrial strategy.

This is something highlighted in the interim report of the Just Transition Commission. The report also stresses the importance of turning sectoral emission targets into detailed Just Transition plans. As they say; “To date this sort of planning has not been undertaken in as rigorous a manner as might be the case.”

Transport is responsible for more than a third of Scotland’s greenhouse gases, while estimates suggest air pollution causes upwards of 2,500 deaths every year. Electric cars will be part of the solution, but what is needed a real shift to public transport and active travel. This means a step change in the provision of low-emission buses and the early electrification of our railways. Aviation growth also has to be curbed and needs measures like a frequent flyer levy, if the polluter pays principle is to mean anything.

A lot of progress has been made in decarbonising electricity generation in Scotland, but that still leaves heat decarbonisation, which will require the roll-out of technologies like solar hot water and hydrogen and investment in district heat networks.

A recent WWF report clearly sets out the actions needed to reduce emissions in agriculture. I am not sure this week’s NFU report really steps up to the challenge with its steady-state message. We need a much more radical approach to land use and food production, as well as action on fertilisers and pesticides.

As this week's row over fossil fuel investments at Strathclyde Pension Fund shows, some parts of the public sector have some way to go in taking climate change action seriously.

Many of these issues are covered in a new Scottish Labour policy consultation paper.  The paper argues the action required to deliver on our climate change targets cannot simply be done by governments imposing top-down solutions. It requires grassroots action and social innovation, changing social norms and behaviour as much as technology. A (low carbon) net-zero economy can mean many more jobs, but we must ensure that there is a Just Transition, which doesn’t leave any community behind.

Scotland needs to demonstrate that we are not just a world leader in climate change ambition, but that we can also lead in climate change action.

How pension funds can invest responsibly

In the last few months, I have completed three projects on Responsible Investment (also known as Environmental, Social and Governance (ESG)) in the pensions sector. One a broad policy paper and two projects reviewing the Responsible Investment policies of pension funds. In this blog post, I cover some of the issues I encountered.

All pension funds should understand that we must keep global warming to less than 1.5oC (compared to pre-industrial levels), in line with the 2015 Paris Agreement on climate change. UK and Scottish legislation set ambitious targets and measures to help achieve this. Most funds also understand that the ethical policies of the firms they invest in can also impact on investment performance. A study undertaken by Morgan Stanley shows that sustainable funds provide both financial performance and lowered risk, as well as ways to invest responsibly.

The mechanism pension funds use to consider ethical investment is usually through their Environmental, Social and Governance (ESG) policies. Many have signed up to the UN Principles for Responsible Investment, which has more than 2,000 institutions with over US$82 trillion of assets as signatories. At the heart of the Principles and other frameworks is the commitment to integrate ESG factors into decision-making at all levels.

Many pension funds use a systemic approach such as the investment statement on the Just Transition, Climate WGBI and certification schemes. More than 20 UK-based institutions with nearly US$2 trillion in assets have signed the international investor statement on the Just Transition. The problem with these schemes is they are primarily about sharing best practice. There is little in the way of targets or other accountability measures.

One of the funds I have been working with had signed up to one of the certification schemes that companies can join. There is a legitimate criticism that some of these schemes are simply cash generators and require minimal hard action from the companies concerned - a nice plaque on the wall. I am also pretty sceptical about the growth in ‘Ethical’ funds, as only a tiny number of these funds screen out fossil fuel companies. 

Pension fund trustees are reluctant to join divestment campaigns, sometimes because they are frightened off by advice (usually wrong) that this would be a breach of fiduciary duty. They are therefore more likely to want to focus on shareholder engagement. 

Only the largest funds have the capacity to do this effectively themselves and rely heavily on agencies or their external investment managers. The quality of these varies considerably, with most adopting very conservative strategies, which are unlikely to be very effective. Most of the funds I have worked with believe their engagement strategies have been effective, but in practice, they struggle to support that belief with any meaningful data.

Share Action is one of the better agencies

If pension funds are serious about responsible investment, they need something more than a glossy document and some fine statements of principle. Here is my outline seven-point plan:

1.     The statement of investment principles needs to explicitly set out the pension fund position on key ESG issues including climate change, workforce issues and tax avoidance. Vague assurances that these issues will be considered is not enough.

2.     Systemically assess the risks associated with their investments concerning ESG policies. This must include pooled investments.

3.     Risk assessments should be published regularly along with regular communications to scheme members.

4.     The annual report should include progress made by the fund in reaching their ESG objectives.

5.     Publish an engagement policy which includes how voting of shares is handled, together with an annual assessment of how they have advanced the fund’s ESG principles.

6.     Identify categories of investment that represent a significant long-term risk to the funds and consider the case for divestment in a way that ensures no damage to the fund and members pensions.

7.     Set targets for positive, responsible investment in specific sectors, including low-carbon infrastructure, housing, and low emission transport.

Pension funds exist to provide pensions for members. However, surveys show that members want to see their pensions invested responsibly, especially when this can be done without damaging the fund. To achieve this, pension funds need to move from fine words towards effective systems for delivering responsible investment. 

Still learning the lessons of PPP

Nearly thirty years after John Major’s government introduced the Private Finance Initiative (PFI), it is astonishing that we are still writing about and using this failed model of delivering public services.

Today, we are reminded by Audit Scotland, yet again, of the costs of using this model. It has been modified and rebranded many times over the years. In Scotland, the SNP government calls it Non-Profit Distributing (NPD) and the Hub Initiative, but these all come under the broad heading of Public Private Partnerships (PPP). In May last year, they announced another rebranding with the Mutual Investment Model (MIM). Another PPP scheme with many of the same problems, as is well covered in a recent Common Weal report.

I and others have written thousands of words on why this model doesn’t work. This archive page on the UNISON Scotland website covers many of my earlier publications. It reminds me that I even used to write a regular briefing called ‘PFI Illusion’. I have to say I didn't expect to be making the same points all these years later. Most recently, in Stockholm a couple of weeks ago. 

I first became interested in PPP as a union organiser covering Lanarkshire Health Board in the 1990s. Two of the three acute hospitals were to be financed by PFI, and I recall a meeting with Lanarkshire MPs explaining why this was a bad idea. Particularly to John Smith MP, who as the MP for Monklands was likely to be the loser because his hospital didn’t have ring-fenced PFI funding.

The fact that PPP schemes are more expensive is not disputed as it once was. As today’s report reminds us even the SFT accepts this:

“The SFT calculated in April 2019 that the lifetime costs (construction cost, ongoing maintenance, plus repayment of borrowing) of NPD and hub private finance projects signed under the pipeline approach were on average about 2.9 times the construction cost of the assets. This compares with lifetime costs of 1.5 times the construction cost when using capital grants and between 1.9 and 2.6 times the construction cost when using public sector borrowing.”

The costs are higher than this as the Audit Scotland report also confirms: "The Scottish public sector is contracted to pay a total of £40.1 billion in annual payments between 1998/99 and 2047/48 under current PFI, NPD and hub privately financed contracts. This is over four times the capital value of the assets developed”

There are also plenty of other risks and problems associated with PPP schemes as the Edinburgh Sick Kids Hospital, and the collapse of Carillion has highlighted. As today's report also concedes projects that involve technology, legislation changes or complex service delivery are unlikely to be suitable. In practice, very few public services remain static for the 25-40 years of a typical PPP project.

The report also points to the reason governments of all colours have persisted. Devolved administrations have always had limited borrowing powers and therefore keeping borrowing off the public balance sheet is attractive. Few Scottish Government ministers in the early years of devolution thought PFI was a good idea, but it was in the parlance of the time, 'the only game in town'.  The Scottish Government now has much higher borrowing powers, which is why it uses PP less, but still insufficient for its capital programme. Hence the new MIM scheme, which they hope will keep these new schemes off-balance sheet.

Even the Tories have given up on PFI, not least because they can borrow very cheaply and they recognised that the projects were not delivering value for money. The solution for Scotland to go the same way is to give the Scottish Government prudential borrowing powers, ending the current limits. That would end the chase for off-balance-sheet financing and invest the savings in our crumbling infrastructure.

Passing on the Scottish healthcare experience

I am in Stockholm this week talking about health and care systems. Sweden has a healthcare system which is generally free at the point of use. However, there is greater local autonomy at the regional level than in the NHS and is increasingly adopting market-based systems with private sector providers, particularly in Stockholm.

Privatisation is being challenged in Stockholm, and I was invited to speak at a seminar to explain the Scottish experience. We moved from a command and control NHS model, to the internal market and now to a collaborative system. Having tried the market for around 15 years, they are interested in our experience and why we changed in the years after devolution. And why we have retained the model despite privatisation in England.

International comparisons in healthcare are notoriously difficult, and my approach is to explain the Scottish system, rather than suggest it should or could be copied directly. While Sweden starts with universal health care, the health challenges are very different to Scotland with our massive health inequalities. If only we had their more equal society, even if they are rightly concerned that the post-war gains are being eroded.

On systems, we can offer some relevant experience. The local newspaper was interviewing me outside a large new hospital built with private finance. Unsurprisingly, they have already discovered the cost of these projects and the creeping privatisation that comes with them. Scotland didn't have the cheap borrowing powers when most of our PPP hospitals were built. So why a country like Sweden, which can borrow for next to nothing would want to pay private sector rates is difficult to understand. Even the Tories have largely abandoned this model.

My interview in the main daily newspaper

I outlined our experience of market-based systems in healthcare and the benefits of collaboration over competition. The key points include:

·       The private sector brings extra costs through private finance, profits and dividends.

·       To work, they need to create surplus capacity, which in a universal healthcare system has to be financed by the taxpayer.

·       Markets also have administrative and other costs. Prioritising marketing managers over nurses seems a poor choice at a time of scarce resources.

·       Collaboration enables the sharing of best practice. If one hospital innovates that is shared in a collaborative system, rather than patented in a private sector one.

·       National and local planning is difficult when hospitals and other care systems are competing. Not to mention the considerable procurement savings in an integrated system, most notably on drugs.

From a workplace perspective, partnership working has brought stable industrial relations and better staff engagement in service design. The private sector approach brought expensive management consultants, with their 'Blue Peter' method, 'here is one I prepared earlier'!

That is not to say that despite high user satisfaction there are no problems with NHS Scotland. Performance under budgetary, workforce and demand pressures are rightly highlighted in Parliament and elsewhere. We are not achieving a meaningful shift in resources from acute to primary care, and community engagement is limited, not least because of limited local democratic accountability. However, none of these issues would be addressed in a market-based system.

I also spent some time explaining the problems we face integrating health and social care. Ironically, many of these exist because we retain the use of market mechanisms in social care. Most Scandinavian countries have fewer problems with this because these services are integrated with primary care in local government. 

So, while the Scottish healthcare system is far from perfect, it does at least avoid the disaster that marketisation brings. It is up to the Swedes to make their own decisions, but at least they can learn from those who have been there and won’t be returning anytime soon.

Financial and workforce challenges for social care in Scotland

Two new reports again highlight the problems facing social care in Scotland but offer few indications that a credible solution is on the horizon. 

The Accounts Commission annual overview of local government is rarely a cheery read. It again highlights how the Scottish Government has dumped austerity onto councils with 7.6% real-terms cut since 2013/14. This compares with a 0.4% cut to other budget areas. An increasing proportion of this reducing budget is also committed to central government priorities – a long way from the promise to end ring-fencing!

This year’s report pays particular attention to health and care integration. The Chair’s foreword summarises his concerns:

“Of particular note for us this year, Integration Joint Boards (IJBs) continue to

 face very significant challenges and they need to do much more to address

 their financial sustainability. The pace of progress with integration has been too slow and we have yet to see evidence of a significant shift in spending and services from hospitals to community and social care. I continue to be concerned about the significant turnover in senior staff in IJBs. This instability inevitably impacts on leadership capacity and the pace of progress.”

Unsurprisingly, a majority of IJBs struggled to break even. Without additional funding from partners, 19 IJBs would have recorded a total deficit of £58 million. 14 IJBs had not agreed on a budget by the start of the financial year, and half had unidentified savings. The projected funding gap for next year is £208m. This is reflected beyond next year in the medium-term financial strategy which shows increased demand for social care costed at £683m by 2023/4.

Many IJBs have highlighted workforce issues as a high-risk area, and not just at a senior level. The Scottish Government and COSLA have finally published an integrated health and social care workforce plan. This is long overdue, but in fairness at least there is one, along with a recognition that workforce planning is not an exact science.

The headline estimate is that Scotland will need 20,000 WTE more health and care employees in the period up to 2023/24, which they hope will be reduced by up to 10,000 WTE through mitigating actions like efficiency savings (cuts), technology and redesign. 

The significant number is over 14,400 home care staff, a group that is likely to be heavily impacted by Brexit and the UK government's immigration policies. This is a sector that already has high turnover rates. The overall vacancy rate in social care is almost twice the Scottish average.

Analysis and scenario planning is fine, but the real test of workforce planning lies in action. The principal plans appear to be: 

• Growing the numbers of staff in training. This is particularly important for the NHS, where most staff groups require formal qualifications. This includes a focus on community-based and mental health staff, which is essential if there is to be a meaningful shift in care from hospitals to the community.
• For other groups, the focus is on retaining the existing workforce, encouraging returners and widening access to the sector. Creating better career pathways and implementing the Fair Work Framework are essential initiatives.
• Pay is recognised as a critical issue. To say that ‘there have been some challenges in implementation’ of the Real Living Wage is something of an understatement! Sadly, there is little sign of any plan to address this.

Overall, the plan is again stronger on process than action. The NHS element has well-established workforce planning and some detailed plans to address shortages. There is at least a welcome aim to elevate workforce planning into a whole system position.

The weakness is in the social care sector. The fragmented, and at times chaotic, social care system in Scotland is in major need of reform. I fear that without that reform, we will again be looking at evaluation reports which highlight workforce gaps and financial problems for years to come.

Focusing on energy and the climate emergency

I see in The Herald that ScottishPower chief executive Keith Anderson said Labour promises to take back control of Britain’s energy network meant “losing focus” on the issue of tackling the climate emergency. I appreciate that the policy may impact on ScottishPower’s profits, which won't go down well with the company's Spanish owners. Still, Labour is very much focused on the climate emergency and reforming the failed energy market system is essential to that task. 

By common consensus across the environment lobby, Labour's Green Industrial Revolution is a shift change in political action on climate change. The key to this is the £250 billion Green Transformation Fund dedicated to renewable and low carbon energy, transport, biodiversity and environmental restoration. This investment will enable the Scottish Parliament to adopt more radical climate change targets and action plans, including retrofitting almost all of Scotland’s 2.6m homes to the highest energy standards.

You might have thought that Keith Anderson would have welcomed the new wind farm capacity (7000 offshore and 2000 onshore wind turbines), 60% of which will be in Scotland creating around 20,000 new jobs. It might be a little easier persuading the often cash strapped Iberdrola board in Spain to invest if there is government investment as well. Particularly when the government can borrow so much more cheaply than energy companies.

Of course, Labour will link this to a new industrial strategy, which, unlike almost all ScottishPower wind farms, will link investment to jobs in the UK. The shift to renewable energy is welcome, but there has been no Just Transition for workers in the industry and the supply chain. That is a failure of the UK and Scottish governments, and all power companies, including ScottishPower.

ScottishPower’s primary concern is Labour’s plan to bring UK energy systems into democratic public ownership, including those run by ScottishPower. This means the current profits will be reinvested or used to reduce bills, rather than being sent to Iberdrola in Spain. 

Citizens Advice estimated that over eight years network companies would make £7.5 billion in unjustified profits. The Committee on Climate Change also identified higher network costs as a key reason UK business have faced higher electricity bills than European competitors.

Public ownership will secure democratic control over nationally strategic infrastructure and provide collective stewardship for vital natural resources. This will help deliver Labour’s ambitious emissions targets. Private network companies and the toothless regulator Ofgem have failed to upgrade the grid at the speed and scale needed. In contrast, publicly owned networks will accelerate and coordinate investment to connect renewable and low carbon energy as they have done so successfully in other European countries, most notably Denmark. Only two countries in Europe have fully privatised electricity – UK and Portugal (Portugal because of EU austerity imposition). That’s because they understand the importance of democratic control of grid access.

Public ownership will also end the expensive regulatory system which involves armies of economic regulators in Ofgem and the power companies. As someone who represented energy workers for years, I have seen the waste that this system creates, all ultimately paid for by consumers.

Interestingly, Keith Anderson didn’t appear to be as exercised over the nationalisation of ScottishPower’s supply arm. The current supply companies are not profitable and have increasingly sought to reduce costs by offshoring jobs and cutting corners with customer service - as evidenced by consumer surveys. SSE has already sold off its supply business and Npower is effectively closing its business. I have long argued that the Scottish government should offer to take over ScottishPower’s supply arm rather than set up its own company. I suspect that might get the favourable attention of decision-makers in Bilbao.   

The so-called energy market has led to higher costs, consumer confusion over tariffs, and discrimination against low income pre-paid meter customers. Labour will create a green army of workers focused on energy efficiency, not selling energy in a flawed and false market. Just compare the confusion of the smart meter rollout with the way North Sea gas conversion was achieved in the 1970s. 

I’ll end by quoting Brian Wilson, the best energy minister I have ever worked with. He recently said: 

“In meeting the climate emergency, it is the state that must step in. It is government which needs the power to determine a response, rather than be in the supplicant position of asking a whole range of players if they would mind adjusting their priorities, please.”

Labour’s plans may not be well received in some corporate boardrooms, but they are very much focused on tackling the climate emergency for the many, not the few.