Strengthening local democracy

Fifty years of centralisation hasn't solved Scotland's biggest challenges, so let's try strengthening local democracy.

That's the conclusion of the final report of the Commission on Strengthening Local Democracy. It argues that the level of inequality remains intolerable after years of centralisation and has left us with huge social and financial costs. They also identify a link between the absence of strong local democracy and the prevalence of inequalities. It is communities that empower governments at all levels, not governments that empower people.

The report starts by making the case for local democracy. Put simply, they argue that strong local democracy means putting local people in charge of their own lives, and leaving national government to focus on outcomes for the whole of Scotland. They do recognise the countervailing forces of centralisation - consistency, efficiency and public support. As others have put it, one person's postcode lottery reflects another's local circumstances.

The Commission has identified seven principles that they believe provide a powerful basis for renewing Scottish democracy. They have also concluded that the evolution of Scotland’s democratic system across the past 50 years has more or less undermined or inverted all these principles, albeit often with good intentions.

It's recommendations start with the need for a fundamental review of the structure, boundaries, functions and democratic arrangements for all local governance in Scotland. They recognise that calling for another review might appear a bit inadequate, but it requires a bottom up engagement on a scale that is outwith the scope of this Commission.

They do however point to different approaches in different parts of Scotland, in particular, between cities and more rural areas - no one size fits all solutions here. They strongly oppose the 'supersizing' of councils and suggest that 60 to 80 councils might be the way forward. This would bring Scotland more in line with the rest of Europe. It should also consider bringing the array of services currently delivered by national quangos under local democratic control, through a 'right to challenge' national delivery. This would also enable councils to connect services more effectively. Where this isn't practical, councils should have the power to veto the local plans of national bodies.

Unsurprisingly, they identify the lack of local fiscal powers as the biggest limitation on local democracy. They recommend that local government should have full local control of the whole suite of property taxes and a general competence to set and raise new taxes, subject only to not duplicating taxes already set elsewhere. This chimes with the Scottish Parliament's call for a cross party approach to council finance and UNISON's own approach.

Another interesting recommendation is making Ministers undertake ‘subsidiarity impact assessments’ on national policy and legislation, as a way of restraining the drift to centralisation. This is balanced by a duty on councils to support and resource community participation in all local decision making about tax, spend and service delivery priorities. This means deliberative engagement, not just more consultation. As they say, language is important here. The report captures this as the choice between ‘ceding’ power and ‘seeding’ power. In other words it is about subsidiarity, not decentralisation.

The report also discusses how the role and powers of local government could be embedded in the constitution, as is the norm elsewhere in Europe. In particular, the European Charter of Local Self Government should be put on a statutory basis within Scotland.

While the Commission's recommendations will take some time to deliver, they helpfully suggest ways in which we could start the journey now. Community planning, decentralisation schemes and other local initiatives offer a way forward to embed a different approach to developing local democracy. The powers already exist to do much of this. However, we need to take the opportunities of additional devolution or independence to ensure that we don't simply swap Holyrood for Westminster. Scotland is few people's definition of local.

In conclusion, the report argues that communities across Europe have enjoyed the benefits of strong local democracy for decades. Scotland must be no different. Real change can create a vibrant new democracy for this century and a stronger, more equal society.

I would argue that there is much in this report that will be welcomed by those who support genuine local democracy. It gets the balance right between recognising that democracy doesn't end in the council chamber and the rather woolly community development approach that risks capture by unrepresentative interest groups. I suspect many will find the lack of firm recommendations in key areas like structure and finance frustrating. However, there is a direction of travel on these issues that is consistent with some well thought through principles. What stands out from the report is the clear articulation of the case for local democracy. It is welcome for that alone.

Women are shut out of the economic recovery

Women, especially those on low pay, are firmly shut out of the economic recovery.

That’s the conclusion of a new report - The changing labour market 2: women, low pay and gender equality in the emerging recovery’, published by the Fawcett Society.

The key findings include:

Since the start of the crisis in 2008, almost a million (826,000) extra women have moved into types of work that are typically low paid and insecure. Since 2008, female under-employment has nearly doubled (to 789,000) and an additional 371,000 women have moved into self-employment, which is typically very low paid. 1 in 8 low paid women now describe themselves as on a zero hours contract.

The increasing levels of women in low paid work, along with the declining value of low pay, is contributing to the widening inequality gap between women and men. Last year the gender pay gap increased for the first time in five years and now stands at 19.1 per cent for all employees.

Low paid women are feeling the cost of living crisis sharply: nearly 1 in 2 say they feel worse off now than five years ago; nearly 1 in 10 have obtained a loan from a pay day lender in the last twelve months; nearly 1 in 12 low paid women with children have obtained food from a food bank in the past twelve months

This report is published on the same day as the Prime Minister announces that all government policies must pass the ‘family test’. You might therefore expect some action on the issues highlighted in the Fawcett Society report. You will be disappointed. The initiative focuses on age ratings for music videos and a throwing a few pennies at the counselling service Relate. Not a mention of the impact of welfare cuts on the family, the closure of sure start centres or the consequences of his austerity economics.

The Fawcett Society report sets out the harsh reality of a Britain the Prime Minister simply doesn’t understand.

A new framework for industrial relations in Scotland

The 'Working Together' Review has set out a positive new framework for industrial relations in Scotland.

Last February the Scottish Government commissioned an independent review of progressive workplace policies and practices in the public and private sectors in Scotland. It was Chaired by Jim Mather and had a broad based membership from employers, trade unions (including UNISON's Lilian Macer) and academics. The aim was to identify best practice to promote collective bargaining and innovation in the workplace.

In many ways the strength of this report is in the description of industrial relations in Scotland today. It dispels many of the myths about relations between unions and employers, highlighting the positive relationships that rarely get media coverage. Scotland does of course benefit from significantly higher union density than the rest of the UK, but this report goes further in setting out the range and depth of industrial relations practice. This is helpfully illustrated with case studies and examples from a range of sectors.

The Review Group identified a shared ambition to embed progressive workplace practices to boost innovation and productivity and deliver successful organisations, sustainable business and economic growth, high-quality jobs and a more equitable society. This is reflected in the key themes for action that include:

• investing in the capacity of union members and staff - and enhancing employer capacity in the same way - to deliver economic, social and civic benefits;
  
• investing in dialogue and communication about fair work to achieve a broader and deeper recognition of the benefits that accrue from unions and employers working together, and a shared commitment to progressive workplace policies;
  
• fostering real opportunities for unions, employees and employers to work together which embeds these values more systematically and maximises the benefits of shared knowledge and distributed leadership;
  
• a willingness to resource, evidence, share and learn from what works.

There are 30 recommendations in the report that seek to deliver practical actions in support of the key themes.

They recommend that there should be a new strategic stakeholder body to provide leadership and support the development of better industrial relations. The model is to be promoted through procurement and the other policy levers of government. Practical measures that I particularly welcome, include recognition of the valuable role equality and green union representatives can play in the workplace. A number of UNISON projects have shown the value of these and the proposed environmental workplace fund would aid the development of green reps.

For the public sector there is a recognition of the merits of the NHS partnership model and the benefits of a degree of common best practice. This reflects the Christie recommendations and UNISON's case for a national workforce strategy. Extending worker directors to all public bodies is also welcome and the Scottish Government has an opportunity to deliver on this in the Food (Scotland) Bill.

The basic premise behind these recommendations is that the economic and social challenges and opportunities facing Scotland are more likely to be addressed successfully in an environment where unions play their full part. Those in trade unions who cling to the Marxist school of industrial relations, or the 'race to the bottom' employers, won't find a lot in this report to encourage their approach. However, most employers and trade unions in Scotland will welcome this report and look to the Scottish Government to translate their response to the recommendations into action.

 

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Wage growth is needed for a sustainable economic recovery

There are still some very mixed messages on the economy in the latest batch of reports.

Scotland's economy continued to strengthen over the first half of the year, with a forecast to of the strongest year of growth since 2007, according to the Scottish Government's latest State of the Economy report. Output expanded by 1% in the first quarter of 2014, moving beyond pre-recession levels, and business surveys indicate that expansion has continued in the second quarter of the year.

The latest retail sales figures for Scotland increased in the second quarter but at a slower pace than Great Britain as a whole. Data indicated that sales volume grew by 0.8% between April and June and on an annual basis, they were up by 2.9%. In comparison, retail sales in Great Britain increased by 1.6% during the second quarter, and by 4.5% annually.

However, the National Institute for Economic and Social Research (NIESR) said Britain is growing at its slowest pace in a year, following news that the manufacturing sector is performing less strongly than the City expected. NIESR believed the economy expanded by 0.6% in the three months to July, down from 0.8% in the three months to June. Their estimates come after ONS released figures showing manufacturing lagging well behind the service sector in its ability to recoup ground lost during the "great recession" of 2008-09. The ONS said that output from UK factories remained more than 7% below its pre-recession peak. The strong pound is also a concern for exporters.

Increasing growth is also having little impact on wages. The FT highlights that very few have increased the starting salaries they offer, denting hopes for a recovery in wages after six lean years. Just 2% of the 1,000 employers surveyed by the Chartered Institute of Personnel and Development reported a significant increase in starting salaries. The organisation’s survey of 1,000 employees showed the median pay rise this year was just 2 per cent, down from 2.5 per cent in 2013. The summer Labour Market Outlook (LMO) report also warns that wage growth is expected to remain weak, even though output is growing strongly and the jobs market is buoyant.

Further evidence comes from today's ONS Labour Market statistics. Unemployment in Scotland has fallen by nearly 1% in the last quarter with significantly bigger reductions for women than men.

Irritatingly, there is again no Scottish wage data, but UK data shows that average wages excluding bonuses rose by 0.6% in the year to June, the slowest rise since records began in 2001.

Low average wage rises are an indication of the level of so-called "spare capacity" in the economy. This is the Bank of England's measure of the extent to which the UK economy is underperforming, as a result of a lack of business investment either in hiring new staff, technology or machinery. It is also an important factor in their advice on the timing of any interest rate rise. There is some, albeit outdated, evidence that the wages of full time workers are rising faster than average wages. This might indicate a further shift to part time work.

Francis O'Grady at the TUC sums this up well, "The combination of rising employment and falling pay growth suggests the economy is very good at creating low-paid jobs, but struggling to create the better-paid work we need for a fair and sustainable recovery. Self-employment has been responsible for almost half of the rise in employment over the last year. The fact that self-employed workers generally earn less than employees means our pay crisis is even deeper than previously thought, as their pay is not recorded in official figures. Falling unemployment is always welcome – particularly for young people who are finally starting to find work – but unless the quality of job creation increases Britain’s living standards crisis will continue and people will be locked out of the benefits of recovery."

Overall, it does appear that the economy is recovering slowly. However, better employment numbers still reflects insecure and part-time working. Most importantly, wages are not increasing and that is an essential element of sustainable economic growth.

 

 

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Chicken contamination puts profits before safety

A recent survey for the Food Standards Agency showed 59% of raw chicken bought at supermarkets contained the potentially deadly bacteria Campylobacter, with 16% being heavily contaminated. This demonstrates, yet again, that the light touch regulation favoured by the UK and Scottish government's is not protecting the consumer.

Campylobacter is the most common form of food poisoning in the UK, affecting more than a quarter of a million people every year. It causes stomach upsets, vomiting and diarrhoea and is responsible for more than 100 deaths a year, costing the economy £900m.

Stephen Jardine highlights the regulatory failure in his Scotsman article, "After a decade of trying to get the poultry industry to clean up its act, the Food Standards Agency had promised to name and shame the worst offenders in the first quarter of its year-long survey. However, pressure from the industry has led the FSA to back down". He concludes "Action will only come when culprits are named and shamed, forcing them to act tough with suppliers to protect their market share. Then, and only then, will things really start to change."

Even that bastion of the free market, The Daily Mail, was outraged, "The survey results are a damning indictment of supermarkets, farmers and processors who are putting customers at risk every day of the week"

Food safety experts have highlighted the close links between the industry and regulators. Erik Millstone, professor of science policy at the University of Sussex said, "The FSA has failed to keep its promise to the British public. This means that consumers can no longer trust the FSA to put the interest of consumers ahead of those of the food industry."

Tim Lang, professor of food policy at City University, said the FSA had been ‘captured’ by industry interests. "This is a sad day for British food policy. A quarter of a century after the British learned of the extent of contamination of poultry, we are back again with unacceptable levels of food-borne pathogens. Then, it was salmonella. Now, it’s campylobacter."

In June this year, I gave evidence to the Scottish Parliament's Health Committee on the Food (Scotland) Bill that will create Food Standards Scotland. I highlighted the work of Scottish meat inspectors in preventing over a million instances of diseased animal carcasses from entering the food chain. The FoI data we released included 100,000 chicken tumours. I said, "This shows what a vital job meat inspectors do. We are calling on the Scottish Government to ensure that Food Standards Scotland is focussed on safety of consumers not food industry profits. Meat inspectors and vets must be able to carry out thorough independent inspections, free from food industry influence."

Meat inspectors and environmental health staff have been warning of the implications of deregulation and cuts in food safety for years. To add to the demoralisation caused by unheeded warnings, meat inspectors are now suffering real term cuts to their pay. They are not even getting the miserly government pay policy. Meat inspectors, official veterinarians and support staff employed by the Food Standards Agency have therefore voted for industrial action. That action will have a serious impact on food output.

The food industry hasn't done enough to clean up its act and deregulation has simply encouraged them to put profits before consumer safety. The FSA has been complicit in this process, being far too close to the industry. The Scottish Government has an opportunity through the establishment of Food Standards Scotland to take a new approach. Early signs are not good with the Scottish Parliament passing regulations that allow visual only inspection of pigs.

Hopefully, this latest survey will cause ministers to think again and put the consumer first.

 

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Pension fund investment - pop down to the casino

Forget pension fund managers and their expensive fees - pop down to the casino. Even some of the best fund manager financial track records are simply performing at the market average you could achieve by random chance.

This is the entertaining and important hypothesis argued by Toby Ord from the University of Oxford in today’s edition of the academic newspaper ‘The Conversation’. Important because most of the £24bn of our Scottish local government members pension cash is invested in equities, advised by fund managers.

And they don’t come cheap. Last year there was an excellent Radio 4 programme, "How You Pay for the City" that highlighted excessive charges in the UK compared to Holland that means the average comparable Dutch pension will be 50% higher than you would get in the UK. The programme set out the mechanisms fund managers use to maximise their fees at the expense of scheme members and pensioners. It is not just excessive fees by fund managers, but also "churn" (excessive buying and selling of stock); stock lending (they lend out your share certificates for a fee), "Custody Banks" and "transitional management".

Toby Ord’s hypothesis goes like this: 

“Suppose I start 16 funds with $1,000 in each and bet the contents of each one on a fair double-or-nothing game. On average, eight will win. We can do this again with three more games and by the end, on average, one fund will win all four of its bets, taking it up to $16,000. By making opposing bets, I can even guarantee it. We can then put it back into an index fund in the stock market, wait for a while, then show investors a fund that radically outperformed the market. If the period is ten years, that would translate to outperforming the market by 32%. This is an apparently impressive result for an unskilled stock-picker, but much less impressive if you know that 15 other funds collapsed behind the scenes.”

He concludes:

“It is unclear that there has ever been (or ever will be) a fund whose past performance has been good evidence for its future success. It all strengthens the growing case for investing in low-cost index tracking funds, even if those costs mean you are guaranteed to perpetually underperform the market.”

In Scotland’s biggest pension funds, local government, we are moving towards a new system of governance that should provide an opportunity for greater transparency and engagement by members. These are the sort of issues that the new pension board members will need to grapple with.

How councils can improve our energy system

Cities could play an important role in our energy system. In the energy chapter of the 'Red Paper on Scotland', I argued for greater public ownership of energy generation in Scotland by rediscovering the role local government used to play. This reflects what other countries regard as the norm, notably through the growth of renewables in Denmark.

And not just Denmark. Munich in Germany has a target to supply the entire municipality of 1 million people with renewable electricity by 2025. The city has already invested €900 million in renewable energy projects, and it has plans to invest a total of €9 billion to deliver its 2025 target. A group of councils, primarily in England, are also getting involved.

The IPPR has now published a report entitled ‘City energy: a new powerhouse for Britain’. This sets out how cities can become involved in energy and what central government could do to support them.

Cities could deliver the investment to decarbonise our energy system by raising their own finance through issuing green bonds and by making better use of their pension funds. In Scotland, over £24bn is sitting in local government pension funds, mostly invested overseas. Lancashire County Council has already done this.

Using this finance, city energy companies would deliver benefits to city residents rather than shareholders of the mostly foreign companies that dominate the Big Six. Currently, 50% of offshore wind and 69% of nuclear generation is owned by foreign state-backed companies. This means our consumer funded subsidies are going to foreign shareholders.

The IPPR report sets out a number of ways cities could get involved in energy, from becoming a licensed supplier down to joint ventures or partnerships. Aberdeen is one example of a Scottish council that is getting involved by becoming a global pioneer in the use of hydrogen produced using excess power from their nearby offshore wind farms.

The gains include cutting bills and tackling the fuel poverty endemic in our cities. Providing new investment to decarbonise our power supply, with generation that will help secure long term energy security. Not to mention jobs and sustainable economic growth.

In Scotland, this initiative should not just be limited to cities. Scottish Water is well placed to do more than the modest first steps it has taken in this area. Smaller, rural authorities could also get involved, either by linking with cities, or forming partnerships with other councils.

Local government led the way in the 19th Century by generating energy. It's time to rediscover that role and the IPPR report shows how to do it.

 

Cross posted at Utilities Scotland

 

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