Housing Lobby

I took part in yesterday's STUC housing lobby of the Scottish Parliament. There was an excellent turnout of housing staff, tenants organisations and housing associations in an attempt to push social housing in Scotland further up the political agenda.

The bottom line on housing is that Scotland needs more affordable housing, built and maintained to higher standard. This is not only good for housing but also for the economy by creating quality jobs. Around 19,000 additional households require housing every year and some 250,000 people languish on housing waiting lists. 

The housing budget is suffering a massive cut in the Budget Bill and spending plans for the coming year. The Scottish Government's plan is to spread the limited cash ever more thinly. As a number of speakers pointed out, councils and housing associations do not have the reserves to plug the gap on the funding for each new house. Therefore, they either won't be built or HA's will have to borrow at high cost and pass the burden onto the tenants through higher rents.

In fairness the Scottish Government has taken a number of positive actions in housing policy.  A partial end to the right to buy should stop the hemorrhaging of our social housing stock that has resulted in 400,000 houses in Scotland being lost to social housing. The small (3,300 houses) reinstatement of council house building may be a drop in the ocean but it does at least create a welcome ripple. The social housing charter and stronger regulation of the private rented sector is also welcome.

The lobby put a particular focus on the Con-Dem coalition's cuts in Housing Benefit (see my post below). Expert speakers predicted this would impact on all tenants with up to 110,000 people in Scotland being forced to move house, when alternative smaller accommodation is simply not there. 

There was a further concern over the quality of housing. Fuel poverty is supposed to be eliminated by 2016. However, 45% of rural households and 30% of urban ones still live in fuel poverty and rising energy bills are likely to increase those numbers. A big energy conservation programme would help and create new jobs quickly.

Council budgets

Parliament today will finalise the spending allocations for Scottish local government following on from the Budget Bill debate yesterday. Much sound and fury as usual in the chamber, but the phrase 'moving deckchairs around on the Titanic' more accurately captured my feeling watching the debate. Shifting a few million here and there simply misses the point. This budget may put off a number of difficult spending decisions past May, but it will result in massive cuts to our essential public services.

The approach to local government is of particular concern. In November’s draft budget, the Government presented councils with a Hobson’s choice: deliver key SNP policies, such as freezing the council tax and maintaining police and teacher numbers, or face an even bigger cut in your budget allocation. The Government claimed that councils who signed up to the ‘package’ of Government priorities would face a cut of 2.6 per cent, while councils who did not would face a cut of 6.4 per cent.

The continued council tax freeze prevents councils from raising vital funds and at the same time provides a real-terms tax cut to the wealthiest homeowners at the expense of vital services. The demands to recruit 1,000 extra police officers is simply a cosmetic political exercise. It simply means that large numbers of police (civilian) staffs will be cut. This will mean fewer police on our streets as they are taken off normal duties to perform administrative and specialist tasks they are not qualified to do at a greater financial cost to the public.

The Scottish Government started well in trying to forge a new relationship with local government. Less central control, reduction in ring fencing etc. However, they have now moved full circle in this settlement by dictating how council budgets are spent. In our response today UNISON describes this as ‘handcuffing’ local authorities, sounding the death knell for local democracy. Democracy is the defining difference between public and private services and it is vital local authorities are able to allocate funds based on the local needs of their communities, not political spin.

Tax havens

On the day the Scottish Parliament is setting a budget that implements the Con-Dem coalition's cuts, it is perhaps a good time to look at some alternative means of financing public services.

I have just read 'Tax Havens: How Globalisation Really Works by Palen, Murphy and Chavagneux. This is everything you wanted know about tax havens and everything you feared would be the case. The authors take us through the history of tax havens, how they work and set out some vital statistics. They reckon individual annual tax loss amounts to over $255bn and that figure is dwarfed by corporate tax dodging. In the UK alone 30% of the largest companies don't pay any tax. Half the global stock of money goes through tax havens.

They then show us how rich individuals and corporations use tax havens to dodge tax. The array financial instruments, offshore companies etc is truly staggering. All of this is facilitated by the 'Big Four' international accountancy firms. This includes our old friends KPMG, caught out again, this time by US tax authorities. They were fined $456m for selling tax evasion products worth $1.4bn that they netted $124m in commissions on. The ECJ also concluded that another KPMG scheme was an improper attempt to avoid VAT. And they want to tell us how to run Scotland's public services!

The book highlights a particular concern over the impact on the developed world, with $850bn flowing out into tax havens, ten times the total world aid budget. Another big loser are the salaried middle classes who are paying for the tax dodging rich.

There is some hope that the latest financial crisis is leading to a renewed attack on tax havens, or at least the secrecy that surrounds them. Including the OECD, G7 and countries including the USA, Germany and France. Sadly the UK is not rising to the challenge particularly when many tax havens are British dependencies.

In fact they are going in the opposite direction. As George Monbiot has highlighted in the Guardian the Con-Dem coalition is planning the biggest corporate tax cut in history.

"At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches. Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to “large and medium companies”: it is not available for smaller firms. The government says it expects “large financial services companies to make the greatest use of the exemption regime”. The main beneficiaries, in other words, will be the banks.

But that’s not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate “of any major western economy”. By the time this government is done, we’ll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph, David Cameron said: “What I want is tax revenue from the banks into the exchequer, so we can help rebuild this economy.” He’s doing just the opposite. These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates. Any UK business that doesn’t outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage. The new rules also threaten to degrade the tax base everywhere, as companies with headquarters in other countries will demand similar measures from their own governments."
So there you have it, official government policy in the UK is to promote tax havens and make the rest of us on PAYE pick up the bill. Why? Another story in today's news may give us a clue. Half of all Tory donations come from the City. More precisely, from the very same hedge funds that make extensive use of tax havens.
 
The US authorities found 18,857 businesses registered at just one address in the Cayman Islands. As President Obama said "that's either a very big building or a very big scam'. I think we know which!

SCVO Manifesto

The Scottish Council for Voluntary Services has launched their manifesto for the Scottish elections. There is much in this document to support and most would agree that Scotland needs a thriving third sector. A new approach to social partnership in Scotland is also a positive idea. The voluntary sector is an important contributor to the design and in some cases the delivery of public services. They can provide innovative and flexible services, enabling new approaches to be piloted in ways that can be difficult for core services to undertake. They often share the public service ethos that is absent from the market realm.

It is of course important to recognise the diversity of the sector. We should distinguish local community organisations with their role in community planning and national campaigning organisations that promote and represent service interests, from the role of semi-commercial service delivery organisations.

My problem with the manifesto is those sections that have clearly been influenced by the SCVO's big funders, the semi-commercial delivery organisations. The emphasis the SCVO has given to these sections of their manifesto, drown out the rest. Complaints about protecting the 'bloated' public sector, the need to expand the third sector's role in delivering public services etc. This takes the SCVO perilously close to the business lobby agenda. In fact their spokesperson on Sunday's Politics Show talked about opening up services to the voluntary and private sectors. Of course he used to be a lobbyist for the business lobby, but if this is a new strategy to join up these positions, it is dangerously naive.

Due to EU procurement legislation this approach opens services to contestability and in some sectors, notably care, has created an opening for poor quality private sector providers to start a race to the bottom in terms of quality. It may initially award contracts to the voluntary sector (or even small business), but the end result is big private sector care operators with their minimum wage, corner cutting approach that has been highlighted in so many care scandals. Ironically, outsourcing in the voluntary sector has thrown up some difficulties this week with the news that the company running the Salvation Army's clothes recycling made £10m out of the charitable donations.

Much is made in the SCVO manifesto and recent press releases about how wrong it is to protect public sector jobs. This confuses attempts by the Scottish Government to avoid complusory redundancies with job losses. The SCVO jobs watch this week stands at 134 jobs. UNISON's public sector jobs watch stands at over 12,000 with much more to come. So this spin is just absurd. Job losses are bad news to both sectors and the Scottish economy, but if the SCVO have a strategy that attempts to divide public and voluntary sector workers, then they will win few friends anywhere.  




In the wider context of public service reform the voluntary sector does offer the prospect of better community engagement, but of course it is not democratically accountable. Some organisations have poor governance, are captured by managerial elites and are run with poor management of staff. In this context there is a need to be able to find a role for the voluntary sector that captures the best features of the sector without damaging the overall approach to integrated service delivery.

UNISON Scotland has today launched its evidence to the Christie Commission. We argue for a new approach to public service delivery that views the service from the service user perspective. In that vision there is plenty of space for the voluntary sector.

Election Manifesto

UNISON Scotland will today launch our manifesto for the Scottish Elections in May.

In past years we would have pulled this document together from our bank of policy positions over a period of months. This time we decided to do it differently. We started our manifesto project some 18 months ago by identifying twelve core issues for UNISON members. Some broad issues and others more service specific. We encouraged activists to sign up to network groups on each issue and promoted a debate amongst members through our web site and in our publications. We have used the output from these groups to input into the political party manifesto processes, some being more open than others, and contributing to wider debate across civic society on these issues.

So the document we are publishing today (available on our website) is more the culmination of the process than a starting point.

As we say in the introduction, our vision for Scotland is different. Public services are part of the fabric of our society. An attack on those services is an attack, not on unions or workers, but on society itself. We set out a different approach, one that is rooted in our members deep understanding and commitment to those public services. 

We do nice photies as well!

KPMG and billing

Interesting story in the Herald today about the accountancy firm KPMG. This is the firm that claims to be able to reduce costs in the public sector whilst at the same time making a lot of cash out of its public sector contracts. No discount there! They are also significant players in the commercial lobby to privatise Scottish Water.

Administrators from KPMG who were called in to Glasgow jewellers Martin Groundland have had a £518,000 bill reduced by £77,000 after a judge ruled that parts of the claim could not be justified. According to the story they may have been charging £100 for phone calls a few minutes long. Not bad work if you can get it!

KPMG also explained that its spreadsheet system “does not and cannot specify the particular work done." Can this be the same firm critical of public sector work practices?

According to KPMG it is “not uncommon for courts to reduce the fees of accountants and solicitors without any question of overcharging or malpractice”. I have to say I struggle with that explanation, but perhaps the Accounts Commission and those public bodies who have shelled out vast sums to KPMG over recent years should take a closer look at their bills?

PFI and secrecy

There is a very good analysis by economists Margaret and Jim Cuthbert on the financial impact of Scottish PFI school schemes in the journal Public Finance. They conclude:

“Overall, the findings in our research paint a worrying picture of the squeeze which is going to be imposed on other areas of local authority service because of PFI contractual commitments, as the financial pressures on local authorities intensify. In particular, if we now hit the combination of relatively high inflation combined with real-term cuts in the support local authority gets from central government, the problems faced by many local authorities with PFI commitments are likely to be severe.”

When asked to comment on this work my reaction was that this is exactly what we warned would happen when these schemes were signed off. PFI contracts are effectively ringfenced, so when public finances get tight they take up a larger proportion of total spending. No one in their right mind signs off 25 year plus contracts because you simply cannot anticipate developments in both public finance, inflation and service need that far ahead.

It may be slightly childish to say 'I told you so', but we did. I personally stomped the conference circuit, told politicians and officials as part of a small band of sceptics at the time. The Tories introduced PFI for largely ideological reasons. Labour continued with them because it provided off balance sheet funding for new schools and hospitals. The SNP scaled back but have now returned to the trough. Politicians have to learn that there is no such thing as a free lunch in relation to capital finance. Sadly we are now paying the price of that hard reality.

The work that UNISON, the Cuthberts and others have done on this issue has been greatly facilitated by freedom of information laws. All of these deals were done in great secrecy because those doing them knew full well that the numbers simply didn't add up. Sadly this message seems to have passed the Scottish Government by.

In December 2009 the Scottish Government said it was considering extending FoI to firms who have public sector contracts, as well as Trusts running local authority sports, leisure and cultural facilities amongst others. But the Scottish Government said last Wednesday - just as Tommy Sheridan's perjury sentence was dominating the news - that the proposals would not proceed. Parliamentary business minister Bruce Crawford said it would be "premature" to extend coverage before other deficiencies in the Act can be put right.

Information Commissioner, Kevin Dunnion has rightly commented that Scotland is at risk of falling behind in FoI best practice. The lesson of PFI is that openness is the only policy and the Scottish Government is wrong to cave in to business interests on this issue.