Chapter 4: economic and social issues
Chapter 4 - economic and social issues
Contents
This chapter sets out the work of the General Council on economic, industrial and social issues. Underlying the General Council=s approach is the theme of social partnership. Paragraphs 4.2 to 4.7 set out the TUC=s partnership approach to the economy. They emphasise the TUC=s support for the New Deal and the need for policies to secure economic growth. Paragraphs 4.8 to 4.21 outline the partnership approach in industry and the workplace. They describe the TUC work on particular sectors in both the public and private sectors.
The New Deals for young unemployed people, older long-term unemployed people, lone parents and disabled people are the Government=s most important commitment to helping groups of people excluded from the labour market and tackling poverty and inequality. With the support of 15,000 employers, and the involvement of hundreds of voluntary organisations, the New Deals are also the Government=s highest profile initiative.
It is vital that unions should be at the centre of this programme, and the TUC has made the New Deal a priority in the past year. In December the TUC held the first major national conference on the New Deal to be organised by any non-governmental organisation. The speakers included the Chancellor, Employment Minister Andrew Smith, and Sir Peter Davis, the Chair of the New Deal Task Force. More than 300 trade unionists, civil servants and employers took part. The TUC has produced briefing materials about the New Deal, an information leaflet for workers in companies taking on New Deal workers and a recruitment leaflet for New Deal workers.
In June the TUC published a guide - Negotiating the New Deal - which looks at the negotiating issues which may arise and provides detailed practical advice on negotiating >New Deal Agreements= with employers. These Agreements are designed to protect the employment rights of New Deal recruits and existing employees and to promote a genuine partnership between trade unions and employers in the crusade to make the New Deal a success. The guide argues that unions should encourage employers to participate and ensure that the resulting jobs and training achieve high standards. The guide is mainly aimed at trade union representatives in workplaces recruiting, or considering recruiting, subsidised New Deal employees, and is being launched at a series of regional meetings.
Last year=s Congress agreed a resolution on full employment and the New Deal, which welcomed the clear break from the coercive policies of the previous Government which the New Deal represents, and called on the Government and the social partners to work together to make the New Deal a fair deal for young people. The TUC has nominated union members to the Strategic Partnerships which are guiding the New Deal at a local level, organised regional briefing meetings with the Employment Service and agreed with the ES a joint statement about the role of union representatives in raising complaints at a local level about abuse of the New Deal. In discussions with officials and Ministers, the TUC has continually pressed unions= concerns about the design of the New Deal, particularly the fact that participants in the Environmental Task Force and Voluntary Sector options are paid their benefits plus an extra ,15 per week, not the rate for the job. The TUC will continue to press the Government to modify the New Deal=s design in line with union objectives.
Although the New Deal is the most prominent element of the Government=s welfare-to-work policy, other important features have emerged in the past year. The most significant of these is the announcement, in the Budget, that Family Credit (FC) will, from 1999, be replaced by a Working Families Tax Credit (WFTC).
The Government=s consideration of this step was announced in the 1997 Budget, and, in October, the TUC took the opportunity of its submission to Martin Taylor=s review of taxes and benefits to press union concerns about this proposal. The TUC was concerned that, if FC were replaced by a tax credit modelled on the US Earned Income Tax Credit, there was a serious danger that claimantsÕ benefits might be cut. The TUC therefore welcomed the 1998 Budget announcement that the WFTC will have the same structure as FC. The TUC was particularly pleased that the Chancellor announced an extra ,1.5 billion investment in this new measure, which will enable WFTC to be extended to 400,000 more families than currently claim FC. The TUC continues to be concerned that the decision to pay WFTC through the pay packet could lead to a transfer of resources from women to men, and has argued that the tax credit should normally be paid to the parent with primary responsibility for the care of the family=s children.
Another major Government initiative has been the restructuring of employers= National Insurance Contributions (NICs), which will also come into effect in 1999. From next year employers= NICs will be levied at a single rate of 12.2 per cent, instead of rising in steps as employees= earnings rise. The TUC welcomed this reform, which will remove an incentive for employers to hold down wages. The Government=s proposals for employees= NICs have not yet been announced, and this is an issue about which unions have a particular interest. The current structure of employee NICs excludes workers earning less than ,64 per week from National Insurance benefits and Statutory Sickness and Maternity Pay. In March the TUC published Low Paid and Excluded, which reveals that 2.5 million low-paid and part-time workers (four out of five of them women) are excluded from benefit entitlement by this rule. Coverage could be extended to these workers at a cost of as little as ,140 million.
The Government=s welfare-to-work policies are administered by the Employment Service, and the future of the ES is an important issue for unions. When the House of Commons Employment Committee announced an inquiry into this subject the TUC presented evidence arguing that there is an important continuing role for the Employment Service, whose services should not be contracted out to private companies.
The TUC continues to press the interests of unemployed people who have not yet been helped into work by the Government=s policies. The TUC has continued to campaign for reforms to the Jobseeker=s Allowance (JSA) in the past year and has worked closely with the TUC Centres for the Unemployed, who have increasingly taken a leadership role in this policy area. The TUC has campaigned on a number of specific issues, such as the Government=s announcement that it intended to extend the period when the JSA is not paid at the beginning of a claim (the Government subsequently abandoned this measure).
The most important development in the field of social security in the past year was the publication in March of the Government=s Green Paper on welfare reform. This document sets the terms for social security reform at least until the next election, and the TUC welcomed the Government=s readiness to consult on this issue.
In recognition of the significance of this development, the TUC inaugurated a series of Welfare Reform briefings, covering topics which will be the subject of heated debate. Briefings which have been published so far cover social security in the USA, the New Deal, inequality, fraud and the administration of the welfare system. At last year=s Congress a motion on pregnancy and low incomes was remitted. This addressed the problems of pregnant 16 and 17 year olds with no entitlement to benefits. A special issue of the briefing series, on Young people and welfare, highlighted this problem, and called for benefit rights to be restored to young people.
In July the General Council held a seminar on welfare reform for senior union officers, at which contributions were made by Carey Oppenheim, Ruth Lister, David Piachaud and Marilyn Howard. The TUC intends to develop the link begun with this seminar, building relations with academics and policy experts who are well-respected in this field.
Also in July the TUC published its response to the Green Paper, which argued that there is no necessary contradiction between the Government=s welfare-to-work policies (which unions support) and raising benefit levels. Indeed, if benefits continue to be raised only in line with prices, then inequality (which the response argued is Britain=s most pressing welfare problem) will continue to increase. The TUC response also argued for the strengthening and re-vitalisation of National Insurance, a system which avoids the poverty traps of means-tested benefits and the exclusions associated with private insurance.
In July the TUC also published its submission to the Royal Commission on the Funding of Long-term Care. In this it was argued that there is a serious problem of low pay in care homes, which should be taken into account when deciding the funding arrangements. The submission argued for a National Insurance long-term care scheme, and opposed suggestions that part of workers= pensions be used to pay for care.
4.5 Economic policy - 1998 Budget campaign
The TUC=s 1998 Budget campaign has continued to focus on full employment and the creation of a high investment economy, taking account of composite resolution 7.
The main points in the TUC=s 1998 Budget Submission were discussed with the Chancellor before the Budget at a meeting on 27 January, and the Submission was formally published on 2 February. The Submission took account of the Government=s November 1997 Pre-Budget Report Securing Britain=s long term economic future. The Submission welcomed the Government=s restated commitment to growth and employment, but warned that these objectives could be undermined by the deteriorating economic situation. Unemployment would start to rise by the end of 1998, and this would make it far more difficult for key policies, such as the New Deal, to deliver.
The Submission argued that active fiscal policy should have a role in supporting growth, and that the Chancellor should convene national level social partnership discussions on the labour market to look at issues such as skill shortages, productivity, and excessive remuneration in the City and the boardroom.
The Submission called for the unallocated reserves of ,2.8 billion for 1998-1999 to be spent on a package directed to helping the low paid and families, supporting priority public services, such as health and education; investment; and the New Deal. In addition, another ,0.5 billion should be provided through releasing local authority capital receipts and bringing forward unspent allocations from the windfall tax. This would allow a significant increase in child benefit, bringing the low paid into the scope of statutory benefits, support for local authority and public corporation investment programmes, and expansion and improvement of the New Deal for older unemployed workers.
The Submission also set out a number of proposals on corporate governance to encourage long-termism in industrial investment, and for more long-term public investment. Public corporations should be free to borrow for worthwhile long-term investments by moving to the European definition of public borrowing, the General Government Financial Deficit (GGFD).
The Submission welcomed the Government=s welfare to work strategy, and pointed out that while the welfare state should be brought up to date, it was clearly still economically affordable. The Submission noted that the Government=s proposal for the Working Family Tax Credit (WFTC) would need to pass a number of critical tests, especially the impact on women, and should be seen as part of a package of measures to deliver support for mothers and children.
In addition, a TUC Pre-Budget conference was held on 3 March to discuss the economic situation and the TUC=s Budget priorities. The conference was addressed by economists from the City, CBI, the TUC and the London Business School; and by a number of experts on the reform of the welfare state. The TUC also published a report by Emma McClellan setting out in detail proposed reforms to the national insurance system to give very low-paid workers, mainly women working part-time, access to statutory benefits such as sickness and maternity pay.
The Budget was held on 17 March, and, as in previous years, the TUC published an overnight analysis.
The Chancellor did make additional allocations to the health and education services, but the overall very tight spending plans were retained. The Budget=s overall stance maintained the fiscal tightening that started in the July 1997 Budget. With monetary policy also tightening, the TUC warned that the economy would slow down even faster than the Budget forecasts for economic growth anticipated, and this would mean unemployment would rise by over 200,000 by the end of 1999.
The TUC noted the Chancellor=s calls for wage responsibility so that the economy could grow faster without generating inflationary pressure. However, the analysis pointed out that while negotiated settlements were responsible, the same could not be said at the top of the labour market and in the boardrooms. Moreover, pay for those in the public sector was lagging far behind the private sector average. The main danger of upward pressure on settlements came from the rise in the cost of living from higher interest rates and taxes.
However, within these constraints (as the figure shows) the Chancellor also delivered a redistributive Budget in which families and the low paid - the TUC=s key priority - were major gainers for the first time in nearly 20 years. From April 1999 child benefit for the eldest child will rise significantly above inflation, and poorer families in work will gain from the Working Family Tax Credit (WFTC). The poorest 20 per cent of households gained most, and poor households with children and working households gained even more.
The Chancellor had also gone some way to meet the TUC=s concerns about the potential impact of the WFTC on independent taxation for women and the transfer of income to men from women who previously received Family Credit. The Chancellor also announced reforms to national insurance and the extension of the New Deal to older long-term unemployed, both identified as priority areas in the TUC Submission.
4.6 TUC economic policy statements
The TUC has continued to warn against the impact of tighter fiscal and monetary policy on the real economy and the labour market and to put forward constructive alternatives. In June the TUC published a report criticising the Bank=s decision to raise interest rates on 4 June, pointing out that wage settlements still remained stable and cost of living increases were being driven by the Bank=s own high interest rate policy. The report also pointed out that productivity had grown faster than real wages during the recovery and company profits were at a record high, allowing a period of faster earnings increases which was both affordable and non-inflationary.
Concerns over the level of accountability of the Bank of England=s Monetary Policy Committee (MPC) in setting interest rates were raised in the TUC submission to the House of Commons Treasury Committee, Bank of England Accountability. The submission made clear that the Bank accepts that the impact on growth, investment and jobs is of central concern to decisions over interest rates.
This was followed up by a further report in July, in advance of the MPC=s 9 July meeting, calling on the MPC=s remit to be clarified so growth and employment objectives could be considered alongside those for inflation, and suggesting that the MPC follow the example of the Low Pay Commission and make more effort to find out what was really happening in British workplaces and in the labour market.
In July the TUC issued an economic policy statement in the light of continued adverse economic news, and the publication of the Government=s 1998 Economic and Fiscal Strategy Report, Stability and Investment for the Long Term, on 9 June. The latter confirmed that the fiscal tightening of 1997-1998 would be locked in over the next three years.
The Statement, Economic Policy and Social Partnership, pointed out that the warnings the TUC had first made at the start of the year were now widely shared, and the most recent OECD economic forecast was predicting a similar rise in unemployment. The TUC=s judgement is that while the whole economy would avoid recession, the fiscal and monetary policy squeeze had created a >two speed= economy with output in manufacturing and public services either falling or stagnant, while growth continued in some parts of the private service industries.
The Statement gave strong support to the Government=s ambitions for economic stability, improving both the sustainable longer-term growth rate and productivity levels, and combatting social exclusion.
However, it warned that unless the economy was effectively managed in the short term, it would be difficult to achieve the Government=s medium-term objectives and specific programmes, such as the New Deal, would be less effective. The rapid economic slowdown was not providing economic stability or the conditions for more investment and higher productivity. By >locking in= fiscal tightening over the next three years the Chancellor was in danger of throwing away active fiscal policy as a means of keeping the economy on course. The Statement suggested that the Government should introduce an Autumn Stabilisation Package to moderate the expected slowdown.
The Stabilisation Package would be targeted on high unemployment areas and aimed to help regenerate depressed local communities through a public investment programme combined with strengthening and improving New Deal and other training programmes such as Modern Apprenticeships. The total cost would be around ,3 billion, or nearly 0.4 per cent of GDP, and would be paid for by running slightly lower surpluses than planned on current spending and by bringing forward the planned increases in capital spending. At the same time this should be backed by a more supportive monetary policy, including the announcement of a medium term exchange rate target of 2.50DM to the pound as part of the UK=s preparations for EMU entry.
The Statement also returned to the themes first set out in the 1997 TUC policy statement Partners for Progress. The Statement suggested that national social partnership discussions should be held on how the social partners could work together to achieve the GovernmentÕs medium-term economic objectives. This would require discussions on investment, productivity, fair rewards for public sector workers, and also how to reconcile growth, high employment, and low inflation.
The TUC met the Chancellor on 20 July to discuss these proposals, and further discussions on the economic situation and productivity will be held later this year.
4.7 Comprehensive Spending Review
The Government=s Comprehensive Spending Review (CSR) set out the main spending programmes and priorities over the next three years. In May, prior to the CSR publication, the TUC published a submission drawing on the projections for the public finances set out in the March Budget. The Submission took into account composite resolution 10, and resolutions 53, 64, and 77.
The CSR Submission argued that the Government could meet all its medium-term objectives for prudence with the public finances and still allow overall public spending to grow at 3 per cent per annum in real terms. This compared with the options put forward in the Budget Statement for growth of 2.25 per cent, 1.5 per cent, or 0.75 per cent in real terms. The Statement argued that the share of national income spent on public welfare had fallen significantly since 1979, and was one of the lowest in the European Union. The budget options would continue this process further. The Statement set out in more detail the case for the priority areas, including active labour market measures; public investment in local communities, particularly social housing; the education and health services; and the public transport system.
The TUC met the Chancellor and the Financial Secretary on 2 June to discuss the TUC=s CSR Submission and other concerns about the economy. The first stage of the CSR settlement was subsequently announced on 11 June as part of the 1998 Economic and Fiscal Strategy Report. The Government is planning a welcome overall increase in public spending of 2.75 per cent in real terms, over the next three years (1999-2000 to 2001-2002), significantly closer to the TUCÕs proposals than the options under consideration at the time of the Budget.
However, the plans for current spending were for a lower increase in real terms, of 2.25 per cent, and the TUC remains concerned that this may not be enough to ensure fair rewards for public servants and meet public expectations for better public services. There is also concern that much of the welcome increase in capital investment is to be financed by asset sales and partial privatisation.
Moreover, while stability for major spending programmes is desirable, the danger is that the Chancellor has left himself no room in the published plans for discretionary fiscal policy if, as seems likely, the economic assumptions underpinning the public finance projections prove too optimistic.
The more detailed statement on the CSR setting out the plans in each of the priority spending areas was published on 14 July. The TUC will be assessing the implications of these plans and discussing the implications for public sector pay, jobs and the quality of public services with the Chancellor and other relevant Ministers.
4.8 Building partnership in the workplace
A central theme of the General Council=s work on both public and private sector issues has been the promotion of real partnership in the workplace. This work has been underpinned by the principles set out in the document Partners for Progress endorsed by the 1997 Congress and by Resolution 34 of that Congress. One of the General Council=s main concerns has been the UK=s generally mediocre economic performance when benchmarked against the international competition. This diagnosis is supported by the Government=s own recent views on the UK=s competitiveness problem. The General Council believe that the practical application of the partnership approach can both improve business performance in the private sector and deliver higher quality and greater efficiency in the public sector. The purpose of Partners was to position trade unions as organisations that can work with employers and government to solve some of the country=s most difficult problems.
4.9 Promoting best practice through workplace partnerships
It is clear, however, that the organisations that have developed partnerships with trade unions are too few in number. One of the priority objectives in the last year has been to ensure that the principles of Partners for Progress are applied more widely. The General Council have also continued to argue, in line with resolution 76 of the 1997 Congress, that high performance and quality services cannot be delivered where employers are eroding conditions of employment and pension rights. The work has also taken into account composite resolution 9 on Flexibility and Fairness at Work.
The Government supports the view that performance can be improved through partnership between unions and employers. This is clear from the White Paper on Fairness at Work and the social dialogue approach of the Low Pay Commission. Indeed, the White Paper tentatively suggests that public funds may be available for the provision of training for both employers and unions to develop effective partnerships at work. The General Council have therefore been concerned to work with the grain of public policy.
In February it was agreed that the sum of up to ,10,000 should be allocated from the Development Fund for a feasibility study to be undertaken which would review what unions had already achieved in developing workplace partnerships. The intention was to show that the principles of Partners for Progress were already being applied by trade unions and that there were significant benefits for both trade union members and employers. Furthermore, the study was designed to establish that unions could play a constructive role in working with employers to solve shared problems. Finally, the study was to set out an agenda for further action for the General Council=s consideration.
Mr Alan Cave, an independent consultant with extensive experience of working with trade unions, was commissioned to prepare the feasibility study. Assisted by the TUC office he undertook an extensive programme of interviews with union officials at all levels which included a programme of workplace visits. His interim report was considered by the General Council in June.
The report noted that partnership was a concept that was widely used but far too often the content was unclear. However, some of the partnership rhetoric disguised a considerable amount of hard practical work by unions. The study found that partnership can bring real benefits for workers. It can widen the bargaining agenda by putting a new focus on issues like employment security, learning and skills, work reorganisation and family friendly policies. The report also noted that partnership was essential for the dissemination of best practice and the improvement of organisational performance.
One of the difficulties with the partnership concept is that in some cases employers will state that the partnership they seek is with individual employees without what they regard as >third party= intervention by a trade union. However, the report showed that partnerships built around union involvement are superior to arrangements which exclude unions. The key element that unions bring to partnership is an independent employee voice which means that workers can express their views honestly, that management decisions can be questioned and that genuine relationships of trust and mutuality can be developed.
The interviews conducted with union representatives and employers led to the identification of six principles which underpin successful partnerships.
Principle 1: Recognition of legitimate interests
This is the fundamental principle of true partnerships (as opposed to sham exercises in involvement) and the guarantor that the partnership can grow and evolve. It means that both unions and employers recognise that there may be genuine differences of interest from time to time. However, the partnership arrangement, if effective, will embody a degree of trust and respect that should assist in resolving such differences. Ultimately each partner must respect the need of the other properly to represent their constituency.
Principle 2: Joint commitment to success
Both the unions and the employer must have a joint commitment to the success of the organisation. This means that unions must be involved in shaping the goals of the organisation, that unions and the employer identify some shared objectives and that there is a willingness to embrace Best Practice ideas from outside the organisation. It also means that the unions and employers jointly address issues like flexibility and work organisation.
Principle 3: Commitment to employment security
Just as partnership must address the need for flexibility so too it must embrace measures to ensure that flexibility is not achieved at the expense of workersÕ security. This principle is generally given effect through agreements limiting the use of compulsory redundancies along with investment in training and skills to improve employability outside the organisation. In addition, employers may provide counselling or job search facilities for those workers who are made redundant.
Principle 4: Focus on the quality of working life
Partnership must be seen to deliver something more for workers than warm words about involvement and participation. The feasibility study found that partnerships can contribute most effectively to the quality of working life by creating greater opportunities for the personal development of workers. In the best cases unions and employers work together to improve the skill base of the organisation and offer access to new training and development opportunities. In addition, individual workers have more control over the way in which their work is done. The role of management becomes that of a facilitator - enabling workers to solve their own problems instead of imposing >top down= solutions.
Partnership is characterised by a more open sharing of information. Unions will have access to more information about the financial position and the strategic direction of the organisation. Perhaps most importantly, employers are able to discuss new initiatives with unions when they are at the >glint in the eye= stage. Equally, employers must be willing to listen to union arguments (based on a business case) for a different approach to a particular issue.
It must be clear to both unions and the employer that partnership adds value to the quality of employment relationships and organisational performance. There must be measurable improvements which deliver benefits for both partners.
Having considered the feasibility study, the General Council agreed in June that more work was needed to take the project forward. A good deal of information had been collected through the process of interviewing unions and employers and it was agreed that this should be drawn together in a TUC publication to showcase successful partnership agreements. In addition it was agreed that a seminar should be held after Congress to explain the results of the feasibility study and identify the practical steps necessary to take forward the partnership agenda.
The feasibility study had raised a host of interesting questions about the further work that was required. For example, it was noted that building partnership required new skills for shop stewards to deal with more detailed business information, participate in joint problem solving exercises and communicate effectively with employers in a non-adversarial context. The General Council agreed that a training-needs analysis was needed. This would involve an assessment of how far these skill needs are met through existing provision by the TUC and unions. It would also be important to establish a relationship with the University for Industry to strengthen the role of workplace education within partnership arrangements. Any initiative of this kind would build on the work of the Learning Services Task Group over the last Congress year (see appendix one).
The General Council decided that further consideration should be given to the role of the TUC in providing information, advice and consultancy services on partnership. There is a clear need for arrangements which encourage the collection and dissemination of information about Best Practice to ensure that everybody can learn from the best. Possibilities to be considered would include regular bulletins and newsletters, a TUC database of partnership and Best Practice and a register of specialists who could be available to help individual unions. A particularly important departure would be the provision of a TUC consultancy service which would provide assistance to unions in a particular organisation tailored to their specific needs. There is already some experience of this approach following the TUC Bargaining for Skills projects which are described in more detail in chapters 7, 8 and 13.
Further consideration of the training - needs analysis and the TUC=s possible consultancy role will take place after Congress.
The argument that partnership is essential for high performance has also underpinned the TUC=s work on competitiveness. These views have been conveyed to the Government through several channels during the year. For example, the General Secretary and John Edmonds have continued to serve on the high-level Advisory Group assisting the President of the Board of Trade on competitiveness issues.
As reported to the 1997 Congress the Government published a comprehensive audit of UK competitiveness in July 1997 entitled Competitiveness - A Benchmark for Business. The audit suggested that although there were some excellent UK companies, performance in general was mediocre across firms of all sizes. This is a diagnosis that the General Council supports.
Following the publication of the audit the Government announced its intention to publish a white paper on competitiveness in the summer of 1998. As part of the preparatory process the Department of Trade and Industry established six working groups to map the terrain of some of the key issues. Their terms of reference were to:
identify and prioritise barriers impacting on business performance and potential future constraints;
agree the respective roles of business, government and others in overcoming these barriers; and,
put forward practical proposals for action by i) business to improve its competitiveness; and ii) other members of the competitiveness UK partnership to help business help itself.
All of the working groups were required to report to the President by March 1998.
The TUC was invited to suggest people to serve on these working groups and the trade unionists appointed are set out below:
Promoting the best of best practice: Lynn Williams, National Organiser/Education and Productivity Services, AEEU
Making the most of the information age: Tony Young, the then Joint General Secretary, CWU
Enhancing business performance through developing individuals: Brendan Barber, Deputy General Secretary, TUC; Jeannie Drake, Deputy General Secretary, CWU; Tony Dubbins, General Secretary, GPMU; John Edmonds, General Secretary, GMB
Increasing business investment: Roger Lyons, General Secretary, MSF.
At the time of writing the White Paper had yet to be published. The General Council will be preparing a full response to the Government=s proposals and in particular will emphasise the importance of trade union involvement in the promotion and dissemination of Best Practice to improve competitiveness.
In October the Government introduced a new Competition Bill to outlaw various anti-competitive practices. The TUC took legal advice on the likely effects of the Bill on the operation of collective agreements, particularly at sectoral level where agreements could affect fixed terms and conditions for self-employed trade union members. A meeting subsequently took place with DTI officials to discuss the possible general effects on trade unions and on those in the arts and entertainment sector in particular.
The DTI gave an assurance that there was no intention to affect the process of collective bargaining. A subsequent statement by Nigel Griffiths, Parliamentary Under-Secretary of State for Competition and Consumer Affairs, during the Bill=s committee stage clarified the Government=s position. The legislation is not to be used as an instrument for regulating employee-employer relations, including collective agreements fixing terms and conditions for the self-employed.
4.12 Corporate governance and stakeholding
The General Council have continued to monitor the growing gap between average worker and top executive pay in line with previous Congress policy, in particular the report to the 1996 Congress entitled Your Stake at Work. In January the TUC published the report Wider Still and Wider. This included new research which revealed that the gap between directorsÕ pay and average employee pay in the same companies has continued to rise over recent years. Looking at over 350 companies, average highest paid director pay has increased from ,204,160 in 1994 to ,312,910 in 1997, an increase of 53 per cent over the whole period or around 16 per cent per year. Average employee pay in the same companies increased from ,17,240 in 1994 to ,19,410 in 1997, an increase of 13 per cent over the whole period or 4 per cent per year. Directors= pay rises have outstripped those for ordinary employees by a factor of four to one. This research also excludes directors= pay revenues from shares, share options or Long-Term Incentive Plans, all of which can inflate total earnings considerably.
As reported to the 1997 Congress the Committee on Corporate Governance chaired by Sir Ronnie Hampel, Chairman of ICI, was set up in 1995 to make recommendations for improving corporate governance in UK publicly listed companies. The Committee followed on the work done by the previous Cadbury and Greenbury Committees which had examined more specific areas of corporate governance. The Hampel Committee=s remit was to review the implementation of previous recommendations and to make further recommendations : >to promote high standards of corporate governance=.
The TUC submitted evidence to the Committee last year which reviewed the impact of the recommendations of the Cadbury and Greenbury Committees and the problems that had become obvious with their implementation. The TUC submission also addressed the other areas of corporate governance that were being examined by the Committee including directors= duties and the roles of non-executive directors, the chairs of company boards and chief executives.
The Committee published its preliminary report in September 1997 and the TUC responded with detailed comments. The TUC criticised the preliminary report for not going far enough with its recommendations. Hampel advised that companies should be left to regulate their own affairs and that self-regulation was adequate to ensure full compliance with codes of best practice. The TUC pointed out the varied standards of implementation of the Cadbury recommendations and said that this showed that companies would not always be willing to comply with purely voluntary codes. In line with resolution 37 of the 1997 Congress, the TUC argued that only a change in the law would bring about a real change in the way that companies are run.
The TUC=s response argued that recent directors= pay rises and the continued widening of the gap between directors= pay and that of their employees demonstrate that the Cadbury recommendations of increased disclosure and the appointment of a remuneration committee were not adequate to curb these excesses.
It was also pointed out that too many UK companies are concerned with the short term rather than the long term. The effects of previous efforts to shake up the way that companies are run have been insufficient to ensure that companies are run in the long-term best interests of all stakeholders. The TUC concluded that a comprehensive review of company law was required.
The General Council therefore welcomed the announcement made by the President of the Board of Trade that a wide-ranging review of company law was to be launched. The consultation process is expected to last until June 2000 with a final report and White Paper being published in March 2001.
Bill Callaghan, TUC Chief Economist, has been appointed to a Consultative Committee dealing with the review process. The Committee will help to guide the overall process of the review and working groups will be established to examine different aspects of company law in detail.
Employee Share Ownership Plans
In line with resolution 36 of the 1997 Congress the TUC held a seminar on employee share ownership in February 1998. It was organised in conjunction with Capital Strategies, a corporate finance house with extensive experience of working with trade unions, and was aimed at promoting discussion about ESOPs across the trade union movement.
In opening the seminar the General Secretary emphasised that unions had different experiences of ESOPS. The purpose of the seminar was to work towards an honest evaluation of the impact of employee share ownership.
The speakers included Nigel Mason of Capital Strategies who explained some of the technical issues behind employee share ownership and the range of different schemes available. Bill Patterson from the AFL-CIO explained the ways in which ESOPs had been used in the USA and the role they might play as part of a wider trade union capital strategy. Adam Blumenthal from US Capital Strategies explained some further aspects of the US experience as he presented several case studies where unions had used employee ownership strategies to protect jobs.
The remainder of the seminar consisted of case studies. Brian Mayhew of the US Allied Pilots Association outlined the negotiations that had led the pilots at American Airlines to accept an equity stake in the business through a share option scheme. Chris Darke, the General Secretary of BALPA, widened the discussion with his thoughts based on his recent experience with British Airways. The final case study presented was that of Tullis Russell, a company which had been family owned and which became employee owned when the family wished to relinquish ownership.
The General Council will return to this issue after Congress and determine what further action is necessary based on an assessment of union experiences of ESOPs.
In line with resolution 68 of the 1997 Congress, the TUC published a report on New Information and Communication Technologies at Work in January 1998. It is an in-depth survey of the new technologies that are being introduced into both the workplace and the home and how this has affected and will continue to affect the working environment.
The first section concentrates on defining the new types of technology and discussing the ways in which these have affected both employment levels and industrial development. The report then turns to the ways that these have changed working practices and their future potential for wide-ranging changes to the patterns of work in this country.
The role of trade unions - both in terms of the support that they can offer to their members and the ways that the new technologies will affect their ways of working - is addressed in the final section of the report. The report shows the ways in which trade unions have supported members on issues such as health and safety, regulatory changes and skills and training.
The report concludes that the effective use of technology holds the key to future employment potential. The successful adoption of modern technology can increase the productivity and competitiveness of companies, ensuring job stability.
The TUC welcomed the Government=s statement on the Fuels Review made to the House of Commons on 25 June 1998. It was pleased to see that much of the analysis contained in the TUC=s evidence to the Fuels Review was incorporated into the Statement and in the subsequent consultation document.
The new framework announced in the Statement, and to be further consulted upon, represented a constructive step forward in resolving the crisis in the coal industry and rolling back the >dash for gas= in power station ordering. In line with Composite 15 on the environment carried at the 1997 Congress, the interplay between energy and environment policy has continued to be monitored , in conjunction with the new Trade Unions for Sustainable Development Advisory Committee (see chapter 10).
The TUC has worked with a range of different bodies and organisations throughout the year, taking note of resolution 30, to ensure that the issues facing manufacturing industry are central to the debate about the future of the UK economy.
The hardship faced by manufacturing industry was featured in the TUC=s Budget Submission and other economic statements. The economic shock caused by the strong pound and the Asian crisis to manufacturers and the resulting possible job losses were highlighted in particular. These concerns have been made known to the Chancellor of the Exchequer and the Bank of England.
The TUC has supported the need to work with the Government to reduce skills gaps and shortages (see Chapter 7).
The TUC supported the campaign in November to get Government support for the building of two new Airbuses. The Government agreed in February that it would work with British Aerospace in a public/private partnership to develop the Airbuses with the Government making an investment of ,123 million in the project. The TUC welcomed the Government=s support for this important sector of manufacturing industry which secured over 2,000 jobs at British Aerospace and will directly benefit another 25,000 jobs in the UK.
Work has been guided by resolutions 77 and 80 and composite 20. The office has paid particular attention to work concerned with the Integrated Transport White Paper. The TUC=s response to the Comprehensive Spending Review called for the development of a modern transport infrastructure to be a major priority within the public investment programme. The TUC submission argued that the development of high quality, efficient and affordable public transport systems is essential if the Government=s objectives for the regeneration of cities, increasing mobility in rural areas, and the promotion of sustainable development are to be met. The TUC will organise a conference in October to coordinate the trade union response to this long-awaited White Paper.
It had been hoped the TUC would hold a conference focusing on investment in shipping and skills and training. Unfortunately this conference was cancelled at a late stage. However, more work in this area is planned. The TUC remains in close contact with the maritime unions and will be considering further action in the light of the Integrated Transport White Paper.
The TUC also supported a RMT lobby of Parliament which was organised to convey trade union concerns about the future of the tube network to the Government.
The TUC has maintained close contact with the arts and entertainment unions in a year when the defence of key employment rights has been of central importance to this sector. Work on arts and entertainment issues has been in line with resolutions 65, 66 and 67 of the 1997 Congress.
Increasing casualisation and self-employment, cuts to training and concerns over the break up of the BBC and changes to the tax and benefits system have been key issues. The TUC has ensured that the issues specific to this sector have been promoted in its work in relation to Fairness at Work (chapter 1), the Minimum Wage (chapter 2) and the Working Time Directive (chapter 1), social security and the Competition Bill.
A TUC seminar on the >Future of Broadcasting= was held in September with presentations from Chris Smith, Secretary of State for C
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