General Council Report 2002: Chapter 3
General Council Report 2002
- economic and industrial affairs
- 3.2 The economy: an overview
- 3.3 Spending Review and the Budget
- 3.4 Manufacturing
- 3.5 Corporate governance
- 3.6 Institutional investment
- 3.7 Competition policy
- 3.8 The National Minimum Wage
- 3.9 Working time
- 3.10 Public services
- 3.11 The Private Finance Initiative and Public Private Partnership
- 3.12 Local government
- 3.13 National Health Service
- 3.14 Education issues
- 3.15 Criminal justice
- 3.16 The voluntary sector
- 3.17 Transport
- 3.18 Energy
- 3.19 Arts, media and sport
economic and industrial affairs
This chapter reports on the TUC’s work on the economy over the course of the year. It records the key recommendations of the TUC’s Budget Submission and our evidence to the Third Comprehensive Spending Review. In addition, it sets out the General Council’s work on the National Minimum Wage, working time issues, corporate governance and competition policy, public services, primary and secondary education, transport and a range of private sector issues including energy policy and the arts.
3.2 The economy: an overview
The TUC has published a number of economic analyses in advance of the Bank of England’s monthly Monetary Policy Committee’s meetings arguing for interest rates to be held as low as possible to protect the domestic economy against the global downturn and to bring some relief to the manufacturing sector.
The UK economy has been affected by the global recession in manufacturing, worsened by the terrorist attack on the World Trade Center on September 11.
At the time of writing, the world economy had started to recover, but with continued concerns over the impact of corporate scandals in the US and weakness in the German economy in Europe.
The UK economy as a whole has come through the global downturn comparatively well. In 2001 GDP growth was higher than in the other major industrialised economies. However, manufacturing has fallen in recession, with deep cuts in output, investment and jobs.
Cuts in interest rates, public spending and the expansion of employment in the public services and in construction have been key factors in helping stabilise both the overall economy and the labour market in the face of the global downturn. In 2002 the Treasury expects government consumption to increase by 3.25 per cent in real terms and government investment to increase by over 26 per cent in real terms. There has been relatively little increase in unemployment and total employment continued to expand despite the loss of jobs in the manufacturing sector.
Britain’s two-speed economy in 2002
Change over latest Manufacturing - Whole
twelve months economy
Output growth (%) - 4.4% + 1.1%
Business
Investment (%) - 14.7% - 8.9%
Employee jobs (%) - 4.5% + 0.3%
Employee jobs (000s) -174,000 + 74,000
Note: manufacturing is year to May 2002 for output and jobs and year to Q1 2002 for investment; whole economy is year to Q1 2002. Employee jobs are from the Employer Survey. All figures are UK, seasonally adjusted.
Source: Office for National Statistics
We expect the economy to recover in the second half of 2002, and for the year as a whole we expect growth to be at the bottom end of the Treasury forecast range of 2 to 2.5 per cent GDP growth. We expect growth to be much stronger in 2003, in excess of 3 per cent. A key factor will be the forecast recovery in manufacturing output.
Throughout the year inflation has remained firmly under control - indeed, it has consistently been below the Chancellor’s target of 2.5 per cent measured by the Retail Price Index less the cost of mortgage interest payments (RPI-X). The house price boom has been a potentially destabilising factor, but so far there is no sign that it is feeding through to general inflation. Inflation defined as RPI-X is expected to remain below the Bank’s target in 2003. Economic growth forecasts for 2003 are summarized below.
Economy and manufacturing forecast to recover in 2003
Economic Independent
forecasts Budget March average
for 2003 2002 forecasts (June 2002)
GDP growth 3.25% 2.7%
Manufacturing output 2.5% 2.4%
Government consumption 3.25% 3.7%
Private consumption 2.5% 2.5%
Investment 6.0% 3.0%
Inflation (RPI-X) 2.25% 2.3%
Note: all figures annual change on previous year. RPI-X is the Bank’s inflation target defined as the RPI less the cost of mortgage interest rates, and is set at 2.5 per cent. Public investment is included in the overall investment forecast. Treasury forecast show general government investment growing by 12.5 per cent in 2003. Independent average based on 24 forecasts published in June 2002.
Source: HMT June 2002.
The global recession has not been the only source of pressure on the economy and the manufacturing sector. The exchange rate has remained high at around 1.6 euros to the pound for most of the past 12 months. At the time of writing the fall in the dollar against the euro had also caused a welcome depreciation in the pound to around euros 1.55. This is still above our upper estimate of the sustainable exchange rate.
We expect the dollar to depreciate further, and this may further improve the pound-euro exchange rate. We believe a further depreciation in the pound can be accommodated without threatening domestic economic stability.
3.3 Spending Review and the Budget
In January the TUC Submission to the Third Spending Review was submitted to government. This called for increased overall spending and investment on the priority public services together with the development of a genuine partnership approach. This is discussed in more detail below in paragraphs 3.10 on the public services. The Submission also emphasised the need for stronger industrial support measures for manufacturing. The Submission was discussed in the light of the March Budget announcements, with Treasury Ministers in May.
In February the TUC Budget Submission called for a package of measures to help the manufacturing sector, including the introduction of tax credits for R&D and training and a significant increase in regional industrial assistance through the Regional Development Agencies. The Submission also called for the restoration of the link between the state pension and average earnings. These proposals were discussed at a meeting with the Chancellor in February and further publicised at the TUC Budget Pre-Budget Conference held in March.
The March 2002 Budget was a defining moment. The Chancellor announced that the overall rate of public spending under the Third Spending Review was to be increased. He further announced an unprecedented increase in NHS spending to 2008-2009, by which time the UK will have significantly closed if not eliminated the spending gap with our EU States. The Budget also announced a new tax credit for R&D spending and new fiscal incentives for training, and these are discussed in more detail below.
Higher spending on the NHS is to be paid for by increases in both employer and employee national insurance, to take effect from April 2003. The latter is to be offset by further tax-benefit reforms that will ensure that many workers on below average earnings will pay little or no increase in tax.
The economic downturn cut tax revenues and reduced the surplus on the current budget. However, economic recovery and the planned tax rises will ensure that the underlying public finances remain sound. The Chancellor will remain well within his fiscal rules despite the strong planned increase in public spending. Increased public borrowing will be modest and entirely directed towards increased capital investment.
The General Council issued a statement in April strongly welcoming the Budget announcements, particularly for the NHS. The statement offered a partnership across all public services to ensure higher investment translated into better frontline services for the public. The statement also criticised the unbalanced and negative reaction from some employer organisations to the Budget tax rises.
In July the General Council welcomed the outcome of the Third Spending Review in which further significant real term increases were announced for key public services including health, education, transport, and housing. Overall, Departmental spending is planned to rise by just over 5 per cent per annum in real terms between 2003 and 2006 with annual average increases of 7.3 per cent in health and 5.7 per cent in education.
The Review also substantially increased the budgets of the Regional Development Agencies, so that by 2005-2006 the English RDAs will control budgets of £2 billion. As reported above, this has been a key TUC priority in the Budget Submission and TUC Submissions to the Review.
The science budget was also increased by an annual average 10 per cent in real terms between 2003 and 2006, including more funding to promote technology transfer and to implement the Robert’s Review recommendations to improve the supply of qualified scientists and engineers. This reflected several of the recommendations of the CBI-TUC Productivity Innovation Group.
The TUC wrote to the Chancellor in July welcoming the increased funding for the public services, and the strengthening of the regional industrial aid and science budgets, and seeking further discussions on the details of future reforms of the public services.
As part of the follow up to the economic assessment of the impact of foot and mouth reported to last year’s Congress, a further meeting was held with Ministers at the new Department for Environment and Rural Affairs in May. The TUC will take into account the terms of remitted motion 33 on the foot and mouth crisis in further follow up work on this issue, including the implications of the Spending Review for future funding of research services within the new Department.
3.4 Manufacturing
The General Council have made manufacturing a key priority for their work since Congress 2001 and have fully taken into account the terms of Composite Resolution 10.
In December the Secretary of State for Trade and Industry convened a Manufacturing Summit in Birmingham attended by trade unions, employers, and regional development agencies. The Summit identified a number of key policy priorities that should be developed further on investment, innovation and skills and stressed the importance of regional agencies.
In February, a TUC work programme was agreed to highlight the dismal prospects facing manufacturing in the short term and make the case for immediate measures to help the sector; to campaign for an active long term strategy for the manufacturing sector; and to follow up the relevant recommendations of the TUC-CBI Productivity Initiatives.
Building on the Budget campaign, the General Council have taken a number of steps to strengthen our arguments for a more active industrial policy. In April a TUC policy seminar brought together national trade union officials, key policy advisors and senior civil servants, and outside academic experts. In May the TUC commissioned two specific research projects working with Dr Rebecca Harding, Chief Economist at the Work Foundation. The first report on innovation policy was published at the end of July. The second report on state aids will be published later in the summer.
The TUC has consistently emphasised the importance of the regional dimension in developing a new manufacturing strategy. In February, a briefing from senior Treasury officials and advisors was arranged for both national and regional trade union officials on the Treasury’s proposals for developing a new regional economic policy. In June the TUC published a report Half a World Away that set out proposals for strengthening regional institutions and calling for a significant increase in funding for the Regional Development Agencies (RDAs). The statement was submitted to Government as a supplement to the TUC’s Submission to the Third Spending Review, and a seminar was held to debate the report’s findings between special advisors to the Treasury and the DTI and national and regional trade union officials and others.
In April, the DTI published a Manufacturing Strategy. The TUC welcomed the Strategy that emphasised the key role of manufacturing in the economy and stressed the importance of partnership and developing the regional dimension. The Strategy is based around ‘policy pillars’ including macro-economic stability, investment, public infrastructure, innovation, partnership and best practice, and skills. In July the TUC drew up a statement for Congress setting out where the TUC thought the Government were getting it right, where we thought the Government was moving in the right direction, and where we thought there was more to be done. The TUC Statement is set out in full in a separate report to Congress.
The follow up to the CBI-TUC Productivity Initiative has also focused on the manufacturing sector. The final reports of the four working groups (investment, innovation, best practice and skills) were submitted to the Chancellor in October. In November the TUC and CBI agreed to establish a new permanent body to follow up the recommendations; to develop further joint submissions to the government; and to act as a sounding board for further government proposals to improve productivity. The group will meet Ministers at least twice a year in advance of the November Pre Budget Report and the March Budget.
A number of practical measures have been put in place as a result of the Productivity Reports. A new tax credit for R&D, was announced in Budget 2002, a recommendation jointly supported by the TUC-CBI Productivity Innovation Task Group. The CBI-TUC Skills Task Group had called for new fiscal incentives to support training and development. It was also announced in the Budget that training pilots would be developed to test out new fiscal incentives to allow employees to take up, as a right, training or education towards obtaining level 2 qualifications.
As an immediate response to the Manufacturing Summit, the Secretary of State announced £20 million of additional funding to support the follow up work of the CBI-TUC Productivity Group on Best Practice. The DTI has also announced further support for the Partnership Fund and the TUC Partnership Institute (see chapter four). The TUC and the CBI will also be jointly represented on the steering group for the Fit for the Future Campaign.
A number of follow up meetings with the Chancellor and the Secretary of State have taken place. Among the areas being actively pursued are how public purchasing policy might be used more effectively to address underlying weaknesses in UK based manufacturing, the regional dimension to the productivity initiative, further work around skills and the follow up to the Budget training pilots.
In April the TUC and the CBI wrote to the Prime Minister expressing their concern about the uncertain future of the Export Credits Guarantee Department. The Prime Minister replied, in June, to confirm the Government’s commitment to the ECGD.
3.5 Corporate governance
Company law
On 16 July 2002 the Government published a White Paper Modernising Company Law, the first part of its response to the Final Report of the Company Law Review (CLR), published in June 2001.
On the areas of most interest to the TUC, the Government has made few changes to the recommendations of the CLR’s Final Report. The Government is planning to codify directors’ duties, requiring directors 'to promote the success of the company for the benefit of its members', but also requiring them to take into account 'the company’s need to foster its business relationships, including those with its employees and suppliers and … customers' as well as its impact on communities and the environment and its need to maintain its reputation.
On reporting, the Government is supporting the CLR’s proposal that large companies should be required to produce a forward-looking Operating and Financial Review (OFR), which would include qualitative information, including information on employment issues. However, while some items of the OFR will be mandatory, others will be required only to the extent that directors believe them to be material. Regrettably, the Government is not proposing to make reporting on employment relationships mandatory.
The TUC issued a press release in response to the publication of the White Paper which welcomed the proposals on directors’ duties, but warned that it was essential that the Operating and Financial Review delivered comprehensive and transparent reporting on all issues relevant for an assessment of a company’s performance, especially the vital area of employment relationships. The TUC is committed to campaigning to ensure that these objectives are met in the new Companies Act, and the General Council will respond in detail to the White Paper’s proposals in the autumn.
Corporate social responsibility (CSR)
Autumn 2001, the TUC participated in a series of seminars organised by the DTI to canvass views on the European Commission’s Green Paper on Corporate Social Responsibility. The TUC spoke on a platform with the CBI and Business in the Community (BiTC) at a DTI seminar in November, which was attended by unions, NGOs and other interested organisations. The TUC was also represented at a conference on the Green Paper organised by the Belgian Presidency of the EU in Brussels.
At their December meeting, the General Council considered their response to the Green Paper. Their response argued that:
· developing positive employment relationships in company head offices is an essential part of CSR;
· responsible companies recognise trade unions, and partnership between employers and unions in the workplace is a strong foundation for CSR;
· codes of conduct should be based on ILO labour standards, and include all the core labour standards; and
· companies should be required to produce reports on their social and environmental impacts.
The TUC office has participated in discussions with organisations such as BiTC to promote the General Council’s views about CSR, and the General Secretary has written a number of media articles on the subject.
Directors’ pay
The General Council have continued to raise their concern about the growing gap between directors’ pay and that of ordinary employees and the lack of accountability in the executive pay-setting process.
Following a consultation exercise, the Government produced a White Paper in December 2001 setting out its proposals for legislation to require companies to publish a report on directors’ remuneration as part of the company’s annual reporting cycle. This report would set out details of individual directors’ remuneration packages, the company’s remuneration policy, the role of the board and the role of the remuneration committee. Companies would be required to put an annual resolution on the remuneration report to shareholders at their AGM.
In March 2002, the General Council considered their response to the Government’s proposals. Executive Excess, published in March, supported the Government’s proposals as making an important step towards positive change. But it argued that there was one glaring gap in the proposals on remuneration reports: there was no requirement to publish information on pay and conditions for other employees in the company. The report revealed that:
· the pay gap between directors and their employees has continued to rise - between 1994 and 2001, basic pay rises for directors outstripped those for average employees by a factor of 3:1; and
· nearly three quarters of the British public agree with the statement 'Top directors should get pay rises at a similar rate as those given to the rest of the company’s staff'.
It argued that draft regulations should be amended to require remuneration reports to disclose, in addition to the information on directors’ pay, the average pay increase for staff elsewhere in the company for each of the last three years, and the distribution of pay throughout the company as a whole. The report achieved extensive media coverage.
The regulations were laid before the House of Commons on 1 July with a proposed start date of 1 August 2002, with application to companies’ financial years ending on or after 31 December 2002.
Non-executive directors
In their work on corporate governance, the General Council have consistently promoted the argument that non-executive directors (NEDs) should be drawn from a wider pool than they are at present, and that this is essential if NEDs are to perform the monitoring role ascribed to them in the Combined Code. The Company Law Review inexplicably omitted the whole area of NEDs from their Final Report. However, following events at Enron, which focused attention on the importance of adequate monitoring capacity on company boards, in April 2002 the DTI and Treasury set up a review of the role of NEDs, led by Derek Higgs. The General Secretary met Mr Higgs in June, and at their July meeting the General Council considered their response to his consultation document Review of the role and effectiveness of non-executive directors. The TUC’s response made the following points:
· It is essential for the NEDs of a company to include someone whose experience of employment relationships will enable them to understand the consequences of boardroom decisions from the perspective of the company’s employees, and provide insights into the implications of employment relationships for company strategy.
· Separate duties for NEDs, focusing on their monitoring role on boards, should be established.
· Employees should be represented on nomination committees through their trade unions.
· To assist companies in recruiting NEDs from new constituencies, a pool of potential NEDs, drawn from a range of backgrounds, should be established. The Government should invite organisations with a relevant interest to participate in discussions about the practical steps necessary to achieve this.
· Advertisements for applicants for the pool should be placed in media with the capacity to reach out to a wide range of constituencies. Nominations should be sought from organisations whose members are likely to have experience that would be valuable to boards. A training programme that could provide some of the knowledge that would currently be gained on other boards should be put in place.
· Induction programmes for NEDs should include meetings with employees and their representatives. Training programmes for NEDs (and other directors) should include information on employment relationships.
· Boards should be required to report annually on how they collectively hold the skills and experience required to carry out their responsibilities.
The TUC response was sent to Derek Higgs and his team. Their report is expected by the end of 2002.
3.6 Institutional investment
A number of events have caused the profile and importance of institutional investors to be raised recently. The crisis in the US business sector has pushed corporate governance up the agenda once more whilst some government initiatives in the UK look to be handing more power to shareholder activists.
The General Council responded positively to the consultations that have followed the completion of the Treasury-backed Myners review of institutional investment, in particular arguing in favour of the requirement for shareholders to intervene in failing companies. In July the General Council considered how unions might make use of the opportunities presented by these changes by increasing union involvement in the institutional investment process.
A number of meetings have been held with fund managers, pension funds and some of the groups interested in shareholder activism and socially responsible investment. This process has forged some useful links in the institutional investment community that should prove productive in advancing trade union aims in this arena.
The TUC also had some success in encouraging institutional investors to support a shareholder resolution at the annual general meeting of US energy firm Unocal over its continued operations in Burma and its employment practices.
The Government has continued to take an interest in the area of shareholder activism, confirming that from next year all shareholders will have a vote on the executive remuneration policies of companies in which they invest.
Working capital - trade union strategy
The General Council have begun to develop a strategy for union engagement with fund managers, analysts and pension fund trustees to use the power of workers’ pension funds. A document, discussed in July, set out the background of institutional ownership of UK companies and the concentration of shareholding among large institutional investors such as pension funds and insurance companies. It covered the negative impact institutional investors have had on employees’ interest in the past and as such why unions should take an interest in institutional investment.
The document identified those areas where unions can apply pressure to companies and the kind of initiatives that could be undertaken, such as shareholder resolutions, and some of the issues that could be progressed. The General Council have agreed that a major conference should be held in the autumn at which these possibilities might be presented to a wider trade union audience.
Relationships with other institutional investors
From January 2002, the TUC has met with a number of large institutional investors - both pension funds and fund management companies. The aim has been to build links with some of the more ‘activist’ investors, and to gain an understanding of what issues they raise with companies in which they invest and how activism is undertaken. The response so far has been very positive with a number of large investors indicating their willingness to work with the TUC on certain issues. In addition some are interested in trade union views on issues such as labour standards and employment practices to enable them to raise such issues with companies more effectively. It is anticipated that the TUC will hold briefings with key institutional investors on certain issues where it is felt there is common ground, such as executive remuneration and other governance issues.
Unocal shareholder resolution
During the early part of 2002, the TUC was involved in building support for a shareholder resolution at the AGM of US energy firm Unocal in relation to its continued operations in Burma and its employment practices. The TUC contacted around 100 pension funds and a number of large fund management firms to ask them to support the resolution. A briefing was held with a number of key shareholders to explain why the TUC was seeking support for the resolution. Although Unocal is a US firm, a number of UK funds did hold Unocal shares and, following discussion with the TUC, several decided to vote in favour of the resolution or abstain, among them fund manager CIS and some individual pension funds.
Overall, the resolution, which called on Unocal to put in place a company-wide employee policy based on ILO rights at work, picked up a record 34.1 per cent of shareholder votes. This was a massive increase on the 23 per cent vote a similar resolution achieved last year. It was also the highest ever vote for a labour rights shareholder resolution. As a result of the campaign in favour of the resolution, Unocal has agreed to discuss its Burma operations with some of the concerned UK investors. In addition during the course of the campaign, the TUC made contact with some pension funds that are already involved in some shareholder activism and which are interested in focusing on labour standards as an issue.
3.7 Competition policy
Enterprise Bill
In September 2001 the TUC responded to the DTI White Paper A World Class Competition Regime. At the heart of the response was the TUC’s opposition to replacing the current public interest test for mergers and takeovers with a purely competition-based test. The submission argued that employees have a vital interest in the operation of competition policy and this should be recognised by policy makers. The submission also opposed taking politicians out of decisions on mergers, arguing that the Government’s aim of depoliticising competition decisions was not achievable, if the consequences involved large scale job losses and disruption to local economies. It argued that recruits to the Office of Fair Trading and the Competition Commission should include those with industrial experience of the consequences of mergers and takeovers.
The general secretary voiced the General Council’s concern about the direction of the Government’s competition policy in a letter to Secretary of State for Trade and Industry in March 2002. The letter suggested an amendment to the White Paper proposals that would provide a route for a written submission to be made by an interested party to the Secretary of State, setting out grounds for public interest considerations to be taken into account, at the time when a merger proposal was passed to the Competition Commission. The secretary of state would have an obligation to make a considered judgment on the points raised and to set out a full explanation for his or her decision in a written response to the applicant. The secretary of state rejected these proposals in her reply.
Also, in September 2001, the TUC responded to a White Paper Insolvency - A Second Chance, which was to form the main part of the rest of the Enterprise Bill. The White Paper covered proposals on both personal bankruptcy and corporate insolvency. The TUC’s response argued that the premise behind the personal bankruptcy proposals - that the stigma of bankruptcy acts as a deterrent upon risk-taking and enterprise in the economy - was unfounded, and that the bankruptcy regime must protect employees and other creditors from rogue directors who walk from one phoenix company to another leaving unpaid workers and debts in their wake. On corporate insolvency, the TUC response welcomed the Government’s aim of promoting a rescue culture for failing companies by making administration, rather than receivership, the starting point for all actions against a defaulting company. However, it drew attention to the omission of any provision for consulting employees in the proposals. It argued that mechanisms to ensure that the interests of employees are represented and considered throughout an administration process must be an integral part of proposals for tackling corporate insolvency.
The Enterprise Bill, incorporating the proposals in A World Class Competition Regime and Insolvency - A Second Chance, was introduced to the House of Commons on 26 March 2002. The TUC distributed a Parliamentary Briefing setting out its position on the provisions of the draft Enterprise Bill at this time. This briefing outlined the TUC’s opposition to the abolition of the public interest test for mergers and takeovers, and set out the case for taking employment issues into account; it supported the proposals to promote company rescue by making administration, rather than receivership, the starting point for all actions against a defaulting company, but called for mechanisms for consultation of employees; and it argued that the provisions on personal bankruptcy must protect the interests of workers and other creditors.
The TUC produced Parliamentary Briefings on the corporate insolvency proposals of the Enterprise Bill in May, when these clauses were discussed by the House of Commons Standing Committee, and again in June, when the draft Bill was introduced to the House of Lords.
Further work will be done on the Bill when the Parliament returns to the legislation in the autumn.
European Commission Review of EC Merger Regulation
In March 2002, the General Council considered their response to the European Commission Green Paper on the Review of Merger Regulation. Their submission argued that the EC Merger Regulation should be amended to require that employment effects are taken into account when judging a merger proposal, and that this would be in line with Article 127, paragraph 2 of the Treaty of the Founding of the European Community which stipulates: 'The objective of a high level of employment shall be taken into account in the formulation and implementation of Community policies and activities.' The response also discussed the current limitations on workers’ consultation rights, and proposed that the Commission should have an obligation to consult with the relevant workforces when they are considering a merger proposal and that sufficient time to do this effectively must be allowed. The submission was sent to the DTI and the European Commission.
In May 2002, the TUC was invited to give oral evidence to the House of Lords European Union Committee Merger Control (COM(01) 745/6) Inquiry. David Coats, Head of ESAD, Janet Williamson, ESAD Policy Officer and Gerry Veart, GMB National Secretary represented the TUC. They argued that the conditions under which a merger takes place were crucial to its legitimacy, and that those affected by mergers should have a voice in the process. They set out the problems caused by insufficient time and lack of information that unions faced when consulted about European mergers under the current mechanisms. They argued that reforms to give employees and their representatives rights to be consulted as soon as a merger proposal reached the Commission were necessary. In addition, unions should have adequate information rights and be given enough time to consult and represent their members effectively.
3.8 The National Minimum Wage
On 1 October 2001, the National Minimum Wage (NMW) rates were increased by 40p per hour, taking the adult rate to £4.10 per hour and the development/youth rate to £3.50 respectively. This increase, which represented an 11 per cent rise in the adult rate, was accommodated without any detrimental effects on employment or the wider economy.
This was the first stage of the Low Pay Commission’s two-year settlement. In April 2002, the Government confirmed that the NMW rates would rise by a further 10p per hour from 1 October this year.
The General Council’s work has focused on making a success of the introduction of these new rates - and, in particular, the question of the enforcement of the NMW. To that end, the TUC has continued to organise the National Minimum Wage Enforcement Group, which brings together unions with an interest in the issue, the Low Pay Units, the National Association of Citizens Advice Bureaux and the National Group on Homeworking.
The NMW is unique amongst employment rights in that the Government proactively enforces it. The Inland Revenue runs the NMW helpline, and employs 14 teams of compliance officers, based around the country. They have so far recovered more than £9 million for underpaid workers.
The Government also funds eight community projects, based in areas where there is likely to be substantial non-compliance. Unions are involved as partners in some of these projects.
Despite this concentrated effort to catch employers who fail to pay the NMW, there is no room for complacency. Although there are no robust figures for non-compliance, estimates suggest that between 100,000 and 220,000 workers may still be underpaid. The General Council will therefore launch a further enforcement initiative in the autumn, which will be accompanied by a new edition of the TUC/DTI/Low Pay Unit/Low Pay Network joint enforcement guide.
Members of the Low Pay Commission 2002/3
Adair Turner - Merrill Lynch Europe (LPC Chair)
Professor William Brown- University of Cambridge
David Coats - TUC
John Cridland - CBI
Paul Gates - KFAT
Ian Hay - Scottish Association of Master Bakers
Professor David -London School of
Metcalf Economics
Margaret Prosser OBE - T&G
Angie Risley - Whitbread PLC
The LPC has now been given new terms of reference and will report again in February 2003 to recommend the rates to apply from Autumn 2003 and 2004. The TUC will submit evidence to the LPC in October 2002. This will take account of motion 34 (remitted from the 2001 Congress), and will be based on the following statement from the General Council.
The National Minimum Wage: General Council Statement
Introduction
The General Council continue to regard the National Minimum Wage (NMW) as one of the major successes of Labour’s first term of office. Trade unions worked long and hard for the NMW and the effectiveness of the policy is a tribute to the resilience and dedication of those who supported the campaign.
Contrary to the views of those employers and right-wing politicians who opposed the policy in 1997, there is no evidence to suggest that the NMW has had any negative impact on employment and ample evidence to show that it has delivered major gains for the lowest paid workers. Indeed, there are almost a million more jobs in the economy today than in 1999 when the NMW was introduced and around a million people have seen their earnings rise as a result of the NMW.
In the General Council’s view the Low Pay Commission (LPC) has been essential in establishing the legitimacy of the NMW. The LPC has built a consensus that a floor under wages is essential to prevent exploitation and ensure a minimum degree of fairness in the labour market. There is no employer chorus demanding the repeal of the NMW should there be a change of government. Even the Conservative Party has seemingly executed a u-turn and supports the principle of the NMW - although there is no evidence that they would be committed to sustained increases in the rate.
Despite these successes however there are real weaknesses in the NMW regime. One of the most important, of course, is the treatment of younger workers and this issue should be a priority for the LPC in their next report. But the most critical question concerns the level of the NMW. The General Council understand the LPC’s argument that it was sensible to proceed prudently when the NMW was introduced. At that time nobody could accurately predict the labour market effects. While all the international evidence pointed to no adverse effect on jobs these studies concerned the uprating of a pre-existing minimum wage rather than the introduction of the policy.
However, the General Council believe that if there is a time for prudence then there is also a time for boldness. Three upratings to the NMW have been successfully implemented since introduction with no obvious negative effects. Equally, there is a view expressed by many commentators and shared by the General Council that the level of the NMW is too low. It fails to set a sufficiently robust floor under wages and still means that too many people at work are reliant on in-work benefits or tax credits for a decent level of income. This means that the state is continuing to offer a large subsidy to low paying employers with the burden of low pay transferred directly to the taxpayer. The purpose of this statement is to set out how a more ambitious minimum wage strategy might be given practical effect.
The General Council therefore set out their views below on:
· Setting the new NMW rate;
· Establishing a new collective bargaining target;
· Removing age based rates from the NMW; and
· Enforcement.
Setting the new rate
In setting the level of the NMW in the past the LPC have always had regard to the general economic situation, the likely impact of an NMW change on the economy and the implications for certain sectors and groups of workers. A particularly important consideration has been the number of workers affected - the so-called bite of the minimum wage.
Yet, largely as a result of the inadequacy of the official statistics, the LPC has consistently overestimated the number of workers benefiting from the NMW. For example, when the LPC set the NMW rate for April 1999 they believed that 1.9 million workers would be affected. The actual number turned out to be around half that figure. In addition, the coverage of the NMW falls as pay rises elsewhere in the economy - the ‘bite’ can reduce dramatically between upratings.
The critical question of course is the likely condition of the UK economy at the time of the next uprating. This will affect both the LPC’s judgment about the affordability of the NMW increase and the attitude of employers to the NMW.
The LPC’s recommendations will be effective from October 2003 and October 2004 respectively and the General Council note that the economic forecasts for this period suggest stable levels of employment and inflation. Growth is predicted to run at 5.6 per cent during the two-year period between Oct 2002 and Oct 2004.
It is also likely that there will be a strong demand for labour, that the number of people in employment will increase, and that wages will rise steadily. The Bank of England’s target for sustainable wage growth suggests that earnings might increase by around 9 per cent in the two-year period from October 2002 onwards. All these forecasts are consistent with the achievement of the Chancellor’s 2.5 per cent inflation target.
In summary, it is hard to imagine conditions more favourable to the successful implementation of a significant rise in the NMW than those that are likely to apply. It is true that there may be some clouds on the horizon and a degree of uncertainty about the strength of the economic recovery in the USA, but the General Council’s best assessment is that the overall outlook is set fair for growth.
Reference has already been made to the LPC’s prudent approach. Yet the NMW must do more than merely keep pace with earnings growth if it is to fulfil its full potential as a tool for economic and social good. A significant increase to the NMW rate is both desirable and sustainable.
In making our recommendations for a new rate, the General Council have been particularly concerned to ensure that the NMW should not harm employment in low paying industries. We are heartened by the fact that employment across these industries has risen somewhat since the NMW was introduced. We have also taken into account evidence that the persistence of low pay is damaging the productivity and competitiveness of certain industries.
The starting point for the General Council is to recall the development of policy since the appointment of the LPC in 1998. At that time the TUC was recommending that the NMW should be introduced at a level of 'somewhat more than £4.00 an hour'. This was based on work undertaken for the TUC by Professor Stephen Machin of University College London, which suggested that a minimum wage of £3.80 an hour could have been introduced in 1996 in the confident belief that there would be no adverse effects on employment or the wider economy. The figure was based on the highest of the old wages councils rates at the end of the 1970s when they had their greatest bite in the labour market. These considerations, and the fact that the original £3.60 and £3.70 rates had no impact on employment and affected significantly fewer people than originally envisaged led the General Council to recommend an uprating in 2001 to between £4.50 and £5.00 an hour.
The evidence to date suggests that employment has either been stable or has grown since the increase in the NMW to £4.10 in October last year. All experience to date suggests that the scheduled increase to £4.20 this October will produce a modest improvement in the incomes of the lowest paid with no negative effects on the economy. This leads the General Council to believe that the time is now ripe for a significant and sustained rise in the level of the NMW. Taking the lower TUC target of £4.50 as the starting point and uprating in line with average earnings would suggest that the NMW should be fixed at between £5.00 and £5.30 in 2003/04. It is understood that the LPC is likely to make a recommendation for a phased increase in the NMW with the first element to be implemented in 2003 and the second in 2004. This is a very welcome step in the direction of an annual uprating of the NMW - a principle that the TUC still hopes to see formally incorporated into the NMW regime.
The General Council would therefore urge that the LPC seek to smooth the effect of the uprating by increasing the NMW in equal amounts over this two-year period. This approach will establish a higher level of certainty and clarity and help to maintain the bite of the NMW between LPC reports. It will also enable unions and employers to adjust pay structures more easily than would be the case with a large increase in the first year followed by a small increase in the second.
Fixing a new collective bargaining target
Since 1995, the General Council have set a collective bargaining target for minimum earnings above our preferred level of the NMW. The purpose of the target has been to send a very clear message that unions will not tolerate low pay. It has set out a practical agenda to show that collective bargaining builds on a floor of statutory rights and offers union members generally higher wages than those guaranteed by law. Progress towards the achievement of the target has always shaped the General Council’s view of the sustainable level of the NMW.
Official statistics suggest that the current collective bargaining target of £5.00 per hour has now been met for many workers. There are clear indications that for a large number of trade union members £5.00 is the bottom rung on the pay scale in collective agreements. In line with previous practice, therefore, the General Council believe that the time has come to recommend that the collective bargaining target for minimum earnings should be increased to £6.00 an hour with the aim of achieving this level in all collective agreements by the end of 2004.
Ensuring fair treatment for young workers
The General Council believe that the full adult rate NMW should be payable at the age of 18. We have consistently argued that the lower rate for younger workers is discriminatory, contrary to the principle of establishing a fair rate of pay for the job, and counterproductive for those employers who choose to use it. The fact is that most people believe that adulthood starts at 18 and that pay should reflect this norm. It is a glaring anomaly that an employer can choose to pay lower wages to workers under the age of 22 merely because they are young.
Young people entering the world of work at ages 18-21 come with a range of educational experience and qualifications. Naturally, young workers need some job-related training. However, the proportion in this age group actually receiving such training is not much higher than the figure for 22-24 year old workers, who must be paid the NMW at the full-rate. To pay 18-21 year olds less than adults is to ignore modern trends in pay, and, most importantly, to ignore what young workers see as fair. The TUC’s report Young People: What Do They Know About the NMW? found that most people in this age group believed that if they did the same job as older colleagues they should be paid accordingly.
Paying a youth rate is not good for recruitment, retention or productivity. It sends exactly the wrong message to young people about how they are expected to perform at work. Yet some employers will choose to use the youth rate for as long as it is available. It must be stressed that this is a question of choice rather than of need. The jobs market for this age group is buoyant and in most cases those paid the youth rate work in industries that are quite profitable. The General Council were therefore particularly disappointed that the Government rejected the unanimous recommendation from the LPC that 21 year olds should receive the adult rate.
The General Council believe that 16 and 17 year olds should be in full-time education and training. However, we also recognise that 660,000 of them are in employment. Indeed, many in this age group have no choice about seeking paid work to support them during their studies. The lower their pay, the more hours they will have to work, and the more their studies will suffer. Young workers are generally recognised as an especially vulnerable group warranting special protection.
There is very strong support across the trade union movement that the principle of 'the rate for the job' should apply to all workers above school leaving age. However, as a practical matter the General Council understand that the payment of the adult rate at the age of 16 is unlikely to be high on the agenda of either the government or the LPC. Indeed, the implementation of the Young Workers Directive has already established that workers in this age group are not yet deemed to be full participants in the labour market. Nevertheless, there is a strong case for saying that some protection for 16 and 17 year olds is necessary to prevent exploitation. A new rate for young workers in this age group, based on a fixed proportion of the adult rate, should be given active consideration by the LPC in their next report.
Enforcement and promotion
The General Council welcome the Inland Revenue’s work in enforcing the NMW. The Revenue have so far recovered more than £9 million in back pay for workers who were being underpaid. It is also welcome that the DTI are funding a range of community, based enforcement projects, many of which are led by trade unions and all of which are intended to ensure compliance with the NMW.
However, the General Council believe that there is no cause for complacency on enforcement. Despite the solid efforts made to enforce the NMW, we believe it is possible that around 170,000 non-unionised workers are still underpaid.
The Government must improve the resources available to the Inland Revenue and increase their capacity to deal with non-compliance. Ensuring that all rogue employers are caught demands more inspectors on the ground in high-risk areas. The trade union movement should also redouble its efforts to enforce the NMW.
The Government has a role to play too in ensuring that all workers are aware of their rights to the NMW. This means that there must be regular and well resourced campaigns to promote the NMW rates and a continuing commitment that all workers must receive their entitlement to the NMW.
Conclusions and recommendations
The National Minimum Wage has made a real difference for some low paid workers. However, it has yet to achieve its full potential as a force for good as the rates set so far have proved to be too cautious. The economic prospects for a substantial rise and for the extension of the NMW to cover younger workers are now excellent.
Given this positive context and the practical experience of the NMW the General Council make the following recommendations:
· There should be a substantial rise in the NMW to take the rate to between £5.00 and £5.30 by October 2004;
· There is no justification for the continuing use of the youth/development rate. The adult rate should apply from the age of 18 onwards;
· There is a strong case for protection for 16/17 year olds, who are currently outside the NMW; and
· The efforts made so far to enforce the NMW are very welcome. Trade unions have played a significant role in this work. The government needs to keep the pressure on until all rogue employers are compelled to comply with the NMW.
3.9 Working time
Taking account of motions 35, 36 and 49 (remitted from the 2001 Congress), the General Council have intensified their efforts on working time. Our goals are:
· to end excessive hours;
· to extend workers’ choice over their hours and patterns of work.
Unions have been developing the collective bargaining agenda to try to address these issues. They have been able to achieve some solid successes, but progress would be accelerated by the full implementation of the Working Time Directive.
The Government has introduced a rolling programme of rights to support their family friendly/work life balance goals, most recently extending maternity and paternity rights. The General Council have sought to accelerate and embolden the Government’s legislative programme.
In February 2002 the TUC held a major conference, ‘About Time’, which featured keynote speeches from John Monks, John Cridland, Deputy Director, CBI, and Patricia Hewitt, Secretary of State for Trade and Industry.
Patricia Hewitt made the following commitments:
· To end the long hours culture within five years;
· To write to her cabinet colleagues to ask them what steps they would take on the issue in their departments; and
l To lead an international study programme in the autumn to identify best practice.
The first delegation visited the USA 28-30 July. The Secretary of State led the visit, and involved senior figures from the TUC and affiliated unions and the CBI. Future visits will be to the Netherlands, Germany, Ireland, France, Denmark and Spain. The outcomes will be reported at a major DTI conference on working time scheduled for early 2003, and will help to inform the UK policy debate.
The report accompanying the ‘About Time’ conference found that four million people still work more than 48 hours per week in the UK, that ten million workers want to work fewer hours and that 2.5 million would take a pay cut in order to do so, that more people work overtime because they are paid to do so or to meet their workloads than do so because they like their jobs, that four out of ten workers have no flexibility at all over their hours or patterns of work, and that there are also 1.6 million employees who would like to work more hours because they are currently underemployed.
The February meeting of the General Council discussed the lessons that might be learnt from the About Time conference, and commissioned a further programme of work. In the spring the TUC consulted unions in a number of different sectors to identify best practice in dealing with working time issues. The results of this consultation were reported to the June meeting of the General Council.
A key consideration is that the UK provisions that allow individual workers to opt-out from the 48-hour average working time limit are set to expire in November 2003. The European Commission is currently reviewing the operation of these provisions and it is unlikely that they will continue for very long after 2003. The TUC’s position on this issue is clear - the 48-hour limit is a health and safety measure and should be rigorously enforced.
This position presents unions with a real challenge, because some 500,000 union members working more than 48 hours per week receive overtime payments, and many have come to rely on them to maintain their standard of living. Where unions have succeeded in reducing long hours there has been a process of negotiation focusing on productivity, investment, training and customer needs as well as hours and earnings.
Yet even the full implementation of the 48-hour week will not necessarily end the long hours culture in the UK. The 1999 amendment to the Working Time Regulations (1998) redefined unpaid overtime so that it does not count towards the 48-hour limit. This affects some 800,000 trade union members. The General Council will campaign for a change in the Regulations.
As reported to Congress 2001, until June 2000, the UK also had an opt-out from some of the provisions on working time and nightwork in the Young Workers Directive (YWD). The TUC responded to the DTI’s consultation on future regulations in March 2001. The DTI announced a further round of consultation from June to October 2002. The revised set of draft regulations was an improvement on the earlier version as a clause was removed that would have allowed business needs to override the provisions of the directive.
However, the Government still proposes to make the maximum use of the permitted derogations. The General Council welcome the application of the directive, which is now seriously overdue, but also believe that most of the derogations are inappropriate.
From June 2002, a separate EU directive on seafarers working time came into effect. Working time in shipping is already regulated by a number of international conventions and agreements. The directive gave member states the choice of specifying maximum hours of work, or a somewhat laxer ‘minimum hours of rest’ provision. The UK Government has adopted the latter measure, thus ensuring an effective 91-hour maximum working week for seafarers, calculated over a rolling seven-day average and providing a maximum 13-hour day. It should be noted that this is a reduction from the current maximum of 98 hours per week.
The ‘Horizontal Amending Directive’ will give transport workers and junior doctors some of the WTD rights from June 2003. It is likely that the Government will consult on regulations in the New Year.
The TUC has continued to run a campaign in support of the introduction of three more public holidays, and for public holidays to be supported by statutory rights to paid time off and premium rates for those who choose to work. A poll conducted by the TUC shows that this campaign has been very popular with working people; there is now a broad national debate on the issue, which will need to be pressed home to the Government.
3.10 Public services
Introduction
The General Council’s work on public services has been guided by the 2001 General Council Statement on the Future of Public Services and composite 11 of the 2001 Congress. Work on public services has formed a central priority for the year. In December, the General Council held a highly successful lobby of parliament and a rally in line with composite 11.
The General Council have continued to argue for public sector workers to get adequate protection from the detrimental impact of transfer to the private sector. The need for improvements in public services is understood, public service workers are themselves dissatisfied with the status quo and want to see positive change. However, the TUC remains unconvinced that the private sector will provide the solution.
The General Council are acutely aware of the continuing problems caused by low pay in public services. This has an impact on the lives of the people who work in public services and on recruitment and retention, which has a knock-on effect on the ability of those services to respond to the needs of citizens. The TUC continues to argue that pay is a significant factor in recruiting and retaining staff in public services. The Government cannot continue to rely on the dedication of low paid workers to perform some of the most difficult jobs - in a civilised society all public service workers must be properly rewarded.
Public Services Campaign
In December the TUC held a rally and lobby of Parliament to celebrate the hard work and commitment of public service workers under the banner Public Works. The theme of the event was that directly funded and managed public services, with directly employed staff can deliver the improvements in service provision that the Government seeks. The principal objective was to demonstrate the General Council’s commitment to high quality public services that meet the needs of citizens.
Over 1,000 trade union members from across the country lobbied their MPs. A wide range of speakers, both workers and service users, representing all parts of the public services addressed the rally. The rally heard speeches from fire fighters, an air traffic controller, a coastguard, a home care worker, a school meals worker, an environmental health officer, teachers, a parents’ representative and school governor, railway and London Underground workers, a representative from a tube passenger organisation, a nursing student, a patients’ representative and a physiotherapist. The speakers all related personal experiences that illustrated the true value and meaning of public service. The Rt Hon Charles Clarke, Chair of the Labour Party, also addressed the event. In between the speeches music from Ruby Turner gave the event an air of celebration.
The TUC also arranged a number of meetings with ministers throughout the year, in line with composite 11 of the 2001 Congress, to discuss improving public services by developing in-house provision and building on the skills and commitment of the workforce. At these meetings unions representatives consistently set out the TUC’s concerns about the involvement of the private sector in the delivery of public services and the role of the Private Finance Initiative (PFI). The TUC has also continued to campaign for an end to the two-tier workforce.
The General Council submitted written evidence to the Inquiry into Public Service Reform conducted by the Public Administration Committee of the House of Commons. This suggested that any programme for public sector modernisation and reform must:
· Recognise the importance of effective democratic accountability;
· Be based on a continued effort to sustain high levels of public investment;
· Recognise the need to build management capacity across the public services through the development of centres of excellence;
· Develop networking so the best of the public sector can share experience more widely and directly tackle underperformance; and
· Implement an effective approach to trade union and employee involvement.
The submission built on the General Council’s call for a renewal of the public service ethos and outlined why it is essential to the delivery of high quality public services.
The two-tier workforce
The General Council statement on the Future of Public Services and composite 11 of the 2001 Congress have guided the General Council’s work on the two-tier workforce, which has once again been a major issue for the TUC.
A new Fair Wages Resolution (FWR) remains a key objective for the General Council, as it would prevent the emergence of a two-tier workforce where public services are outsourced. Private contractors would be required to pay the appropriate negotiated wages and conditions that, in this case, would be determined by reference to the relevant public sector collective agreements. A new FWR would also ensure that public sector clients only procured goods from employers that observed decent labour standards - it would prevent public authorities from shopping in the bargain basement. Indeed, for much of the period from 1891 to 1983 when the various FWR’s were in operation this was the most important effect. The Government used its purchasing power to encourage the extension of collective agreements across the private sector.
The General Council have continued to press the case for a new FWR and some progress has been made in developing more detailed policy. Professor Brian Bercusson of King’s College London was commissioned to provide the TUC with a draft framework for a new FWR. In September a meeting of public sector unions was held to consider the issues raised by Professor Bercusson’s paper and consider how the proposals might be carried forward. It was agreed that a number of sectoral meetings were required to resolve many of the issues raised and to consider detailed operational arrangements in each sector. Discussions have subsequently taken place with representatives of unions in the NHS and local government and this has informed the work on the two-tier workforce.
At the Labour Party conference in October the Rt Hon Stephen Byers, Secretary of State for Transport, Local Government and the Regions committed the Government to take action to eliminate the two-tier workforce if he could be convinced that it existed. The issue was to be considered as part of the Department of Transport, Local Government and the Regions (DTLR) Review of Best Value in local government - details of the wider Review are outlined below at paragraph 3.11.
As well as concerns about the two-tier workforce, the General Council are alarmed at the continued erosion of pension rights of workers transferred from the public to the private sector. The evidence that the TUC produced for the review of Best Value in local government conducted by the DTLR amplified both these points.
In March Mr Byers wrote to the members of the review group to indicate that in his view the review had demonstrated that the two-tier workforce was a real problem. Mr Byers’ letter then went on to set out the Government’s proposals to deal with the problem.
First, the Government proposed to legislate to make sure that councils implement the provisions in the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector and the annex to it, A Fair Deal for Staff Pensions. This will ensure that TUPE is applied in all but the most exceptional of cases and that transferred workers would either retain membership of the Local Government Pension Scheme or be offered a broadly comparable scheme.
Mr Byers’ letter also stated that the DTLR would draw up a Code of Practice on the treatment of new recruits working on local authority contracts alongside transferred staff. The code would: 'oblige contractors to offer employment to new staff on fair and reasonable terms and conditions which are, overall, broadly comparable to those of transferred employees, and that take into account the need to recruit and retain quality employees and conditions in local labour markets; and that offer reasonable pension arrangements'.
The Government proposed that the Code would include a requirement for consultation rights for recognised unions on the terms and conditions of new recruits. There was also a commitment from the Government to revise Best Value guidance, along the lines of the continuous dialogue model used in the NHS, in order to ensure that workers and their unions were properly consulted when a local authority is considering contracting out a service.
The Code would be supported by statutory guidance and would be written into individual contracts between local authorities and contractors. The Government also proposed that monitoring of the Code’s application was to be included as part of the Best Value inspection and enforcement regime.
The TUC welcomed the Government’s proposals for a Code of Practice as a step in the right direction. However, the General Council still have some concerns about the implementation of the Code. For instance, expressions such as ‘fair and reasonable’, ‘broadly comparable’ and ‘conditions in local labour markets’ (see above) could lead to unnecessary disputes based on different interpretations of the Code. The General Council believe that the language used in the Code must be clear and unambiguous in order to avoid unnecessary disputes.
The General Council are also concerned about how the Code is to be enforced. In situations where there is a dispute between a contractor and a union or a local authority, it is vital that the matter is brought to a speedy and satisfactory conclusion. Failure to do so will mean that unscrupulous contractors can effectively flout the legislation.
At the time of writing the Government had not yet published the draft code for consultation. However, the General Council will ensure that all the above points are pressed further before the Code is brought into operation.
There has also been some progress in developing arrangements in the NHS to ensure that transferred workers are protected against the emergence of a two-tier workforce. The Retention of Employment model proposes that in the future the majority of NHS staff affected by Private Finance Initiative (PFI) deals will remain NHS employees and work on secondment to the contractor. Whilst this is a welcome move, the TUC remains concerned about the staff not covered by this arrangement, such as supervisors and those involved in building maintenance.
While it is clear that progress is being made, the General Council will continue to make the case for a new Fair Wages Resolution as the only effective means of eradicating the two-tier workforce from public services.
3.11 The Private Finance Initiative and Public Private Partnership
This year work on PFI has been guided by the 2001 General Council Statement on the Future of Public Services and by the remitted composite 11 and motion 47 of the 2001 Congress.
Apart from the problems of the two-tier workforce outlined above, the General Council have wider public policy concerns about PFI and PPPs. The TUC can find no evidence to suggest that PFI provides better value for money than traditionally financed public investment that is properly monitored and controlled by democratic institutions. Indeed PFI would not offer value for money if it operated on a level playing field with a real choice of procurement options, including a robustly constructed public sector comparator. The TUC was encouraged by the Government’s proposal to allow local authorities greater borrowing flexibility, however, this is tempered by the continuation of additional support for local authorities that choose PFI.
The General Council believe that PFI and PPPs should not be extended into new areas, such as intermediate and primary health care after the difficulties that have been experienced elsewhere in the public services.
3.12 Local government
TUC Best Value Working Party Membership 2001-2002
David Coats, (TUC) Chair, Jack Dromey (TGWU), Mick Graham, (GMB), Jim Kennedy, (UCATT), Heather Wakefield (UNISON). Malcolm Wing, (UNISON),
Geoff Whitlow, (AEEU)
The 2001 General Council Statement on the Future of Public Services and composite 11 and motion 49 of the 2001 Congress have guided work on local government. The TUC’s Best Value Working Party (BVWP) has supported the work of the General Council.
In August 2001 a TUC delegation met the Secretary of State for Transport, Local Government and the Regions, Rt Hon Stephen Byers, to discuss the approach of the re-elected government. The TUC representatives emphasised the General Council’s commitment to the improvement of public services but reminded Mr Byers that this could not be achieved without the support of the workforce and trade unions. A number of further points were made: the bureaucratic nature of Best Value; the failure of many councils to resolve the equal pay gap; the need for a level playing field in capital finance so that PFI was not the ‘only game in town’; and the continuing problem of the two-tier workforce. Mr Byers agreed to consider the equal pay problem as part of the 2002 Spending Review. He went on to say that legislation was being considered to resolve the capital funding issue.
The focus for much of the TUC’s work for the year has been the Department of Transport, Local Government and the Regions (DTLR) Review of Best Value in local Government, which started in December. A Review Group was established to examine the wider issue of the operation of Best Value, which was chaired by the Local Government Minister, Nick Raynsford and consisted of representatives from the public sector, the private sector, local government bodies and trade unions and the TUC. The TUC was represented on the Review Group by David Coats, Jack Dromey (TGWU), Mick Graham (GMB) and Malcolm Wing (UNISION). The TUC priorities were:
· Greater employee involvement in the improvement of council services;
· To reduce unnecessary bureaucracy, in line with motion 49 of the 2001 Congress;
· A level playing field for procurement decisions - based on the best not the cheapest;
· An end to under funding and the requirement for 2 per cent year on year ‘efficiency savings’;
· An emphasis on Best Value rather than private sector involvement as the measure of success;
· The promotion of the power for councils to trade their services as a driver for innovation.
The Review Group also considered the problem of the two-tier workforce, which has been reported in detail above.
In May Mr Raynsford wrote to the Secretary of State for Transport Local Government and the Regions with details of the Review Group’s recommendations. The main points of Mr Raynsford’s letter were:
· Staff and union involvement in Best Value should become a mainstream activity. He also stated that staff and trade unions should be consulted at an early stage 'before the options are more narrowly defined';
· Employees and their unions should be involved when the options for procurement are first considered. Where there is a decision to outsource, staff and unions should be involved in the selection process and in the subsequent detailed work around the transfer;
· A new statutory obligation to consult staff and trade unions under Best Value might act as a powerful driver for change and a clear signal of Government intent, although he warned that it 'requires a genuine cultural change on all sides;
· Local authorities had to develop the capacity to conduct an effective challenge to current provision, disseminate best practice and build joint capacity where individual authorities cannot expect to develop and maintain expertise alone;
· A balance of quality and cost is required to prevent an approach where the lowest bid wins, regardless of the likely impact on the service;
· In-house provision had to be developed to allow local authorities greater freedom to decide how services should be provided;
· Councils should explore the possibilities of joint working with other local authorities and public bodies. The arrangements used in regeneration initiatives were given as an example of how accountability could be preserved;
· There needs to be greater transparency in developing the cost benefit appraisals for Public Private Partnerships. Mr Raynsford gave the example that risk, although difficult to quantify, 'is often the most significant factor in tipping the balance in favour of a PPP option'.
The General Council also responded to government consultation on a new Local Government Bill, which is due to be introduced in the next parliamentary session. The draft Bill deals mainly with local government finance and introduces new freedom for councils to make their own borrowing arrangements in order to fund capital investment. It will also give the Government the opportunity to make council tax more progressive with the introduction of more council tax bands. These are moves that the TUC called for in the response to the Local Government Finance Green Paper in December 2000.
3.13 National Health Service
The 2001 General Council Statement on the Future of Public Services, composite 11 and motions 49, 55, 56, 57, 58, 59 and 60 of the 2001 Congress have guided work on the NHS. The debate about the level of private sector involvement in public services has been at its most intense in relation to the NHS. This reflects both the rapidity and the volume of government initiatives and has been a matter of considerable concern to the General Council throughout the year.
The General Council welcomed the additional NHS expenditure when it was announced in the 2002 budget. The TUC believes that it demonstrated the Government’s long-term commitment to the future of the NHS. The TUC also welcomed the assurance that the NHS will continue to be funded from taxation and would not be subjected to the uncertainty implied by other funding methods.
In line with the General Council Statement on the Future of Public Services and composite 11 of the 2001 Congress the TUC met the Secretary of State for Health, Rt. Hon Alan Milburn, to discuss the Government’s plans for reform. The TUC delegation expressed concern about the increasing uncertainty regarding the true nature of the reforms and asked for a clear definition of the boundaries of private sector involvement in the NHS. The TUC also reaffirmed the dedication of NHS staff and their unions to the improvement of services to the public and expressed concern that this commitment was being stretched by the expanded role of the private sector. Mr Milburn outlined four key areas for private sector involvement: the use of spare private capacity to increase NHS provision; performing high volume/low cost procedures at Diagnostic and Treatment centres; the extension of PFI; and the management of non-clinical services such as car parks.
Representatives of NHS unions also met Mr Milburn in March to outline concerns about the new performance assessment framework for NHS trusts. The delegation had particular concerns about the increased insecurity for NHS staff and the negative impact on morale that may occur in NHS trusts that do not receive high marks. The TUC also pressed Mr Milburn to finalise Agenda for Change negotiations in order to start delivering the benefits of pay modernisation to the public. The point was made that improved arrangements were needed to enable staff to become fully involved in partnership working.
The TUC has also established a regular programme of meetings between the Department of Health and NHS unions. At these meetings the TUC has made the case for better and fairer pay and conditions to support recruitment and retention of staff. In line with motion 49 of the 2001 Congress the TUC also raised the problems of the excessive workloads generated by unnecessary bureaucracy in the NHS and pointed out that this is an impediment to improved patient care. The meetings also discussed the Government’s plans for investment and reform of the NHS, shifting the balance of power to frontline workers and private sector involvement in the NHS.
The TUC has also facilitated discussion with ministers in order to promote 24-hour community nursing services in line with resolution 60 of the 2001 Congress.
3.14 Education issues
The General Council have made a concerted effort this year to ensure that the Government works in partnership with unions in the education sector to deliver its investment and reform programme. The General Council have concentrated on opening up channels of communication with the Government, and have continued to make the case for an effective process to consult staff in the education sector and to manage change.
A number of meetings have been held with the Secretary of State for Education and Skills, Rt. Hon Estelle Morris and education ministers on a range of different issues including pay and conditions in the Further Education sector, excessive teacher workload, and reform of
14 - 19 stage education, in line with composite resolutions 14 and 15 of he 2001 Congress.
In October 2001, the General Council established a TUC school workforce remodelling working party consisting of ATL, GMB, NASUWT, NUT, TGWU, UNISON and UCAC. In Scotland, where the EIS has members, these issues are handled through the Scottish Parliament. In responding to the commitment of the Government to ‘remodel teaching’ the working party has been examining issues such as the role of teachers, teaching assistants, and other support staff, ways to reduce teacher workload, and pay and conditions issues for teachers and classroom staff, including London Weighting. Through the working party, it has been possible to agree a joint union approach on the pay and conditions of teachers to the School Teachers Review Body, an all-teacher rally and lobby of Parliament, and submissions to the Government’s remodelling working party.
The discussions between the higher education unions co-ordinated by the Deputy General Secretary and the Universities and Colleges Employers Association (UCEA) resulted in the establishment of a Joint Negotiating Committee for Higher Education Staffs (JNCHES). The new machinery put into effect the major recommendations of the Independent Review of Higher Education Pay and Conditions, chaired by Sir Michael Bett, which called for an end to the fragmentary system of pay and conditions across the sector. The Secretary of State for Education and Skills officially launched the JNCHES at Congress House in October 2001. The JNCHES has 41 members, with half comprising unions representing teaching and professional, technical, administrative and ancillary staffs. It is chaired by employment lawyer, Mary Stacey.
In November 2001, the General Council responded to the Government’s White Paper ‘Schools Achieving Success’ and following consultation with the relevant unions, submitted a paper to the Department for Education and Skills which argued that any strategy for change must be in partnership with, and have the commitment of all those who work in the education sector. The paper went on to comment on a wide range of proposals including the future of comprehensive education, measures to deal with failing schools, how to achieve the Government’s target to ensure that 50 per cent of people aged between 18 and 30 years of age continue into higher education, as well as the main employment issues facing the sector.
In May 2002, following consultation with affiliates, the General Council submitted a response to the DfES Green Paper: 14 - 19: Extending Opportunities, Raising Standards. The TUC paper welcomed many of the Government’s proposals as part of a bold and radical agenda. In particular, the TUC welcomed the commitment to raise the parity of esteem between vocational and academic qualifications. However, the paper also reiterated the need for a broad-based curriculum and warned against the development of a two-tier education system.
Over the spring and summer months, the General Council worked with individual affiliates to lobby the Government and secure amendments on the Education Bill, which included a TUC parliamentary briefing which focused on issues relating to pay and conditions.
3.15 Criminal justice
During the course of the year the TUC has continued to work closely with the Justice Forum and unions organising in the justice system. This year a programme of meetings has been organised in the context of the General Council’s work on public services reform. The scope of the meetings has included the expansion of PFI within the justice system and funding issues.
In October, the Lord Chancellor’s Department published the Auld Report which represented the most extensive review of the criminal justice system carried out in the last 30 years. In January, the TUC worked with the justice unions to prepare a response to the review. The submission endorsed the aims of the review to provide criminal courts which are modern, in touch with communities, efficient and responsive to the needs of the users of the various justice agencies. It also highlighted the need for measures to ensure that the magistracy and juries are more representative of the communities which they serve, in particular, by increasing the participation of ethnic minority groups and disabled people. It also profiled the importance of the allocation of adequate resources to fund any future reforms to the criminal justice system. Finally, the response expressed concerns over trends towards the closure of local courts and the concentration of work in widely dispersed court centres and called for improvements in court security.
3.16 The voluntary sector
The TUC has continued to work with the voluntary sector during the year. Work has concentrated on promoting trade union recognition in the sector. The TUC has also continued to work with the National Council for Voluntary Organisations (NCVO) to develop its Partnership at Work project to promote the benefits of employee involvement for voluntary organisations.
3.17 Transport
The General Council’s work on transport has been guided by composite resolution 12 and resolution 64 of the 2001 Congress.
In July 2002 the Government set out its spending plans for the next three years and announced that public sector spending on transport would be increased by a very substantial amount.
Nevertheless, this has been a difficult year, with particular problems in the rail and aviation sectors.
Rail
The General Council argued strongly against the privatisation of Railtrack, which was rushed through by the previous administration. We have consistently argued that the railways should be run for the benefit of the nation rather than for the benefit of shareholders. The General Council’s criticisms proved well founded when the Secretary of State at the Department for Transport, Local Government and the regions Rt. Hon Stephen Byers put Railtrack into administration in October 2001.
Railtrack’s position had clearly become untenable. Despite the support of government money, the Railtrack share price had collapsed from a high of £16.50 in 1998 to just £2.50 in October 2001 and was still falling when trading was halted. It is right that the Government should invest in the railways but it has a duty to ensure that the taxpayer receives value for money.
TUC delegations met the Secretary of State and the Transport Minister on a number of occasions in order to address this crisis in the industry. We have also met Network Rail and the Strategic Rail Authority to discuss the key issues for the future of the industry.
In June 2002, Railtrack was sold to Network Rail, who will operate as a company limited by guarantee, with a remit to reinvest all their profits in the rail network. The board of Network Rail will be appointed by, and responsible to, a body known as the ‘company’ - a broadly based group of appointees that will include representatives of all the stakeholders, including the rail unions.
The most urgent matter in the rail sector now is the need to ensure that maintenance work is carried out properly. The 10 May train crash at Potters Bar, which killed seven people, starkly underlines this imperative. It is clear from the inquiries into previous crashes that the extended chain of subcontracting is undermining the quality of maintenance work and thus safety. The TUC continues to press the case that this could be dealt with most effectively by taking this work back
in-house.
The number of industrial disputes on the railways has also been a matter of concern. The fragmentation of bargaining in the industry is an important cause of discontent, as it has led to striking disparities in terms and conditions between employees engaged in similar work. The TUC has pressed for the establishment of a more rational system of collective bargaining in the industry.
In July of this year, a paper was drawn up as the basis for discussion with the new Secretary of State for Transport, Alistair Darling, in which the General Council made the case to bring maintenance staff back ‘in-house’, under the direct employment of the infrastructure controller Network Rail.
In line with Composite 12, that was passed at Congress 2001, which called on the General Council to establish a Rail Transport Task Group, exploratory talks have taken place with the relevant unions with a view to agreeing a remit and programme of work.
The General Council have consistently opposed the Government's plans for the PPP for London Underground and has continued to press the Government on a number of points. In particular, the Government has been unable to demonstrate that the plans for PPP will deliver value for money. Their insistence in continuing to pursue this route has led to an extraordinary delay in the commencement of the modernisation programme.
Aviation
The 11 September terrorist attacks on the USA hit the UK aviation industry badly. Passenger numbers declined sharply and a number of aviation and aerospace employers made significant job cuts.
The recently established PPP for National Air Traffic Services, which draws funding from the CAA on the basis of the volume of air traffic, was also hit by the aftermath of the attacks.
TUC led delegations met Rt. Hon Stephen Byers on a number of occasions in order to try to stabilise the situation. In the aftermath of the terrorist attacks, airlines were finding it impossible to renew their insurance and thus faced being grounded. We argued successfully that the Government should underwrite the insurance of the industry for as long as such action was needed. We also argued that the relevant airlines should be compensated for the days that US airspace was closed, which resulted in a number of carriers making successful claims.
Although passenger numbers are not yet back up to pre -11 September levels, very strong growth is expected in the aviation sector in the medium term, and the prospects for employment growth are also good. There is an urgent need to ensure that the UK will have sufficient aviation capacity in the medium term to retain its share of international demand. That is why the TUC welcomed the Government’s November 2001 decision to support the construction of Heathrow Terminal Five.
The Government commissioned a series of regional air studies that reported in July 2002. These studies showed that the UK would need to build a number of new runways during the next two decades.
The General Council support this necessary expansion in our aviation capacity. However, the General Council’s support for new runways is given on the condition that growth is firmly linked to the pursuit of environmental best practice. The TUC and a number of affiliated unions are members of the broadly based Freedom to Fly Coalition. The TUC General Secretary addressed their conference at Congress House in July.
Road Transport
The TUC also met Secretary of State Rt. Hon Alistair Darling following the Government reshuttle to make the following points on road transport issues. The Government has made some progress with its roads programme, although the need to wait for the results of the multi-modal transport corridor studies to report has led to significant delays in some areas. The Government should review its road-building program to ensure that it is still sufficient.
There is a particular need to improve the take up of Bus Quality Partnerships (BQPs). There is a driver shortage in many parts of the country. Part of the Government’s strategy should be to encourage local authorities to take staffing strategies into account when setting up BQPs.
The Government needs to give some thought to how the road haulage industry might be restructured to gain economies of scale, and how to encourage employers to make employment in the industry more attractive.
Shipping
The TUC also put the following points on the shipping sector to Mr Darling.
The Government’s earlier programme, Charting a New Course, has now run out of steam. The key problem is that ‘flagging out’ has led to a serious decline in the number of British seafarers. This is undesirable for a number of reasons, not least because it raises difficulties for defence. The introduction of the Tonnage Tax has led to some ‘flagging in’. This is to be welcomed, but has not proved sufficient to solve the problems in the industry.
EU state aid is available to encourage national flag shipping and to improve maritime skills. The General Council believe that the Secretary of State should also look again at the income tax rules for seafarers and at extending the Crew Relief Costs scheme to seafarers. Action could also be taken to enforce existing controls on the standards of shipping visiting UK ports, and further dialogue is needed to ensure that seafarers have decent pay, conditions, welfare, social security and rights. In particular, the Government should support the proposed EU directive on minimum conditions and wages for seafarers on intra-community ferry services.
3.18 Energy
Composite 13 has guided the development of the General Council’s energy policy during the past year. The focus for the TUC’s work has been the Government’s energy review, which will result in the publication of a White Paper in due course.
In October the General Council responded to the Cabinet Office Performance and Innovation Unit energy review. The TUC submission emphasised how important it is for the Government to meet its commitment to reduce emissions in line with Kyoto in a planned and managed manner that ensures the long-term stability of our energy industry and the people it employs.
The General Council believe that a successful energy industry requires investment, security for employees and a safe and secure supply. The TUC pressed the Government for urgent action in support of increased research and development across all energy sectors to maintain fuel diversity, meet emissions targets, and ensure that the UK is able to compete in the growing world market for environmental technologies.
In order to ensure that the Government’s energy policy objective of fuel diversity can be achieved, the TUC called for the Government to underwrite a programme of new clean coal power stations that would be environmentally benign and provide an opportunity for UK manufacturing to generate export earnings.
Sustainable development and the environment
The General Council channelled its work on sustainable development through the Trade Union Sustainable Development Advisory Committee (TUSDAC), which met three times during the year. TUSDAC is co-chaired by the Minister for the Environment, Michael Meacher, and John Edmonds who leads for the General Council on environmental matters. A Working Level Group that deals with operational issues supports the work of TUSDAC.
Much of the work of TUSDAC has focused on the World Summit on Sustainable Development which will take place in Johannesburg in the autumn. This will be an opportunity to demonstrate that a successful transition to a low carbon economy cannot be effective unless the economic and social implications are recognised and dealt with. The TUC’s view is that the early involvement of workers and their unions is crucial to the success of sustainable development.
In November, the General Council received a report that indicated the benefits of developing a sustainable waste strategy. The report focused on five main areas:
· A comparison of the UK’s current performance on waste recycling against our main competitors;
· The role of trade unions in stimulating recycling initiatives;
· The potential for recycling projects to create new jobs;
· An analysis of the type of jobs created and the skills required;
· Factors that stimulate demand and supply for recycled goods.
The TUC has now developed an approach to waste based on promoting best practice through partnership. Work is now being done with unions to identify a small number of case studies that can demonstrate how partnership can promote recycling and deliver better waste management practices in the workplace.
3.19 Arts, media and sport
Throughout the year the General Council have continued to liaise with the Federation of Entertainment Unions to ensure that the concerns of workers in this sector properly featured in the work of the TUC.
The General Council support the principle of public service broadcasting and believe that it is essential for regulation in this area to safeguard standards and diversity of output, creators’ rights over their material and employment rights for those who work in the industry. Reflecting these concerns, set out in Congress 2001 motions 69 and 71, the TUC office organised a meeting in August 2002 for all unions with an interest in the Communications Bill to discuss a joint approach to these issues.
Building on Congress policy, as set out in Congress 2001 resolution 70 on public entertainment licences, the General Secretary wrote to the Home Secretary Rt. Hon David Blunkett, setting out the case for reforming the regulation public entertainment licences in the context of Article 10 of the European Convention. The letter also raised the issue of community arts funding, as set out in Congress 2001 resolution 67.
The General Secretary also wrote to Secretary of State for Culture, Media and Sport Rt. Hon Tessa Jowell in January 2002 to express the General Council’s concern about the future of children’s TV, building on Congress 2001 motion 68. The letter argued that a decline in Children’s TV would lead to a significant decline in the quality and variety, as well as quantity, of children’s television overall, and that children’s television is an important cultural and social influence on future generations. It called for statutory obligations on broadcasters regarding children’s television to be maintained, arguing that self-regulation would not be appropriate for this area.
In October, the General Council expressed their support for the Professional Footballers Association in their dispute with the Premier League over television monies, pointing to the valuable work which the Association did in support of those former professional footballers who were in financial difficulties, who had suffered injury and who were looking for help in turning to new careers. The dispute was subsequently settled following negotiations between the various parties.
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