Category Archives: Politics

Austerity – myth or reality

Just read an article by Mark Serwotka, general secretary of the Public and Commercial Services Union, that has prompted this quick response – would like to have done it through twitter but I need more than 140ch to get it off my chest.

Now I must admit I went into this full of optimism that someone was finally set to expose the austerity story. The article at http://bit.ly/TYXXNJ starts quite well – but then it tails off into a whole pile of populist drivel. The sort of garbage that raises a loud cheer amongst the troops, but does nothing to show us the light.

The situation in the UK is fairly straightforward. We have an enormous debt of around £1.3tn (excluding a public pension deficit that would probably dwarf that figure) that continues to grow at an alarming rate. All we hear in the news is about reducing the budget deficit – which means we’re not reducing the debt at all, just reducing the rate at which is grows. I’d say that’s cause for concern not just for this generation but all those with the unpleasant task of following us and sorting out our mess.

So let’s be clear Mark about your statement, “But is there really less money around? Of course not. Our economy is still one of the largest in the world and some people are still doing very nicely, thank you very much”. What you fail to observe is that technically we are bust – if we were a business or an individual we would be declared bankrupt. The only money that is around comes from increasing the debt which a business or individual would not be allowed to do. I’m one of those old-fashioned types who believes if you can’t afford it, you can’t have it, but clearly when you refer to money your views are more “I want it, therefore it is my right to have it”.

What saves us is the fact that many other countries are in the same boat and one country will not call the loans on another because it would spark a meltdown that would put 2008 into the “nice to have” category. Fortunately, we have the luxury compared to some of being able to set our own interest rates. The Bank of England decided that low-interest rates were the order of the day – again only possible because everyone else was doing it. There were several reasons for that decision and one in particular related to our very high levels of household debt (which last year stood at around £28k for every single adult in this country) – and the absolute need to prevent a housing crisis similar to that seen in the US with sub-prime.

So prior to the 2008 financial crisis, we had interest rates running at around 5% and they are now at 0.5%. So what that means is the vast majority of people in debt were actually financially better off after the crisis than before because they were paying less to service their debt. Without all the trimmings (again to keep it simple) the average mortgage payments for approximately 10 million mortgage holding households have gone down by over £3000 per year. So every person who has remained in employment (we have more people in employment now than in 2008) who carries debt is better off now than before the crisis. That’s an awful lot of people.

I do however recognise that alongside that, many people have seen their pay reduced and for them the benefit of interest rate reductions might simply soften the blow. Mike points out that the public sector has come in for some fairly rough treatment and that is right. However one could argue that the public sector has simply become too big and needs trimming back – in 2013 almost 20% of all jobs were in the public sector. Whether you like it or not, the size of the public sector is dictated by the size of the private sector – the bigger the private sector, the more money is taken into the public purse to pay for services. The size of our national debt would infer the public sector is too big and the choice facing the budget holders is to reduce jobs, pay or both.

However, the people I feel sorry for are those with savings because the cut in interest rates means they are worse off. The moral of the government approach is spend yourself silly, get into debt, have everything you want now regardless of whether you can afford it (spending is always good for the economy) and then when it all goes pear-shaped we’ll help you out and shaft all those people who’ve tried to live within their means. Brilliant but the inevitable consequence is people won’t learn. Only next time it will be worse because all those debt addicts will carry on and many savers will join them because they might as well enjoy themselves.

Mark also refers to poverty which is something of red rag to a bull with me. Relative poverty defines income or resources in relation to the average. So let’s assume we have 5 people with incomes 100, 150, 175, 200, 225 – to put the average at 170 – which means that 2 people are in relative poverty. Now if someone enters our country with a large wad of cash (perhaps a Russian oligarch, a Chinese billionaire or rich Europeans hedging their assets) and an income of 350, then all of a sudden our average moves to 200 and we now have 3 if not 4 people staring at poverty. Their circumstances haven’t changed, but the headline figure of 4 in 6 people now in poverty is a real attention grabber. Even better, our economy is now showing growth because our new wealthy immigrant has lots of money to spend in the shops and on property and is more than willing to do so.

So let’s be clear relative poverty is not a very good definition of a person’s struggle to survive – it is simply a measure of the gap between the top and the bottom. That’s not to say it doesn’t have it’s place, but it is currently being used mischievously out of context. And when you then use the poverty card against utility companies you seem to ignore the reasons why their prices have increased or the fact that many of our pensions a leading shareholders in those companies.

It also leads to another interesting question. In your country would you rather have more millionaires or less? Personally I don’t want to see millionaires who are well off because they have simply exploited others. I categorize people working in and around the stock market as such because all they do is gamble with other people’s money – if they win, they receive a ridiculously high bonus whilst the pension pot receives 5% and if they lose they receive a moderate bonus whilst the pension pot is obliterated. How the stock market is allowed to work as a no-lose casino for the traders is beyond me – but that’s for another day and another blog.

However I do want to see more millionaires who have created something – created products and services that generate good employment. Employment where the employees receive a fair market rate and good working conditions and prospects. The more of those millionaires the better and I’m sure their money will be welcomed up and down the country in every shop they walk into. I agree morally it is not comfortable to hear that the top 5 wealthy families are worth more than the bottom 20%. Clearly there is an imbalance but I’m not jealous of what they have earned – I’m thankful that they’ve chosen to do it in the UK so we have a little more money to fund our public services without financially crippling our future generations. Having said that, you might find if those families chose to leave the UK (and they are wealthy enough do so) then it would drag a large number of people out of poverty.

If Mike is going to be a responsible trade union leader he needs to think first about what is best for the country, then what is best for his members. That cannot ignore the debt.

A big tick or a red cross for the teacher’s strike?

The National Union of Teachers is planning a strike in England and Wales on 10 July because apparently the government is failing to make progress on a long-running dispute over pay, pensions and workload. Christine Blower, general secretary of the NUT said “For teachers, performance-related pay, working until 68 for a full pension and heavy workload of 60 hours a week is unsustainable.”

In the UK there is a legal right to strike – and some would call it a human right to strike. It stems from the recognition of collective bargaining in the late 1940’s and is supposed to be act as a deterrent to prevent “bully boy” tactics by employers. Which all sounds very reasonable and logical. However what happened in the 1970’s showed that it could also be used by “bully boy” trade unions to get their own way as short-sighted union officials nearly bought this country to its knees.

In the mid 90’s I used to work for a company that had historically strong trade unions. One Saturday morning, I needed a trailer to be moved away from a loading bay to be parked in the yard. Just 1 trailer that would have taken 15 minutes to move. I asked the team of 4 shunt drivers whether anyone fancied the overtime only for my attention to be drawn to the union agreement. It stated that any weekend overtime needed to be offered to the entire shunt crew rather than any individual as it wasn’t fair to favour any one over the others and any employee turning up for weekend work would be paid a minimum of 8 hours at double time. So for 15 minutes work I would need to pay 4 people the equivalent of 16 hours pay each – in other words 15 minutes of work would cost the company 64 hours of pay. And by the way – no one other than the shunt drivers was allowed to carry out that work so we couldn’t bring anyone else in to do it either. My hands were tied and there was nothing I could do. I was so annoyed, I decided to have none of them in and leave the trailer where it was until the following week – it caused me a lot more work to re-jig the schedule but there was no way the union was going to blackmail me.

At the end of the day, the unions can hold massive power. A power that a company simply can’t compete with. That sort of power needs respect – by those who are against it but more importantly those who have it.

My example showed an agreement that was designed to “protect” the employee, but simply created a division between employees and management. An agreement that elevated workers rights far beyond what was sensible or appropriate. An agreement so inefficient that it could only lead to the demise of the company and instead of talking about overtime, we’d eventually be talking about redundancies – especially in a global economy. As with most things, the problem is people. In order to be an effective trade union you need to balance the long-term benefit of both the company and the employee. To recognise when the company is being too demanding, but to also recognise when the company needs to make changes to survive and prosper. To do that effectively, you need to have sat in the Management seat and had the experience of taking a company forward. Trade Unionists who have not been Managers are recipes for disaster.

Similarly, however management need to recognise the importance of their employees. Without the employees a company is nothing. How can a Manager who has never had experience working in the conditions experienced by some of the employees possibly understand their needs. Managers who have no experience of doing – on the streets, in the factory, in the yard – are a recipe for disaster.

So let’s move on to the teachers. To remove labour from our schools is significant. There is little more important than education and depriving children of something so fundamentally important is concerning. So surely it must be the last resort – well I mean surely it must be the last resort since the previous last resort strike in March.

But does the NUT have a legitimate cause? I know there are other issues at play but let’s look at the 3 points mentioned by Christine Blower – performance-related pay, working until 68 for a full pension and heavy workload of 60 hours a week.

  • Performance related pay: The idea to reward better performance sounds great but it all comes down to measurement, subjectivity and mitigating factors.  More often than not, employers measure the wrong things, often in a subjective way, without taking into account the circumstances.  So rather than be productive, they can actually de-motivate.  Teaching is about enabling each child to reach their potential and there are a whole range of factors at play.   It is pointless and hugely subjective to measure a teachers based on the results of the children. Is a teacher with pupils achieving A* grades performing better than one achieving B?   Is a teacher with a class where 99% achieve A*-B better than a teacher with 50% A*-B ?  No – we have no way of knowing because we don’t understand the influencing factors outside the control of the teacher.   Performance related pay can only be divisive for teachers.
  • Working until 68 for a full pension:  The truth of the matter is we’re living longer and there is already a massive public sector pension deficit.   No-one likes the idea of working longer for the same pension but you have to be living on Mars not to realise things can’t go on as they are.   Private sector pensions have been severely hit over the last few years with the removal of final salary schemes, greater employee contributions and an increase in pensionable age.   Many companies (massive household names) have huge pension deficits that they are trying to fund and many will go out of business as a result.   At the end of the day it’s basic  maths – what’s paid in vs what needs to be paid out – and if the payments out are greater than the payments in then we have a problem.  That’s exactly where we are and as a result, I have absolutely no sympathy for teachers on this issue. Teachers need to accept that everyone will face the same issue and given that their pension schemes are already far better than many they should be very grateful.
  • heavy workload for 60 hours a week:  A nominal school day is between say 9 and 4 so potentially it’s a 7 hour day times 5 days per week which equates to 35 hours per week.  So that figure of 60 hours would suggest every teacher is doing 25 hours extra per week or potentially 5 hours per night – which does sound rather a lot of marking, class preparation, extra curricular activities,  report writing etc.   Whilst many in the private sector are equally flogged, if teachers are really working 60 hours per week, then it is too much.  It’s too much because it would appear that our teachers, who’ve been trained to teach, are in fact spending almost as much time not teaching as they are teaching.  However to strike about this seems almost counter-intuitive.  The teachers will now have less days to cram in the same amount of work – assuming they’ll still follow the curriculum.   It would be better instead to concentrate on removing the non value adding tasks – and there are many in our schools – and making others more efficient.  I know the NUT and it’s members are probably up in arms throwing tantrums by the dozen because of the suggestion they are not 100% efficient – but none of us are and occasionally we can all do with re-pointing.

So there is only 1 point that is a justified grievance.  Performance related pay is a nonsense.  But is it really so serious that the only way out is a strike?   I think not!  The real motive behind this strike are not the issues of debate but a jostling for power and that sort of strike takes us back to the dark days of the 70’s and is an abuse of the right.  The NUT flexing it’s muscles against the unpopular Michael Gove who has the audacity to attempt to change a system that in all honesty doesn’t work as well as it needs to in the modern world.  He might not be right in some of what he’s trying to do, but the NUT are plain wrong.

Teaching is a difficult job and in our blame culture they are at the coal face when it comes to looking for excuses.   It’s not made any easier when the people supposed to represent them pursue a self interested agenda – and when you consider the hundreds of pounds the teachers pay for the privilege it’s almost laughable.

Perhaps children should go on strike to protest about teachers going on strike – then we’d really have something interesting on our hands.

Population and house prices – is there a link Sherlock?

According to The Office for National Statistics estimated there were 64.1 million people in the UK in June 2013, a rise of 0.63% on the previous year. That equates to a population growth of more than 400,000 which apparently is more than any other country in the EU and it’s a rate that will soon take the UK to over 70 million.

So where’s all that increase coming from. Apparently just over half was down to natural change – births minus deaths – while net migration represented 46% of the rise and interestingly more than a quarter of all births came from immigrant mothers. A quarter of the UK population growth was in London.

At the same time we appear to be caught up in another housing boom. The governor of the Bank of England, Mark Carney warned of “deep structural problems” in the British housing market stemming from a shortage of fresh stock. It is most chronic in the South East where Savills estimates a shortage well into the hundred thousands. Co-incidentally last week official figures showed annual house price rising at around 9.9% pa – with London showing a near 19% rise.

And so the conversation concerning the Great House Price Inflation Robbery began:

Holmes begins, “Dr Watson, there is nothing like first hand evidence. We have a growing population, largely driven by immigration or the offspring of immigration. We have a shortage of houses which I deduce must have something to do with the fact that we have more people to house – I would surmise that should the population remain flat then there would be no material increase number of houses.”
Dr Watson steps in, “With you so far Holmes old chap, although perhaps I could add to your last point to acknowledge the role of the single parent family in all this. Apparently nearly 25% of households are now single parent – a number which has trebled over the last 4 decades.”
Back to Holmes, “Good point Watson and it is clear there is nothing more deceptive than an obvious fact. So we would need a small increase in new homes to account for those people who can longer bring themselves to share the same living space with their family.”
Watson “Absolutely old chap. And a damned shame it is too! Then there is also the need to build houses that are replacements for those that are no longer fit for purpose.”
Holmes again, “Another point well made, my dear Dr Watson. However, having gathered these facts and smoked several pipes over them, trying to separate those which were crucial from others which were merely incidental. I concluded them as merely incidental compared to population increase as the leading culprit in this dastardly robbery.”
Holmes went on, “I confess to knowing no earthly reason why the leaders of our great nation do not appear to make the glaringly obvious connection between immigration and the increase in population that so violently contributes to the housing shortage and consequent bubble. Surely any man not blinded by the need of the populist vote could conclude the same and then react accordingly.”
Dr Watson exhales slowly before adding, “All very well old chap. But more people, means more “needs” to be satisfied which ultimately means more jobs and more spending. The connection may well have been made Holmes, but it’s a turkey voting for Christmas like move for any politician to stifle what little growth there may be in the economy. I’ve even heard some comment that the infrastructure, such as schools, hospitals and transport, can’t take the added load, only to be informed by those of a certain persuasion, that investment in infrastructure will in itself create more jobs and make the government more appealing to voters.”
Holmes responds swiftly “I think that you know me well enough, Watson, to understand that I am by no means a nervous man. At the same time, it is stupidity rather than courage to refuse to recognize danger when it is close upon you. This reminds me of the curious incident of the dog in the night-time”
Dr Watson inquires “But the dog did nothing at night-time”
Holmes again “That was the curious incident! Here we have a government with an apparent need to demonstrate growth to the voting public. Growth is a curious beast. Its variances means little on the streets, but as a headline it symbolises prosperity and has become a battle cry to rally the troops. In a country getting close to the edge of all it can consume without losing it’s buttons and popping it’s shirt, the only way to maintain the illusion of growth is to grow the population. I imagine you will find a very different per capita picture from that promoted by our government of the day – something which the common man fails to grasp. In the short-term such rapid population growth will lead to house price inflation and it can also fuel anti-immigration sentiment as shown by the results for that Moriarty like creature and his UKIP party – but they are merely bumps in the road. More serious are the possible long-term effects of such an approach. A national debt of £1.4tn growing at over £5k per second simply cannot stomach the increased public spending required to grow the infrastructure needed to maintain a harmonious community – and that figure does not even include the alarming pension deficit. The night-time is fast approaching, Watson – decisions need to be made quickly to reduce the debt and ensure harmony on our streets is maintained – but if the dog doesn’t raise itself into action, it may be a long time before the light returns”

With that, Watson poured himself a quick tipple and changed the subject to why England seem incapable of winning the World Cup