Pensions and independence - need more numbers and less rhetoric

The latest independence pensions row still leaves the voters short of hard data on which to assess the implications for state and occupational pensions. Pensions are too important to be treated in this cavalier manner.

The UK government has today published the latest in their Scotland Analysis series on work and pensions. My main interest is the pensions chapter as I am the lead negotiator for the largest pension scheme in Scotland (LGPS) and work with many others.

The essence of the paper's argument is:

•    The UK has a sophisticated pension system developed over many years.

•    The size of the UK enables economies of scale and risk sharing such as the Pensions Protection Fund.

•    Scotland's ageing population and White Paper policy commitments add £1.4bn per year to the costs of pensions in an independent Scotland.

•    Significant cost implications of setting up new systems and disentangling Scotland from UK .

•    Public service pension liabilities of around £100bn.

The Scottish Government's response was given by Nicola Sturgeon who said, "Pensions and welfare are more affordable than in the rest of the UK, that would be the starting point of independence. And why do a I say that, well they make up a smaller proportion of our GDP and a smaller proportion of our tax revenues. This is just another example of a UK government that is scaremongering that is plucking figures out of thin air to try and tell people in Scotland you can't do it."

Comparisons with the proportion of tax revenues is as as pointless as the UK Government's comparisons with oil revenue. Sadly, this sort of exchange is what passes for informed debate at present.

It certainly is the case that the paper's numbers, if not plucked out of thin air, are suspiciously rounded and there isn't a lot of detail as to how they are calculated. Having said that, the Scottish Government has produced even fewer numbers to justify their assertions.

On the cost of establishing a new system the White Paper tells us that an independent Scotland would continue to use the UK systems for a transitional period. That of course assumes a common currency, which is unlikely, and the same benefits - when the White Paper tells us they would make changes. It simply isn't credible to expect another country to make expensive changes to their systems to accommodate Scotland. Exactly how much extra all this would cost is unknown and I suspect the UK assessment is on the high side, but the onus is on the Scottish Government to publish a credible assessment.

The Scottish Government is certainly right to claim that pensions would be cheaper in Scotland because we die earlier. Any pensions negotiator knows that this is the key metric determining the cost of pensions. However, they are ignoring the other costs that go with poor life expectancy such as ill health, older workforce etc. Having recently renegotiated the biggest pension scheme in Scotland, these factors balanced out to the extent that the Scottish scheme cost the same as the English one. As John Swinney signed off that calculation he should understand this!

For private sector occupational pension schemes the cross border provisions of the IORP Directive are still a concern given typical underfunding. In most cases it would require a very challenging funding increase or splitting the pension scheme. For Scottish based companies of a reasonable size this won't be a problem, but for the Scottish arm of UK companies it will be. The Scottish Government was banking on the EU rules being reviewed, but that is now not going to happen. Something the FM was obviously not aware of when he wrongly implied that they would, in an answer to a question at the STUC last week.

The weakest section of the UK paper is on public service pensions. A very crude number of £100bn is presented without any attempt to calculate the actual liability. Apparently this is too complex. Strange, given that the UK Public Service Pensions Act requires just such an assessment of liabilities. The paper also gives the impression that this liability falls on Scotland on Independence Day! Of course it is spread out over many years and doesn't reflect the annual revenue from employer and employee pension contributions. You need to look at both sides of the balance sheet. The local government scheme is already separate in Scotland and won't cost a penny more, and the NHS is actually in surplus. We also know that UK public service pension costs are falling as a proportion of GDP.

In conclusion, if we ignore the rhetoric from both sides, the actual paper is a useful contribution to the debate and poses questions that the Scottish Government's very broad brush on pensions needs to address. However, it could have been much more useful if the Treasury had commissioned the Government Actuary Department to do some real calculations, rather than rely on pretty crude apportionment. 

  

How Scotland rejected NHS marketisation

Given the downward spiral of the NHS in England, we should give full credit to the Scottish Labour administrations who ensured that Scotland exited the road to health marketisation.

A few recent events made me think about the recent history of the NHS in Scotland. Firstly, the announcement that Malcolm Chisholm MSP is to retire at the next election. He was the Labour health minister who abolished NHS trusts in Scotland.

Secondly, an answer Nicola Sturgeon MSP gave at a recent UNISON referendum hustings comparing the NHS in Scotland and England. She didn't quite say that this was entirely down to the SNP, but those not aware of the history might have interpreted it that way. That's not to say that she wasn't a very good health minister herself and strongly opposed to marketisation. However, she was continuing the work of others. It also reflects the fact that there is not an ideological divide between Scottish Labour and the SNP on health.

Thirdly, a trip to our UK health conference reminded me just how bad NHS England is!

Following the 1997 general election Labour came into government and quickly initiated the devolution referendum that resulted in the first devolved administration in 1999. In April 1999 they set the path to reform by halving the number of NHS trusts in Scotland from 47 to 28. Susan Deacon was the first health minister and everyone was left in no doubt that the market was not the future for health care in Scotland. I spent some eighteen months on secondment to the health department during this period and then served on her advisory board. I'll be circumspect, as I am probably still covered by the Official Secrets Act and the key players are still alive, but let's just say there was some institutional resistance to the direction of travel!

None the less important steps were taken to build cooperation in the NHS rather than competition. Market testing was dropped and services started to come back in house. This included a new HR strategy (the primary reason for my secondment) that introduced partnership working into the NHS. A model that survives to this day and has been rated as probably the best of its type in the world.

At the end of 2001, Malcolm Chisholm took over as health minister and he took over the reform process that resulted in the NHS Reform Act of 2004. This Act formally abolished trusts and established a duty of cooperation. We had Community Health Partnerships for primary care and staff governance was given a statutory footing.

It is often said that Scottish Labour is dictated to by 'London Labour' - largely a myth in my extensive experience of the policy making process. However, it is certainly the case that when New Labour in England reintroduced elements of NHS marketisation there was pressure to follow the same model in Scotland. What is less well known is that Scottish Labour ministers resisted that pressure. I remember one Blairite special advisor in the run up to the UK general election complaining, that the Tories said if their reforms were so good why didn't the Scots adopt them - could we not just sound a bit like them? He was firmly told that the answer was, 'it's devolution stupid!'. However, part of the problem was that ministers were told not to highlight differences and as a consequence they have never got the credit they deserve.

The last Labour health minister, Andy Kerr, went against Gordon Brown's decision to defer a PRB award (topical again this month) and bought, what is now the Golden Jubilee Hospital, into public ownership. Even if he didn't appreciate our press release welcoming the hospital's 'nationalisation'!

The one issue that didn't get resolved was stopping the big PFI hospital projects that had been started and some smaller ones that joined the programme. Ministers like Malcolm Chisholm didn't like PFI, but they were told it was 'the only game in town', due to off balance sheet funding. Wrong in principle and practice and sadly a lesson not learnt to this day, as the present Scottish Government has one of the biggest PFI programmes in Europe.

The first two post devolution administrations didn't get everything right and certainly not over PFI. However, they made crucial decisions over a partnership approach to health through cooperation rather than competition. Health ministers like Susan Deacon, Malcolm Chisholm and Andy Kerr, supported by the wider cabinet, made these decisions and kept to this approach despite political pressure from elsewhere. When we see what's happening to the NHS in England, we should remember to say, thanks very much comrades!

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IPCC clear on climate change and pragmatic on energy

In the most comprehensive report on climate change the UN IPCC has said that the impacts of global warming are likely to be "severe, pervasive and irreversible". Dr Saleemul Huq, a convening lead author said: "Before this we thought we knew this was happening, but now we have overwhelming evidence that it is happening and it is real."

Philip Pearson at the TUC has picked out some of the key energy points at the Touchstone blog and highlights four points on which there is high scientific confidence:

• Global greenhouse gas emissions are accelerating. Despite greater investment in low carbon technologies, emissions grew by one billion tonnes a year (ie a gigatonne) in the past decade, reaching 49 gigatonnes in 2010. This compares with 400 million tonnes a year in the period 1970-2010.
  
• Carbon dioxide (CO2) from burning fossil fuels and industrial processes made up three quarters (78%) of the increase in greenhouse gases. Most of this is CO2, methane and Nitrous Oxide.
  
• By 2100, without additional effort, global average temperatures will increase by between 3.7 and 4.8 degrees C. One driver is the albedo effect, the amount of incoming radiation reflected back from the earth’s surface, which falls as the amount of sea ice decreases.
  
• In futures where we take deliberate action to stem man made global warming to below 2 degrees C above pre-industrial levels, atmospheric concentration of CO2 are “likely” to be 450 parts per million. We are now at 399.5 (March 2014).
  

The IPCC report also covers the economic impact of taking action on climate change. Diverting investment from fossil fuels into renewable energy and cutting energy waste would shave just 0.06% off expected annual economic growth rates of 1.3%-3%. “It is actually affordable to do it and people are not going to have to sacrifice their aspirations about improved standards of living,” said Professor Jim Skea, co-chair of the IPCC, “It is not a hair shirt change of lifestyle at all that is being envisaged and there is space for poorer countries to develop too.”

On a more controversial note the report takes a more positive view of investment in gas. Many environmentalists argue against investing in gas, for fear it would lock us into a high-carbon future compared with renewables. However, the latest IPCC report seems to accept the gas argument by saying:

"Greenhouse gas emissions from energy supply can be reduced significantly by replacing current world average coal‐fired power plants with modern, highly efficient natural gas combined‐cycle power plants or combined heat and power plants, provided that natural gas is available and the fugitive emissions associated with extraction and supply are low or mitigated (robust evidence, high agreement)."

It can be argued that an abundance of cheap gas puts competitive pressure on renewables and nuclear and offers a short-term bridge to a low carbon future. Producing electricity from gas gives of about half the CO2 emissions of coal and as coal is still a dominant fuel source in many countries in the world switching to gas would reduce their CO2 emissions at lower costs than switching to renewables. While this may be a strategy for the developing world that doesn't just justify fracking in Scotland, or environmental or economic grounds.

Equally controversial in environmental circles, the report also recommends that nuclear power can make an “increasing contribution to low-carbon energy supply”, though they accept this is not without its ill-effects on the environment.

Overall, the IPCC report is a very clear wake up call to the world that measures taken to date are simply not sufficient to halt global warming. The scientific evidence is overwhelming, leaving little room for climate change sceptics. However, the report is also pragmatic on energy issues like gas and nuclear and that will be a challenge for some in the environment lobby.

 

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Health and care integration - Scotland and the UK

Health and care integration is right in principle but it will take more than moving the managerial deck chairs around to deliver quality care.

I took a day away from the STUC in Dundee to make a day trip to Brighton to speak in panel discussion on health and care integration at the UNISON UK health conference. I was giving the Scottish perspective on what is a similar challenge across the UK.

The context for integration is pretty similar across the UK. Demographic change is even more acute in Scotland with 25% of the population over 65 by 2035 and an 80% increase in the over 80s. Today's FT had an interesting UK Statistic reporting that centenarians will grow from 14,000 in 2013 to 111,000 in 2037. It will at least keep the Queen busy. Their overall message was let's embrace longevity, it's a good thing. That said, we can't ignore the financial pressures that have resulted, in social care at least, in a race to the bottom as UNISON Scotland's Time to Care report highlights.

There have been efforts to promote care integration since the 'joint finance' initiative in the 1970s, with admittedly limited success. An Audit Scotland report found few examples of effective joint planning. The long waits for patient discharge have largely gone, but 837 patients are still in Scottish hospitals who should not be. That's the equivalent of the Southern General Hospital. The Scottish public service model, based on collaboration not marketisation, should enable joint working, but as the Christie Commission found this hasn't always been achieved.

The new integration model is outlined in the Public Bodies (Joint Working) Act, to be implemented in April next year. This permits two broad models. Lead agency and body corporate bring in councils and health boards together in Health & Social Care Partnerships. Everywhere other than Highland are likely to go for the body corporate model. They will be run by an Integration Joint Board with at least 3 council and 3 Health board members plus non-voting members from the voluntary sector, trade unions and patient groups. Each Board has to develop integration plan (services, budgets) and a three year Strategic Plan. There will also be Locality Planning Groups below council level. All of these plans have to approved by minister who has extensive powers and will set national outcomes and lead an accountability process. No staff will transfer to the new bodies, they will remain employed by councils and health boards.

UNISON Scotland welcomes the less prescriptive model than first envisaged, but remains concerned about the extensive ministerial powers that could be another force for centralisation. International studies show that local implementation is the key to successful integration. The staffing provisions are minimal, but after our Bill lobby a partnership group has been established to address workforce issues. 

Outsourcing remains a concern as home care is the most outsourced public service Scotland and we don't want to see that extended any further - certainly not into NHS provision. The financial provisions in the Act are weak with little indication of how growing care needs are to be funded. The savings identified in the Christie report on unplanned admissions have already been absorbed into rising, not reducing NHS bed requirements. I would also argue that GPs are weakly integrated into new system and they can be a big driver for admissions to hospital.

Finally, for the future more work is needed on the detailed secondary legislation and local plans. UNISON's  short term focus is on effective joint branch working and developing skills. The industrial relations cultures in health and local government are also very different. 

In the longer term, I argued that we need to address three key care issues. Improve the social care workforce as set out in UNISON's Ethical Care Charter. Find a way of funding care at the level we are going to need. And develop a new social contract that sets out the responsibilities of the state and the citizen. Vague concepts like co-production and asset based approaches need more definition.

This was a very interesting debate, even if I struggle with the bewildering acronyms the English NHS has imposed on itself with multiple types of care integration and privatisation. As always when I hear about NHS England, I am grateful for devolution and the decisions a Scottish Labour government took to dismantle marketisation. 

Scottish and UK governments go head to head on energy

Energy policy has been the focus of the independence debate this week with the publication of Scottish and UK government papers.

First out was the Scottish Government with its paper ‘UK energy policy and Scotland’s contribution to security of supply’. It argues that the UK is facing the highest black-out risk in a generation, with reserve energy margins falling to as low as 2 per cent in the very near future. The consequences of this are upward pressure on consumer bills, extra costs for business and a deterrent effect on inward investment. They blame repeated failures of Westminster governments to take necessary decisions. Electricity Market Reform has also been mishandled leading to a withdrawal of investment in new capacity. The Budget measures will make this position worse and they are particularly scathing about the level of subsidy for nuclear power.

The positive pitch is that Scotland makes a significant and reliable contribution to the security of power supplies. Scotland exported approximately 13 TWh of electricity in 2012 to the rest of the UK. England also imported 12 TWh from the European mainland via the French and Dutch interconnectors, and a further 2.5 TWh from Wales. They argue that there is common interest in sharing energy resources across these islands. Scotland offers safe and secure supplies of electricity and gas and can assist the rest of the UK in meeting its renewable energy targets. However, as a substantial supplier to the rest of the UK, they say that, “an independent Scotland will require a far greater degree of oversight of the market arrangements for energy and firmer safeguards over Scottish energy security.”

The UK government paper, ‘Scotland Analysis: Energy’, (snappier title, but much weightier tome!) argues that the GB energy market is ten times larger than Scotland’s alone and therefore costs can be spread across 30 million households and businesses. The current integrated system could not continue because separate governments not unreasonably pursue their own policy objectives.

As a consequence the costs of supporting Scottish energy network investment, small-scale renewables and programmes to support remote consumers would fall on Scottish bill payers alone. They claim this would add at least £38 to annual household energy bills and around £110,000 to energy costs for a medium-sized manufacturer in 2020. This could grow to £189 for households and £608,000 for a medium sized manufacturer if the full costs of supporting large scale renewable fell on Scotland alone.

They accept that Scotland is currently a net exporter of electricity to other parts of the UK. However, this is only a small proportion of demand in England and Wales (4.59%). In the event of independence, Scotland would be only one of the countries the rUK could source energy supplies from. The decision would be taken on a commercial basis and in the national interest of the rUK.

So what do these papers add to the debate? In my opinion, other than updated statistics and some nice graphics, not a great deal.

The UK government paper is noticeably weak on their failure to properly address the capacity margins across the UK. EMR has been badly planned and the Treasury interference in energy policy has been a malign influence on the development of a credible policy. The first part of the Scottish government paper is therefore largely correct in highlighting the mess Westminster has made of energy policy. However, if this is the case, why would Scotland want to join the UK system?

The answer is that the economics of the Scottish government’s over reliance on renewable energy requires a bigger market to spread the costs. Scotland gets a third of the UK’s renewable support with less than a tenth of the population.

As I set out in the energy chapter in the ‘Red Paper on Scotland 2014’, there are huge holes in the Scottish Government’s core argument that the lights will go out in England without Scottish renewables. The rUK has a range of options even before fracking and new nuclear kicks in. Even more importantly, rUK capacity margins will be tightest when the wind isn’t blowing and therefore intermittent Scottish renewables will be the wrong energy at the wrong time.

I have little doubt that it is in the interests of rUK to allow access to their energy market. It is certainly essential to Scotland if we are to retain our role as an energy exporter. However, the decision to take Scottish renewables will be a purely commercial one. The notion that they would grant the level of ‘oversight’ of the market arrangements that the Scottish Government would wish, is hugely optimistic. The parallels with the currency debate are obvious. We may get market access, but at what price to the energy industry and household budgets?

Why regulation matters

Good regulation rarely gets a mention in the 'red tape' headlines, but it's an essential safeguard for us all. Regulations don’t just protect the public from unscrupulous and dangerous practices they protect other businesses as well. Companies who don’t follow the rules can offer a cheaper and/or faster service. This makes it difficult for those who do the right thing to compete. Fly tippers can charge a lot less than those who pay to have their waste disposed of or recycled. This drives down profit margins and increases costs for taxpayers who have to pay to have streets cleaned.

Today, we held a meeting of our members who deliver a wide range of regulatory functions. Planners, environmental health, trading standards and meat inspectors ensure that Scotland is a better, safer place to live and work.

Both the UK and Scottish Governments have bought, to varying degrees, the 'red tape' myth. As the OECD has reported, the UK actually has one of the lowest administrative burdens in the developed world. Even business surveys show low levels of concern and very few actual examples of unnecessary regulation. None the less, in Scotland we now have the Regulatory Reform Act, a largely unnecessary and cosmetic piece of legislation, and today we were considering the consultation on a Scottish regulators code of practice.

The code is a high level strategic document which is the right approach as front line staff cannot be expected to juggle with conflicting requirements. However, there is still a concern that the concept of 'regulators as enablers' conflicts with the primary role of ensuring compliance. In some areas, like food safety, compliance should be absolute, whereas in others an enabling approach is possible. More effort is focussed on high risk areas but we should not abandon others. I did like the SEPA enforcement model in the consultation – ‘chancers’ indeed!

The Act introduced the concept of regulators contributing to ‘sustainable economic growth’. While this is an admirable, if vague, ideal, the actions of regulators have a minimal impact on economic growth. Creating an industry around this issue is likely to add to the recording and other burdens staff are already struggling with.

The biggest concern is cuts in staff and resources. As our FoI and survey evidence shows, many areas of regulatory activity are being abandoned as well as training and other forms of support to businesses. In areas like meat inspection, the industry is successfully lobbying for light touch regulation. I for one don’t want to eat food with abscesses, but that’s precisely what I am going to get when meat inspectors are limited to visual inspection of animals. This is something MSPs will need to address when the Food (Scotland) Bill is considered by the Health Committee.

Sensible regulation is something we all take for granted. We assume that someone is checking that the food we eat and the goods we buy are safe. Increasingly, that is simply not the case and as usual it will be a tragedy that causes governments to rethink the merits of light touch regulation.

Self-directed care - reality doesn't always match the rhetoric

Self-directed care is right in principle, but does not always match with the reality of care provision in Scotland today. The rhetoric of choice and control is often used as cover for a deteriorating service.

The Self-Directed Care (Scotland) Act comes into force today and requires local authorities to offer personal payments if requested. I was interviewed by the BBC today on the impact this legislation will have on care in Scotland.

This approach works well for some service users, but can be an unnecessary burden for others. We should therefore be careful not to turn this into another one-size fits all approach to social care. UNISON signed a joint statement as far back as 2006 with the Scottish Personal Assistant Employer Network supporting direct payments while recognising that this approach should not be used a cover for cuts. However, by 2012 it was becoming clearer that assessments were focused on making savings rather than delivering better care. We illustrated these concerns with case studies in our report, ‘Personalisation in Scotland – The Facts’.

Today, cuts in budget provision means that the individual service user often has a smaller budget to buy equivalent services. This has contributed to the ‘race to the bottom’ in home care as highlighted in UNISON Scotland’s recent ‘Time to Care’ report. Staff, often paid little more than the minimum wage, on zero-hours contracts, with little training, are literally running about trying to provide the same service.

Many service users don’t understand or want the responsibilities of being an employer. As a consequence the service is being privatised with agencies providing the staff rather than the envisaged genuine personalised service. With budget cuts service users are being forced to choose a cut price ‘personalised’ service that is short on quality.

Self-directed support is leading to cuts in collective provision, such as day centres. This leads to greater social isolation that we know has a damaging impact on health. Social isolation is associated with a higher risk of death in older people regardless of whether they consider themselves lonely. A study of 6,500 UK men and women aged over 52 found that being isolated from family and friends was linked with a 26% higher death risk over seven years. Our home care members report that they are often the only living person some elderly people see in days. All the more reason to allow more time to care.

There is also no legislative requirement that a personal employer checks for Protection of Vulnerable Groups Scheme membership. Our discussions with home care staff indicated that many would be reluctant to raise care abuse concerns, particularly when they are employed on zero-hour contracts. Given the disparate nature of this service it is difficult for councils and regulators to check on the quality of care in the same way as they do in residential settings.

Overall, self-directed care is still right in principle and works well for some groups of service user. However, it isn’t suitable for everyone and has some big downsides, particularly when budgets are under financial strain.