Thanks for being a Touchstone blog reader over the years and we hope you will also find our new blogs as useful to you.

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Do you reckon you’d be able to cover the cost?

In research carried out for us by the polling company GQR, we asked over 3,000 working adults if they could cope with an unexpected £500 bill. One in four told us they couldn’t. Despite being in work, such a sudden expense would be unaffordable.

This is worse among certain groups. 32 per cent of young workers, for example, would be unable to pay the sudden cost. The situation’s similar for women and for Black, Asian and Minority Ethnic (BAME) workers.

An underlying fear of a sudden big cost is undoubtedly stressful. Working all day, but still constantly worrying about a sudden unexpected bill ruining your budget is frustrating. It’s horrible to be bringing in a wage, but for that wage to insufficient to the point that you panic a bit whenever the washing machine makes a weird noise.

It’s not just unexpected costs causing stress

But it’s not just sudden costs, a lot of working people are stressed about just meeting the usual household costs over the coming year.

Just under a half of all workers asked are concerned or very concerned about meeting basic household expenses.

Again, this rises among certain groups. Three in five BAME workers, and a majority of young workers, are worried about paying bills throughout the next year.

This is getting worse. More than a third of workers are finding it harder to pay the bills than they were a year ago – rising to 40% of working women and 39% of BAME workers.

This manifests itself in day-to-day decisions. Two-fifths of workers have changed spending habits to deal with financial difficulty, with many deciding not to go away, or putting off big financial commitments.

17 per cent of workers have left the heating off when it was cold to save on energy bills.

The same number have pawned something in the last year because they were short on money, and the same number again have had to ask a friend or family member for money.

Others are going hungry just to make ends meet. 1 in 8 workers are skipping main meals to save money.

It’s down to wages and the cost of living

The reasons people are struggling are clear – wages are stagnating and the cost of living is increasing.

We asked people for the main reason that household expenses are getting harder to meet.

41 per cent blamed the cost of living – meaning either the general cost of living, increasing prices, or bills going up.

Another 41 per cent told us that the main reason was related to their job in some way. This was due to either:

• Their income not rising to meet rising prices (22 per cent)
• Low pay meaning they simply don’t earn enough (9 per cent)
• Hours being cut, or not getting enough hours (6 per cent)
• Not receiving a pay rise (4 per cent)

No surprises

The core reasons behind concerns about making ends meet come as no surprise.

For a while now, we’ve been experiencing the longest pay squeeze since Victorian times. In 2016, average real weekly pay (that’s pay once inflation has been taken into account) for UK workers was around £1,200 a year less than it was back in 2008.

After the post-2008 crash, real wages did start to recover slightly between 2014 and 2016. However, latest estimates show this trend reversing. Real wages have fallen in each of the past four months.

This isn’t set to get better anytime soon. The OECD forecasts that UK real wages will fall by 1.1% in 2018. This is the joint worst across the OECD countries, and makes the UK one of only four countries that will see a fall in real wages.

Turning to debt

Struggling to make ends meet increases the temptation to take on personal debt. It’s therefore little surprise that we’ve seen a recent rise in unsecured debt.

Back in May, we revealed that shrinking pay packets are forcing workers to take on more personal debt. Unsecured debt per household was £13,200 in 2016 – the highest figure since the crash. And it’s set to reach a record high in 2017, and exceed £15,000 before the end of the next parliament.

Source: ONS, OBR, TUC analysis

Britain needs a pay rise

Something must be done to halt this living standards crisis.

The simplest next step for politicians is to scrap public sector pay restrictions. These artificial restrictions have meant drastic cuts in real pay for those who deliver vital public services.

But this isn’t enough. As the striking McDonald’s have recently shown, those in the private sector clearly need a pay rise too. We want to see the minimum wage rise to £10 per hour as quick as possible.

We also need investment to create great jobs across the country. Too many communities have been left behind and regional inequalities continue to exist. We need a proper industrial strategy with a Great Jobs Agenda at its heart.

The post Struggling workers are skipping meals to make ends meet appeared first on ToUChstone blog.

• The UK received €1.21bn from Horizon2020 in 2015, the highest amount received by any member state.
• We are also net beneficiaries from hosting the European Medicines Agency and Joint European Taurus (JET) fusion research based in Oxfordshire.
• International collaboration increases the impact and value of UK R&D. For example, UK papers with international co-authors have around 40% higher citation scores than those without.

But if the Government is serious about continued engagement, aspiration must be backed by effective action.

The UK’s financial contribution will probably at least need to match the benefit received. Alongside Horizon 2020, the UK benefits from other funding streams and European Regional Development Fund grants.

These commitments should not and will not be resolved through reallocation of existing science funding including that announced in the 2017 Budget. They will require significant investment of new money. The industrial strategy for the life sciences sector published in August made clear that it was necessary to increase R&D expenditure to around 2.6% of GDP compared with 1.7% currently.

In Prospect’s view government should take a holistic approach and ensure that higher public investment leverages in a much needed rise in private sector R&D.

But in addition to confirming funding, UK science needs the personal and organisational collaboration that programmes like Horizon 2020 bring. Relationships have already been disrupted as a result of Brexit uncertainty, with UK-based research frozen out of some new project bids and loss of lead partner status elsewhere. The perceptions of the European science community may not be shifted as easily as government would like to think.

142,000 EU nationals work in British science and technology and they continue to face pernicious uncertainty about their future status and security. Successful collaboration depends on sharing of expertise and that requires free movement of scientists and the technical experts they work with. Government must commit now to maintaining the position of EU nationals and their families. There is no doubt that without their contribution UK capacity and capability will suffer dramatically.

Against a background in which scientific influence is visibly waning under the current US administration, today’s position paper will be a watershed for our own political leaders. At stake is the UK’s ability to steer the future of science rather than leave that to others. Also at risk is our place in ‘Big Science’ mega-projects, relating to climate, space and energy, that are only possible at the international scale.

Aspiration is good but action is what counts. Prospect members are tired of waiting.

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So-called pensions freedom is one of ex-Chancellor George Osborne’s great gifts to the nation. From 2015, no longer would most savers in defined contribution schemes (the kind in which the pension is dependent on payments in and market returns) have to buy an annuity, giving them an income for life. Instead, they could do what they wished with the money from age 55.

With one attention-grabbing announcement, he blew up the (flawed) old system, but failed to put anything in its place. The TUC and others warned that abandoning savers like this to a financial services market that is notoriously unresponsive to the needs of mass market savers was unwise.

Many would be ripped off. Others, in the absence of more obvious options, would simply cash their savings in. The ability of people to generate an income to see them through their later years could be hindered not improved.

There are growing signs that this is coming to pass, most recently in a report from the Financial Conduct Authority. The regulator found:

• Signs that cashing-in at least part of a pension long before retirement is becoming a cultural norm. The FCA report finds that 53 per cent of the pension pots that have been accessed have been fully cashed in.
• Charges for drawdown, a way of taking an income from a pension pot, are complex and opaque.
• There is little evidence of savers “shopping around” for retirement products. Some 94 per cent of non-advised drawdown sales are made to existing customers
• There are limited signs of innovation by product providers.

In short, there is evidence that the combination of product complexity and consumer inertia that led to so many people getting a poor deal from the annuity market has been replicated under pensions freedom.

These shortcomings are significant, not least because increasing numbers of retirees will be relying on DC savings in retirement. Putting in place measures to assist savers in meeting their retirement needs would underpin the achievements of automatic enrolment in bringing millions of low and middle income workers into the pensions system. But it is important that any changes draw on the experiences of past reforms.

The approaches mooted by the FCA fall into two categories: supply side changes that alter the way the pension industry runs and demand-side modifications that seek to empower the consumer so that market mechanisms change outcomes. These are not necessarily in conflict but we should be very clear about which are likely to deliver the desired results.

Recent pensions industry studies and reforms strongly suggest that the former should be emphasised. These include:

• The Office of Fair Trading’s 2013 defined contribution workplace pension market study found that competition alone cannot be relied upon to drive value for money due to the weakness of the consumer and complexity of products.
• Work done in 2014 for the FCA on the annuity market showed that despite various initiatives designed to encourage shopping around, almost half of buyers made their decisions with limited or no competitive information.
• The highly successful automatic enrolment reforms rolled out from 2012 have relied primarily on supply-side changes. Those who do not want to save into a pension have to actively opt-out. Employers are compelled to make contributions. There is a cap on charges on default funds. And the National Employment Savings Trust (NEST) was established as a back-stop provider to ensure that all firms and workers, however unattractive to traditional providers, could access a scheme.

Decision-making is very hard for DC savers as they approach retirement. Osborne’s pension freedoms want people to make assessments of their likely lifespan, investment returns and inflation outlook. And that they will continue to make these judgements throughout retirement.

In its response to the FCA report, the TUC has been clear that we believe the key to giving savers a better chance of good outcomes is the establishment of default retirement pathways. This is one of the options explored by the FCA. These would be well-researched, good value, securely governed solutions that would be suitable for most savers. In the TUC’s view, this would include a guaranteed income for life so those savings could never run out. Those who wished to pursue an alternative approach would be free to do so.

This would be a new world, but one rooted in the real world.

The post Why the new world of pension freedom won’t solve the old problem of retirement income appeared first on ToUChstone blog.

We are not asking for a lot. We are asking to be treated with respect, have guaranteed hours, and to be paid a decent living wage of £10 that we can afford to live on. It’s all very reasonable when you actually think about it.

These are the words of Lewis Baker, one of the McDonald’s workers striking today. Lewis is completely right – each of the requests being made as part of these strikes is completely reasonable.

A pay increase

Jobs are supposed to offer us some financial security – enough to live on and get by.

But that increasingly isn’t the case. Despite employment being at a record high, work is failing to offer a guaranteed route out of poverty. In fact, a majority of people in poverty are in working households.

This is true for some of those at McDonalds. The Bakers Food and Allied Workers Union (BFAWU) explain:

Some workers are working full time and are still living in poverty. That’s the harsh reality of it.

Shen Batmaz, one of the strikers at the Crayford branch of McDonald’s, has highlighted the impact of this. In an interview with her local newspaper, she explained that one of her colleagues has been left homeless due to poor pay and conditions.

This isn’t a unique experience. A number of insecure workers recently told us about being unable to pay the rent – some having to move back in with their parents.

In-work poverty is unsurprising given that real wages are lower now than they were back in 2008. Money just isn’t going as far as it once did, and people are struggling.

This isn’t set to get better. For four months now, real wages have been shrinking. And the OECD has forecast that UK real wages will fall by 1.1% in 2018. This is the joint worst across the OECD countries.

In the face of this pay squeeze, workers requesting a higher rate of pay is, as Lewis said, completely reasonable. This is especially true given that their employer makes billions each year, and is experiencing record share prices.

At the TUC we believe the National Minimum Wage should reach £10 an hour as quickly as possible. The Low Pay Commission is starting to take evidence on the rates for next year in September. We hope they’ll be listening to workers like those in McDonald’s.

Guaranteed hours

It’s not just the pay, but also the contracts. Those on strike were promised an end to zero-hours contracts. This promise is yet to be met.

Striking workers have spoken about their fears of suddenly being given less work. One staff member, Steve, told the Guardian:

It’s happened to a friend of mine who went on holiday who came back to just one shift a week instead of five … No explanation was given, because they don’t have to give one.

This is a typical experience for those on zero-hours contracts.

We’ve heard from many in insecure work about being given little notice of their shifts. Some even turn up for work just to be sent home without pay. They have no idea when they’ll be working, or even how long for.

This means pay unpredictably fluctuates, and budgeting becomes pretty much impossible.

Treating staff like this is indicative of a power dynamic that favours the employer. Staff are reliant on their bosses for shifts, and doing something that displeases a boss can lead to a drop in hours. A drop in hours means even less pay.

This same power dynamic allows some bosses to get away with hostile behaviour. We recently heard from those in insecure work who had been threatened and harassed by bosses just for turning down a shift, or taking sick leave.

The McDonald’s workers striking in Crayford and Cambridge report similar behaviour. In her interview with the local paper, Shen spoke about the “culture of fear” at the Crayford branch of McDonald’s:

“Workers have suffered bullying and harassment, staff are afraid to stand up out of fear that their weekly hours could be cut to just one shift a week.”

The right to join a union

Given these pay and conditions, it makes sense that one of the requests of the strikers is the right to unionise.

The fast food industry isn’t known for a history of strikes. As many have noted, this is the first time ever that McDonald’s workers in Britain have taken strike action.

The symbolism here is therefore important. These workers have suffered silently for too long. They’ve fought hard, and risked a lot, to have their voice heard. Other workers facing the same problems and pressures deserve to be able to unionise and make their voices heard too.

The post McDonald’s workers’ requests are reasonable – they deserve to be met appeared first on ToUChstone blog.

Real wages have been falling for the past four months, and that’s expected to continue. This is particularly concerning because, on average, UK workers are still paid less than they were back in 2008. This should all be big news.

Instead though, we hear a lot about the high amounts the top few footballers are paid. We hear about new signings being paid £300,000 per week, players being tempted away by the offer of more money, and frustrated defenders complaining about only being on £60,000 per week. (It’s important to note that this is just at the top of the game, the average footballer’s salary isn’t as great.)

But, in honesty, it’s beginning to border on bland to talk about how much senior Premier League players earn. We all know they earn loads. More than loads. Loads and loads of loads. So many loads that the numbers just sound a bit fictional.

So let’s not chat about those for a little while – let’s focus on those who don’t have such a good deal.

Those who keep the club running miss out on a living wage

Many of the top football clubs don’t guarantee their staff the real living wage set by the Living Wage Foundation.

Despite Premier League clubs choosing to pay some players millions per year, many can’t seem to find an extra couple of quid an hour for all the caterers, cleaners and groundspeople that keep the clubs running.

While some have committed to paying all staff a real living wage, this isn’t yet the norm. In 2014, Chelsea became the first Premier League club to sign up to the living wage. Everton have since followed. These remain the only two clubs accreditted by the Living Wage Foundation.

When asked if they paid workers the living wage back in 2015, some teams refused to answer. Others explained that they pay it, but only for full-time or permanent employees. This means that casual staff, agency staff and contractors may be missing out on the living wage.

The pay disparity between top players and those on low pay at Premier League clubs is made clear if you play about with this BBC interactive tool. The tool shows you how long it takes to earn the wage of a star footballer on your current wage. Sorry for the spoiler, but if you’re on an average salary, it’ll take you over a thousand years.

But it’s unfair to just focus this criticism to the world of football. Football reflects society, not the other way round. This is another case of the highest paid in a profitable industry being paid vastly more than the lowest paid. Gaps between the highest and lowest paid in industries and organisations are nothing new and exist elsewhere.

What can be done?

There’s numerous ideas on how to address this disparity. As part of its lacklustre proposals on corporate governance, for example, the government is proposing that UK-listed companies be obliged to publish the pay ratio between their chief executive and their average British worker.

If we really want to help those on the lowest pay, it seems to make more sense to make companies pay the pay ratio between the chief executive and lowest paid, rather than the average.

However, publishing information alone isn’t enough. More needs to be done to help those on the lowest pay.

At the TUC, we’d like to see more employers signing up to the real living wage.

The lowest paid are struggling and wages simply aren’t rising in line with living costs. As real wages continue to fall, work increasingly doesn’t guarantee financial security. Nor does it offer a guaranteed route out of poverty – the majority of those in poverty are also in work.

Premier League clubs aren’t an anomaly – there’s a lot of profitable companies that can afford to pay their employees a living wage but choose not to. When we hear about footballers and chief executives being paid millions, let’s remember to ask, “but what about everyone else who works there?”.

This post originally appeared on Left Foot Forward.

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The TUC’s new research explores how young parents are feeling – and their findings around fathers underline ours, and reveal a workplace culture unfit for purpose.  Taking all fathers, we found that 1 in 8 fear they will be seen as less committed if they work flexibly; and 1 in 10 think it will negatively impact their career.

To enable fathers to take a greater role looking after their children – and kick start a change in culture in the workplace that supports them to do so – Working Families is calling for a paid period of independent leave that makes time away from work to spend with new children a realistic option for more fathers.

Of course, it isn’t just fathers that are affected by this outdated culture; we found that more than 1 in 5 parents, young and older, would not feel confident discussing family-related issues with their employer.  1 in 12 could never tell their employer they have childcare problems, for fear of being viewed negatively.

Workplace culture is stuck in the past; employers are being needlessly rigid about the way they design and advertise vacancies – leaving too many parents that want to work left with just one choice: taking on low-paid, insecure work – or not working at all.  This rigidity is little more than self-harm on the part of employers, who are depriving themselves of talented and committed employees.

To create the workplace culture needed for parents of all ages to thrive at home and at work, we must move to a situation where all UK jobs are designed and advertised flexibly, by default.  Working Families, in partnership with the government, the TUC, CBI and the FSB, created the Happy to Talk Flexible Working strapline and logo.  Matthew Taylor’s review of modern employment practice has called on the government to champion it; of course, I completely agree.

More decent, part-time and flexible jobs are the change that needs to happen to ensure other initiatives work.  Does the government think Universal Credit will work effectively for parents if there are no decent quality part-time and flexible jobs? How will 30 free childcare hours work if the decent jobs parents need are advertised only at 35 hours per week?  And how will fathers returning from a period of paid leave continue to share care if the flexibility they need to do so isn’t available?  If we expect any of these to succeed, we have first to reform our outdated labour market.

The current situation must change – in particular to support young parents who have even more of an appetite to share care and who value flexibility highly.  Too many young parents are trapped in insecure work with uncertainty about their hours, making planning childcare very difficult.  The government should level the playing field on parental rights between those classified as ‘workers’, ‘employees’ and ‘self-employed’ without delay.

This would ensure that working parents obliged to take low-paid, insecure work is not denied the family-friendly rights which employees are entitled to.  For example, all agency workers (not just those who have been there 12 weeks) should have a right to paid time off for antenatal appointments; all workers (not just employees with a year’s service) should be able to ask for unpaid parental leave; and self-employed fathers should be able to access paternity pay.

What struck me most strongly on reading the TUC’s research is the individualization of the issue.  As they rightly point out, and despite the progress that has undoubtedly been made, many employers still see balancing work and family responsibilities as the employee’s problem.  Our 2017 Modern Families Index shows that employees tend to agree – they see the responsibility as primarily theirs, rather than their employer’s or the government’s.

Of course, parents need to be proactive on their own behalf; but this is undoubtedly more difficult for an individual, on their own, and especially if they face a hostile response from their employer, and if their employer isn’t being encouraged to support them by the government.  We – parents, employers and the government – must understand we all have a part to play in helping families achieve the balance that works for them; and respond.  After all, it’s all of us who will benefit.

You can read the Better Jobs For Mums And Dads report here.

The post Let’s help families achieve the balance that works for them appeared first on ToUChstone blog.

• If they are aware of three key existing employment rights which could help working parents with their childcare responsibilities:
• What they thought about these rights, and
• How the rights could be improved so they would be more useful to them

Here’s what they told us.

Existing rights aren’t delivering

The first right we asked about was the right to time off for dependents

50% of young mums and dads that we spoke to were unaware of this right.

Time off for dependants is unpaid unless an employer is willing to give paid time off under the terms and conditions of employment.  This means that lots of mums and dads can’t use this right, as they can’t afford to go without pay!

Then we asked them about the right to request flexible working.

43% of young mums and dads that we spoke to were unaware of this right.

Young mums and dads who had tried to use this right said that it was far too easy for an employer to turn down their request to work flexibly.

They suggested that when someone starts a new job it should automatically be possible to use flexible working practices, which would help them manage their childcare. The only exception should be where an employer can provide a good business reason for it not being possible.

The last right we asked about was the right to unpaid parental leave.

Shockingly, 63% of young mums and dads that we spoke to, are not aware of the right to unpaid parental leave.

The parents that we spoke to had a household income of less than £28,000.  Many felt that this right was not really helpful to them, as taking large chunks of unpaid time off is not realistic.

If you are a young mum or dad working on a zero hours contract, or as an agency worker, it is extremely unlikely that you will be entitled to use any of the three rights above.  These rights are only available for those people who are classed as “employees”.  Those people who are on more permanent contracts, with regular hours, for example.

So what new rights would help parents?

1. All workers should be given notice of their shifts one month in advance

Many young mums and dads have jobs without fixed working hours.  Shifts can be handed out with less than one week’s notice and they are often unsure about what time they will finish work.  Greater certainty of working hours would help young mums and dads plan their childcare around their working hours.

2. Parental leave and time off for dependants should be paid

It is not affordable for many young parents to take time off unpaid.  The government should start by introducing a period of 5 days paid parental leave.  It should be paid at least at the rate of the relevant National Minimum Wage rate.

Half of the mums and dads we spoke to said they struggle to combine work and childcare. These new rights could help change that. Now’s the time for the government to act.

You can read the Better Jobs For Mums And Dads report here.

The post 3 employment rights that aren’t working for young mums and dads. And 2 rights that they should have. appeared first on ToUChstone blog.

And in the Guardian, TUC General Secretary Frances O’Grady and the Adam Smith Institute’s Sam Bowman set out alternative views on whether companies be forced to put workers on boards. No prizes for guessing for who was arguing which viewpoint…

Despite the government’s disappointing u-turn on workers on boards, the genie is out of the bottle and the TUC has no intention of letting it back in!

The post A missed opportunity – the government’s corporate governance proposals appeared first on ToUChstone blog.

Speaking to the BBC yesterday, Lord Harris – a multi-millionaire, retail tycoon and Tory peer – claimed that Brexit would ‘give younger people more opportunity’ because they could work longer hours in his shops.

“We can only keep our staff on for 35 hours a week,” the Carpetright founder complained. In other words, his problem with the EU is that it gives workers too many rights.

Although he doesn’t even understand the laws he’s so keen to be rid of, since the European Working Time Directive actually sets a limit of 48 hours a week on the amount someone can be required to work.

It’s not a restrictive regulation or an attack on business, it’s a common sense law that protects people from being forced to work unhealthy hours.

Still no guarantees

Since the vote for Brexit, the government has brushed off concerns that working people will be worse off outside the EU. Theresa May has promised to “ensure that workers’ rights are fully protected and maintained”.

But time and again, senior Tories have undermined that promise, couching their support for Brexit in attacks on workers rights.

And we’re getting to crunch time on this issue. Next month, the government will present its Repeal Bill to parliament. The bill is supposed to transfer about 12,000 EU regulations into British law, but trade unions are concerned that working rights will be diluted in the process.

As Tories continue to publicly denounce workers’ rights legislation, vague promises from government simply aren’t good enough.

Working people need a concrete guarantee that their rights are safe from the likes of Lord Harris.

The post Tory peer says Brexit is good for young workers…because they’ll have fewer rights appeared first on ToUChstone blog.

So what’s going on in the economy?

GDP growth

The chart below represents the quarterly (blue bars) and four-quarterly (orange line) growth rate for the UK economy. It shows growth slowing significantly over the first half of 2017. The economy grew by 0.2 and 0.3 per cent in the first and second quarters of the year, compared with 0.5 and 0.7 per cent over the second half of 2016. Four-quarter growth came in at 1.7 per cent, down on the previous quarter’s 2%, and far below the pre-2008 long-term average of 2.8%.

GDP growth, per cent

Source: ONS

Expenditure

This reduction in GDP growth is being driven by declining demand across the board, with the notable – and perhaps surprising – exception of government spending. The chart below shows the contribution to the quarterly change in expenditure from different sectors. The key drivers of this year’s slowdown have been a reduction in household spending and a deterioration in the UK’s balance of trade (of which more below). This is particularly alarming given our recent over-reliance on consumer spending, and the high hopes for exports in a post-Brexit world.

 GDP (expenditure), percentage point contributions to quarterly growth 2016-17 Source: ONS

Government investment (the pink bar on the chart above) has been stronger, growing by 10.4 per cent on the year – the highest rate of growth since the spike in 2014. This is striking, though should be approached with caution – the figures are very provisional. Even at face value this is still very small-scale stimulus, set against the harm done by austerity policies since 2010, and the scale of uncertainties since the referendum. But it might be step in the right direction.

Trade

Over the year since the referendum, the trade story is complex to unravel. But the overall narrative is not a happy one. The chart below shows the annual percentage change in trade flows. For goods, exports (‘X’ on the chart) have seen a moderate strengthening (up 5.0 per cent in the year to Q2 2017), that has been matched by a corresponding increase in imports (‘M’ on the chart, up 4.7 per cent). With imports larger in cash terms, this means a deterioration in the balance of trade on goods.

Trade flows, % four-quarter growth 2014-17 

Source: ONS

The picture for services is more categorically negative, with exports declining by 1.3 per cent on the year to Q2 2017 and imports up by 0.5 per cent.  As a result, over the year, the overall trade deficit has deteriorated in cash terms from £7.8bn in Q2 2016 to £8.9bn in Q2 2017.

Employment

There is a brighter picture in the labour market data with the employment rate reaching 75.1%. This is the highest level the figure has hit since comparable records began in 1971.

Quarterly change in composition of jobs 2008-17

Source: ONS

Encouragingly, the majority of jobs created this year have been full time positions, shown by the size of the blue bars in the chart above. The majority of employment growth in previous quarters has come from an expansion in the number of part-time or self employed positions. There has even been a (very slight) drop in the number of workers on zero hour contracts this quarter, although 900,000 people remain reliant on these controversial arrangements.

Pay

Unfortunately this has not had the effect you might expect on pay packets. The chart below shows the increase in real wages we saw in 2015 and 2016, which was largely due to low inflation rather than strong nominal pay growth, was short-lived. Nominal wage growth is still around half the average before the 2008 financial crisis and the return of inflation this year has resulted in falling real incomes yet again.

Real earnings (percentage year on year) 3-month average 2008-17

Source: ONS

And the squeeze is not expected to ease. The Bank of England expects inflation to increase to around 3 per cent in the autumn, and for wage growth to average 2 per cent in 2017.

Which means the pressure on household incomes shows no sign of abating. And for those working in the public sector, the continuation of a 1 per cent cap on pay increases has made life even more difficult.

So there’s no shortage of challenges for the Chancellor to think about as he turns his mind to his first autumn Budget.

The post What’s going on in the economy? Five key charts for September appeared first on ToUChstone blog.

The conclusion of the booklet suggests that money we could ‘save’ by cutting our paid holidays, rest breaks, limits on night work and equal pay should be recycled to employers by cutting their National Insurance payments by 2%!

The TUC is all for a better performing UK economy, but regulation has benefits as well as costs, and there are much better ways to promote competitiveness than taking away protections for workers, consumers and the environment.

The first assumption in the essay is that a sharp increase in EU regulation was a direct consequence of EU integration. This is a shoddy account of European history. While at the very beginning the then European Community sought to harmonise national product regulations, it soon concluded that it would be impractical to proceed on that basis. So it switched to the principle of mutual recognition, which deems national rules to be roughly equivalent. The objective was (and still is) to create a market where consumers in one country can feel confident that what they are purchasing from another country is safe. The idea that the EU adopts regulations to harm businesses is plain wrong.

Secondly, Congdon suggests that the EU has opted to kill the competitiveness of its own manufacturing industries by forcing its member states to pollute less and spend more on renewables. But competitiveness and a greener economy don’t have to be mutually exclusive. A proper industrial policy would mitigate the effects of more climate-friendly energy production.

This has been done in Germany, where an ultra-efficient plant design produces 40% fewer emissions compared to a conventional coal-fired station, all within the supposed constraint of EU regulation and without denting the country’s competitiveness. It is government policy choices and not EU regulation that are the main obstacles to a thriving and eco-friendly industry.

Tim also takes aim at the Working Time Directive and the Gender Equality Directives by blaming these for increasing costs to business and reducing employment. It has been amply demonstrated that there is no causal link between levels of regulation and employment creation. And of course there are also benefits to individuals and society at large for every cost to law abiding businesses. The questionable estimate that the UK loses 1% of GDP due to EU social legislation is more than compensated by the 10.3% of GDP that membership of the single market is worth to the UK economy.

The author also argues against financial regulation (citing the bankers’ bonus cap) and bans on harmful substances, as if either didn’t serve any purpose at all but to annoy the City and other businesses. Light touch regulation of financial markets helped cause the financial crisis in 2008 with disastrous effects on ordinary workers who have been facing stagnant or falling pay in Britain ever since.

Congdon’s over-riding argument is that EU regulation has reduced UK productivity, although it doesn’t seem to have had that effect on other countries in the EU which are more productive: the UK lags France by over 20% and Italy by 8%. And as argued elsewhere by TUC economists, low pay and austerity have more to do with low productivity than ‘red tape’.

The TUC campaigned to remain in the EU referendum but we have accepted the outcome of the vote. What we need now is to protect jobs, employment rights and livelihoods. The best way to do this is not by continuing to peddle myths about ‘too much regulation’, but by staying in the single market – according to the IFS that alone would be worth 4% more in GDP.

The post Over-regulation is not the problem a post-Brexit Britain would face appeared first on ToUChstone blog.

… switching demand away from consumers to net exports and business investment, and boosting corporate profits.

Let’s examine each of these claims in sequence. [Spoiler: the argument doesn’t stand up]

“Switching demand away from consumers …”

This much appears true. ONS figures show household consumption slowing to a near standstill, with quarterly growth of 0.1% in 2017Q2 following 0.4% in 2017Q1. Quarterly growth averaged 0.75% over 2016, so that’s a big change. I have a sense this might exaggerate the scale of the slowdown, not least because retail sales picked up and credit growth is still strong. But, whatever, the comment isn’t false at this stage.

“… to net exports”

Er, no. Over the year, the trade deficit has deteriorated (in cash terms) from £7.8bn in 2016Q2 to £8.9bn in 2017Q2. There are two problems. First exports of goods are matched by a corresponding (and more sustained) increase in imports of goods – see the chart below. The EEF reminded us a few weeks ago (here) that “the impact of the sterling depreciation on the manufacturing sector was more nuanced than economic theory suggests given the dependence of manufacturers on imported materials and components”. Second, over the past year, exports of services have declined (by -1.3%) and imports haven’t (rising by 0.5%).

Exports (X) and Imports (M), % four quarter growth

“… and business investment”

Completely clear cut no. Business investment has ground to a halt. It grew by 0.0% on the quarter and 0.0% on the same quarter a year ago.

“… and boosting corporate profits”

This one is true, but so what? ONS data show a rise in profits of 6.2% on the year compared with a decline of -1.4% a year ago.

The trouble is demand was ‘switched’ to nowhere. Demand across the board is weak. Ironically the only area supporting demand, apart from what’s left of consumer demand, is government investment and consumption. Here’s a chart showing the contributions to quarterly GDP(E) growth (I’ve had to add net trade into the residual category as it is so volatile on this basis):

Demand, percentage point contributions to quarterly growth

In fact government consumption and investment accounted for 85 per cent of growth in the latest quarter. Too little too late, but a start. Moreover, Professor Minford is not known for celebrating the way the government can contribute to the economy.

Back to profits. How can they be up if everything else is down? Well, total income (GDP) is equal to profits plus labour income. With total income growth down and profit growth up, labour income growth must be down. Employment growth, wages growth and self-employment incomes are all weaker. What with the other effect of devaluation – rising inflation – that’s a big hit on real incomes. And that’s hardly good news.

‘Project Prosperity’ has not materialised. Insofar as the data reflect reality (and there is uncertainty), that’s a fact.

The post ‘Economists for free trade’ contradicted by today’s GDP data appeared first on ToUChstone blog.

Have you ever had a ride in a light blue car? Have you ever stopped to think who’s the slave and who’s the master? Have you ever had trouble with your automobile? Have you ever had to push push push push? Car trouble oh yeah.

– Adam Ant

For those of a certain age, it turns out that in 1980 Adam Ant was asking the right questions. There’s a growing sense of unease around the financial arrangements in the car market. In America talk of sub-prime auto loans echoes the not-so-distant past of the housing market. The Bank of England has also started to warn about the effects on UK financial stability.

But it’s not just financial stability we should be worried about. In the real world, the car industry looks like it’s struggling:

• Car registrations have fallen by 10% over the year to 2017 Q2 and Q3
• 2017Q2 has seen the steepest decline in motor vehicle production since the global recession
• Car retail and wholesale grinding to near zero growth in 2017Q2
• A fall of 19% in capital investment in motor vehicle (and engineering) industries, steeper than in the global recession
• Exports decline 5% in 2017Q2
• At 3.5%, the highest new car price inflation since 2011

Before turning to these figures, a review of the financial processes. Adam Ant may have feared becoming slave to his automobile. But today the worry once more is that the real economy is slave to the speculative excesses of the financial sector.

What’s going on with car financing?

‘Personal contract purchases’ now account for around four in five car purchases, compared to one in five in 2006. These permit consumers more favorable interest rates than on other forms of credit (e.g. a bank loan), as well as greatly extending the amount of finance available for car purchase.

The norm is that buyers (renters really) return cars after around three years of monthly payments, and then take out a new plan on a new car. These schemes are operated by ‘finance providers’ that are normally attached to manufacturers, though for example the Financial Times (FT) [4 – there’s a link on the number, and full list of references at the end] report Lloyds Bank operating in this area in the UK (and also Santander in the US [2]).

On top of this is a second layer of financial engineering. Just as with housing, finance providers package up some of their loans and sell them on, in the process known as securitisation. In February the Guardian [1] observed: “Some of the car-leasing loans in the US and the UK have been packaged into asset-backed securities [ABS], to be sold on to investors such as pension funds”.

More recently the FT [3] gave some numbers: “During 2016, €4.8bn [that’d be ¼ million cars at price €20K] [to put it into perspective, total net lending from banks to all non-financial business in 2016 was only £15bn, and total consumer credit was £10bn – see here] of auto asset-backed securities were sold into the UK — the highest amount issued since the financial crisis, and more than twice the volume in 2015, according to data from Morgan Stanley. Across Europe, just under €18bn of auto bonds were placed in 2016 — a 50 per cent rise on the year before”. In America they are now talking about ‘deep sub-prime’.

So how does this process unravel? The Bank of England have emphasized the dangers of a collapse in second hand car prices and the impact on finance providers, who rely on reselling in the second hand market when customers return cars after three years. Further down the line come dangers to pension funds and other asset holders who have bought the securities based on these car loans if prices collapse, and ultimately passing the risk onto households.

But fundamentally it seems hard to understand how this was not always a likely consequence of a scheme built on asking people to buy seriously upgraded cars in the middle of living standards crisis. The flooding of the second hand market and fall in prices is an effect of the scheme – not the cause of its collapse.

But likewise there will be a corresponding reversal in financial markets. On the 3 July the FT [3] reported Andrew Dennis, a securitisation investor at Aberdeen Asset Management, saying: “We do identify it as a risk point, but it is for sure a brewing risk”. But they had already [2] reported the warnings of an expert on the US market: ‘“It’s a new mini-Big Short,” she says, alluding to traders who made billions by betting on a housing collapse a decade ago’.

Then at the end of July– again with echoes of housing – the FT [5] reported the ratings agencies catching up:

Moody’s has raised the alarm over a wide range of UK consumer loans that are bundled together and sold to institutional investors, underlining how anxiety over a deteriorating economic outlook is spilling into markets. Auto loans, credit cards, buy-to-let mortgages and so-called “non-conforming” mortgages that do not meet high street lending standards were among those that make up asset backed securities and were singled out by the rating agency for a negative outlook.

In the meantime, the impact of financing an increase in car production off the back of an unsustainable rise in lending is beginning to make itself felt in the real world, with a wide range of indicators suggesting that the automotive industry is struggling.

• 10% decline in new car registrations

The latest (15 August) Bank of England discussion (‘Car finance: what’s new?’, strictly it’s on their blog, ’Bank Underground’), takes a “sharp” fall in demand for new cars as their point of departure. Society for Motor Manufacturers and Traders (SMMT) figures show new car registrations declining by 10% on the year, the steepest decline for at least five years. This is the Bank chart.

The authors also note that SMMT forecasts total new car registrations declining by 2½% in 2017 and a further 4% in 2018.

• Steepest decline in motor vehicle production since the global recession

In the second quarter of 2017 manufacturing output was back in decline, by 0.6% on the quarter. Within this, manufacturing of motor vehicles declined by 5.8% (accounting for around ¾ of the total decline). The chart below shows the four quarter growth rate at -5.0% in 2017Q2, the steepest annual decline since the global recession.

Motor vehicle production, % 4Q growth

Source: ONS

• Car retailing and wholesale grinds to a halt.

Aside from car production, car sales contribute to the UK economy through the activities of retailers and wholesalers (the ONS measure also includes services provided by garages). Between 2012 and 2016 annual growth averaged 9%; in 2016 Q2, growth was 0.6 per cent.

Retail and Wholesale of cars, % 4Q growth

Source: ONS

•  Capital investment in motor vehicle (and engineering) industries collapses

In the year to the first quarter of 2017, investment in engineering and vehicles industries fell by 18.6%, marginally less terrible than the 24.1% decline in 2016Q4. The 2016 figure was significantly below the worse annual decline in the global recession. The suggestion is a severe failure of confidence in these industries.

Investment in engineering and vehicles industries, % 4Q growth

Source: ONS

•  Exports in decline, imports on the verge

Registrations and retailing figures suggests domestic demand is contracting. In parallel imports of motor vehicles slowed to 2.5% in the latest quarter, having averaged 16% over the previous four years. But export growth has taken an even bigger hit, declining by 4.9% in the year to 2017Q2.

Trade, % four quarter growth

Source: ONS

This suggests a wider international decline, which is likely consistent with financial arrangements not being unique to the UK.

There are other things going on of course. For one imports and exports are partly related, with supply chains operating across more than one country. For two various other domestic factors are likely to be hitting demand, notably the fall in real wages but also behavior in response to the government removing green subsidies and putting up vehicle excise duty. Then there is Brexit, and the associated movements in the exchange rate and potential withdrawal of foreign direct investment. One point is clear, the fall in the exchange rate does not seem to be helping UK car manufacturers. 

• Highest new car price inflation since 2011

In July new car price inflation of 3.5% was up 1.0 ppts on June, and the highest rate since 2011. Used car price deflation turned more sharply negative, with inflation of -3.1% in July following -2.3% in June, and the highest fall for six month. Rising prices for new cars might be an inevitable consequence of financing difficulties translating into rising costs (as well as the exchange rate). But they are unlikely to help the situation.

Car price inflation, CPI %

Source: ONS

Discussion

These are very worrying developments. The strength of the car industry in recent years has been a significant success story of the British economy. It shows what can be achieved when demand is in place, even if fostered by ad hoc means – before financial engineering were the ‘scrappage schemes’ that governments put in place in the wake of the global recession. Even now, manufacturers continue to innovate. Ford have just announced a new scrappage scheme, offering cash incentives for trading-in polluting cars for purchase plans on new efficient, low-emission vehicles.

Something in all this seems very familiar. The Bank’s blog closes rather dismally.

As amounts of consumer credit increase, so do the risks to the finance providers. Most car finance is provided by non-banks, which are not regulated. These developments make the industry increasingly vulnerable  to shocks.

These inherent vulnerabilities in financial arrangements are plainly now having a impact on the real business of manufacturing cars.

Once more you are left knowing wondering why economic activity is hostage to (apparently unregulated) financial alchemy. The car industry proves that there is no shortage of capability in the real economy. There must be a different way to a stronger economy, one that permits higher demand, higher wages and higher production to go hand in hand in a sustainable way.

In the meantime, “Car trouble, oh yeah”.

REFERENCES

[1] Sub-prime cars: are car loans driving us towards the next financial crash?, 10 February 2017, Patrick Collinson, Guardian

[2] Debt pile-up in US car market sparks subprime fear, May 30, 2017, Ben McLannahan, Financial Times

[3] Investors increasingly wary of car loan bonds, July 3, 2017, Thomas Hale, Financial Times

[4] Warning signs emerge in the UK car loan market, July 9, 2017, Emma Dunkley and Martin Arnold, Financial Times

[5] Outlook darkens for UK debt collateral, July 31, 2017, Thomas Hale, Financial Times

The post Car trouble? Sub-prime auto lending hits the real world appeared first on ToUChstone blog.

The latest figures show employment has reached a new record of 75.1% and the unemployment rate is just 4.4%. But workers are feeling the pinch with wages rising slower than the cost of living for the fourth month in a row.

Real earnings (percentage year on year) 3-month average (2008-2017) 

The growth in real wages we saw in 2015 and 2016 was short-lived. It was largely due to exceptionally low inflation rates. Before the crisis, the norm for the growth in nominal wages was usually around 4%.

Nominal wage growth increased from 2.0% to 2.1% in the latest set of data. But one set of data is not a trend. The pattern since the recession has been lower nominal wage growth.

Nominal wage growth 2006-2017

Source: ONS

In our previous blogs we explored possible  causes  for the lack of wage pressure, including lower productivity,  slack in the labour market, and that the situation has been exacerbated by the government’s fiscal policies.

However, the current living standards squeeze is caused by the combination of weak nominal wage growth and increasing inflation. After the vote to leave the EU, the reduction in the value of the pound leading to more expensive imports has contributed to inflation (CPIH) rising to 2.6 per cent. A year ago, it was only 0.8 per cent.

And the squeeze isn’t expected to ease. The Bank of England expects inflation to increase to around 3% in the Autumn, and for wage growth to average 2% in 2017.

The governor of the Bank of England views the UK’s weak productivity as key to explaining poor wage growth. But he also believes Brexit uncertainties have discouraged firms from awarding pay rises.

The pressure on household incomes has intensified with no immediate signs of abating. And for those working in the public sector, the imposition of the 1% pay cap has made life even more difficult.

The post Rising employment shouldn’t distract from the living standards crisis appeared first on ToUChstone blog.

Last month the government announced it was waiving historic financial penalties and temporarily suspending enforcement of the National Minimum Wage (NMW) for workers required to ‘sleep-in’ on their employer’s premises overnight to look after social care residents.

This is unprecedented action from a government that has, up to now, been rather keen on enforcing the NMW. It appears that some social care employers have said they will collapse if they have to pay arrears, which have been estimated by employers as ranging somewhere between £100 million to £400 million.

These figures are simply ridiculous overestimates. According to the government’s July 2017 evidence to the Low Pay Commission, they recovered £374,000 arrears in social care last year and I calculate that a total of just over £700,000 has been received for workers in social care in the past three years. Note that this includes arrears for issues beyond failure to pay for sleep-ins, such as non-payment of traveling time between visiting clients.

In a week that has seen the government named a record number of underpaying employers in other sectors it is time to have a look at how social care got into this kind of debt – and what will happen next.

What went wrong in social care?

The first thing to say is that most social care is now provided either by private sector companies or charities. Local authorities fund most social care and, faced with continuous government cuts to their budgets, have squeezed social care funding year after year.

Against that tight financial background, a number of social care providers have buried their heads in the sand over the growing certainty that they must pay the minimum wage.

Before the minimum wage was introduced employers commonly paid workers a flat fee for sleeping in, plus an hourly rate for time spent actively working. This was changed by successive employment tribunals from the late noughties onward, albeit with a certain degree of see-sawing back and forth so it really should not be a surprise for employers that the minimum wage applies to workers.

Just how clear is the law on the NMW and sleep-ins?

The law has certainly been in a settled position since the 2013 Whittleston v BJP Home Support Limited Employment Appeal Tribunal.Government guidance on the NMW also makes it clear that the NMW must be paid for sleep-ins.

Six years of minimum wage arrears can be claimed in England, Wales and Northern Ireland and five years in Scotland, so you might wonder why some of the handfuls of large employers who are complaining did not at least consider making provision against the day when they would have to pay up.

Trade unions have been visibly negotiating and campaigning to ensure that social care employers pay up. In particular, UNISON reached a notable agreement (with MENCAP in June 2017, meaning that staff would receive the NMW for sleep-ins from then on.

Employers could also have sought free advice from ACAS if they were in any doubt about the right thing to do – and they should have done so, but some have simply failed to face up to their responsibilities.

What does the government’s partial suspension of enforcement on sleep-ins mean?

Basically, the government’s announcement means the social care sector has three months to get its act together. Employers have been let off of historic civil penalties in current cases. These can be quite substantial, as these penalties are twice the amount owed, up to a maximum of £20,000 per worker.

However, the government will continue to pursue arrears for workers in these cases, and we have been ensured that full enforcement will resume in October.

Resuming normal service will not be enough

Social care providers need to take these announcements as a wake-up call. The government simply cannot afford to let them off of the NMW, and should be clear that no extension of the penalties amnesty will be forthcoming. Providers should face full enforcement for any new offenses that occur from October onwards.

But the government does not come out of this very well either, as squeezing funding on social care has been a contributory factor.

The government must find a way to ensure that social care has sufficient funding and to ensure that social care workers are paid at least the NMW, which is the bare legal minimum. Failure to achieve these goals means that those receiving care and those who deliver it will both suffer, which is something that any shrewd government will want to avoid.

The post Why on earth have social care workers not been getting the National Minimum Wage? appeared first on ToUChstone blog.

This is the first fall we have seen in the data series. However, at 2%, this is a drop in the ocean. There are still around 900,000 of these controversial contracts.

Numbers on zero-hour contracts Apr- June (2014-2017) 

The data produced by the ONS reminds us of some of the reasons why we should be worried about those on zero hours.

TUC analysis shows that insecurity is concentrated among those groups that already face labour market disadvantage, including women, and Black and Minority Ethnic (BME) workers.

The latest data shows that the number of women working on zero-hours contracts has increased by 8%, further worsening women’s position in the labour market.

Numbers of men and women on zero-hours contracts (April – June 2017) 

While the latest data is not yet available by ethnicity, our research based on data from the previous two quarters found that the proportion of Black workers in zero-hours contracts is almost twice the average.

Zero-hours contracts also vary significantly by region. We previously found that the North East is a hotspot for insecure work. And the latest data continues to show that the North East is still well above the UK average on the percentage of people in employment on a zero-hours contract (3.7% compared to 2.8%).

While employers often argue that they need flexibility to meet short-term surges in demand, it’s clear that many are using zero-hours contracts as a long-term employment strategy. 60% of those on zero-hours contracts have been there for more than a year.

Dissatisfaction

And while we can’t tell from the data much about how people feel about their zero-hours jobs, the data does show higher levels of dissatisfaction than for those on regular jobs.

Zero-hours workers:

• Are two and a half times more likely to want a new job or an additional job
• Are twice as likely to want a new job
• Are four times more likely to want to work more hours. This will also reflect the fact that those on zero hours are much more likely to be part-time (65%) then those not on zero hours (25%).

That’s not surprising when you look at the experience that many of those on ZHCs report. Those working on zero-hours contracts  have told us how they face insecurity about their income and hours of work, and often miss out on key employment rights.  

When Wetherspoons were voluntarily moving away from zero-hour contracts, they found that four out of five employees preferred a contract guaranteeing them a minimum number of hours’ work per week.

We believe that everyone should have the right to a contract that guarantees the hours they work. That’s why we’re sceptical of the Taylor review’s recommendation that those on zero-hours contracts be given a ‘right to request’ regular hours after a year on the job.

It’s good news that there are fewer people on zero-hours contracts. But delivering real change for the nearly 900,000 people still in this form of insecure work requires government to take action.

The post Why we should still be worried about zero-hours contracts appeared first on ToUChstone blog.

The North / South divide is not a myth…

• Your life is likely to be shorter if you’re from the North of England rather than the South.
• More young adults are dying before their time in the North of England than in the South. And the gap is widening.
• As a child, you’re twice as likely to live in a workless household in the North East than in if you grow up in the South East…
• And when there are new jobs in the North East, two-thirds are insecure (e.g. agency, temporary, or zero hours).
• In old industrial areas, at the median men earn around £200 less per month than the national level. And in these areas, the poorest-paid 10 per cent earn less than a third of median earnings across Britain as a whole.
• Less than 1 in 3 (30.6 per cent) of residents in Yorkshire and the Humber are skilled at NVQ Level 4+, against 1 in 2 of all Londoners.

…But it’s not all roses in the South

• Out of 21 NUTS 3 areas, in London, 10 had economic output lower than UK average in 2015.
• Output in 13 London regions has fallen as a proportion of UK output since records began in 1997.
• Outside of London, output across many areas has fallen or remained static. Certain Boroughs in the capital steam ahead as a share of UK output. Here is an example from Norfolk and Suffolk and London, using data for NUTS 2 (slightly bigger) regions:

Regional GVA as total of UK output, 1997 and 2015 (%)

Source: ONS Regional gross value added (income approach), December 2016

New approaches to regional industrial strategy

The post From North to South, no community deserves to be abandoned appeared first on ToUChstone blog.

The ONS stats tell what is to a large extent a success story. Incomes from private pensions increased sevenfold between 1977 and 2016. This is due to both a rise in the proportion of households receiving private pension income, and also increases in the amounts they receive. The proportion of retired households receiving income from private pensions rose from 45 per cent in 1977 to nearly 80 per cent in the financial year to 2016.

But despite rises in income from state pensions, the gap between those with workplace pensions and those relying on state pensions has grown. Those in receipt of private pensions have 1.6 times the disposable income of those relying on state pensions. This is the widest gap since the data was first collected in 1977. Having expanded during the 1980s, the gap has been increasing again since 2010.

What do these figures tell us about pensions policy today?

1. We need to improve access to workplace pensions. Many of those reaching retirement now are the beneficiaries of widespread pension provision (at least to men in full-time work) in previous decades. But this started being whittled away from the 1980s. By 2012 a minority of private sector workers were in a pension scheme. While automatic enrolment has improved this, nearly half of adults are ineligible to be automatically enrolled into a scheme. A key barrier is the £10,000 earnings trigger which excludes many low-paid and part-time workers, the vast majority of them women.
2. We need good quality pension schemes. There has been a strong shift away from defined benefit schemes, which pay an income based on your service and salary. In their place have come defined contribution pension schemes, in which the member is reliant on contributions made and the performance of investment markets. Contributions into very many DC schemes, particularly for those newly automatically enrolled, are utterly insufficient to generate a decent income in retirement. Unless this improves drastically, incomes from private pensions in future will be a fraction of those received by many retiring today.
3. There needs to be decent state provision. The ONS calculated that income from state pensions almost doubled between 1977 (£5,600) and 2016 (£11,000) in real terms. But the ONS reports that cash benefits, such as the state pension, have become less effective at reducing inequality among pensioners in recent years. We know that there are great inequalities in workplace pension entitlements. Women have far smaller private pensions than men. And single women are most likely to be reliant on the state pension. So if we are concerned about gross inequality among the retired, then a decent state pension is a must.

The post Workplace pensions work: three lessons from today’s ONS stats appeared first on ToUChstone blog.

On 1 August, civil servants employed as civilian enforcement officers (CEOs) were told that the work they do enforcing financial fines for the criminal courts, will be put out to tender. 

This see around 150 staff outsourced to a private company, but it will also put the safety and finances of the public at risk. 

This comes less than two years after an attempt to privatise all enforcement work was abandoned; a Freedom of Information request by PCS revealed the five-year project cost taxpayers £8 million. 

CEOs currently employed directly by HM Courts and Tribunals Service are subject to the civil service code governing standards of behaviour. They have the authority to enter and search premises and place defaulters in custody, and can access sensitive data held on government systems, including the Police National Computer. 

The code would not apply to staff working for private companies motivated by profit. It’s widely acknowledged that the private bailiff industry is poorly regulated and the government’s 2014 Taking Control of Goods reforms haven’t gone far enough.

Citizens Advice and other debt charities have recently reported that these reforms, in the absence of an independent regulator, have had little impact on protecting the public from overzealous and aggressive bailiffs. 

The TUC warns that average household debt in the UK stands at a record £13,000. This means more vulnerable people could be subjected to more aggressive tactics from bailiffs driven by payment by results, rather than by the delivery of justice. 

Considering outsourcing this work without proper measures in place to protect the public, is a reckless move by the government when austerity is biting more and more families.  

Ultimately privatising this work will put the profits of a private bailiff firm before the safety and security of vulnerable people, and the delivery of fair and effective justice.  

PCS is arguing that, instead of privatising this highly sensitive work, the government should work to ensure that CEOs working in HMCTS have the resources available to them to carry out their work. 

You can support our campaign by emailing your MP asking them to oppose this privatisation. 

The post The government’s decision to privatise enforcement puts profits ahead of security appeared first on ToUChstone blog.

The point of departure is a speech by Alex Brazier of the Bank of England, who examined in some detail the household story. According to his Star Wars allusion: “I’ll ask whether … the galaxy can be a safer place thanks to the Return of the Regulator”. Newly issued Bank of England data is then used to examine the position for non-financial and financial firms in addition to that for households. A New Hope for the galaxy seems a way off.

1. The Bank’s analysis

The Bank concluded that we shouldn’t be too worried, drawing on a chart of lending to the ‘real economy’ (defined as households plus private non-financial corporations) keeping pace more or less with nominal GDP growth

Reverting to an older allusion, Alex Brazier was content that the “credit supply looks neither too cold – as it was after the crisis – nor too hot – as it was in the build-up to the crisis”. But on household indebtedness, “even when the overall temperature is just right, there can be pockets of debt that are too hot”. He addressed three such pockets:

• the pace of consumer credit growth, with lending conditions perhaps becoming too ‘easy’
• how a possible – inevitable? – collapse in second hand car prices might impact on companies involved in ‘personal contract purchase’ plans (his discussion on pp. 10-11 is a valuable account of how new financing mechanisms are operating)
• the increased amount of mortgage lending at high loan to house price values

The TUC has discussed this subject at some length (most recently). The question here is whether lending to firms might be too cold – seemingly simple math when household lending is too hot and overall lending to the real economy is at the right temperature.

On Monday the Bank issued figures that permit a closer look at the overall position. ‘Bankstats’ now goes to June and so covers the first half of 2017, and this can be compared with previous calendar years (as in my previous post on the subject) simply by multiplying the half year position by two (there are caveats below).

2. Total bank lending

The first chart looks at lending by sector (with households split between mortgage and consumer credit). Each column reflects net lending (i.e. new lending minus repayments), and therefore the annual change in the total stock of lending. Overall, the projected position for 2017 shows lending positive across the board for the second year in a row.

• There is a big increase over 2016 (by just over £100bn), but this is accounted for by lending to the financial sector. While this might be alarming in its own right, there are caveats addressed in section 4 below.
• Within households, mortgage lending is proceeding at almost exactly the same pace as last year; consumer credit has come off a little.
• Net lending to business is moderately positive for the third year in a row, after six negative years. The increase on the year is likely to be spurious though – discussed further in section 3.

Bank lending to all sectors, annual change £ billion

[The source for all charts is ‘bankstats’; with methodological detail as in the previous post; 2017* indicates the use of a projection for an annual figure.]

3. Lending to businesses

Total net lending to businesses is projected at £20bn for 2017, up £5bn from £15bn in 2016. And at face value the strongest year since the financial crisis. There is, however, a big ‘but’. Updating the analysis over time results in the chart below. The strength on the year is explained by (unprecedentedly) strong lending to the manufacturing sector.

Bank lending to non-financial businesses, annual change, £ billion

But looking deeper into the figures shows manufacturing lending little changed on the year except for a £5bn surge in foreign currency lending to the chemical industry in June – which looks like some kind of financial engineering.

Adjusting this movement out (which amounts to £10bn on the year as a whole), gives the position for 2016, 2017 and the change between the two years shown on the next chart. While lending is still up (by £9bn), it is up by less than in 2016 (£15bn). Lending to real estate is back in negative territory, which echoes worries about slowing activity in the commercial real estate market outlined in the Bank’s latest Financial Stability Review (pp. 8-11). Then the increase in lending to business services is down significantly on the increase last year. Lending to construction and other services accelerated and UK banks’ and building societies’ remarkable largesse to agriculture continues.

Net lending to non-financial businesses, £ billion

Firms are also able to borrow from other sources, notably capital markets. My earlier assessment is updated in the chart blow, with 2017 so far coming in a little down on 2016. While corporate bonds (yellow) are taking up the majority of the slack, the issuance falls far short of compensating for the shortfall in bank lending to the real economy.

Net finance raised by non-financial companies, £ billions

4. Lending within the financial sector

Deciphering the different flows of money to the financial sector is tricky. The next chart gives the breakdown according to the main categories in bankstats. The strength overall is dominated by lending to ‘activities auxiliary to financial intermediation’ (e.g. securitisation special purpose vehicles and fund management), with lending to ‘financial intermediation’ itself still subdued.  At face value the former is heading for a record. But there is a seasonal factor here.

Net lending to financial businesses, £ billion

The below chart shows a tendency in a number of years for an extension of lending in the first half of the year and then repayment in the second half. So it may be that my estimate for 2017 (based on the first half of the year) is excessive. There may still however be growth in this form of lending, given the strong figure for 2016 – £28bn, the third largest on record, and dwarfing lending to non-financial business.

Net lending to activities auxiliary to financial intermediation, £ million

5. To wrap up

This is detailed stuff and relies on a projection for the year as a whole that makes the figures merely indicative. But the analysis offers a view of where bank lending into the real economy stands.

To return to the Bank’s preferred allusion … The darkest days of the empire may have passed, but order has not been restored to the galaxy. The Jedi at the Bank of England are rightly worried about increased consumer borrowing in the middle of a living standards crisis. But there can be no New Hope without a strong economy, and with lending to business still severely restricted, worried should we be.

The post Excess household lending + deficient business lending = no New Hope for galaxy appeared first on ToUChstone blog.

Two pieces of research published this week show the dangers of restricting access to the state pension to attempt to force people to work longer.

• The first was from the Institute for Fiscal Studies. It showed that more than one in five women (21.2 per cent) in the group affected by recent increases in state pension age were in poverty. This is up 6.4 percentage points on the situation pre-reform.
• Meanwhile, analysis by the Centre for Longitudinal Studies found that the poorest pensioners are the least able to work into their later years. It concluded that men and women who had been poor during their working lives were the most likely to leave the jobs market between ages 50 and 55. Poor health was the key driver.

These findings have been published weeks after the government announced a hike in state pension age to 68 for those currently in their late 30s and 40s.

The figures add to the case for government intervention to help those hardest hit by moves to equalise state pension ages for men and women.

They also undermine simplistic notions of intergenerational unfairness that in their crudest form seek to paint the babyboomer generation as a universally privileged group.

The 1995 Pensions Act legislated to increase the female state pension age from 60 to 65 from April 2010. This move to equalise it with the male state pension age therefore affected all women born after April 1950.

The process was accelerated in 2011, as part of George Osborne’s austerity drive.

But with striking inequalities in life expectancy and healthy life expectancy, there were great worries that this would hit the poorest and most vulnerable hardest.

This has been borne out by the IFS analysis. It shows that a third of single women aged between 60 and 63 were in poverty after housing costs. This is up 13.5 percentage points since before the reforms. Similarly, nearly four out of ten renters, up from around a quarter in this group, were in poverty.

The IFS found that the 1.1 million affected women saw their individual incomes fall by an average of £50 per week. Increased income from earnings was not enough to offset the loss of the pension.

The impact was more muted at household level. The IFS suggests that male partners are taking more in workplace pension money and benefit from greater entitlement to benefits.

But men are not immune from these reforms either. Eligibility for Pensions Credit is tied to women’s state pension age, so there has been a sharp increase in the number of single men in poverty, up 6.1 percentage points to 23.4 per cent.

It should be noted that the IFS suggested that those who suffer a drop in income in the run-up to retirement are at no greater risk of poverty once they hit state pension age. It also found no evidence of material deprivation, with those affected seemingly still able to buy key items.

This, the authors said, was probably due to people “smoothing” their incomes to cover the gap between work and pension. However, there must be some doubt whether this will still be the case once the SPA rises further and the smoothing has to stretch further.

What is becoming increasingly clear is that the hope that a rise in state pension age will lead to everyone working longer is fantasy.

The IFS found that employment rates among women affected by the SPA rise jumped 9.8 percentage points to 47.8 per cent, still leaving most out of work.

The TUC has previously warned about this. Our analysis showed that half a million (436,000) workers who are within five years of state pension age have had to leave the workplace for medical reasons. Those who have worked in the lowest paid jobs – including cleaners, carers and those doing heavy manual jobs – are twice as likely to stop working before retirement age due to sickness and disability than managers or professionals.

The Centre for Longitudinal Studies, focusing on men and women born in 1958, found those who had more experience of being in a workless household were the most likely to have exited the labour market between ages 50 and 55. The most significant cause was poor health. Those in poor general or mental health at age 50 were around twice as likely as others not be working at age 55.

In the absence of labour market reforms it is hard to see how raising the state pension age will allow this group to continue working. Rather it will mean greater reliance on working age benefits.

It also makes it even more indefensible that the government decided to implement the recommendation of the recent Cridland review to accelerate the rise in SPA to age 68. Yet it ignored the (very limited) welfare reforms John Cridland said were essential to cushion the impact of such changes.

The post Poorest pensioners hit by rise in state pension age appeared first on ToUChstone blog.

If trade deals don’t contain effective protections for workers’ rights, they just make it easier for companies to locate themselves in countries where wages are lower and workers are less able to resist exploitation.

Unfortunately trade deals the UK is currently involved in (via EU membership) do not contain adequate protections for workers’ rights.

The ETUC has raised concerns that, while EU trade agreements require countries to respect international standards on workers’ rights, there is very little in the agreements to hold countries to these commitments.  This is why workers’ rights continue to be abused in countries the EU has signed trade deals with, such as Korea.

The ETUC is pressing for a change of approach along the lines of the actions listed below to make EU trade deals actually effective in protecting workers’ rights.

Fox’s dangerous friends

The TUC believes that we would be better off in the EU customs union, so we can continue to benefit from the decent jobs on good pay that EU trade delivers. If we left the customs union, there’s a serious risk that the Conservative government would negotiate even worse trade deals with the rest of the world that won’t protect workers’ rights.

It is worrying that trade minister Liam Fox has been enthusiastic about the prospect of signing trade deals with countries like the Philippines where the President has been implicated in the deaths of over 7000 people in his ‘campaign against drugs’. Appallingly, Fox spoke of the ‘shared values’ between the UK and Philippines in February.

Last week we also saw Fox cosying up to Trump in the USA – where trade unions are effectively illegal in some ‘Right to Work’ states – and the finance minister of Mexico – where employer-controlled unions have been used to crush workers’ rights.

8 actions needed

The TUC has developed 8 actions we want to see taken in future trade deals with non-EU states to protect rights and promote decent work. They are relevant whether the UK stays in the customs union or not. If we stay in, we will work with the European Trade Union Confederation to secure the EU’s support for them. If we end up out of the customs union, we will call for the UK government’s support.

1. Involvement of trade unions in trade negotiations

This is essential if trade deals are to deliver decent jobs and provide the protections needed for decent jobs and rights.  Workers have at least as much at stake as employers do, so we should also have a voice in negotiations

2. No workers’ rights, no deal

The government should require potential trading partners to demonstrate respect for essential workers’ rights (outlined in the UN Sustainable Development Goal on Decent Work) before agreeing to sign a deal with them.

Trade deals should contain commitments that countries will to respect workers’ rights. There should be material consequences if these commitments aren’t followed – see (6).

3. Requiring companies to respect workers’ rights

Trade deals should also require countries to ensure their companies respect the Ethical Trading Initiative’s Base Code. This is a set of nine standards, based on the core conventions of the International Labour Organisation (ILO), including freedom of association, living wages and equality.

4. Trade union monitoring 

Trade deals should establish an independent committee that monitors countries respect for workers’ rights.   This should involve trade unions as well as other civil society representatives and experts.

5. Legal forum to investigate potential abuses

Trade deals should establish an independent legal forum of experts in labour law.  Trade unions, other organisations and individuals should be able to submit complaints to this forum when there are abuses of workers’ rights, either by governments or companies.  This should result in investigations being conducted and remedies considered.

6. Penalties

If the independent legal forum finds that a country has broken its commitments on workers’ rights, it should be able to impose sanctions, such as financial penalties.

If companies are found to be violating the ETI Base Code, the forum should be able to require countries to impose penalties on companies, such as fines or withdrawal of export licenses.

7. Exclusions for public services

Trade deals need to entirely exclude public services to defend them from privatisation and attacks on workers’ wages and conditions.

8. No special courts for foreign investors

Recent trade deals such as the EU-Canada (CETA) agreement have contained systems that allow foreign investors to sue government for actions that threaten their profits.  In this past such courts have been used to prevent increases in the minimum wage, as well as other employment protections.

The TUC believes all such systems, known variously as ISDS, ICS and now the MIC, should be scrapped from trade deals to ensure workers are protected from these kind of challenges.

We developed this action list with unions across Europe and internationally who are making similar calls on their governments. Workers internationally are calling for a level playing field of rights to prevent trade deals being used to drive a race to the bottom.

The post What would it take for trade deals to protect workers’ rights? appeared first on ToUChstone blog.

More surprising perhaps has been the recent positioning of MPC members that has fostered speculation that a rate rise was more likely.

At one level this is understandable. With CPI inflation not far off a percentage point above the official target, some demonstration of vigilance was to be expected. Equally, increases in consumer credit are obviously setting off alarm bells, with various technical measures to address the situation recently announced alongside the publication of the Bank’s (June) Financial Stability Review (see ToUChstone discussion here).

But these are very far from conditions of excess. The dominant concern is still of deficient not excessive aggregate demand – exemplified by the quite abrupt slowdown in GDP growth into 2017 and the dismal performance of business investment.

UK Inflation is up not because the economy is booming, but because because of the post-referendum reduction in the exchange rate. Outside the UK, the main trend over recent months has been for inflation to weaken not strengthen. This comes in part as lower oil prices work through the system, but oil prices are still likely to be a symptom of a wider global deficiency of demand. The Bank of England and OBR have expected UK inflation to come off relatively slowly, and the projections in today’s Inflation Report are imperceptibly changed from the position in May (chart below). My money is that this will happen faster than they expect.

CPI inflation forecasts, %

Source: BoE and OBR 

Similarly pressures on consumer credit (and low saving) are at in large part a function of the unprecedented decline in wages. This a low income rather than high consumption situation.

A rate rise will not support deficient demand and will not increase income.

Understandably there are concerns at the scale of the reliance on monetary policy to support the economy. Understandably there are concerns about the scale of reliance on consumer demand.
But in the absence of action to support other sources of demand in the economy, attacking the consumer will simply make things worse.

To be clear: increased government demand is not only imperative to strengthen and rebalance the economy, but also to permit one day the possibility of some normalisation in interest rates.

Last year (immediately after the EU referendum) Mark Carney made it clear that monetary policy could only do so much – widely interpreted as a call for government to step in and play its part. Now is the time for him to make this point loud and clear.

So one cheer that rates were not raised. But far better would be to be able to celebrate something constructive, rather than simply avoiding detriment.

The post Demand needs to rise before rates do appeared first on ToUChstone blog.

He will play an important role in determining the focus, resources (both intelligence and financial) and priorities of these three enforcement agencies.

Earlier this week the government published the director’s introductory report on labour enforcement strategy and the consultation document that will inform the more comprehensive strategy next year.  Included in both are some useful indicators about how employment rights could be enforced going forward.

1. Joint and several liability in supply chains

The consultation is going to consider whether more can be done to enforce labour standards through supply chains.  A few ideas are floated, including:

• Voluntary accreditation of suppliers;
• Public procurement strategies to use the purchasing power of public funds to stamp out non-compliance in the private sector;
• Joint and several liability, which would mean workers can enforce their employment rights against companies at the top of a supply chain as well as their employer.

As we set out in our new report on insecure work, in recent years the UK labour market has become increasingly fragmented, with the emergence of long and complex supply chains.  The TUC is concerned that employers are increasingly using intermediaries in order to benefit from tax advantages and to avoid employment law obligations.  The law needs to change to ensure that the companies and organisations that are in practice responsible for undercutting employment standards or mistreating individuals are held to account. The best way to achieve this is to move towards a system of joint and several liability for employment law standards throughout supply chains.

Helpful precedents can be found in other countries.  The USA has adopted a ‘joint employer’ model. Under the Fair Labor Standards Act, which includes rights to the minimum wage and overtime pay, and the National Labor Relations Act, which contains trade union and collective bargaining rights, the law states that individuals can be jointly employed by two or more employers where there is evidence the companies are economically dependent and/or both employers are involved in directing or supervise the individual’s work.  Also, some European countries, such as The Netherlands, have systems that apply joint and several liability for the payment of wages through supply chains.

It’s welcome that public procurement is mentioned as public sector bodies should lead the way in this respect, ensuring that employers throughout their supply chain are paying the national minimum wage, offering all workers (who want them) contracts with guaranteed hours, and ensuring that they have access to sick pay and holiday pay

2. Closer working with the HMRC tax office

There are proposals for closer working between the enforcement agencies and HMRC revenue teams with responsibility for collecting tax from the hidden economy.  Serious cases of exploitation often take place in the hidden economy, so other organisations helping to shine a light on this is good

3. Review of licensing sectors, certification, registration

The director is asking for views on the licensing scheme that the GLAA currently operates.  He can, for example, recommend to ministers that licensing is extended to other sectors.  Interestingly, the consultation document suggests that the licensing scheme could be doing more than enforcing minimum standards in a licensed sector and that an effective licensing scheme could be driving up standards.  This suggests that a more rigorous set of licensing standards might be considered.

However, the report also flags up that there are alternatives to licensing and is seeking views on options “along the spectrum: licensing-certification-registration-nothing.”

Unions are strongly opposed to any watering down of the licensing system and the introduction of voluntary forms of accreditation.

The TUC would like to see the licensing model currently used by the Gangmasters Labour Abuse Authority (GLAA) in the shellfish-gathering, agriculture and horticulture sectors extended further across the labour market. We believe this is the most effective system for ensuring organisations comply with core labour standards. Licensing is an effective system for weeding out unscrupulous employers from the labour market. This is because only licensed labour providers can operate in a particular sector. Before they do so they have to prove that they comply with core licensing standards.

4. Resources

The director will decide whether current resources are adequate for the enforcement agencies to fulfil their functions, and how the overall funding envelope should be distributed between the enforcement agencies.

The EAS budget has been cut to £500,000 and the GLAA and HMRC NMW enforcement teams both have an expanded remit.  It’s important that enforcement agencies have enough money to do their job properly.  Part of the new strategy should involve a review of the resources at the enforcement agencies’ disposal and whether these are adequate to fulfil their enforcement obligations.

5. Sector specific solutions

The consultation document asks for suggestions for sector specific solutions to deal with sectors where there are high levels of non-compliance.

A similar recommendation came out of the Taylor Review which said that the Low Pay Commission should look at the lowest paid sectors and help to develop an effective industrial strategy which would drive up standards and productivity.

It’s clear that unions need to be at the negotiating table in any sector level solutions.  As part of the TUC Great Jobs Agenda the TUC is lobbying for government to get businesses, unions and government together to discuss pay, training and conditions in low paid industries.

6. Intelligence hub

The Labour Market Enforcement Office is developing a new intelligence hub.  The hub will bring together information from all enforcement bodies, including those not under the remit of the Director of Labour Market enforcement, such as the Health and Safety Executive.  Other types of information such as academic studies, reports from research organisations, and intelligence gathered from charities and unions will also be included.  This is a welcome development as it should result in better intelligence, less duplication of enforcement activity and more coordinated investigations by enforcement agencies.

The newly developed intelligence hub should help enforcement agencies to launch evidence led, proactive investigations.  A more targeted, proactive approach to enforcement could also reap enormous benefits.  Particularly in sectors where workers are unware of their rights or too afraid to raise complaints through fear of reprisals.

The post Labour enforcement agencies – six potential developments appeared first on ToUChstone blog.

Britain’s dreadful performance on productivity is the key to understanding our wage stagnation. Productivity is just 1% higher than a decade ago, and 17% per cent below the pre-crash trend. The government’s efforts to address the productivity crisis have been somewhat disappointing. Fixing the Foundations – their plan to boost productivity – was released two years ago this month. Since then, productivity has grown by 0.0%.  

Key to ending the long stall in productivity, and the long squeeze in pay, will be improving our adult skills system. With millions of workers trapped in low pay, we need an adult skills system that helps support progression. With technology rapidly advancing and automation threatening millions of jobs, we need a skills system that helps adults adapt and keep their skills up to date. 

However, our skills system is beset by systemic weaknesses. First, employers in the UK are not investing enough in the skills of their workforce. Employers here invest half as much as the EU average in continuing vocational training, and employer investment declined by 14% employee between 2007 and 2015. At the same time public investment has also been slashed, with the adult skills budget being cut by 41% since 2010. 

Second, there is a lack of high quality vocational provision. Much of the training we are seeing – both through apprenticeships and FE – are low level. The wage and employment returns of lower level vocational qualifications are often quite poor, and too few workers are progressing to higher level qualifications. 

Finally, the skills system has failed to address stark social and regional inequalities. Those who could most benefit from training – adults who left school early, who have low or no qualifications, and adults stuck in low-pay occupations – are the least likely to be engaging with lifelong learning. Employers are more likely to invest in training for staff who are already higher-skilled, and entitlement to public funding for training for low-paid workers has recently been restricted.

The skills system has also failed to narrow the regional inequalities that scar our country. The apprenticeship levy is likely to accentuate rather than address these; it will raise more money and stimulate more investment in London and the south east, where pay and productivity are far higher. Conversely, it will boost training least in the areas that need investment most.  

In a new IPPR report – Another Lost Decade –  we set out a series of reforms to address these challenges and get our skills system fit for the economy of the future.  

We’ve called for the apprenticeship levy to be reformed into Productivity and Skills Levy, which would raise £5.1 billion – double what is currently raised. If a quarter of the contributions of the largest employers were top-sliced, this would provide a £1.1 billion Regional Skills Fund which could be devolved according to skills need in order to address regional skills gaps and drive skills devolution.  

While boosting employer investment is important, we need to ensure individuals can invest in their own skills too. So we’ve called for a Personal Learning Credit, which would provide £700 a year for low-skilled, low-paid workers to invest in training.  

The role of unions

Beyond these reforms, we believe that trade unions should play a much greater role in the skills system in order to drive up both the quality and the quantity of training.  

Unions already do important work in workplaces where they are present. The presence of trade unions in a workplace has a positive impact on the likelihood of employers to provide training, even controlling for factors such as sector. UnionLearn does fantastic work, supporting hundreds of thousands of workers accessing learning and training to progress their career.  

Recent reforms have aimed to make the skills system more employer-led. There are benefits in this approach. Employers should be involved in the design of qualifications, so that they meet their needs and deliver economic benefits. But under the current system, too many employers choose not to invest, and too much of the training we do see is low-level and narrowly firm- or job-specefic. While employers need to have a say in the system, employees deserve a voice too.  

The government have recently established the Institute for Apprenticeships, which is tasked with developing and maintaining apprenticeship standards, and ensuring quality assurance in the assessment process. The institute is employer-led, and there is no voice for workers on it. Government should invite representatives from TUC and the biggest trade unions to sit on the Institute.  

This alone will not be enough though. Compared to other advanced economies, the UK has comparatively weak sectoral institutions. In Denmark, the skills system is overseen by strong sectoral institutions, where employers and unions work together to design the content of training. As part of their new industrial strategy, government should seek to establish sectoral institutions to oversee a collective commitment to skills and productivity. These institutions should be responsible for designing the content of training, for developing career pathways that support progression, and for overseeing the operation of the levy in their sector.  

We need stronger and more democratic local institutions too. We’ve called for LEPs to be reformed and redesignated as Local Productivity Partnerships, with responsibility for overseeing the skills system locally. With representation from local government, local employers, and trade unions, these institutions would invest the soon to be devolved Adult Education Budget, provide business advice for local employers, and provide high quality information advice and guidance to learners.  

Our skills system has a poor track-record of supporting adults to adapt to economic change. With our economy set to transform in the coming years, we must not repeat the mistakes of the past. We need urgent reforms to improve the quantity and the quality of training, and trade unions are essential partners in making this happen.

The post After another lost decade, it’s time to fix the UK’s broken skills system appeared first on ToUChstone blog.

Amber Rudd’s junior minister, Brandon Lewis, contradicted her spin if not her substance, almost immediately. Meanwhile, the government continues to fail to take initiatives it could already take which would go a long way to demonstrating that we have always had more control over migration than Brexiteers admit.

The first thing worth noting is that this is what happens when you announce government policy on a key issue by writing an article in a newspaper (even if it is the Financial Times) rather than making a statement to Parliament.

MPs should be up in arms about the disrespect shown to them by waiting until the week of their summer holidays began to sneak this out, especially since it has been 13 months since the referendum, and the only practical step the government is taking is to ask the Migration Advisory Committee (MAC) to examine the evidence about the impact of free movement on the economy. As several people pointed out, that should have been done before the referendum, and certainly before the government started the process to leave the EU. It’s remarkable it couldn’t have been done a week earlier, at least, so MPs could hear it first.

So when do they want to end freedom of movement?

The main area of confusion is about when exactly free movement is supposed to end (although so many exemptions for sectors like construction, agriculture, health, coffee bars etc have been asked for and offered by Ministers that free movement might as well continue to exist). Amber Rudd seemed to be suggesting that it would continue for two or three years after the UK formally leaves the EU in March 2019, but Brandon Lewis said it would definitely end at that point.

There’s nothing in the Home Office statement yesterday, nor in the letter to the MAC, either way. (We’re also totally in the dark about the proposal that European migrants should ‘register’ if they arrive after March 2019 – it might be a good idea, but until we find out what it means, who can say?)

But if Philip Hammond’s plan for a transitional period of two to three years after March 2019 – during which the UK will stay in the single market and customs union – is implemented (as the TUC has been advocating), then free movement would have to continue during that period as well.

So that’s all clear then…

What happens on migration?

The TUC is very pleased to see the MAC being given the job it has, and we will be using the opportunity to stress the value that migrants make to public services, manufacturing, research and knowledge industries, and the economy generally. But we will also be drawing attention to the way bad employers exploit migrants and undercut existing workers’ terms and conditions, as well as making the case that the long-term solution to skill shortages is training, not migration.

As mentioned above, this evidence should have been commissioned long ago. But this is not the only area where the government has been dragging its feet on migration. Earlier this week I blogged for Labour List on measures that the government could take now to control migration – in particular by regulating the labour market to address exploitation and undercutting. We’re inching towards those steps, but no thanks to the government.

And what about our rights at work?

One step that needed taking – and which came up frequently at workplace meetings in the referendum campaign  – was to make it easier for working people to enforce the rights they have under European employment laws. These laws were introduced essentially to balance the impact on workers of the freedom of movement of people and capital that the single market entails.

But if workers can’t make use of those rights, they are worthless, and that’s part of the loss of influence over their own lives that the Leave campaign brilliantly encapsulated in the “take back control” slogan.

This week it was fantastic that Unison’s challenge to Employment Tribunal fees in the Supreme Court was successful – but no thanks to the government which introduced and defended the fees even when the evidence clearly showed that the fees had prevented people from exercising their legal rights.

Another area where we said the government could take action was to end the so-called ‘Swedish derogation’ which means that many agency workers are paid less than the regular workforce doing the exact same job. Employers often use this exemption to employ migrant workers on lower wages, and it needs to go. The Taylor Review which reported earlier this month recommended that the derogation be scrapped. But the government has no plans yet to do so. Why don’t they just get on with it?

It’s good to talk…

Finally, the Home Secretary announced, in a statement on which no one had been consulted, that she would in future consult unions as well as businesses and others on her migration plans. We genuinely can’t wait (any longer).

The post Immigration – confusion and inaction from government appeared first on ToUChstone blog.

“The Review believes that for work to be fair and decent, workers must have a voice.”

A good start then – an acknowledgement that workers’ voice is integral to decent work. And the report goes on to argue that there is a need to address ‘poor management practices’ to give more workers more influence over their working lives.

However, as in other areas of the Review, the proposals put forward aren’t up to the job in hand. Alongside the warm words and some welcome proposals, there are critical gaps.

Missing – proposals to boost collective bargaining

Trade unionism is based on the principle that coming together gives workers more power than acting alone. This collaboration goes some way to addressing what is otherwise a fundamental imbalance of power within the employment relationship. This is true within any workplace – but especially true for a workforce that is vulnerable. Insecure workers are by definition easier to lay-off – it may be as easy as just not sending that text message with the next shift.

For insecure workers, it is doubly important that they have the protection of acting together and acting with and through a trade union, which can provide support and legal advice. Collective bargaining provides a way to address low pay, insecure contracts and the myriad of abusive employment practices that have become all too common in many of the fastest growing sectors in the UK today (think of retail, hotels, restaurants and pubs, construction, further education, care…)

However, the Review is silent on boosting collective bargaining or making it easier for unions to organise. There’s nothing on giving unions access to workplaces to help workers address problems at work; nothing on establishing sectoral bodies where unions and employers could establish minimum standards in sectors where exploitation is rife.

Warm words – the role of unions

There are warm words about the role of unions – but nothing to help us do our job. Nothing to make it easier for unions to organise and support workers who are both most in need of a union and, at the same time, the most difficult for unions to reach.

This is a critical gap that goes to the very heart of the Review.

Missed opportunity – workers on boards

The Review is neutral on workers on boards, saying:

“We do not have a strong view on whether workers should be directly represented on company boards, as they are in some other countries, or whether other solutions would work better in a British context.”

This is another missed opportunity. Including workers on company boards would give workers a voice in strategic decision-making and help companies to recognise the gains to morale and productivity that stem from using a responsible model of employment.

Welcome proposals – extending consultation rights and company reporting on employment

More positively, the Review does recommend making it easier for workers to trigger rights to information and consultation at work. At present, if ten per cent of employees request it, employers must provide information and consult employees on key business decisions. These rights are not very commonly used. Few people know about them and organising ten per cent of the workforce is a high bar, unless there is a union in the workplace.

The Review recommends extending these right to workers (currently, they apply only to employees) and reducing the threshold to two per cent of the workforce, which is welcome. Extending the rights to workers is a common sense response to the changing profile of the workforce and may give unions an additional means of helping some of the UK’s most vulnerable workers to get organised. Changes will need to be accompanied by a huge publicity drive. Even with a lower trigger threshold, if no one knows about them, the rights are not likely to be used.

Also welcome is the Review’s proposal that companies should be required to report on their employment model, including their use of agency workers – another long-standing TUC proposal. This will help unions and others to highlight the reputational and operational risks that companies using insecure employment practices face.

Conclusion – overall, the Review is disappointing on workers’ voice

The Review shows a recognition of the importance of workers’ voice, but a lack of understanding of what is needed to make it work at the sharp end of the labour market. There are some welcome, but limited, proposals; unions will do their best to make the most of them, but alone they will not be enough to boost workers’ voice where it is needed most.

The post We need a voice at work – but was the Taylor Review listening? appeared first on ToUChstone blog.

What’s more, the government will have to refund any fees paid since 2013 — at a cost of about £27m.

It’s a massive win for working people, and we congratulate UNISON for doggedly pursuing this case.

When tribunal fees of up to £1,200 per case were introduced in 2013, it very quickly became clear that many working people could no longer afford to uphold their rights at work.

The number of cases taken has dropped by nearly 70%. Low-paid and insecure workers have all but lost their ability to take cases, whether on non-payment of the national minimum wage, unauthorised deductions from pay, or even unfair dismissal. Only union members and the well-off were guaranteed access to justice.

And the number of discrimination cases has gone through the floor too, hurting women, workers with disabilities, black and minority ethnic and LGBT+ workers who have been unfairly treated or harassed.

The fees have been a bonanza for bad bosses, giving them a free rein to mistreat staff. As UNISON rightly argued, access to the courts is a vital component of the rule of law. Working rights aren’t worth the paper they’re written on unless they can be enforced.

This is a resounding defeat for the government, and they must act immediately to implement the court’s finding. Any fees paid should be refunded as soon as possible. But even then, we’ll never know how many people have missed out on justice over the last four years because they couldn’t afford to pay for it.

Above all, today’s result shows the value of working people standing together in trade unions. This decision will have a lasting impact, making sure people can enforce their employment rights.

The government priced workers out of justice, sending the message that fair treatment is a luxury, not a right.

Today, they’ve been proved wrong.

The post Massive win for working people as Supreme Court rejects employment tribunal fees appeared first on ToUChstone blog.

This means that from today, employment tribunal fees will no longer apply and that all previous fees that have been paid will have to be repaid.

The Supreme Court unanimously upheld each of UNISON’s arguments against employment tribunal fees.  They found that the Fees Order:

1. Restricted access to justice;
   • As the Supreme Court said, “Fees must be affordable not in a theoretical sense, but in the sense that they can reasonably be afforded. Where households on low to middle incomes can only afford fees by forgoing an acceptable standard of living, the fees cannot be regarded as affordable”.
2. Limited Parliament’s role in granting employment rights and how they should be enforced;
3. And, discriminated unlawfully against women
   • As the Supreme Court said, “The Fees Order is indirectly discriminatory under the Equality Act 2010 because the higher fees for type B claims put women at a particular disadvantage because a higher proportion of women bring type B than bring type A claims.”

The victory today is one of the most significant employment law judgments for a generation.  It is a massive step towards ensuring that working people can enforce their employment rights.  It is a clear example of trade unions standing up for all working people.  The Supreme Court judgment smashes down a financial barrier which was pricing workers out of justice.  From today, all working people will be able to enforce their rights without having to worry about whether they can afford the fee.  All claimants who have previously paid a tribunal fee will have to be reimbursed.  Abolishing fees restores access to the tribunals and means that future significant decisions (which might not have been heard) can have wide ranging consequences for all workplaces.

Government statistics have shown that employment claims across the board fell by 67% following the introduction of fees.  However, some groups of workers were affected disproportionately.  Victims of discrimination, workers who had wages unfairly docked, workers who have been unfairly sacked were amongst the groups who really found it unaffordable to bring a claim to employment tribunal.

Today’s decision will also have a positive knock on effect leading to more disputes being resolved in the workplace.  It’s been widely recognised, including in evidence given to the recent government review on tribunal fees, that bad bosses have become emboldened due to workers being less likely to pursue an employment tribunal claim.

Huge congratulations to UNISON for this landmark victory.  Today’s victory is a massive step to improving working peoples’ ability to enforce their employment rights.  And it is a great example of the value of working people standing together in trade unions.

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A right to request fixed hours, however, is no right at all. It’s more of a vague hope.

To see why, we just need to look at the likely thought process behind submitting a request for fixed hours.

Two questions are probably going to pop up before you consider submitting such a request:

• Is it worth the risk?
• Is there a fair chance it’ll be accepted?

While the Taylor Review hopes the answer to these questions is “yes”. In reality, they’re barely maybes.

Would a worker take the risk?

Let’s start with the first question.

Those on zero hours contracts rely entirely on their bosses to allocate work to them each week. We know that one of the day-to-day experiences is a fear of falling out of favour with your boss, or getting a reputation as being unreliable.

If your employer does take a bit of a disliking to you, you can suddenly find yourself with no shifts and no income.

So what happens if you submit a request for guaranteed hours? At best, your employer accepts the request and the guaranteed hours are approved. At worst, however, the employer is irked by the request. They refuse it, as they’ll be entitled to do. They then don’t offer you as many shifts for the next few months.

If you have rent and bills to pay, is it worth the risk?

This’ll depend on whether you think the request would go down well.

Hundreds of people employed in insecure work have told us about their experiences. Many have been shouted at and threatened for wanting to take time off, either for sickness or holiday. It’s not always explicit threats. In some places, shame and guilt are used to coerce people into working.

Because of this, working people regularly drag themselves into work while sick and avoid using their annual leave.

In hostile work environments, it’s difficult to believe that a request for fixed hours is always going to be met positively. Workers with a lot to lose, who are already scared of asking for more hours, are unlikely to want to risk asking for a new right.

Is there a fair chance it’ll be accepted?

Due to financial risks, as well as the fear of missing out on future work, many of those in insecure work accept shifts whenever offered. They feel constantly on call.

This negatively impacts the employee, but benefits the employer. It provides them with a flexible workforce that can be used to meet demand, or lack of demand, at any given time.

This power dynamic means that employers can often get away with:

• Cancelling shifts at last minute
• Providing shift rotas late, leaving staff with little or no notice of when they’ll be working
• Sending staff home without pay when they’re not as busy as expected

On top of this, employers will be pretty safe in the knowledge that if they refuse a request for whatever reason, there’ll be little consequence for them.

Tribunal fees currently price low-paid workers out of enforcing their rights. The cost of holding an employer to account is too high for many, as seen by the sharp drop in tribunal claims since the introduction of fees.

So what else could we do?

It’s therefore not enough to offer a right to request.

Instead, the government should move towards banning the use of zero-hours contracts.

Those who work regular hours must have an enforceable right to a written contract that guarantees their normal working hours. It’s wrong that employers can drastically reduce someone’s hours and income for no reason. It allows bosses to ruin someone’s livelihood just because they’ve taken a bit of a disliking to them.

Those who are expected to work variable hours should be financially rewarded for the flexibility they provide. To do this, we need to ensure all workers receive additional pay for any non-contracted hours.

Fair play to the Taylor Review for looking at this. The Review says it will ask the Low Pay Commission to examine the case for a higher national minimum wage (NMW) rate for hours that are not guaranteed as part of the contract. We’ll want to discuss this with the Low Pay Commission. But in principle, we think a premium should be applied to all workers who have to work above their contracted hours, not just those on minimum wage.

Learning from elsewhere

Elements of this have recently been seen in the slow rise of “fair scheduling” laws in the United States. These laws legally require employers to provide advance notice of all shifts to workers. Workers receive compensation if shifts are cancelled. This protects against unpredictable work and pay.

It’s been introduced in a few cities but, thanks to Oregon’s state legislature, has recently been enacted on a state-level for the first time.

It’s interesting to read the report on the impact of irregular scheduling in Oregon. The section on workers’ experiences of irregular scheduling pretty much reads exactly like our own report and blog posts on irregular work.

They’re so similar that we could create a BuzzFeed-style quiz called “Guess Who Said This: An Oregonian Insecure Worker or a British Insecure Worker” and it would be impossibly difficult. It would also be a kinda grim quiz.

The Fair Work Week Act

So Oregon responded with its Fair Work Week Act. It requires certain companies to:

• Provide employees with a written work schedule at least a week before the first day of the working week. Employees can then request any additional shifts, and decline any new shifts not included on the schedule.
• Tell employees about changes to the schedule in a timely manner, allowing employees to decline work shifts not already included in the schedule
• Give new employees a written estimate of their work schedule. This must say the median number of hours the employee can expect to work in an average month.
• Let employees have a 10-hour rest period between shifts. Employees must receive 1.5 times their regular pay for any time worked during a rest period.

Companies can still have a “standby” list of employees who can be asked to work additional hours if there’s unexpected demand. However, this list must be voluntary and the employee must be able to request to be removed from the list. Those on the list must not be required to work any additional hours, it must remain opt-in.

Compensation for workers

Importantly, employers must compensate an employee if they change a schedule with less than seven days’ notice.

An employee must receive one hour of pay at their regular rate of pay, in addition to wages earned, when the employer:

• Adds more than 30 minutes of work to the employee’s work shift
• Changes the date or start or end time of the employee’s work shift with no loss of hours
• Schedules the employee for an additional work shift or on-call shift

As well as this, employees must receive 1.5 times their regular rate of pay per hour for each scheduled hour that they don’t work when the employer:

• Takes away hours from their work shift before or after the employee reports for duty
• Changes the date or start or end time of the employee’s work shift, resulting in a loss of working hours
• Cancels the employee’s work shift
• Does not ask the employee to perform work when the employee is scheduled for an on-call shift

Employees don’t receive compensation if they request these changes themselves.

It’s not perfect, but it’s a start

In some aspects, the act isn’t perfect. It only covers certain companies and industries. Compensation only kicks in when working time is changed by more than 30 minutes, and there’s a few potential loop holes around some of the compensation payments. And while employees can request not to work at certain times, the employer is under no obligation to accept.

Despite these flaws, the act will provide eligible employees with a better idea of their working hours and schedules. Workers will be ridded of the unpredictable hours they find so frustrating. The need to pay compensation may also encourage employers to provide accurate and timely work schedules or face financial costs.

Notably, politicians from both parties supported the bill.

But that’s not enough.

Ultimately though, it wouldn’t be enough just to introduce a new right similar to the Fair Work Week Act.

For a right to be effective, tribunal fees must first be scrapped. This is for the same reasons as when we looked at enforcement last week. If people can’t enforce a right, that right is meaningless.

The post A right to request fixed hours is no right at all appeared first on ToUChstone blog.

A good example of this is a resolution on forced labour passed by the Consumer Goods Forum (CGF), which brings together senior executives from the consumer goods sector to lead positive change in business practices. The CGF recently published a booklet of success stories entitled Business Actions Against Forced Labour, featuring leading companies such as Unilever, Tesco and M&S, and outlines the actions they are taking.

The booklet opens with a message from Zed Ra’ad Al Hussein, the UN High Commissioner for Human Rights:

“Forced labour is a widespread problem in supply chains globally. Virtually every country is touched in some way by this modern form of slavery. With 21 million individuals suffering as victims of forced labour today, a problem of this magnitude cannot be solved without essential cross-sectoral collaboration between businesses, government, civil society and workers’ organisations.”

I could not agree more.

But this mention of “workers’ organisations” in the Foreword is the first and last time they are mentioned in the report. None of the companies mentioned – companies who are being singled out for the great work they are doing fighting against forced labour – mentions them. The term “trade unions” appears nowhere in the report.

And yet one cannot imagine a successful fight against forced labour and child labour without putting trade unions first and foremost.

That is certainly the position of the Ethical Trading Initiative (ETI), which has just released two new Guidance Reports on Modern Slavery (with a focus on forced labour) and Child Labour. Those reports give advice to companies to help them understand the key concepts, their legal responsibilities, and suggests practical steps they can take to tackle these rights violations.

The role of trade unions is central in ETI’s strategy for combatting modern slavery.

The report on child labour makes it clear from the outset that “ending child labour requires the involvement of many others, apart from businesses” – among them, trade unions.

The Guidance on Child Labour is critical of existing social audits, insisting that these “should be complemented by information from labour inspectors, local civil society organisations, trade union representatives and other labour rights experts.”

The report encourages large multinational companies to consider developing an international framework agreement with global union federations.

It calls on businesses to recognise “freedom of association” and explains what this means in practice: “workers’ right to form trade unions and engage in collective bargaining.”

The second Guidance report on Modern Slavery, contains even more examples of ETI’s putting unions front and centre in the fight.　

For example, it highlights the role of unions as organisations “that can act on behalf of vulnerable workers” and urges businesses to ensure workers have access to them.

It calls on employers to work “in partnership with other key stakeholders, such as trade unions and NGOs” and gives concrete examples of this happening.

It clearly identifies “lack of trade union presence and freedom of association” as a factor that may contribute to modern slavery.

ETI differs from most other organisations working in this field in its commitment to trade unions, NGOs and businesses working together to address these issues.

Without trade unions, we will never be able to deal with the horror that is modern slavery.　 Everyone else working on these issues should agree.

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In October 2015, health secretary Jeremy Hunt told the House of Commons that ‘we need more midwives’. But since then, the number has increased by less than 0.7%. Across England, we have a shortage of around 3,500.

Of the midwives we do have, the latest figures show that almost 1,400 come from elsewhere in the EU. This includes almost 300 from Italy, almost 200 from Spain, and over 100 from Poland. These EU midwives make an invaluable contribution to our NHS, supporting and caring for women. Without them, England would face a shortage of 5,000 midwives. The consequences of that kind of shortfall are unthinkable.

Given the contribution EU midwives make, new figures from the profession’s regulator should set alarm bells ringing. The Nursing and Midwifery Council (NMC) find that the number of midwives – qualified and ready to work – who are registering to practise here in the UK has plummeted since the referendum 13 months ago.

During June and July last year, 80 people from elsewhere in the EU registered with the NMC to practise as a midwife in the UK. During the first half of this year, the numbers registering each month were: 8, 3, 1, 1, 3 and 2. Put simply, the number of EU midwives wanting to come here has collapsed.

We need urgently to reassure EU nationals working in the NHS, and elsewhere in the economy too, about their right to continue to live and work here. Ministers have repeatedly spoken about how much they value the work done by EU staff in the NHS; it’s now long past time to back up those warm words with concrete action. And not only should we give guarantees to those EU workers already here, but we should keep the door open.

Applications slump

We need to train more midwives and other healthcare workers here in the UK, of course. But in England, where the midwife shortage is deep, this is being made so much harder by the abolition of bursaries for student midwives and the introduction of tuition fees, from which student midwives were previously exempt.

Midwifery students starting their courses this autumn will end up being tens of thousands of pounds worse off than those who started their courses last autumn. No wonder applications have slumped. Worryingly, this makes building up the workforce with UK-trained staff a much more difficult and challenging task.

Given the Government’s shaky, fumbling start to the exit talks, it is understandable if EU nationals resident here have little confidence that it will all end well for them. This is all the more reason for the Government to act decisively, quickly and generously towards them.

If it does that, maybe EU midwives will start to turn up on our shores once again – ready, willing and able to start work in our maternity units, and drive down that colossal midwifery shortage.

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“Nothing in economics is more potent than a simple idea whose time has come”, Gavyn Davies, October 21^st 2012

The week before last, the Office for Budget Responsibility (OBR) published a new assessment of ‘fiscal risks’ to the UK. Reporting on threats to the public finances, they warned against new spending commitments:

“… new unfunded ‘giveaways’ would take the Government further away from its medium-term fiscal objective and would only add to the longer-term challenges”.

At the same time they made the observation that the “fiscal position … is more vulnerable than that which prevailed on the eve of the crisis 10 years ago”.

The message from the OBR seems to be that the patient must keep on taking the medicine – even though there’s no sign of it working yet. This assessment is based on an assumption that spending cuts are not damaging the economy, and that the weakness in growth since 2010 is nothing to do with government policy.

This rests on a judgement that the size of the ‘multipliers’ that capture the effects of government spending on the economy are very small. This was a controversial position when the OBR first adopted it in June 2010. But even more controversial is their refusal to debate or change this assumption in the light of increasing evidence that they have called this wrong.

In this blog I set out why multipliers matter, the latest evidence on just how big multipliers might be, how the OBR have reacted, and why this matters so much for the health of the economy and public services.

2. To Recap: the multiplier

The idea of the multiplier emerged in the 1930s great depression, as a way to explain the argument that increased government spending could pay for itself. The intuition is simple. Here’s how Keynes put it in an appeal to the public, published originally in the Times newspaper:

It is often said that in Great Britain it costs £500 capital expenditure on public works to give one man employment for a year … This is based on the amount of labour directly employed on the spot … but it is easy to see that the materials used and the transport also give employment … If the expenditure is additional and not merely in substitution for other expenditure, the increase of employment does not stop there. The additional wages and other incomes paid out are spent on additional purchases which lead in turn to further employment … Nor have we reached the end. The newly employed who supply the increased purchases of the employed on the new capital works will , in their turn, spend more, thus adding to the employment of others; and so on.

Keynes warns that “some enthusiasts, perceiving the fact of these repercussions, have greatly exaggerated the total result”. Acting against this ‘exaggeration’ are what he called “leakages” at each stage of the process into saving, imports and price.

While the idea is straightforward, capturing or illustrating it in theoretical terms is less so. The most common way is to consider the series of ‘repercussions’ with a leakage only to saving. So the original government spending increases employment and wages and so labour income. This increase is either spent (proportion c) or saved (s = 1 – c). The money that is spent is earned as income by the recipients, which is then spent according to the same average proportion (so a share c of c, which is equal to c²). And so on. Working through these repercussions leads to a total amount of income/spending equal to 1 /1-c times the original increase in government spending.

[NB the repercussions can be represented as a series 1 + c + c² + c³ + …, which sums to 1/1-c by a standard mathematical result.]

Firms will react to this increase in demand by increasing production, with some of the increase will be met by imports. As discussed in an earlier post, taking into account imports the formula is 1/(1 – c + m), where c is known in the jargon as the marginal propensity to consume and m the marginal propensity to import. Both proportions can be estimated from average experience, using national accounts estimates of annual changes in consumption, imports and GDP. With c = 2/3 and m = 1/3 the multiplier is estimated at 1.5, i.e. if the government increases expenditure by £10bn, this will translate to an increase in GDP (i.e. overall income and spending) of £15bn. (And there will be tax gains and reductions in welfare expenditure, as discussed in the previous post.)

Strictly the (expenditure) multiplier is set in cash terms, but there is obvious interest in the share that goes to increased output and jobs (i.e. the ‘real’ effect’) versus the share that simply goes to price. The whole point of Keynes’s theory is that in conditions of deficient demand, a revival in demand will strengthen the economy; price may go up but as a secondary and generally not problematic consideration.

3. A brief history of the multiplier since the financial crisis

With the financial and economic crisis of 2007-2009 the worst since the 1930s, a revival of interest in multipliers was unsurprising. The most important action was after the election of President Obama. His Council of Economic Advisers (in a report ‘The job impact of the American recovery and reinvestment plan’) advised that the multiplier was 1.5 (though admittedly they were a little short on detail).

At the time, the FT (23/1/09) reported comments from a couple of prominent academic economists, with Ken Rogoff offering vague support:

“Academic economists are far more uncertain about the impact of the fiscal stimulus than Wall Street … The range of estimates is very wide. But given the situation we’re in it is certainly worth trying”

and disagreement from Robert Barro, who argued that the beneficial impact of additional public sector spending would be ‘crowded out’ by reduced private sector spend (I come back to this below), so that:

“… with partial crowding out the multiplier will be a lot less than one”

The implied uncertainties here were largely ignored by policy makers, who, within a year, began to impose public spending cuts – a.k.a. austerity.

The OBR were created by the Coalition to monitor the government’s progress in repairing the UK public finances. In order to make forecasts about the impact of the government’s policies, the OBR had to make their own estimates of the multiplier. They included the following table in their June 2010 Budget forecast.

The implications need to be understood. The largest category of government spending is departmental spending on public services and public sector wages. Here (‘RDEL’) the OBR operate with a multiplier of 0.6. This means for example that an increase of £10bn in public service spending will translate to an increase of only 7bn in overall GDP. This is only possible if other expenditures fall to offset the increase in government spending (namely investment, trade and consumer demand). The idea is that government spending effectively gets in the way of private sector spending and makes the economy less efficient overall – so private spending is ‘crowded out’ by public spending.

In a footnote, the OBR offer background to these estimates, giving prominence to work by the IMF.

A review of estimates for fiscal multipliers for different policy instruments and countries is available in Fiscal Multipliers, Antonio Spilimbergo, Steve Symansky, Martin Schindler (IMF Staff Position Note), May 2009. Further evidence was taken from papers including: Fiscal Policy Action in the Banking Crisis, National Institute Economic Review, January 2009; Fiscal Stabilisation and EMU, HM Treasury, 2003; Public Investment and the Golden Rule: Another (Different) Look, Roberto Perotti (IGIER Working Paper No 277), 2006; and Estimating Tax and Benefit Multipliers in Europe, Ali J Al-Eyd and Ray Barrell, Economic Modelling (Vol 22), 2005.

Yet within only two years even the IMF were alarmed at the scale of the damage to global growth. Their October 2012 World Economic Outlook included analysis of the impact of fiscal consolidations to date – underpinned by recognition that their forecasts of economic growth had gone furthest astray for those countries making the biggest cuts. Effectively they U-turned on previous policy advice and offered new much higher multipliers:

Our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great Recession.

At the time I was working in the Treasury, enjoying the reaction to the IMF findings; my predecessor at the TUC Duncan Weldon justly wondered how the OBR would react – given the importance of IMF work to the original OBR assessment:

The question now is will the OBR follow the course set by the IMF, reassess its own use of multipliers and revise its view of the impact of spending cuts and tax rises?

Gavyn Davies’s (of Goldman Sachs and sometimes Labour Party adviser) reaction is at the top of this blog. But the OBR were undeterred. Some five years later Ben Chu at the Independent challenged outgoing member of the Budget Responsibility Committee Sir Stephen Nickell on underestimating multipliers.

“The IMF had four different measures of multipliers, depending on which branch [you talked to]…. The Great Britain team had multipliers very similar to ours. Olivier [Blanchard – the former chief economist of the IMF] wanted to have much bigger multipliers.”

And Nickell stresses that he is still “perfectly happy” with the OBR’s original judgements on this front.

4. From theory to practice

We now have several years of data about the impact of spending cuts in the UK with which to test these slightly theoretical arguments.

Underlying the OBR position is the idea that private sector activity is ‘crowded out’ by public sector activity (as in the 0.6 example above). Looked at the other way around, cutting back public sector activity should ‘crowd in’ private sector activity, i.e. lead to stronger economic growth. The OBR original economic forecast was for 2010-15, so we can now see how things turned out.

The chart below shows the OBR forecast against growth before the crisis and then against what actually happened after the crisis. It does so by taking the average GDP growth across each period, and examining how different types of spending were affected. (NB While so far the illustrative calculations have been in terms of cash increases, in reality the spending cuts and multiplier have operated on the growth of the economy.)

• Column 1 shows pre-crisis growth
• Column 2 shows the OBR forecast for growth over 2010-2015
• Column 3 shows the difference between the first two columns. They key point is that the OBR expected investment and trade to be ‘crowded in’ by the cuts in government spending – with green and yellow above the line offsetting the red below the line – so that GDP growth was almost unaffected.
• Column 4 fourth column is what actually happened to growth over 2010-15: it was significantly weaker than expected.
• Column 5 shows the difference between the OBR forecast and outcomes in reality. ‘Crowding in’ didn’t happen and consumer demand (pink) was also hit hard. The OBR argue that their forecast was knocked off course by the impact of the Eurozone crisis on the UK economy. Though trade was actually a little less bad after the crisis than before.

Contributions to GDP growth, annual averages in percentage points

Source: TUC calculations on ONS and OBR figures

In fact, comparing pre-crisis and post-crisis outcomes, (nominal) GDP growth slowed by 1.8 percentage points a year (from 5.4 to 3.6 per cent a year). The contribution of government expenditure was down 1.3 percentage points. Applying to this a multiplier of 1.5, suggests a slowdown in economic growth of 1.9 percentage points (= 1.3 x 1.5). So the actual reduction of 1.8 ppts a year was very close to what might have been expected on the basis of normal experience of the relation between government expenditure and economic activity as a whole.

Moreover ‘crowding in’ didn’t happen in any of the 32 OECD countries where cuts were imposed (here). And the evidence across these countries suggests an average multiplier of 3 – with cuts in government expenditure hitting economic growth very hard. It is not plausible to blame the Eurozone for this global disaster (not least because Germany actually did better after the crisis than before). It is hard to see how this evidence effectively of a (very brutal) natural experiment can simply be ignored. The blame is with the policy approach in the UK, EU and most countries of the world.

5. Where now?

The OBR’s report was shortly followed by the circulation of a new report published by the US National Bureau of Economic Research. The author Gabriel Chodorow-Reich finds a US multiplier of 1.7 / 1.8 – working bottom up from regions to the country as a whole.

Long standing critics of austerity were quick to draw attention to the findings. Simon Wren-Lewis tweeted how he had previously assumed 1.5, and so it “looks like I could have gone higher. OBR need to rethink their multipliers”. And Catherine Mann, chief economist at the OECD, backed him up “Collective action generates bigger multipliers. Indeed”.

A proper debate on multipliers is now seriously overdue.

As I discussed in the previous post, a higher multiplier opens up the possibility that the correct way to improve the public finances is to increase rather than reduce spending. While the Chancellor plays the politics of division pitting the public against the private sector, it is perfectly possible that expanding public sector activity will lead to stronger private sector activity. In the meantime, erroneously operating with a too low multiplier means that the economy is being badly damaged for no sound economic reason at all. The consequences of getting multipliers wrong are serious.

The post Why multipliers matter appeared first on ToUChstone blog.

“The two-tier enforcement framework in the UK works”.

No it doesn’t. 

Two things immediately spring to mind that show this statement isn’t true:

1. Employment tribunal fees price people out of justice. Ministry of Justice statistics show that claims have dropped by 67%, since fees were introduced. Because prospective claimants couldn’t afford to pay fees.
2. Over 250,000 people are not being paid the correct National Minimum Wage rates.

Both are strong indicators of an enforcement system that isn’t working.

We need big changes to our enforcement system to make sure that working people can enforce their employment rights.

So, what does the Taylor Review propose?

On employment tribunal fees

Not a lot, and nothing that hasn’t been done already. It suggests that the government “continues to keep the level of fees under review”. In January 2017, the government published a review on employment tribunal fees. Despite revealing evidence that people found fees to be unaffordable, they failed to lower or abolish fees. It’s unlikely that a further review would lead to the government abolishing or even lowering fees.

Beefing up the statutory enforcement agencies

The Review recommends giving enforcement agencies wider powers to enforce core workplace rights for the lowest paid workers:

• HMRC should take responsibility for enforcing the “basic set of core pay rights that apply to all workers”, such as the National Minimum Wage, sick pay and holiday pay
• Increased powers for the Employment Agencies Standards Inspectorate (EASI):
  • Monitoring and enforcing standards for agency workers throughout supply chains, including umbrella companies
  • Extending the remit of EASI so it has an explicit responsibility to tackle breaches of the Agency Workers Regulations

These are welcome suggestions that should make it easier for lower paid, insecure workers to enforce their rights. Agency workers, for example, would be able to contact EASI if they suspected they were not receiving equal treatment in terms of their pay. The TUC carried out a survey of insecure workers earlier this year and time and time again, enforcement of holiday pay was flagged up as an issue.

The Review does acknowledge that statutory enforcement agencies have “limited resources”. EASI’s budget is an example of this. Since 2010 it’s been cut roughly in half to £500,000. Enforcement agencies must be given additional resources to carry out these new functions effectively.

Beefing up the enforcement agencies, however, isn’t going to help the majority of working people. We have a two tier enforcement system. Employees who can afford to pay a fee can enforce their full range of employment rights. All workers can rely on the statutory enforcement agencies to enforce their basic, core workplace rights (such as the National Minimum Wage).

But what does this mean for low paid employees who are unfairly dismissed or discriminated against in the workplace? They can’t afford to bring an employment tribunal claim. The Taylor Review hasn’t offered anything to these workers. That’s why employment tribunal fees need to be abolished.

Reversing the burden of proof, where status is in dispute, so that a claimant is presumed to be a worker/employee until proved otherwise

At the moment, a claimant has to prove to a tribunal that they are a “worker” or “employee” where their employer disputes this is the case. For example, in the recent Uber case supported by GMB, the drivers successfully proved they were “workers”. The Taylor Review recommends reversing the burden of proof. This means the tribunal will presume a claimant is an employee/worker. The employer must then prove that the claimant is not entitled to relevant employment rights. On the face of it, this is a helpful suggestion.

However, the Review says that this will only happen where a claimant meets certain conditions:

• Firstly, the claimant will have to use a new online tool to assess their employment status and have a confirmed finding that they are an employee or worker/dependent contractor
• Secondly, they will have to speak with ACAS and gain certification that they are a worker/employee

Online tools are not sophisticated enough to make sound judgments on employment status. Employment tribunals currently do this job, and they have a great deal of experience and understanding of the case law that has developed in this area. It’s very difficult to see how an online app will be able to determine the reality of the working relationship.

Ensuring employers pay what is owed

As the Review flagged up, 34% of employment tribunal awards in England are not paid. The Taylor Review recommends that the government takes greater responsibility for making sure tribunal awards are paid. The government should:

• Be responsible for taking enforcement action against employers, who don’t pay their awards, on behalf of workers
• Establish a “naming and shaming” scheme for employers who do not pay their employment tribunal awards

Increased sanctions for employers

The Review has suggested that employers should face increased penalties and have to pay the costs of the claimant where they contest and lose a status case, if they have already lost a similar case.

The TUC has called for these proposals for many years. Other options that should be considered include:

• Strengthening public procurement rules to ensure contracts are not given to companies which have failed to pay ET awards.
• Company directors who fail to pay ET awards (more than once) should be debarred.

Ignoring the elephant in the room – employment tribunal fees

Overall, there are some welcome recommendations in the enforcement section. But this is mainly tinkering around the edges. And the review has failed to tackle the single, biggest barrier preventing people from enforcing their employment rights; employment tribunal fees.

There’s a wide consensus that employment tribunal fees should be lowered/scrapped. Trade unions, the CBI, Citizens Advice Bureau and employment lawyers have all called for fees to be scrapped or significantly reduced. The Taylor Review ignored these calls.

Taking a claim to employment tribunal is the principal way for workers to enforce their employment rights. Prospective claimants have to pay fees of up to £1200 and this has priced many workers out of justice. If people can’t enforce their rights, then their existing rights (and, any of the new rights proposed by the Taylor Review) are pretty much meaningless.

As I pointed out at the beginning, the Taylor Review drew the wrong conclusion on our enforcement system, so it’s not surprising that its recommendations fall short of what is needed to create a robust, effective enforcement system.

The TUC is campaigning in the following key areas, to improve our enforcement system:

• To abolish employment tribunal fees
• The law needs to change to ensure that the companies and organisations who are in practice responsible for undercutting employment standards or mistreating individuals are held to account for it. The best way to achieve this is to move towards a system of joint and several liability for employment law standards throughout supply chains.
• The licensing model currently used by the Gangmasters Labour Abuse Authority, in the shellfish gathering, agriculture and horticulture sectors, should be extended across the labour market. We believe this is the most effective system for ensuring organisations comply with core labour standards. Licensing is an effective system for weeding out unscrupulous employers from the labour market. This is because only licensed labour providers can operate in a particular sector. Before they do so they have to prove that they comply with core licensing standards.

The post Our enforcement system isn’t working. What’s the Taylor Review going to do about it? appeared first on ToUChstone blog.

That’s not surprising. Few stories offer such a perfect mix of celebrity gossip, financial drama and political intrigue. Of course journalists are going to jump on this one.

But more than 20,000 people work at the BBC — and this story should be about more than the richest 96.

While the media has focused on the top talent, the Broadcasting, Entertainment, Communications and Theatre Union (BECTU) is talking about the BBC’s lowest-paid workers instead.

They point out that while top management earn hundreds of thousands — and some stars earn millions — over 2,500 BBC staff are on less than £20,000 a year.

“It is totally unacceptable that the BBC is prepared to pay senior management and others many times that amount,” BECTU leader Gerry Morrissey told the Press Association. “There should be a lot more focus on giving low-paid staff a living wage.”

Across the broadcasting industry, engineers, runners, technical and production staff work long hours to keep shows running. Many of those workers are young. They enter at the bottom grade, hoping to get a foothold in the industry. Morrissey warns this can create space for exploitation.

While inequality exists  across the industry, the BBC is a public sector employer and can be held to account for how it uses taxpayers’ contributions — both at the top and the bottom of the pay scale.

Inequality

The salary list also shows a significant gender pay gap at the top of the BBC, and a severe under-representation of BAME staff.

Although there’s a long way to go, the BBC recognises that this is a problem. In theory at least, it’s committed to taking action. These efforts should reach beyond the top tiers of the organisation to include lower-paid female and BAME workers.

But while the corporation is willing to accept that it has problem with gender inequality, BECTU reports resistance from management when it raises pay inequality more generally.

The treatment of behind-the-scenes staff isn’t as juicy as Graham Norton or Chris Evans’s pay.  But if we care about fair pay in the BBC, they’re two sides of the same coin.

The post The BBC can afford millions for the talent, but other staff are denied a fair wage appeared first on ToUChstone blog.

Instead, he made significant play of the “public sector pay premium”. This is the idea that public sector workers earn more, on average, than people in the private sector. Hammond also argued that public sector pensions are more generous, which justifies pay restraint in that sector.

Pay

But the picture is more complicated than it looks.

The Office of National Statistics (ONS) produces data on earnings in both sectors. This is published monthly in their Average Weekly Earnings (AWE) series. AWE shows that the public sector earns 9.5% more than the private sector. That looks pretty decisive. But as with all statistics, the devil is in the detail.

The jobs that make up private and public sector work are often different, so a simple comparison between the two is not necessarily informative. It can be like comparing apples and oranges. In order to have a fair comparison we need to compare similar jobs in each sector. This means we need to take account of different factors that might affect the result, such as type of employment, or the type of work performed.

For instance, if you control for industry you might find you get very different results. Because the public sector doesn’t include many people employed in (typically low-paid) hospitality sector, but the private sector has lots, that will skew the findings a bit. If you control for the type of work being performed the public sector pay premium is significantly reduced.

In fact, 2016 research by Income Data Services (IDS) found that it pay had reached parity between the two sectors. They found that the private sector average was brought down by very low pay in specific industries, although average public sector earnings are less than those in finance and business services, construction and manufacturing.

The Institute for Fiscal Studies (IFS) found a similar effect when they compared workers with similar characteristics. When the IFS looked at this they controlled for age and qualifications, among other factors.

Most people would expect NHS and school staff to paid more than those in retail and hospitality – so dividing them along public/private lines doesn’t really offer a useful comparison.

Public Sector pay is declining

At the same time, we have found that public sector pay is already beginning to lag behind the rest of the economy. When we looked at the trend in public sector pay compared to the rest of the economy we found pay in the economy as a whole should return to its pre-crisis level by 2021, whereas pay in the public sector will continue to decline and AWE will fall decisively behind the private sector and the economy average.

This doesn’t mean that the AWE figures are wrong, only that they present one particular interpretation of the huge amount of data potentially available on pay in the private and public sector.

(If you want more info on the debates about pay there is a really useful report by IDS from 2013 that goes into it in more detail.)

Pensions

Philip Hammond is right, that on average pension provision is better in the public sector than the private sector. But this misses several key facts.

Firstly, pensions are future income. They support workers in retirement but as the chancellor himself acknowledged they don’t pay the rent or feed the kids today.

Secondly, pensions are deferred income. For a workplace pension, workers forgo receiving their full wage today in order to get it at a later date, and their employer contributes an additional amount to top this up. The employee contribution from workplace pensions has increased since 2010, meaning that on top of having their pay cut in real terms, workers are giving up a bigger slice of today’s income to their pension. For example, the majority of midwives saw their contribution rise from 6.5 per cent to 9.3 per cent from 2012 to 2015.

The pensions that public sector workers will receive have also been cut in recent years, meaning that workers will have to work longer, contribute more and then will receive less when they eventually retire.

Race to the bottom

Finally, we should remember that if public sector pensions are still better than many in the private sector that is a reason to improve provision in the private sector. The answer is not to race to the bottom, seeing who can slash pay and provision the most. That way everyone loses.

And it’s is worth remembering that public vs private sector pay is important, but it’s not the only issue at stake. The TUC isn’t only concerned about low-pay, we want fair pay. Workers across the public sector, from nurses, to crown prosecutors, firefighters to nuclear engineers have seen their real pay fall for years. They’ve earned a pay rise on their own merits, through their hard work and dedication.

It is vital that the chancellor gives them this.

The post Is there really a public sector pay premium? appeared first on ToUChstone blog.

This proposal might sound interesting, but here’s 5 reasons why it may not be such a good idea.

All working people should benefit from the same floor of rights

The issue of “employment status” is not what matters to working people. It’s the rights they get at work that count.

The TUC wants to see more people benefiting from the floor of rights that are currently only enjoyed by employees. These include:

• Family friendly rights
• Protection from unfair dismissal
• The ability to play a full role in their union

We would do this by creating a new “worker” definition covering dependent contractors, casual workers and employees.

The Taylor Review avoids this ambitious line. Instead, it recommends keeping the three-tier approach to who gets which rights at work.

So while employees will still benefit from the full range of employment protections, the “self-employed” will get very few rights at work. “Workers” (now named “dependent contractors”) will continue to be treated like second class citizens.

Those on zero-hours contracts or working through an agency may have basic rights to holiday pay, sick pay and protection from discrimination. But they will still be at risk of being sacked without notice and of losing out on redundancy pay if work dries up. This could leave them with no money for rent and bills until they find another job.

They won’t even be guaranteed the right to return to their job after having a baby.

What’s in a name?

You might wonder what’s actually in a name. What’s wrong with renaming workers as “dependent contractors”? Isn’t it just a bit of window-dressing?

No. This apparently minor change would still mean employment legislation needs to undergo major renovation. And it’s not clear the outcome would be more attractive.

The Taylor report suggests the term “dependent contractor” more accurately describes recent changes in the modern world of work. But this is to see the world of work only through the lens of the gig economy.

The Review seems to have forgotten that it’s not just Uber drivers, Deliveroo couriers and Pimlico plumbers who rely on the existing “worker” test. And you’d be hard pressed to find many social care zero-hours contract workers or agency workers picking fruit who think of themselves as “dependent contractors”.

It’s all about control

The Review also recommends that the principle of control should have greater importance when deciding whether an individual is an “independent contractor”.

But doesn’t this risk taking us back to the 1950s/60s? Writing in 1951, Kahn-Freund, a leading labour law scholar, proposed the control test is outdated:

“[it] postulates a combination of managerial and technical functions in the person of the employer, i.e. what to modern eyes appears as an imperfect division of labour”.

In 1968, the courts similarly concluded that control ‘can no longer be regarded as the sole determining factor’. Is this really the time to go back to the future?

The TUC fears that a control-led test won’t help those who enjoy some autonomy over when or how they work, but still rely on the employer for work. This might include academic researchers, project managers or homeworkers who may have deadlines, but can structure their own working patterns.

If courts are to be able to respond to the diverse types of employment seen in the modern workplace, they need access to a wide range of tests. The economic reality of any relationship needs be the first thing to be assessed.

However, the TUC does agree that it’s all too easy for bosses to misclassify staff as ‘self-employed’ simply by inserting a substitution clause in their contract. The ‘personal service test’ should (perhaps) be consigned to history.

Working people should also no longer face the burden of proving they are entitled to rights in the workplace. As a default, individuals should be treated as “employees” unless the employer can show they are genuinely self-employed.

Setting the tests for employment status in stone

The Taylor Review next recommends:

Government should replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail.

There are three main concerns here:

• Setting out the tests in legislation might provide business and workers with more certainty. But it could also provide employers’ with a sitting target – making avoidance far easier. Employment lawyers are very adept at drafting new contracts. It’s unlikely to take them long to get around new fixed statutory tests.
• The recent gig economy cases have shown that the courts are skilled in adapting old status tests to fit new types of employment. Setting the tests in ‘statutory stone’ could tie the judges’ hands and make the law less flexible.
• New statutory tests could quickly become outdated. But any revisions would require politicians to pass new laws. This could take years in a post-EU referendum world. In the meantime, bosses would get away with exploiting workers whilst individuals miss out on the rights they need.

New category with fewer rights

The TUC’s main concern is not that this proposal is just some rebranding exercise. Our fear is that the Taylor recommendations could lead to the creation into a new, distinct legal category that delivers fewer rights for working people. This can only increase inequality in the world of work.

There are already hints of this approach in the Taylor Review. The Review proposes a new, weaker approach to calculating the national minimum wage for gig workers employed as “dependent contractors”.

Companies such as Deliveroo have also been quick to call for legal changes that ensure that some but not all employment rights to apply to their staff.

There’s clear evidence that the market is rigged against those working in the gig economy. It’s vital that employers do not use new technology as an excuse for avoiding basic rights at work and for not treating staff well.

Which takes me back to where I started. It should make no difference if individuals are an employee, or if they are offered or allocated work via an agency, an online platform or an app installed on their smartphones.

All economically dependent workers should benefit from the decent floor of rights currently enjoyed by employees.

Read more on the Taylor Report: Follow the money: How do the tax and social security proposals in the Taylor Review measure up?

The post 5 reasons why a “dependent contractor” test is a bad idea appeared first on ToUChstone blog.

The lower earnings and lower tax paid by the self-employed and those on zero hours contracts means the rise in insecure work has come with a £5bn price tag for the exchequer.

But the cost of insecure work to individuals can also be high. This is due to both lower pay and antiquated rules about entitlement to certain benefits. Sick pay, for example, is only available to those earning over £113 a week. The TUC estimates that around 500,000 people currently in insecure work are deemed too poor to qualify.

It’s therefore welcome that Taylor has recognised the need for tax and social security reform. Both are needed to tackle the rise of insecure work. But the devil will be in the detail of the proposals – and there’s still a lot to work out.

Tax

Taking tax first: Taylor rightly points to the difference in the amount of tax paid by employers as a key driver of false self-employment, and a significant drain on the exchequer. The Review says:

It is also important to recognise that the difference in [National Insurance] NI contributions paid by the self-employed and employed individual is relatively small in comparison with the fact that employers pay 13.8% NI contributions on the labour of employees and workers (earning above the NI secondary threshold), whilst the engagers of self-employed labour do not make any NI contributions on behalf of those they hire. The Review believes that, over time, there is a case for moving to a more equal tax treatment of self-employment: it follows that there is a case for companies and others who engage self-employed labour to contribute more to the overall NI payments made by the self-employed, in the same way as they do for employees.

The Review clearly recommends that the tax rates for individuals should be equalised, as the Chancellor originally intended to do in this year’s budget. However, the timescale for equalising employer rates is much vaguer.

It’s hard to see how hitting self-employed individuals can be the right priority, especially when equalising the rates of employer NI would bring a bigger exchequer return. Of course, there’ll be debates about how best to level the employer playing field. The Social Market Foundation recently suggested that the government introduce a ‘hirers national insurance contribution’ for those employing the self-employed. This would start at 2 per cent per year, and reach parity with employer NICs by 2025.

A Chancellor currently looking for new ways to fund public services could look for a worse place to start in this year’s (Autumn) budget.

Benefits

What about the other side of the fiscal envelope – the benefits that those in insecure work receive?

One huge positive is that the Review recognises that the current system where you can be too poor to qualify for sick pay isn’t fair. Workers who spoke to us about insecure work told us about their fears that they would have no entitlement to sick pay. The Review says:

Government should reform Statutory Sick Pay so that it is explicitly a basic employment right, comparable to the National Minimum Wage, for which all workers are eligible regardless of income from day 1.

If the government wants to move swiftly to show that it takes these concerns seriously, paying sick pay to all workers from day one is a good place to start.

The Review also suggests that sick pay could be calculated differently, and accrued on the basis of length of service. This would be alongside a new right to return to the same job for those who experience a prolonged period of ill-health. Those are ideas that are worthy of consultation. However, they shouldn’t be used to kick the basic principle of ensuring that everyone has the right to sick pay into the long grass.

Expanding sick pay should be the priority for providing those in precarious work the greater financial security they deserve. But there’s a few other social security ideas scattered throughout the Review that point to quick wins for a government that wants to show its delivering change.

Parental benefits

First, equalising parental benefits. One particularly anachronistic feature of the current set of social security rights is the lack of any dedicated support for new fathers or adoptive parents who do not qualify for Statutory Paternity Pay. This can either be because they are self-employed or because they earn too little.

The TUC estimates that one in five new fathers missed out last year.

Philip Hammond reportedly dropped a planned consultation on equalising parental benefits on the day that the Taylor Review was announced. That doesn’t bode well for the chances of getting any more complex changes past the Treasury. But it doesn’t mean it’s the wrong policy – or not one of the easiest for government to implement swiftly.

Pensions

The Review contains sensible suggestions to enable the self-employed to pay into a pension through their tax return (as the TUC has argued). A review of auto-enrolment by the Department of Work and Pensions presents an obvious opportunity to take this forward.

Universal Credit

Finally, the report is silent on the how the planned cuts to Universal Credit will affect those in insecure work. This remains the government’s ‘flagship’ welfare reform. The government expects to save £1.5bn by 2021/22 by introducing tougher rules for the self-employed claiming in-work support. These new rules will arrive alongside cuts in the level of support to all families. All of this will hit those on low incomes the hardest.

Unless the government moves swiftly on the positive proposals in the Taylor report to tackle insecure work, its these cuts that are likely to be the overriding impression the self-employed and those on zero-hours contracts take away of the government’s attitude towards them.

Read more on the Taylor Review: The Taylor Review – should the Low Pay Commission be given more to do?

The post Follow the money: How do the tax and social security proposals in the Taylor Review measure up? appeared first on ToUChstone blog.

Taylor’s broad aim of empowering the LPC to do more to promote decent work is the right one, so the short answer to the question in the headline of this blog is “yes”. Now let’s talk about the detail of the proposals in the review that relate to the NMW.

Proposal 1: The LPC to consider a higher minimum wage for hours worked that are not in the employment contract, and the introduction of penalties for late notice of shifts and cancellations.

The TUC has long argued that, in order to ensure that flexibility cuts both ways, employers should compensate their workforce for non regular hours, and unreasonable changes in work patterns.

To achieve this, the LPC might simply set a premium rate for any hours worked above what is required in the employment contract. For example, extra hours might attract, say, £9 per hour for over-25s rather than the £7.50 standard minimum wage.

However, a premium should be applied to all workers who have to work above their contracted hours. This would mean that those on higher rates are not left with the uncertainly of zero-hours working.

In addition, we’re arguing for a new penalty for late notice of shift changes and shifts that are cancelled when the worker has already left home or arrived. Under this model, a worker required to fulfil a shift with too little notice would get extra pay in compensation

While we believe these measures should go beyond the NMW, we still think that the LPC should play a leading role in developing them, building on its success as a social partnership body with significant expertise in understanding the dynamics of wages.

Proposal 2: Expanding the role of the LPC:

The Taylor review recommends that the LPC should

• Make recommendations on the quality of work across all regions and sectors
• Make recommendations on the legal framework to ensure that fair and decent work is delivered.
• Work with employers and worker representatives to ensure sector specific codes of practice and guidance are developed.
• Promote what works and encourage greater collaboration to improve quality in low paying areas.

The TUC has previously argued for the LPC to have a role in establishing sectoral Modern Wages Councils bringing together employer and trade unions to bargain better wages above the basic NMW, and better conditions and measures like training and productivity that would contribute to business success.

The LPC has been a success story, and now has a duty to rise to a broader challenge of lifting terms, conditions and the quality of work. This implies that the LPC would need a substantial injection of funding and resources.

Proposal 3: The creation of a new “dependent contractor” status and relabelling workers as dependent contractors

The TUC does not agree that a new, separate “dependent contractor status” is required.

Unions have brought a number of successful cases, which have confirmed individuals working for firms such as Deliveroo, Uber, Pimlico Plumbers etc., are “workers” and entitled to basic rights at work, including the NMW. The Taylor proposals on “dependent contractor” could risk undoing the gains made through these cases.

Even relabelling workers as dependent contractors could create negative uncertainty. Any changes to legislation – even changed labels – will lead to new litigation.

Proposal 4: Government to consider adapting NMW Fair Piece Rate system to apply to gig economy workers.

This is simply a bad idea. If people working in the gig economy are “workers” for the purposes of the NMW then a new system is not needed.

Employers can use Fair Piece Rates in cases where workers are paid only on the basis of what they produce. Employers can still choose to pay their workers by the hour rather than use the official piece rate system, and that is what the most have them have done. Rather than being a great success, the current NMW Fair Piece Rate arrangements are used very rarely indeed, to the extent that we can only know of one employer who uses these measures properly.

In sharp contrast, employers have used unfair piece rates on a large number of occasions to obfuscate pay rates and deny workers the NMW, as in contract cleaning in the hotel sector. In such cases, employers take no account at all of the FPR rules. Rather, targets are set without any reference to what is achievable and without the time-trial specified in the FPR regime. Thus more piece rates would be very unwise

What should happen next?

The Taylor report is not the game changer that we were hoping for, but there are ideas in there that could make a real difference. The responsibility now lies with government to get on with the work needed to make better pay for those in insecure work a reality.

The post The Taylor Review – should the Low Pay Commission be given more to do? appeared first on ToUChstone blog.

The economic and social audit costs

In the report we examined: conduct of business and culture costs; economic and social utility costs; externality costs; and threats to financial stability and economic resilience.

Conduct of business and culture costs:  Our tally for ‘retail’ misselling in the UK is £45bn. UK banks also account for a significant share of the estimated £200bn global conduct costs arising from Libor and foreign exchange market manipulation, money laundering and so on. The litany of misselling has left a legacy of mistrust which undermines consumers’ willingness to use financial markets to save for retirement. This also partly contributed to the buy-to-let boom which has helped pump up property prices beyond the reach of younger generations.

Economic and social utility: We found compelling evidence that a primary function of markets – to allocate resources effectively to productive real economy activities – is not working well. Only a very small share of bank and building society lending still goes to non-financial businesses (here). The scale of the value extraction (in the form of high costs and underperformance) in the £6trn asset management industry dwarfs the more high profile misselling scandals. Investor short-termism hinders the ability of real economy firms to plan for the future. Much ‘innovation’ in financial services was either about extracting value from clients or designed to deal with risks created by a previous set of ‘innovations’. There has been an illusion of innovation, some might say alchemy, as investors were sold the promise of higher returns at lower risk. Even now, markets are distorted as institutional investors invest huge sums in low yielding, safe bonds (the so-called ‘flight to quality’) and ‘search for yield’ by investing more in property and alchemical financial products. Investment in long term, productive economic activities falls between the gaps.

Externality costs: the sudden shock of the financial crisis resulted in huge costs for the economy and society. But, over-financialisation imposes ongoing costs by contributing to regional and household inequality and harming long term economic productivity. City institutions are not doing enough to mitigate climate change risk. Tax avoidance is a huge drain on public finances.

Financial stability and economic resilience: The financial crisis did so much damage for two reasons – the sheer scale of the UK financial sector and because we didn’t have the right firebreaks to protect the rest of the economic system. We cannot tell how big a risk the City still represents to the economy until it is tested by a new crisis. But, there are growing concerns that risk has been shifted from more visible parts to the ‘shadow’ financial system and major dislocations are evident in financial markets. The UK financial system still does not appear to be diversified enough to guarantee resilience.

The UK’s system of financial regulation is now well set up for financial stability, conduct of business/ consumer protection and competition regulation (even if it is not used well, it is at least there). But, we lack the institutional policy framework to tackle those structural failures highlighted above. No one in authority seems to be charged with improving the economic and social utility of the City.

Conclusion

Large parts of the financial system are working well and the City does contribute a huge amount to the economy and society. But, set against that, the City may still represent a serious risk to wider economic resilience. Perhaps more importantly for the economy in the long term, the City is just not very good at some of its primary resource allocation and asset management functions.

Reform of the City should be a priority. But this begs the questions: what shape should those reforms take; and can we persuade policymakers that it is possible to reform the financial sector without ‘killing the golden goose’?

To say Brexit complicates matters is an understatement. Brexit will create new risks for the financial sector and for households if regulatory arbitrage occurs. But Brexit also provides the opportunity and possibly the impetus for positive reform of the City.

Overall, the questions raised by this audit can be summed up by asking: what should the City of London look like in a post-Brexit world; what role do we want it play in our economy; and while reform is clearly needed, do we have the credible policies, policy structures and political will to make the necessary reforms happen? These are big questions and we look forward to debating these with stakeholders over the coming years.

The post An economic and social audit of the ‘City’ appeared first on ToUChstone blog.

For us, this isn’t about pitting public sector against private sector. It’s simply about securing fair pay, which rewards our dedication, skill and professionalism.

Since 2010, we have seen our pay cut in real terms, while our pension and national insurance contributions soar. At the same time, our department shed a third of its staff. Absence due to stress is at its highest level on record.

We are looking for pay justice, not a windfall.

My colleagues and I help to protect communities by prosecuting those responsible for terrorist attacks, including at the Manchester Arena and London Bridge.

We are also working on Hillsborough, dealing with the increased number of child sexual abuse cases that have followed the Jimmy Savile revelations, and with growing numbers of hate crime cases following Brexit.

We do what we do because we are passionate about public service and believe in serving our communities.

FDA members are some of the most expert, skilled and professional workers in the country. While we don’t expect the salaries of premier league footballers, merchant bankers or hedge-fund managers, we do expect to be treated fairly.

Since austerity began in 2010, the biggest squeeze has been to public servants’ spending power.

We have less money to spend on buying the goods and services that will get our economy moving again, generating more and better-paid jobs. The 1% public sector cap stunts economic growth while unfairly penalising those providing public services.

When inflation was running at around 1%, public sector workers reluctantly accepted 1% pay increases. But as inflation approaches 3%, anger is building.

We stand side-by-side with our colleague firefighters, nurses and paramedics. But we must not allow the Government to divide and conquer by increasing pay for those who get positive media coverage, while the rest of us are sacrificed for spin, votes and positive publicity.

The post Public sector workers are asking for a fair pay rise, not a windfall appeared first on ToUChstone blog.

An ongoing row in the Gulf over Qatar’s alleged links to terrorist groups, with the wealthy nation blockaded by a group of neighbours led by Saudi Arabia and the UAE, is in danger of causing a humanitarian crisis for thousands of foreign workers trapped in the region by the repressive “kafala” sponsorship system.

Foreign workers in both Qatar and Saudi Arabia are subject to controls on their movement, with employers and government able to block them from going home.

In the wake of the Saudi-led blockade of Qatar, the government has responded with a widespread cancellation of exit visas, leaving workers to face the ever-growing cost of living as sanctions slash the availability of basic foods.

While Qatari citizens and some wealthy Western workers will be able to sit tight for a while, many workers, such as those employed in the massive construction effort surrounding the 2022 World Cup, can be paid as little as £55 per week, with no chance of riding out an economic storm.

The first warnings signs came when workers accompanying Qataris in Saudi Arabia were trapped after their employers were forced to leave. No one is quite sure which of the two countries is most responsible for the situation, but with both operating exit visas requirements under their versions of kafala, workers can suddenly find themselves – through no fault of their own – completely stuck and unable to earn any money to keep themselves alive.

If the dispute rumbles on, more and more companies may reconsider their investment in Qatar, with the potential to leave huge numbers of international workers stranded and jobless.

Over the last few years, campaigns by unions and human rights groups have slowly pushed the government of Qatar into limited reforms to protect workers, but few have been viewed by campaigners as going far enough. Some of the best progress has been reserved for the thousands of workers building World Cup stadiums, after the international building workers’ union (BWI) struck a deal with the cup organisers to inspect the construction work and keep in regular contact with workers’ committees.

But this latest crisis threatens even that glimmer of hope, as the government seems at best oblivious to, and at worse uncaring of, the impact on its vast population of foreign workers. Qatar is a bad enough place to work – it’s a worse place to be workless and trapped. Whether temporarily or (preferably) permanent, it’s time for kafala’s exit visas to be scrapped.

The TUC has written to the Foreign Secretary urging him to press both Qatar and Saudi Arabia to remove exit visa restrictions and prevent working people becoming the real victims of the dispute.

The post Workers stranded in diplomatic stand-off as Qatar and Saudi Arabia square up appeared first on ToUChstone blog.

This is because of the simple fact that a unionised workforce is harder to exploit by even the most unscrupulous employers. But that self-evident truth is one that many who profess themselves concerned with the struggle against forced labour frequently overlook.

There seems a desire amongst some sections of society to depoliticise the struggle against slavery, to render it merely a criminal justice matter. But slavery is, and always has been fundamentally a matter of the political economy. It arises from the laws, policies and customs that human society uses to govern the way it conducts trade, development, employment and business.

The enslavement of tens of thousands of South Asian workers in construction and domestic work across the Arabian peninsula is directly facilitated by the system of tied visas that diverse governments across the region have established to empower employers to prevent workers from leaving the country or even quitting their jobs. This situation is exacerbated by the restrictions on freedom of association that prevent the formation of democratic trades unions which would have the capacity to fight to transform the situation from exploitation to decent work.

Anti-Slavery International recognises slavery as a political issue and a human rights one. History shows that this has always been the case, that slavery is about power, and the exclusion from power of those the powerful wish to exploit and enslave. This is a matter that the trade union movement has also recognised. So it is no accident that the anti-slavery and trade union movements have been allied since their inception in their common struggle against exploitation and for decent work.

The Anti-Slavery Charter, which Anti-Slavery International has recently published, reasserts the political nature of slavery by outlining the elements necessary for its eradication. These are not new. Rather they have been proven in the hard school of history.

Alongside freedom of association to allow the formation of democratic trades unions and an end to immigration rules that render migrants more vulnerable to exploitation, the Charter sets out a broad range of complementary measures that, if implemented, would begin to transform national and international political economies from ones which facilitate slavery into ones that empower those currently vulnerable to slavery to resist. These additional measures include: establishing effective rule of law so that the laws and policies that outlaw slavery are properly implement; ending discrimination; outlawing forced marriage; and achieving universal provision of quality and appropriate education, particularly for those children vulnerable to slavery.

The Charter has been endorsed by the TUC and the International Trade Union Confederation. It is my hope that this Charter will be endorsed by the entire trade union movement as a guide for its continued struggle against slavery and for decent work.

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I’m going to talk mostly about the trade agreement aspects of globalisation, but these remarks are relevant to other aspects and I’d be delighted to discuss the implications for other issues like immigration.

Wilton Park discussions on trade usually address trade agreements as either a technical question about how to remove barriers, or as war by other means, as Clausewitz described politics, between a series of unitary national interests, whereas in fact they are often much more about how to address different & conflicting interests in each country involved, not least consumers and producers: consumers are usually held to benefit from freer trade, while producers sometimes don’t.

So one of the things that is generally missing from discussions about trade agreements is winners and losers within a country, and what to do about them. Telling the losers to buck up, or that they are wrong, may not be the most effective approaches.

Generally, the UK trade union movement – like the DGB – has been a free trade movement because we recognise the benefit freer trade brings in reducing household costs and therefore raising real wages. But that depends on producers adapting to greater trade by upskilling or reskilling, raising productivity, and spreading the benefits of both fairly.

This isn’t to say that trade necessarily destroys jobs, although research in the US suggests that that is more true than economists have previously allowed. It’s certainly true that technology has done more to do that than trade – but that technology has often been introduced precisely to address the productivity and competitiveness challenges free trade produces.

So trade agreements can be successful and even popular where a range of non-trade actions are taken by employers or governments. Where they don’t do that, they provoke distrust, anger and populist protectionism. (Sometimes it’s just that people are angry about the situation they are in, and approach trade agreements – including in this case EU membership – in James Dean style when asked “what are you rebelling against?” they answer “What have you got?”)

This is why the EU has been such a successful trading bloc (whatever else its failings) over the past 60 years: effectively, the social dimension (especially in the last 30 years since the Delors reforms) has made it possible to go further in terms of free trade than any other trade agreement. It’s why Scandinavian trade unionists are more positive about trade agreements than trade unions in the rest of Europe. And it’s why developing countries need aid for trade, broadly described, allowing them to adapt to freer trade.

So, if we want to have more successful trade agreements, and more generally a fairer globalisation, what do we need to do in the next 15-20 years? (I should say I’m a bit of a sceptic about how effective trade agreements are at promoting trade: I suspect making things or providing services people actually want to buy is more important! But they have a geopolitical importance beyond the immediate economic benefits.)

First, I’d scrap investment protection – certainly in trade agreements – I think we’re on the way to that anyway, with the Commission’s ground shifting from Investor State Dispute Settlement to a multilateral investment court, and the European Court of Justice judgment on the EU-Singapore deal. ISDS has no proven economic benefits, as the LSE made clear about the Transatlantic Trade and Investment Partnership (TTIP) and as OECD research, unpublished and likely never to see the light of day unamended, show.

Second, address the redistribution from winners to losers by beefing up the social chapters of trade agreements (you won’t find anything as good as the EU social acquis, but we can get better than a stiffly worded letter as the Canada EU deal provides) and take measures inside countries that mitigate the effects of trade deals, such as greater labour market regulation (which for instance may be part of the solution to concerns on free movement), public investment in infrastructure and skills, redistributive taxation and active industrial strategies.

Third, treat people like adults and discuss trade agreements in public rather than in secret. Trade unions are natural negotiators, so we know that some strategies and red lines need to remain secret, along with some of the cut and thrust. But the presumption should be to be open unless it’s vital to be closed, rather than vice versa.

This is actually also my prescription for an EU-UK deal. Frankly, I don’t think we should throw away UK membership of the single market, with all its requirements and rules, unless someone can provide a better way to protect great jobs and workplace rights. Certainly we should stay in the single market for a transitional arrangement.

I think opinion in the UK on the form that leaving the EU should take – which was of course never tested in the referendum, but may have been a key component of the General Election result – may tilt towards putting the economy and labour market regulation above EU migration (recent polling by the LSE suggests there is still a preference in all age groups and social classes for EU migration over non-EU migration) and a different definition of sovereignty than the one Theresa May advocates.

The post Future economies: what next for globalisation and trade? appeared first on ToUChstone blog.

The government has sought to allay these concerns by promising the Repeal Bill would protect workers’ rights by incorporating them into UK law.

Yesterday, the government finally published the European Union (Withdrawal) Bill – formerly known as the (Great) Repeal Bill.  So what if anything, will the Bill deliver for working people?

EU law should no longer apply

The starting point in the Bill is to the repeal the European Communities Act 1972.  This means EU law will no longer apply in the UK and European Court of Justice (ECJ) judgments will no longer be binding on UK courts.

Retaining EU rights on day one

The Bill then moves on to one of the largest cut and paste jobs ever witnessed in legislative history. It seeks to ensure all EU sourced laws, including workers’ rights, consumer standards and environmental protections will be retained or incorporated in UK law once we exit the EU.  This includes Treaty provisions which individuals can currently rely on in UK courts – such as Article 157 which protects the right to equal pay.  Even free movement rights for EU citizens will form part of UK (that is until any new Immigration Bill changes things).

The government says its aim for this part of the Bill is to provide certainty for businesses, workers and the wider public and to ensure that on the day that the UK exits everyone will have the exact same rights they did the day before we left.  So far so good – you may think.

But then we dig a bit deeper and things start to look a whole lot less rosy for working people.

Human rights on the line

The one major omission in the Bill is the Charter of Fundamental Rights – which the government has decided should not form part of the UK law in years to come.  The government claims the Charter was never intended to create any independent rights for UK citizens – therefore it’s fine to overlook it.  To which one response must be – tell that to the TV and film technicians who relied on the Charter’s predecessor to secure holiday pay for freelancers!

An executive power grab

And then we turn to part three of the Bill and the remaining 57 pages, which set out the wide-ranging new powers for government ministers to scrap, water down or modify EU based rights. And all without the need for full Parliamentary scrutiny.  Some commentators have asked – is this what returning control to our elected representatives really looks like?

No safeguards for workers’ rights

You would be hard pushed to find anyone who voted for fewer workers’ rights once we leave the EU.

Yet despite the government’s commitment to safeguard EU workers’ rights, the Bill contains no special protections for employment rights or health and safety standards.   Not even the Equality Act 2010 will be immune from the new powers.

That said, the Bill does place some limits on future government action.  According to Clause 7, the new powers should only be used where existing EU sourced laws don’t operate effectively or are otherwise deficient.  But decisions on whether these tests are met will not be taken by the general public or by the workers who benefit from the rights.  They are to be made by Ministers – without the need for any consultation or even prior debate.

The Bill also contains a ‘sunset clause’ – which would bring the new powers to an end two years after the UK exits the EU.

But will this mean working people will be able to breathe a sigh of relief after this date in the knowledge their rights will be safe?  No I would suggest.  For there is nothing in the Bill to stop a future government from introducing a new Employment Bill or from using other order-making powers to shred or water down employment rights.

Workers’ Rights remain at risk

So has the government allayed our fears that workers’ rights will be at risk when we leave the EU?

The Repeal Bill may keep workers’ rights safe in the short term.  But in the longer term, the risk remains.

This is not to suggest that we expect there will be a massive bonfire of workers’ rights as soon as the UK exits the EU.

But employers’ lobby are already drawing up plans for the salami slicing approach of workers’ rights.  Whether it’s:

• changes to the way holiday pay is calculated
• fewer rights for agency workers or
• weaker rights for outsourced workers allowing employers to compete for new contracts on the back of lower pay.

Such changes may seem small on the surface – but they would make a real difference to working people.

Failing to keep pace with Europe

And of course the Bill will do nothing to ensure that UK workers’ rights keep pace with those enjoyed working people across Europe in Germany, France or Spain.  On the contrary – the Bill actively prevents Ministers from using new order-making powers to update UK law in line new worker rights secured in Europe (see Clause 7(3)).

UK workers also are likely to lose out on future wins secured in the ECJ.  In recent decades, the ECJ has repeatedly delivered improvements in the rights for UK workers– be it the right to equal pay for equal value work, improved pension rights for part time women workers or rights to be consulted on collective redundancies. In years to come. UK workers risk missing out on similar advances.  Once the UK leaves the EU, our courts may be able to consider new ECJ decisions – but will not be required to follow them.

So all in all, the Repeal Bill delivers very little for working people.

Which is why the TUC is calling for the new trade agreement to ensure that UK employment law keeps pace with the rest of the EU and for the European Union (Withdrawal) Bill to provide better protections for workers’ rights.

The post The ‘not so Great’ Repeal Bill – what’s in it for working people? appeared first on ToUChstone blog.

This is not too surprising considering the focus of the review on tackling contentious employment rights issues in the gig economy and the varied reactions to these recommendations (e.g. see various TUC blogs).

A closer read of the review reveals a number of major recommendations to government on what it should do to support progression at work, including “how people working in atypical or casual work are able to obtain, improve and evidence skills and experience over the course of a working life” (page 82).

The recommendations on learning and skills fall into three main categories.

1. Apprenticeship levy

There are a number of proposed reforms of the apprenticeship levy, which apparently nearly every employer had something to say about.

The review proposes that the levy should be flexed to ensure that it boosts access to apprenticeship training for those working atypically, including through agencies.

Secondly, it is recommended that the levy funding should be able to be used for other forms of off-the-job-training than just apprenticeships.

Interestingly the Conservative manifesto contained a similar proposal to this, saying that the levy would in future be allowed to fund the wages of employees when they were engaged in a new National Retraining Scheme.

Whilst there was nothing about the proposed National Retraining Scheme in the Queen’s Speech, the DfE website does now list it as one of the key responsibilities of the new Skills Minister.

However, at this stage it remains unclear if it will go ahead with a wage subsidy funded from the levy as originally proposed.

The review also has something to say about the role of the Institute for Apprenticeships (IfA), saying its remit should be extended to tackle the barriers faced by BAME people, disabled people and women in accessing high quality apprenticeships.

A recent TUC submission to a consultation on the strategic role of the institute made exactly the same recommendation as this.

2. Funding

The second category of reforms echo the proposals from a wide range of stakeholders (including the TUC) calling on the government to develop new learning accounts to empower more workers to access funding to develop their skills.

The review suggests an initial focus on some key groups, including older workers and those in receipt of Universal Credit.

It also emphasises the need for government to bring about more coherence to employability and lifelong learning by developing a “unified framework of employability skills” and encouraging take-up of this by stakeholders.

3.  Career guidance

The third area of reform touched on is the need to improve career guidance services (again with a specific focus on workers in low paid and atypical employment) and also to extend access to high quality work experience placements at various stages of the education and work cycles.

This is not the first review to make such proposals and the TUC and a number of unions have consistently highlighted the decline of career guidance services, for young and old alike, in recent years.

The TUC has also supported union action to establish safeguards to promote high quality work experience, including through charters such as the TUC Traineeship Charter.

The TUC’s new Great Jobs Agenda campaign includes a number of policy recommendations on learning and progression that reflect elements of the proposed reforms in the Taylor Review.

For example, this new TUC campaign says that government should introduce a range of measures to support more people to learn throughout their lives, including through new learning accounts, comprehensive high quality face-to face careers guidance, new rights to a midlife career review, and free retraining programmes aimed at targeted groups.

Crucially the TUC campaign stresses the urgent need to accompany this policy strategy with a commitment to make sure that further education is properly funded to deliver on this.

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In 2006, Mr Walker entered into a civil partnership and asked his employer that, in the event of his death, his pension be paid to his civil partner.  His employer refused, relying on a loophole in the Equality Act.  As Mr Walker’s service with the company predated the legislation relating to civil partnerships, this was lawful.

If Mr Walker was married to a woman she would be entitled on his death to a “spouse’s pension” of about £45,700 per annum. Before the outcome of this case, Mr Walker’s husband would only have been entitled to a pension of about £1,000 per annum.  This was plainly discrimination against a same-sex couple.  It was shameful that the government supported this case.  This was summed up nicely by the judge, Lord Kerr:

“The salary paid to Mr Walker throughout his working life was precisely the same as that which would have been paid to a heterosexual man. There was no reason for the company to anticipate that it would not become liable to pay a survivor’s pension to his lawful spouse.”

Mr Walker’s struggle will be keenly felt by trade unionists who campaign for equal rights for same-sex couples. Trade unionists have negotiated with employers to improve many workplace occupational pension schemes.  We knew that the provision under the Equality Act which treated gay couples less favourably was discriminatory.

Thanks to Mr Walker and the Supreme Court all same sex couples will receive equal treatment on pensions.  The ruling from the UK’s highest court means that means that a provision under the Equality Act, which made it possible to discriminate against same-sex couples, is now obsolete.  From today, companies continuing to deny equal pension rights to same-sex couples will be breaking the law.  This means that tens of thousands of other same-sex couples will also benefit from John Walker pursuing this case so doggedly.  This ruling will end a system that has left thousands of people with added stress and financial concerns when they are grieving for loved ones.

Today’s decision is also a reminder of the vital role that EU legislation plays in safeguarding equality law.  The Supreme Court were able to set aside provisions of the Equality Act by declaring it to be incompatible with the EU Directive which prohibits discrimination on the grounds of sexual orientation.

EU legislation continues to safeguard equality for same-sex couples and one of the TUC’s campaign priorities is to ensure that Brexit does not lead to these important rights being rolled back.  We want a commitment from the government that employment rights are protected post Brexit and that this important change and any future developments in EU employment legislation will be respected by the UK government.

Mr Walker echoed our call today:

“What I would like from Theresa May and her ministers today is a formal commitment that this change will stay on the statute books after Brexit.”

Hear, hear.

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In assessing what it means, we’ve tried to keep in mind the people who told us about their experience of insecure work, of shifts being cancelled at the drop of a hat, of threats of being fired if you take a day sick, or of seeing your hours cut if you can’t immediately jump when the employer calls you in. We wanted to see proposals that would shift the balance of power decisively in favour of working people, so that they had a chance of taking on the bosses who are trying to cut costs on the backs of denying their workforce basic rights.

On Friday we set out what we thought the review should say. So how does it measure up?

Improving voice at work

As union campaigns from Sports Direct to Uber has shown us, the best way to tackle insecure work is through collective action.

The review proposes a limited step forward on helping more people have their voice heard at work through a reform of the Information and Consultation Regulations, which give employees a right to be heard at work.

But while the review says they heard ‘many positive examples of the role trade unions can play in good employment relations’, beyond a proposed review of information and condition rights and vague calls for the government to work with us, there’s nothing to help us do our job better.

We told the Taylor review that they could make one simple change by giving unions better access to workplaces to tell people about the benefits of joining. That’s something that could have given more workers an opportunity not to have to fight exploitation on their own.

Employment rights

Taylor’s first recommendation is to rename ‘worker’ status as ‘dependent contractor’. Our first response to this is that it could further muddy – already murky – legal waters (We’ll have more to say on this tomorrow).  It’s also important that any changes don’t respond to the special pleadings of gig economy companies and don’t unpick key court wins secured by unions which confirm gig workers are employed and are entitled to employment rights including the minimum wage, holiday and rest breaks.

so… meh.

And there’s a real worry about what the review says about changing how the minimum wage is calculated for some in this group. Moving to ‘piece rates’, whereby the employer tells you how much work you should be doing per hour, rather than simply paying you when you’re at work, risks letting platform companies off the hook. What happens if an Uber or Deliveroo driver gets stuck in traffic? Will they get paid less for not completing their set quota of jobs?

And the review completely ducks the question of whether workers should benefit from more rights – including family friendly rights like returning to the same job after maternity leave.

There’s some more positive news on improving transparency at work. The report repeats the TUC’s longstanding call for a written statement telling workers how much they will be paid and how many hours they may work – from the first day of their job. And we’re pleased to see proposals requiring companies to report about the type of employment contracts on use – again, a longstanding TUC policy.

One sided flexibility?

Opening a chapter of the report called ‘one-sided flexibility’ was enough to get us mildly excited. We’ve been consistently arguing that the problem of insecure work is one in which key risks associated with work have been transferred to working people, while the financial rewards from flexibility accrue to employers.

But it’s here where the biggest disappointment lies. The report recommends that those on zero-hours contracts are given a right to request regular hours, after a year on the job. Think of those people worrying that their shift will be cancelled if they turn down insecure work. That’s not a right that they’re going to feel comfortable taking up. Putting all the pressure on the worker, and all the power in the hands of the boss simply won’t deliver the security these people desperately need.

There’s a slightly better idea in the report when it says it will ask the Low Pay Commission to examine the case for a higher NMW rate for hours that are not guaranteed as part of the contract. We think that’s the right principle, wrong mechanism. A pay premium for non-guaranteed hours is a good idea (and one of our recommendations to the review!), but we fear that doing it through the NMW makes it too easy for employers to game the system, simply by paying rates a penny above the NMW.

Fair pay

One area where the report does get a ‘yay’ is on the proposal to end the so-called ‘Swedish derogation’ which means that many agency workers are paid less than the regular workforce doing the exact same job. Business are already out lobbying against this – but it’s a clear unfairness and one that government should move swiftly to redress.

We’re also pleased to see calls for better sick pay entitlement. We estimate that nearly half a million people miss out on sick pay because they’re too low paid to qualify. It’s great to see the review recommend that everyone should be entitled from day one of their job, no matter how much they earn.

Enforcing rights

In discussing how workers can enforce their rights, the report at least acknowledges the elephant in the room – the introduction of employment tribunal fees of up to £1,200 which has seen the number of cases taken fall by almost 70 per cent.

But instead of saying what everyone who cares about this issue knows – that they need to be abolished – the review proposes some tinkering around the edges.

There are some more helpful suggestions on the wider enforcement agenda, including enabling HMRC to enforce payment of sick pay and holiday pay and making sure those working in complex supply chains that use agencies or umbrella companies actually know who their employer is.

But until we see those fees abolished, there’s no way that we can see all workers be able to access the rights they deserve.

So what now?

Of course, the real responsibility to tackle insecure work lies with the government. We’ll be pushing them to move swiftly to implement the nuggets of good news that are in there – like better pay for those working for agencies, and for those who fall sick – and to think carefully before making moves on employment status, or to weaken minimum wage protections.

And we’ll be continuing to push for our Great Jobs agenda – so that everyone has access to the decent work they deserve.

The post The Taylor review: The yay, the meh, and the no way appeared first on ToUChstone blog.

The Taylor Review into modern employment practices publishes today. And from what we’ve seen, it’s not the game-changer needed to end insecurity and exploitation at work.

We’d welcome any nuggets of good news. But it doesn’t look like the report’s recommendations will shift the balance of power in the modern workplace.

There’s nothing on concrete plans to ban the zero hours contract abuse that is growing so quickly in UK workplaces.

A ‘right to request’ guaranteed hours from an exploitative boss is no right at all for many workers. Especially when they’d still have to fork out £1,200 up front before they could take a case to tribunal.

And we’re particularly concerned these proposals might even weaken gig workers’ rights. Introducing a new category of “dependent contractor” looks like caving in to special pleading from app-based companies, who are claiming that they cannot pay the minimum wage like any other employer.

The responsibility now lies with Theresa May to do more to listen to those at the sharp end of the labour market. Vulnerable workers need root and branch change, not just the warm words they had during the election campaign.

Crucially, unions need to be given the right to go into any workplace to check that workers are treated fairly. That’s how we make sure every job is a good job.

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