Today, I was speaking at the Scottish Green Conference In Edinburgh. Credit to the Green's for an outward looking conference agenda, looking beyond the tribalism that is all too dominant in Scottish politics.
My contribution to their economy debate focussed on wages, industrial relations and role of public services.
The big story of the economy has been the shift from wages to profits.
The share of wages as a percentage of national income has fallen from around 58% in the early 1980’s to 54% in 2011,while profit’s share has increased from 24% to 28% over the same period. I could churn out more numbers, but here’s a practical example. Since 2007 the average Rent for a Council House has increased by 26% - in the same time the wages of a Council Worker have increased by 8.3%. Or in the words of a hospital cleaner, "I just get by. Normally I am really struggling by week three. If my bills and rent go up any more I would not be able to live. Family holidays never happen".
This matters for the economy as well as individuals. If the wage bill kept up with inflation there would be £5bn more spending power in Scottish economy. The combination of rising employment and falling pay growth shows the austerity economy is very good at creating low-paid jobs, but struggling to create the better-paid work we need for a fair and sustainable recovery.
Of course not everyone is suffering. The wealth of the richest 1,000 people in Britain doubled to £519 billion since 2009, about two and a half times the annual deficit. They also dodge taxes with £120bn lost to the exchequer. Just think what those resources could do for our battered public services. Again a real example buried away in Herald business pages. In an Edinburgh fund manager, 7 directors earned an average of £2.5m each and they settled a post retirement benefit liability to a former director for £31m! How the 1% rip us off.
If there are any positives it is that the damage this level of inequality does is beginning to be understood is less likely places. The Pope has highlighted the impact of inequality, even the CBI has said something about low wages. The Bank of England governor, Mark Carney said: "All ideologies are prone to extremes. Capitalism loses its sense of moderation when the belief in the power of the market enters the realm of faith. In the decades prior to the crisis, such radicalism came to dominate economic ideas and became a pattern of social behaviour."
A few words about industrial relations, because strong trade unions and effective collective bargaining are the cornerstone of a more equal society. Last February the Scottish Government commissioned an independent review of progressive workplace policies and practices in the public and private sectors in Scotland. It was Chaired by Jim Mather and had a broad based membership.
This report dispels many of the myths about relations between unions and employers, highlighting the positive relationships that rarely get media coverage. Scotland does of course benefit from significantly higher union density than the rest of the UK and report identified a shared ambition to embed progressive workplace practices to boost innovation and productivity and deliver successful organisations, sustainable business and economic growth, high-quality jobs and a more equitable society. There are 30 recommendations in the report that seek to deliver practical actions in support of the key themes. Most employers and trade unions in Scotland will welcome this report and look to the Scottish Government to translate their response to the recommendations into action.
On public services much has been made income inequality in the UK, quoting the OECD report. But if you read that report the OECD also highlight key role public services play in creating a more equal society.
Public services evolved due to the failure of the voluntary and private sectors to meet the needs of the people. While the well off could buy many things for themselves, infrastructure like roads, water supply and sewerage needed coordinated action and investment. Even the wealthy recognised that it was in their own self-interest to ensure that everyone had clean water to drink and wash in and that waste was dealt with, because everyone suffers when others aren’t covered. The vermin attracted to a street where only half the bins are emptied would be a problem for everyone.
Public sector growth in the 20th century was about providing fair and equal access to services. This also highlights that the defining difference between public and private provision of services is democracy. Not just voting, but deliberative involvement including not just communities of place but also communities of interest.
Scotland has local government but not many genuinely local councils. We have fewer councils and councillors than any other in Europe. Stronger local government needs a wider range of people as councillors, power over finances and integration with other services that are being increasingly centralised.
Like equality, greater public ownership has widespread public support. Not Morrisonian nationalisation but new approaches. Polls show that two thirds believe public services should be provided in-house, not run like a business and with stronger user voice.
One approach to financing services that generate revenue streams is to use some of the £24bn in Scottish local authority pensions funds, provided by workers and the taxpayer. Half that money is currently invested abroad. However, governance is weak with decisions driven by advice from the very same fund managers who got us into the current financial crisis. They also cream off profits for themselves in transaction charges.
Finally some solutions.
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We need an active economic and industrial policy aimed at creating full employment, with quality jobs and a Just Transition to a low carbon economy.
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Work must pay enough to ensure a decent standard of life. There must be fair pay rises across the board, helping to restore living standards and eliminate in work poverty
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We must ensure equal pay is delivered and we should increase the National Minimum Wage in stages at least to the Living Wage level and extend the Living Wage to all workers on public service contracts, particularly in social care.
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Oppose welfare cuts and the political myth making that unfairly blames poverty on those struggling. Including the cut of £6 billion to welfare spending in Scotland.
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We need fair taxation and a crackdown on tax avoidance. Taxes are good value for money. Instead of tax cuts, we need to properly fund the public services that are currently so at risk. Tackling the UK tax gap of £32 billion, pursuing tax evasion to raise £90 billion and raising £23 billion annually with a Robin Hood Tax (Financial Transactions Tax).
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An end to the unfair council tax freeze which has cost more than £2.5 billion and benefits the better off most. Seeking a cross party consensus on funding local government.
Of course we can and should make the case for more powers. UNISON has a detailed shopping list in our Fairer Scotland-Devolution paper and like others we are reviewing these proposals before making a submission to the Smith Commission. But we can do a lot in Scotland now. By all means argue for different constitutional arrangements, but let's get on with what we can now.
There is a broad consensus that a fairer Scotland is possible, let's get on with it.
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