Thursday, 17 December 2009

The importance of public services in the economic recovery - an MP speaks

Colin Burgon, MP for the Leeds constituency of Elmet, made the following timely speech in Parliament yesterday about the economy and public services.

Over the past 18 months we have lived through a financial and economic crisis of international capitalism that is unprecedented since the great depression of the ’30s. Historically unmatched levels of state intervention have been required to stabilise the western economy, which at many times has stood on the verge of collapse.

How ironic it is that the agency of government has done the rescuing—an idea that is anathema to all those neo-liberal free-marketeers who took as their guiding mantra Ronald Reagan’s comment that government is not the solution, but the problem.

The Government’s intervention has crossed the political divide. George Bush’s right-wing Government nationalised the two giant US mortgage market companies and in Britain the Labour Government have made bank interventions that have so far cost us about £140 billion, which is equivalent to more than 10 per cent. of our GDP and more than will be spent on the national health service this year.

The state interventions have ended any supremacy claimed by those ideological fanatics who previously argued that unrestrained free markets were the answer to all economic problems. They have spent the past 30 years seeking to extend the market into more and more areas of our life and have also promoted the domination of finance over all other sectors of our economy.

Yet just one year later, the same free market zealots in the world of politics and their friends in their media now want to take the axe to the public sector, allegedly to address the problems faced by the economy.

At this point we should ask ourselves three questions. First, how did a financial collapse that brought such damage to the wider economy suddenly become the fault of such people as nurses, teachers, carers and other working people? Secondly, why should the majority of the population suffer, as they will if public services are severely cut? Thirdly, and perhaps most importantly, will severe cuts help solve the economic problems that we face?

I want to state that the debate on economic recovery has wrongly and harmfully become dominated by those who argue that only by cutting public services can the issue of growth and the national debt be addressed. That has now become accepted wisdom; it is the received orthodoxy. However, it was once the received medical orthodoxy that the bleeding of patients was a necessary step to recovery. Thankfully, that orthodoxy was overthrown due to the experience of its deadly effects. It therefore needs to be said somewhere, loud and clear, that national debt is the symptom, not the cause, of the recession. To seek to address the debt by attacking Government expenditure fails to tackle the real causes of the economic crisis that have created a deficit.

By engaging in the cuts agenda, either now or in the next few years, we will cause long-term damage or risk a Japanese-style lost decade—or, as some economists are calling it, a zombie economy. Such an economic situation would hit the public finances even more dramatically, leaving us with even larger debts. Instead of the obsession with cuts we need a growth agenda that will allow Government revenues to rise and unemployment to fall and that will, in turn, reduce the debt.

As such an approach breaks with the consensus that has emerged on cutting public services, it may be helpful to put the current levels of national debt into an historical and international context. Government debt, which is at 55 per cent. of GDP in this financial year, is estimated to peak at 78 per cent. in 2014. Although that figure is high, it is far from unprecedented historically. According to the recent House of Commons paper “Background to the 2009 Pre-Budget Report”, Government debt was more than 100 per cent. of GDP every year from 1945 until 1963. The same paper adds: “UK debt would still be below that of Italy, Japan and the US, and broadly similar to that of France and Germany” at the end of 2010.

Of course, the national debt should be reduced in the future, not least as interest repayments soak up vital resources that could be better spent on schools, hospitals and elsewhere, but contrary to the claim of those on the right, increasing the deficit has been necessary during the worldwide recession—especially as it was so deep. I noticed that William Keegan explained it in The Observer in the following way:

“the large deficit…is not the problem: it is an integral part of the solution. It is the reason why we have not experienced the kind of full-scale 1930s-style depression which would have been on the cards without drastic fiscal action.”

Furthermore, anyone seriously wishing to address the debt rather than to pursue outdated and ineffective ideological goals might first want to look at how the debt has come about. Were they to do that, they would find that it is the consequence of three things: declining Government revenues; the large bank bail-outs, which amount to more than 10 per cent. of GDP; and, to a much lesser degree, an increase in Government expenditure. Treasury figures estimate an increase in public sector net debt of 18.9 per cent. of GDP between April 2008 and April 2010, excluding the bank bail-outs.

The majority of the increase in the debt has been caused by a fall in Government receipts. As the House of Commons paper “The outlook for the public finances” explains, it is normal during a recession for revenues to fall. Similarly, Government expenditure has also risen, as expected in a recession. That inevitable rise in Government expenditures is due to the so-called “automatic” processes that take place in a recession, such as, for example, the fact that we see more benefits paid out.

However, only a minority of the deficit has been caused by the increase in Government expenditure, so I would argue that the calls to cut the public sector display economic incoherence. As Professor David Blanchflower, former member of the Bank of England’s monetary policy committee, told the Opposition: “Cutting public spending in a recession is a really bad idea.” I urge even those people on the Government Benches who are tempted by it to reject it.

So, what is the way forward? What practical polices do we need to address the vital issues of investment and growth?

First, we need the Government to use their majority holdings in a number of banks to force the banks to increase investment and lending levels to businesses and to families to revive the economy and housing market. I am one of those who think that there is an element of gutlessness in the way that our Government have dealt with the banks, but we may come on to that later.

Secondly, in those areas where market failure is greatest and private investment has collapsed the most, the Government need to step in and invest directly themselves. Large-scale state investment in transport and housing in such areas would be economically as well as socially useful.

Thirdly, in the really long term, we desperately need to rebalance the economy away from its reliance on finance and develop the industries of the future. The UK has the potential to generate something like 400,000 jobs in green industries, but to fulfil that potential we need state-led investment on a green new deal that would be of tremendous immediate economic benefit and of long-term environmental benefit.

Fourthly, we can help reflate the economy through increasing levels of consumption by putting money into the pockets of those most likely to spend it. The last 30 years of neo-liberalism have witnessed a smaller and smaller proportion of the economy going to wages. If the Government were to reverse that by raising taxation on the super-rich and then handing over exactly the same amount of money to ordinary families, overall consumer spending would rise, helping the economy to move out of recession.

Finally, for those who advocate cuts, there are areas of public spending that can be cut. We do not need to renew Trident and, although I used to support them, I no longer think that we need ID cards. By cutting those projects, tens of billions of pounds could be saved at a stroke.

The package that I have outlined is only a small example of what could be done. It would be a popular message and it would deal with the debt and the much larger issue of restoring economic growth.

The alternative to going for growth is a cuts agenda, but cuts are not savings. They would remove demand from the economy and the recession would worsen as the negative multiplier effect kicked in. On this, we need to learn the lessons of history. Roosevelt announced his new deal in 1933, and things went well for three years after the banks were regulated and there was a big increase in public spending. Then, afraid of public debt and under pressure from the right, he began to cut, sending the economy back into a recession from which it did not recover until just before the second world war.

We can also learn from countries that are a bit closer to Britain than America. If we look just across the Irish sea, we can see the slash-and-burn tactics being employed by the Irish Government. The Fianna Fáil Government have overseen savage cuts to the public sector and a real fiscal tightening—something so beloved of the right wing in this country. That has been to the detriment to the wider economy in Ireland, which has continued to worsen. So the debt continues to rise while the Governments have become more unpopular as the majority have suffered. Colleague and comrades on the Labour Benches should learn the economic and political lessons from Ireland.

I mentioned Roosevelt in a slightly pejorative way earlier so, in an attempt to balance that, I want to say that I believe that we are in a period of great ideological debate—and that is as it should be in a period of great economic crisis. Basically, the debate boils down to these questions: has the neo-liberal consensus of the past 30 years been correct, and what is the role of Government?

By way of an answer, I shall draw on the words of Roosevelt himself. He said:

“What is the State? It is the duly constituted representative of an organized society of human beings, created by them for their mutual protection and well-being. ‘The state’ or ‘The Government’ is but the machinery through which such mutual aid and protection are achieved.”

As we have this huge intellectual debate, I hope that those ideas are remembered. I also hope that we are moving into a period that sees the demise of neo-liberalism.

Colin makes the case for public services being part of the solution to get the country out of the mess caused by greedy bankers. His speech is very much in tunes with UNISON's Million Voices for Public Services camapign.

Monday, 14 December 2009

Daily Express Readers Support Public Sector Pensions!

You've not misread the title of this blog post. Last week the Daily Express ran a phone poll asking "Should public sector pensions be cut back?"

Today (in small print) the Daily Express published the results of the poll. Apparently 69% of Express readers think public sector pensions should not be cut. Well done to Express readers for seeing sense.

Strangely the results of the poll are not yet on their website - but there are numerous poll results about Muslims and, asylum seekers.

Spin over services

Notts County Council are planning to make £33m of service cuts - and at the same time they have decided to advertise for a a new Service Director of Communications (aka "Spin Doctor") with the very handsome salary of more than £71,000

This is a slap in the face of the thousands of frontline staff such as care workers, social workers and contact centre staff who will be spending the Christmas break worrying about whether they will be made redundant in the new year

The advert, which you can find here, says "Nottinghamshire has undergone a change in direction." The council has certainly undergone a change in direction as it now values spin over services

Shameful behavoiour.

Thursday, 3 December 2009

Show us the money

Many councils are saying they have financial problems and are having to cut budgets. Undoubtedly many are facing a drop income from reductions in planning fees and parking charges. And undoubtedly some are facing increasing pressures on budgets as demand for vital services goes up.

But, for years many of them have been putting money into reserves for a "rainy day." We believe that rainy day has come and some councils have the opportunity to use their reserves to protect services.

Freedom of Information (FOI) requests by UNISON have uncovered that many councils in the East Midlands have relatively large reserves that could be used to help support budget problems in the short term. Councils carry many types of reserve, many of which are earmarked for specific projects. However, the reserves we have focused on are the unallocated reserves, or “General Fund Balance” that is free to be spent on anything.

We believe any second tier council (district or borough council) with more than 10 per cent of its total expenditure in unallocated reserves has enough flexibility to use some of these reserves to support any budget shortfalls for the next few years. See here for the list of reserves of all of the 36 second tier councils in the East Midlands. The report also shows the total expenditure for the council in 2008/09 and shows reserves as a proportion of expenditure. Some have big reserves compared to their total expenditure.

The councils with the green bars are ones where reserves are in excess of 10 per cent of their expenditure. Some councils such as (but not limited to) Ashfield, Derbyshire Dales and South Holland have well over 15 per cent in reserves, while some like Daventry and Melton have over 20 per cent in reserves.

Likewise we believe any first tier council (county or unitary council) with more than 2.5 per cent of its total non schools expenditure in unallocated reserves has enough flexibility to use some reserves to support any budget shortfalls for the next few years. See here for the list of reserves of all of the nine first tier councils in the East Midlands. Unallocated reserves range from £1m to a whopping £39m.

So, as the 45 councils in the region construct their budgets for 2010/11, our research has uncovered around half of them have money in reserves they can use to help support their budget. There is no excuse for these councils to cut services.

Tuesday, 1 December 2009

Social Work Task Force

Chris Tansley is one of the region's reps on UNISON's Social Care forum and he has written about the Social Care Task Force report that was released today. The report sets the scene for the future of social work and it is vital central and local government make the funding available to enable the report's recommendations to become reality. Chris Tansley's report is below.

There’s a lot to be welcomed in the task force recommendations released today (1st December) and a lot that mirrors what we’ve been saying in UNISON since the Laming report.

We said to the task force and to the minister, Ed Balls, that the high vacancy levels of social workers meant that those that were employed were carrying dangerously high caseloads.

We also said that the IT system brought in at Laming's recommendation was cumbersome and taking up to 70% of social workers time – time which would be better spent working with the children and families they were responsible for.

UNISON has been saying for years that we need a new grade of senior practitioner to prevent our experienced social workers having only the option of going into management if they wanted to improve their pay.

All of these issues are outlined in the report and Ed Balls has given his commitment to implementing them in full.

The task for us all in social work is to ensure that they are implemented jointly with UNISON representatives at a local level.

These recommendations cannot be done on the cheap. They will require real resources if they are to succeed. This comes at a time when finance in the public sector is in crisis. We need the Government to match their words of support with increased funding specifically aimed at implementing the proposals.

The setting up of a National College of Social Work did not form one of UNISON's proposals. We have been saying for several years now that the image and status of social work needs to be radically improved but we remain sceptical that a National College will just become a distraction from the real issues facing social workers. What matters to social workers is that they get the improvements to their working conditions and career progression in their workplaces.

We also need the Government to build on the start they’ve made in putting the message across that our social workers need to be valued for the great work they do in our communities with vulnerable children and families every day of the year. Perhaps then it will be a career of choice again and social workers can say that they are proud of the work they do.

For the Task Force Report see here.

Chris Tansley

Chair - UNISON National Social Care Forum

Heather Wakefield's blog

Heather Wakefield, UNISON's National Secretary for Local Government has written a very timely piece about the government's recent proposals for a "National Care Service" (NCS). She welcomes the introduction of the NCS but highlights some serious issues about the current situation in care work, in particular, problems with outsourcing; scandalously low rates of pay; workers having to pay for their own uniforms; and patchy service standards.

You can find Heather's article here.