Welcome to my Blog

I am a semi-retired former Scottish trade union policy wonk, now working on a range of projects. All views are my own, not any of the organisations I work with. You can also follow me on Twitter. I hope you find this blog interesting and I would welcome your comments.

Monday, 31 January 2011

Housing Benefit cuts

Much of the noise around the changes to Housing Benefit proposed by the Con-Dem UK government has been the impact on cities like London. However, it is no becoming clearer that it will also have a serious impact on Scotland with some 60,000 households facing severe hardship.

The Scottish Government's Housing Minister has highlighted that in April, 55,000 households will be given nine months to either lose housing benefit or move out of their home. It will affect households who already pay the average price of rent in their area and will now need to find available accommodation in the bottom third bracket of rental prices. 7,500 young people, 25 - 34 year olds, are set to lose nearly £55 a week from April when they will no longer receive support for their own homes and will be forced into shared accommodation.

The Scottish Government has established an expert group to share knowledge of local impacts and to make the case for stopping the worst measures. Not surprisingly, the Scottish Government will also press for the devolution of powers on welfare and benefits. UNISON argued in its evidence to the Calman Commission that Housing and Council Tax benefits should be devolved, but not UK administered benefits.

These reforms could create poverty ghettos, punishing people for being unable to take up a job where no jobs exist. All in this together - again I think not.

Thursday, 27 January 2011

Public sector survival strategies

I was speaking last night at a Fraser of Allander/Herald Group seminar on the subject, Survival Strategies: The Scottish public sector in crisis.  The panel of speakers also included Sir John Arbuthnott, John MacLaren and Alex Linkston.

When presented with a title like this I like to start by questioning the proposal. If there is a crisis it is certainly not one of the public sector's making. Expenditure cuts by the UK Government are an ideological response to the deficit caused by corporate greed. As the latest economic figures show they are cutting too much - too fast. Nick Clegg may have had a Damascine conversion because of the Greek debt crisis, but the UK is not Greece and we can manage the deficit in a way that won't seriously damage our vital services. I outlined a series of ways that we can strengthen the public finances by tackling tax avoidance, introducing fair taxation and cutting out real waste.

That doesn't mean that that there are not challenges for the public realm. We are facing these cuts at a time when demographic change is starting to place significant new costs onto our public services. So even without this ideological attack there is a need to look carefully at how we deliver public services. The Christie Commission is doing this in Scotland and I have written a discussion brief for UNISON branches that is available on our website. 

My starting point was that we need an active state, not an enabling one. This state starts with extending democratic accountability, not just through direct elections important though that is, but by meaningful user engagement. Delivery should be as local as practical and should be an integrated service. There is a real risk that diversity of suppliers leads us to the 19th Century version of the Big Society. The Liberal government of that period came up with an integrated solution, its called local government!

My key message was that we need to stop looking at delivery models from a top down perspective. The management consultant approach with their centralising, off the shelf, latest fad solutions should be eschewed for a new approach that starts with sorting out the service users needs, first time and locally. This means abandoning the idea of front office/back office splits, huge public service factories personified by much, but not all, of the shared services agenda. This simply drives unnecessary transactions as the service users problems are passed around the system. There is much in the ideas of systems thinking, co-production and even public value theory that we can adopt to evidence the benefits of this approach. More importantly we should be tapping into the knowledge, skills and commitment of thousands of public service workers who daily deal with service users.

This approach would recognise the value of national standards and promote best practice without the straitjacket that the system of targets and scrutiny has become. It should also be underpinned by a new public service ethos.

On structures, I cautioned against the rush to start redrawing boundaries as some sort of magical solution. It may be attractive to some politicians because it gives the appearance of action, but structure should follow form and the focus should be delivery models not structures. By looking at local user demand coupled with new forms of user engagement we can develop meaningful community plans. The perceived wisdom is that we should merge councils and health boards into ever bigger units. I am not convinced. I pointed to Norway, a country with similar population and geography to Scotland that has 430 local and 19 regional councils.

The title of my presentation was 'Survival of the Fittest'. The mostly academic and business audience might have been surprised that someone like me, from the political left, would appear to promote this capitalist mantra. However, my meaning of the phrase comes from the the Russian Anarchist, Peter Kropotkin. In his book Mutual Aid: A Factor of Evolution he set out his analysis leading to the conclusion that the fittest was not necessarily the best at competing individually, but often the community made up of those best at working together. Now that is a better way!

Update - 31 January
Good summary of the event in the Herald today

Wednesday, 26 January 2011

Scottish Budget Stage 1

Parliament is currently debating the Budget Bill at Stage 1. In advance of the debate John Swinney has published indicative budget figures for the following three years up to 2013-14 after criticism of his one year budget.

Finance Department officials have not exactly had to work very hard on this exercise. The numbers show a flat cash allocation for every department except health and the Scottish administration. Whilst this looks better than expected, we should remember that this is a cash figure that takes no account of inflation or the growing demands on public services. The Treasury has increased the GDP deflators for 2010-11 and 2011-12 to 3.1% and 2.5% (from 2.9% and 1.9% respectively). However, even this looks hopelessly optimistic when the RPI has increased to 4.8% and the Bank of England Governor announced that he expects inflation to increase further this year.

Yesterday's economic figures will add to these demands and reinforces our concerns that the UK government's ideological attack on public spending is damaging the economy. When politicians blame the weather you know they are really desperate!

The Finance Committee has also published its report on the budget. They highlight the lack of any effort to address low pay in local government or any calculation of the impact of the budget on job numbers across the public sector. They also support the Equal Opportunities Committee's concern that short term savings may impact disproportionately on the most vulnerable members of society. Equality impact assessments should be more robust, something UNISON has highlighted recently. Less convincingly the Committee "invites the Government to respond to the view that given the emphasis on the “social contract” the primary aim of the draft budget is the protection of services rather than economic growth." This misses the point that public services and economic growth are inextricably linked.

On the Council Tax freeze the Committee’s budget adviser concluded that the differences in household outgoings between freezing the council tax and increasing it in line with inflation are relatively small for most households, although the main beneficiaries are those on middle incomes. Further, he states that “there is no case that it supports economic growth and its fairness implications are certainly not clear cut." Despite this, four members of the Committee still welcomed the freeze - this is frankly beyond belief!

Where I do have some sympathy with John Swinney is on the so called 'Tesco Tax'. The Local Government Committee voted against it this morning and it has become the pivotal issue in the Budget Bill. Why this should be is beyond me when it constitutes a tiny proportion of the budget. Fiddling while Rome burns, springs to mind. I thought this was an imaginative effort to raise revenue and address a policy concern over the death of our high street shopping areas.

Out in the real world councils are facing additional costs over and above the budget. These include changes to council tax benefit, changes to the carbon reduction commitment regime, a reduction of 10% in the housing benefit administration grant and an increase of 1% in interest rates for loans from the Public Works Loans Board. The latest big jobs cuts are at Aberdeen City where 900 compulsory redundancies are threatened. The political leadership of this council has been a basket case for some time and they shouldn't be surprised that a 5% pay cut in return for redundancies is not very attractive. Even if staff had any confidence in the council leadership - which they don't.

Tuesday, 25 January 2011

Hutton Review

I met Lord Hutton today on his visit to Scotland as part of his evidence collection towards his final report on public sector pensions. He was keen to discuss the risks in public service schemes, how we had approached cost sharing and how governance could be strengthened.

The one risk missing from his matrix is opt-out. Whilst opt-out is lower in Scotland it still runs at over 15% on average. Whilst Lord Hutton is undoubtedly sincere in his wish to extend membership, the actions of the UK Government are driving opt-out and increased reliance on state benefits. The massive increase in contributions at a time of real term pay cuts will be the main driver. A survey in Pensions Week showed that 65% of staff earning below £25k would opt out if their contributions increased above 6% and that reflects our own feedback.

The other factor driving opt-out will be the lack of certainty. Whilst Lord Hutton is looking at defined benefit schemes, some of his options, like cash balance schemes, don't provide certainty of benefits in retirement.  When members see the government unilaterally cutting the value of pension benefits by 15% through the RPI/CPI switch, confidence slips away.

So whilst some of the principles in Lord Hutton's review may be well intentioned, these are being undermined by the actions of the UK Government. Their actions are driving a race to the bottom in pension provision that will cost us all dear in the long term.

Monday, 24 January 2011

Police budget

Good story in the Sunday Herald yesterday covering the less well known impact of police budget cuts and the much vaunted '1000 extra police officers' the Scottish Government likes to crow about.

It reports on a paper presented to the Scottish Policing Board that calculates that 1200 police civilian posts could go to meet a £40m 'black hole' in the police budget. The paper states that; “Significant reductions to police staff numbers alone are seen to upset the efficient balance between police staff and police with the risk that officers would be used to backfill some police staff roles....."

The article quoting a police source puts the point more explicitly:
"One police insider said: “Instead of responding to crime, officers will become burdened by tasks that were previously delegated to other staff. Police staff are being sacrificed because the SNP want to go into the election boasting about hiring extra officers.”

The Sunday Herald asked me for an opinion piece that they published alongside this article. I give an overview of the roles police staff undertake in a modern police force that may be a surprise to many people. I also highlight how far behind Scotland already is in modernising this way, or to be precise how far behind some forces are. The simple message is that If you sack police staff you cut frontline policing. This is great news for criminals as officers are taken off the beat to do their jobs.

When Parliament starts to debate the budget this week MSP's need to focus on this crazy approach to the police budget. They should place effective policing before political spin.

Thursday, 20 January 2011

Pensions confidence

Back to public sector pensions this week with another couple of blows to pensions confidence.

Last October, the Chancellor announced that there should be progressive changes to employee contributions to public sector pension schemes equivalent to a 3% increase between April 2012 and 2015. Before Christmas they clarified this announcement by increasing contributions to 3.2% to cover their decision to exclude the armed forces. They are seeking to raise £2.8bn from pension contributions. 40% of this in April 2012, 40% in April 2013 and the remaining 20% in April 2014.

This is a simple cash grab by the UK government that has nothing to do with the actual cost of pension schemes. The Scottish Government, CoSLA and the trade unions reached an agreement on the new local government scheme in Scotland that deals with the affordability of the scheme though a system of cost sharing.

The Scottish Government is now under pressure to break that agreement because the UK government is cutting its budget. The problem is that an increase in contributions, over and above what is actually required, will rightly be seen by members as a stealth tax. For low paid staff in particular the decision to remain in a pension scheme is always a marginal one, and with pay freezes and attacks on conditions, many may decide to opt out of pension provision. This will simply create more pensioner poverty a further pressures on welfare spending in future.

Confidence in pension schemes is further undermined with another UK Government announcement that it will change the indexing of public sector pension increases each year from the Retail Price Index (RPI) to the Consumer Price Index (CPI). The effect of the change is likely to cut pension benefits by at least 15%.

The UK Government has now decided not to apply this principle to private sector schemes because, in the words of the Pensions Minister, “we want people to have confidence and trust in their pensions, we will not be re-writing the rules of their pension schemes”. Apparently it‟s OK to rewrite the rules for public service workers. The phrase "pension apartheid" springs to mind!
Lord Hutton is returning to Scotland next week to discuss the second stage of his review of public service pension schemes. A key message is that if you break long standing arrangements with scheme members, it undermines confidence in pension schemes generally. At a time when workers are facing many other financial pressures there is a real risk that workers will simply opt out.

Thursday, 13 January 2011

Private pensions

The UK Government is publishing its Pensions Bill today. Under the likely new statutory system, employers will pay only 3 per cent of salary towards an employee’s scheme. Workers will pay 3 per cent and the Government a further 1 per cent. Workers will be automatically enrolled into a scheme and will have to opt out. The provisions will come into effect between 2014 and 2017.

In principle this is the right approach given the paucity of company pension provision. Incidentally, despite much talk of 'gold plated' public service pensions there is a high opt out among low paid staff here too. This is likely to rise as a consequence of the Hutton Review and increases in contributions.

However, there are some obvious difficulties. Even allowing for opt-outs this is likely to increase the amount employers pay into schemes and this could result in some firms reducing the sums they pay to each individual worker’s pension. Large firms typically pay 6 to 10 per cent of a worker’s salary into a defined contribution pension scheme. So we could see a levelling down, particularly in the current tight labour market. A survey last year suggested that 40 per cent of big firms were looking to reduce their contributions when auto-enrolment begins.

The problem is even greater in small firms because two-thirds offer no pension at all and others offer low contributions. The Association of Consulting Actuaries (ACA) calculates that a total contribution of 15% of salary is required to provide a reasonable retirement income. So a statutory scheme that only requires a 3% employer contribution is simply inadequate.

Another problem, and after cost, the main reason for high opt outs is worker confidence in the pensions system. Annuity rates have fallen for the third consecutive year, primarily due to a combination of increased life expectancy and falling gilt yields. The income a man aged 65 can expect to get from an annuity purchased now is 46.6% lower than it was in 1995, at £607, compared with £1,138. Women have seen a fall of 43.7% in the annual pension they can get.

That confidence is further dented when workers understand that they are being ripped off by pension providers through high fees. This was highlighted in a report by David Pitt-Watson, one of the country's leading pension fund managers, and a team from the Royal Society for the encouragement of Arts, Manufactures & Commerce. This report shows that British workers are about a third worse off in retirement than workers in Holland – and it's mainly down to the fees charged on our pensions. Up to 40% of pension value in Britain in goes in fees. Someone saving £1,000 a year throughout their working lives would retire on an inflation-protected pension worth £16,080 a year if they did not pay fees. However, the typical fees levied by British pension funds would reduce the payout to £9,900 annually.

So, in principle the Pensions Bill is a small step in the right direction, but it could result in a levelling down to inadequate pensions for more workers. Plus, the real issue the Government should tackle is the pension fee rip off. But like the bankers bonuses, tackling that is unlikely to be on the Government's agenda.

Wednesday, 12 January 2011

Systems thinking

For the next six months I will be spending some time focusing on the issue of public service reform, as I have been appointed as an expert advisor to the Christie Commission on Public Service Delivery in Scotland.

When sorting out my reading for this, I returned to John Sneddon's book Systems Thinking in the Public Sector. For those not familiar with his approach he argues that ill thought-out public service reform has led to unwieldy systems of mass production that do little for the people they are supposed to serve. Many services are victims of a dysfunctional regime created by a culture of deliverology that puts targets and red tape before people. He argues we should forget sticking plasters like CRM and citizen empowerment and says don't tweak the system. Ditch it. Instead he emphasises the importance of understanding and managing organisations as systems, empowering the managers and staff who understand the value demands users place on services.

He illustrates his point with a number of examples of how the whole performance management culture has led to enormous waste. It is one of those books you find yourself nodding at almost every page because the examples chime with your own experience. I have seen staff in call centres gaming the system to meet arbitrary targets that simply generate more failure demand and frustrated service users. Managers who spend more time generating useless statistics than actually sorting out the users requirements. Only last week a police steward described to me how not one police officer went on patrol in a large Police Station on a Friday night.

Systems thinking is not the total solution. But it is an important contribution to the debate and points to a different way of approaching service delivery. 

Monday, 10 January 2011

Employment Rights

Well it didn't take long to start the attack on employment rights. On the day the PM is talking about 'a pro-jobs agenda', his government is planning to destroy them by reducing the minimal protection workers have in this country.

A consultation later this week will set out a range of reforms making it even easier for small firms to hire and fire staff. Among them is a potential doubling, to two years, of the length of time someone must be employed before they can bring an unfair dismissal claim. Another proposal would be to require anyone bringing a case to an employment tribunal to pay a fee, returnable if they win, allegedly in an effort to discourage spurious claims. In reality to stop claims from staff, who having been sacked, won't have the cash to do this.

We have the usual business organisations trumpeting their support. The British Chambers of Commerce said employment tribunals were in "dire need" of reform and weighted in favour of workers. Instead of addressing poor employment practice in their member organisations, they want to encourage bad employers.

As someone who manages legal services I see a lot of ET claims and outcomes. Far from being weighted in favour of workers, it is very difficult to prove unfair dismissal. Only the really bad employer conduct cases succeed.  In fact, according to the latest official statistics only 10% of unfair dismissal claims are successful at Tribunal. The average for all types of claims is only 13%.

So Prime Minister, this is an issue of fairness and justice, something you claim to be concerned about. The hint is in the title, workers are only protected from UNFAIR dismissal.

Saturday, 8 January 2011

Bankers Billions

Happy New Year. Not that there appears to be anything new about the weather as I contemplate the journey to Glasgow for a meeting this morning.

The same is of course true for the bankers and their apologists in the UK Con-Dem coalition.  We hear that the Royal Bank of Scotland may pay £1bn in bonuses while Barclays may pay around £5bn. This will no doubt be spun as a small reduction on last year. However, even if bonuses are cut, salaries have risen significantly to compensate, by up to 40% in some cases.

There was much rhetoric on this from Osborne and Cable before and after the election. Vince Cable told the BBC last month that the coalition government was "fully signed up" to "robust action" in curbing bonuses. In 2009 George Osborne said that we could not wait for the 'promised land of a responsible bonus culture'.

It is particularly galling to hear senior bankers defending these bonuses on the grounds that we need to retain talent, incentivise our staff. They entirely forget that it was this 'talent' that brought the world economy to its knees and had to be bailed out by the taxpayer. It is the taxpayer, and public sector workers in particular, who are now paying the price. Few bonuses here, just job losses and pay freezes.

Ian Bell is his comment piece in today's Herald sums it up well.

"It ought to be a sobering thought to anyone who can still manage surprise. Large parts of British banking are in the hands of the state. Other parts are intact and profitable thanks only to the state’s guarantee. Yet no government, of any stripe, is willing or able to exert proper control. It’s easier, too easy, to blame that bloated public sector, and to soak the poor."