The 2017 budget takes place at a time when working people across Britain face profound uncertainty. While the Prime Minister has made clear her negotiating priorities for our exit from the European Union and our future trading relationship, we cannot know to what extent this will be achieved, or its impact on the British economy and working people’s jobs and pay in the future.
The priority for the Chancellor must be to ensure that the British economy is strong enough to protect living standards during this period of uncertainty. That means making sure working people do not pay a price for the country’s decision to leave the EU, and the Prime Minister’s decision to leave the single market. But while it is positive that economic performance after the referendum has been stronger than predicted, there are clear warning signs that the weaknesses in our economic model pose a significant threat to living standards:
- Pay growth continues to be weak, and there is a danger of a pay squeeze as inflation rises. The Office for Budget Responsibility’s projections at the time of the Autumn Statement showed that real wages are not expected to return to their pre-crisis peak until 2020/21, meaning that working people will have endured 13 years of lost pay growth, the longest squeeze since Victorian times.
- The economy remains reliant on consumer spending. But British households have record levels of unsecured debt, which is unsustainable.
- Growth remains skewed towards London and the South East, meaning that where you live still has a disproportionate impact on your pay and prospects. Growth in London was more than double than the average across the rest of the UK over the last two years.
- Despite high levels of employment, job insecurity is growing, with one in ten workers now facing significant insecurity at work.
Some have suggested that the UK’s response to Brexit and weak growth should be to slash corporate taxes and workers’ rights, and seek to make our way in the world on the basis of a race to the bottom. The Prime Minister herself raised this as a prospect in her Lancaster House speech if the negotiations with the EU do not go well. The TUC does not believe that the British people voted for our country to become a low-regulation tax haven on the edge of Europe. Nor do we believe that this is an approach that is likely to achieve inclusive growth and a return to British prosperity. This submission lays out an alternative set of priorities for the Chancellor.
A strong economy needs strong public services. Yet the public services that working people rely on are deteriorating fast following years of underfunding. This can be seen across our public services, but is particularly stark in health and social care. In September 2016, nearly one in three ambulances failed to respond within eight minutes; meanwhile in the same month nearly one in ten patients waited more than 18 weeks to start treatment; and in the second quarter of 2015-16, half a million patients waited longer than four hours in A&E.
And the crisis in our public sector is exacerbated by recruitment challenges, as public sector workers are now facing a decade of pay restraint leading to significant cuts in their levels of real pay. For example, a midwife will face real terms cuts to her pay of over £3,000 by 2020-21.
The Government has so far not responded to the crisis facing health and education services. It has been years in the making, but now is the time to change course and deliver a budget that protects living standards and strengthens the public services that working people rely on.
The TUC’s priorities for the Chancellor are therefore as follows:
A concerted effort to boost living standards by improving pay and security at work
The TUC welcomes the review of modern employment practices and its intention to tackle increased insecurity at work. However, the review will need support from the Chancellor in order to achieve this goal. This should include:
- Government support to drive up pay and conditions by increasing the number of workers covered by collective agreements. The Government should investigate the potential for new industrial bodies in low paid sectors, drawing on lessons learned from the old wages councils as well as the current Low Pay Commission, to work with unions and business to help boost pay and productivity across large sectors of the economy. The Chancellor could help advance this aim, by announcing funding for a pilot of this approach, for example in the social care sector.
- A stronger floor of employment rights, expanding family friendly rights and the right to protection from unfair dismissal.
- Better social security protection for those in insecure work. Universal Credit cuts will hit low paid and insecure workers the hardest. If the Government is serious about supporting those in insecure work, it will take this opportunity to fully reverse them. Further changes needed include expanded sick pay provision for the very low paid, and new support for new fathers in self-employment or insecure work.
- Secure pension provision for everyone including through expanding auto-enrolment to cover more low paid workers.
- The abolition of employment tribunal fees as part of wider efforts to increase enforcement of employment rights, including increased funding for the Gangmasters and Labour Abuse Authority.
Improved corporate governance to improve workforce engagement and productivity
Improving the health of the British economy requires a long term approach, which fully engages the skills and talents of the workforce in raising productivity and contributing to business success. Reforming the UK’s model of corporate governance will be critical to this, and the TUC will be responding fully to the government’s green paper. But the Chancellor could do much to ensure that reform delivers the step change in British productivity the economy needs.
- The promise of workers on boards must mean delivering workers on boards. Real worker involvement in boardroom decision making helps drive better business performance across a wide range of European countries, including those with unitary boards. The Government should stick to its promise and introduce mandatory worker representation within the boardroom.
- Reform of excessive executive pay should be a priority. The government should press ahead with mandatory publication of pay ratios, but go further to require worker representation on remuneration committees, and a reform of the current approach to directors pay in the form of long term incentives.
- Investing in the skills and engagement of the workforce is key to delivering better business performance: Britain’s poor productivity performance can be traced in part to its lack of an effective system for developing the skills of the workforce, and to lower levels of worker participation, which mean that British businesses are failing to get the best out of their workforce. The government should take steps to enhance the quality of apprenticeships delivered under the new levy and make sure these new skills are fully utilised by expanding rights to collective consultation and representation at work.
An industrial strategy to deliver better jobs across the country
There is a clear need for an industrial strategy to redress regional disparities in jobs and pay, and ensure that Britain can continue to deliver decent jobs after we have left the European Union. The success of the government's industrial strategy will be judged on whether it delivers good jobs on good wages in the parts of Britain that need them most. The TUC believes that the strategy should include:
- A plan to negotiate maximum access to our largest trading partners in the European single market, both for our manufacturing industries and for the service sectors providing jobs across the country, without tariffs and with the regulatory compliance that will allow maximum access for services.
- A step up in the level of investment in infrastructure. The £23bn national infrastructure and productivity fund announced at the autumn statement was welcome, but leaves government investment as a share of GDP still below the levels seen in the last parliament. With British levels of infrastructure spending still amongst the lowest in the OECD, a further boost to spending is still required.
- A strategy to ensure that government spending across the board supports the aims of the strategy including a commitment to use procurement to support strategic industries, an expanded Migration Impact Fund to ensure the benefits of migration are fairly shared, and a review of the effectiveness of tax reliefs in supporting jobs rich growth around the country.
A step change in investment in our public services and the public service workers who deliver them
This submission lays out the extensive evidence of the pressure placed on the health, social care, and education services on which working people rely. Investment in public services is investment in people’s ability go about their daily lives without worrying about what will happen if they fall sick, or about whether their child is getting the best possible support at school.
The Chancellor should take the opportunity of the budget to recognise the pressure on public services, and on the public servants who deliver them. This means:
- New funding for health and social care, to ensure that we keep pace with the spending of our major competitors.
- Revisiting the schools funding formula to ensure that no school is a net loser as a result of the changes.
- Lifting the public sector pay cap that will see public sector workers face a decade of pay restraint, and allow public service wages to be determined according to the needs of each sector through collective bargaining between employers and unions or through genuinely autonomous and independent Pay Review Bodies where appropriate
Download the full TUC Budget Submission: