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The Politics of Pay Newcastle City Council Unison Branch AGM 12th March 2012

Hello, thank you very much for inviting me to speak to your AGM today. The Newcastle City Council branch of Unison plays such a big role in the region but is also nationally renowned primarily through the energy and leadership of our friend Kenny Bell who is sadly no longer with us. However one of Kennys great achievements was an encourager of others and I know from my own experience that the team at Newcastle whether through lay activists or officers is committed, tenacious and outward-looking. They were Kennys qualities, they are your new Chair Josies qualities and they are qualities we need across the whole trade union movement right now. Today I will be talking about pay. Now theres is something that makes us feel a little squeamish when it comes to publicly talking about pay. Partly I think its that British thing where we instinctively keep financial affairs as private as we can. Partly I think its also a political awareness that we dont want to appear in any way self-interested or somehow ungrateful or neglectful of those who have even less. Yet it is pay which helps us feeds our families, pays the mortgage and the rent. It is pay which helps us spend in our local economies supporting firms and other workers through our custom and pay which is one half of that equation where pay is the price of our labour. In the public sector fair pay, along with pensions, is part of fully-funded services. But it is more than that it can often be a benchmark of decency for others to note and follow. I want to talk about three things in particular about pay today. First how pay has become a worldwide casualty of neoliberal globalisation over the last forty years and why a wage-led recovery is vital for the UK right now. Second how the state has been subsidising low pay in the public and private sector and why a living wage is an important step in the right direction. And thirdly and most substantively on why we must defeat the Governments plans to localise or regionalise public sector pay.

Poor pay did not begin with globalisation, but it has been made worse by it. Let us go back a hundred years and hear the words of Robert Noonan who as Robert Tressell in 1914 wrote the following in his book The Ragged Trousered Philanthropists. He observed: When there's no work, you will either starve or get into debt. When - as at present there is a little work, you will live in a state of semi-starvation. When times are what you call "good", you will work for twelve or fourteen hours a day and - if you're very lucky occasionally all night. The extra money you then earn will go to pay your debts so that you may be able to get credit again when there's no work.' Now the world we inhibit is different to Noonans in many ways. Despite all the technological and cultural changes some things remain eerily similar. People do going hungry as a result of poverty and poverty pay in 2012. Recent research by Net Mums revealed the scale of stress and suffering many are experiencing right now. According to their research, one in five mothers regularly skips meals so their children can eat. Half of families are selling or pawning belongings to raise extra cash and 1 in 6 are under treatment from their doctor for stress related to their financial problems. 25% are topping up income with credit cards, 1 in 20 survives on payday loans and 1in 100 borrows from loan sharks. Net Mums revealed that 64% of families have less income now than a year ago and 61% are short of cash to pay the bills and living costs every week. 70% of families face severe financial problems if they are hit by any more price rises or loss of income. About 40% need an extra 20 a week to make ends meet, 33% could do with 50 more. The rising cost of living is one factor but the declining value of wages is another. This is not a phenomenon just deteriorated by the recent global crash or austerity measures but something that has been worsening for the last 40 years. Since the 1970s weve seen wage squeeze in which average earnings have been rising more slowly than productivity. The share of national wealth going to wages has been in decline from 65 per cent in 1973 to just 53 per cent today. Thats felt in almost every pay packet in the land. This new squeeze has been made worse by the increasing

concentration of the earnings pool at the top and a decline in the employment opportunities open to those on middle and lower earnings. Almost in slow motion our society and organisations have become more hierarchical with wealth horded at the top with more and more tricks deployed to avoid tax. In the USA super-rich frontrunner to be the Republican Presidential candidate admitted that his tax rate was around 13% - lower than his own secretarys. In our country our Government appoints Sir Philip Green to advise on public sector efficiency while his wealth is hoarded, hidden and untaxed in his wifes name in Monaco and could fund countless new schools, hospitals and childrens centres. We have witnessed the role of active government in the economy has been attacked, trade unions have been restricted and for a variety of reasons weve seen a dereliction of duty of all political parties to consistently put the interests of working men and women at the top of their agenda. It is only in the last three years when the music has stopped on the economic merry-goround that its become so clear how much tax has been avoided and evaded. It is estimated that 70bn of UK tax has been evaded and a further 25bn has been avoided in the last year alone. Such enormous sums of avoided and evaded tax provides with such a striking contrast to whats happening to ordinary working people. From next month 16,200 families in Tyne & Wear could each lose up to 3,780 a year as a result of this Governments changes to Working Families Tax Credits. Tax credits plays a huge role in ensuring families are adequately rewarded by work and can afford to get by. But surely the fact that that are so necessary reveals something fundamentally wrong. Imagine if some of the largest and most successful companies in the UK had the costs of their heating and marketing provided by taxpayers? We could expect to see a few front page headlines. Instead one of their largest costs staffing is subsidised by the taxpayer as a result of them paying just the minimum wage which is not enough to live off especially if you have children. A 13,000 a year worker could receive almost 4,000 in tax credits as a result of their pay and circumstances. The individual has to

apply for tax credits as though it was their problem when it is in fact principally down to the decisions of employers. Even more continued public sector pay freezes will increase the reliance on benefits and top-ups making so-called savings a false economy. This is not just a problem facing public sector workers. A recent private sector survey for the North East Chamber of Commerce showed that half of North East firms were not intending to provide any pay rise whatsoever in the coming year. Whats most extraordinary is that poverty pay is most prevalent within organisations that make huge profits each and every year. A recent report by the Fair Pay Network puts things in perspective. Tesco, Sainsburys, Asda and Morrisons employ 893,000 people at 7,293 stores. They are the largest employer bock in the country second to the NHS. Available records for the most recent trading year show Sainsburys profits up 12.8% (pre-tax profits of 827 million), ASDA recorded pre-tax profits of 803.5 million, Morrisons up 7.3% (pre-tax profits of 632 million) and Tesco up 11.3% (pre-tax profits of 3.54 billion). Tescos Chief Executive Philip Clare received 6.9M last year. Morrisons Chief Executive received 4million. It goes on. You know the pattern. We are paying for their right to enforce poverty pay and rather than pay us back, they pay themselves astronomical sums. They must take us for mugs. And since that report, these supermarkets signed up to the Governments workfare scheme where Tesco at one point were advertising for shelf-stackers to work throughout the night for benefits plus expenses. They must have killed themselves laughing at the prospect of so much free labour. This is why a living wage is so important and why the situation at Newcastle City Council is significant. A Living Wage will make a start for low paid public sector workers. Wage data at the Civic Centre shows that 2071 workers here are paid less than 7.20 per hour. Among the low-paid are 1637 women, 199 BME workers and 164 disabled workers. But even more importantly as the first local authority in the North East set to implement this policy, it will give a message about what is acceptable pay.

And it is not acceptable in this day and age for people to be in work and still in poverty. Joseph Rowntree Foundation studies show a majority (58%) of children in poverty in the UK have a parent or carer in work. In tackling low pay we are also helping tackle child poverty. Finally, we must address one of the most pressing challenges. In November in his preBudget report, Chancellor George Osborne announced he would be reviewing public sector pay to potentially make them more market-facing and responsive to private sector pay rates. Since then Business Secretary Vince Cable among others has warned of the practical problems of localising public sector pay bargaining. He is right to be cautious and it is something that we must exploit in opposing this latest ideologically driven, unfair and counter-productive attack on the public sector which could have devastating long-term consequences. This proposal would have overwhelmingly negative consequences for the regions outside of the South East. 1. It would effectively reduce the pay of almost 3 million workers. There are 680,000 public sector workers in the North West, 536,000 in Yorkshire & Humber, 496,000 in the West Midlands, 495,000 in the South West, 444,000 in the East of England, 382,000 in the East Midlands, 274,000 in the North East and 336,000 in Wales who would all face a real terms pay cut. Even at a cautious level of a 1,000 cut in real terms that would result 3 billion taken out of regional economies per year and would significantly reduce disposable income and demand in the respective local economies. The result would be to make it harder for the private sector to prosper when the economy is so vulnerable from recession and public sector job cuts. It would shift funds to the South East and be an annual loss double the size of the governments 3-year regional growth fund. 2. It doesnt compare like with like. Many public sector jobs simply dont exist in the private sector to make a comparison. There are no private sector paramedics or social

workers just as there are very few public sector mechanics. The only legitimate and fair comparison is between two people doing the same job, with the same skills and experience. 3. There is no evidence the public sector is crowding out the private sector. This could only conceivably ever happen in times of full employment. Instead the North East has the highest unemployment in the UK with eight jobseekers per vacancy and 2,000 public sector jobs lost each month. The private sector has rarely had such a wide choice of labour. Any private skill shortages will be only solved by investment, training or apprenticeships not reducing the pay of others. 4. Postcode pay would increase unfairness and damage morale. Pay localisation could mean two people living on the same street as each other doing an identical job but being paid differently if based at different locations. This is divisive and would be unfair. 5. It could lead to a public sector brain drain in economically deprived areas. In a recent Westminster Hall debate called by Plaid Cymru and supported by Labour MPs, the government said it will exempt doctors and dentists from local pay bargaining to avoid a brain drain. However in the NHS the real shortage is in fact among midwives and podiatrists - they wouldnt be protected. Instead ministers have arbitrarily chosen to preserve national pay bargaining among the highest paid public sector professionals while intending to reduce the real terms pay of the rest. 6. It would be costly and complex with hundreds and thousands of local pay bargaining negotiations required. That is why many large UK-wide private sector employers with multi-sites from Argos to Greggs, Tesco and Marks and Spencer also use national pay bargaining for their workforce. 7. It would reduce not increase living standards in the regions. Pay localisation would shift resources from the poorest regions to the wealthiest and reinforce their economic identity as a low pay region. There would be a race to the bottom of pay at a time when as we established pay as a share of GDP has not been lower in 40 years.

8. Increase reliance on benefits. Since relatively low paid public sector workers face pay freezes and real terms cuts it could lead to an increase in tax credits and housing benefits. This isnt progress and will add to the subsidy of low pay. 9. This could be the thin end of the wedge. If the government wins this argument that a cheaper standard of living should mean pay localisation, then why wont ministers seek to localise the level of minimum wage, tax credits or other state benefits too? 10. Pay localisation will affect many in the private sector too. 40 per cent of couples with dual income have one partner work in the public sector and one in the private sector. The governments divisive thinking fails to take account of the fact it will squeeze the living standards of those working outside of the public sector too. If ministers were at all interested in increasing living standards among low paid workers they would promote a living wage. This proposal will not make private sector workers in the regions one penny better off. Instead it will harm retailers in the regions whose customers will have even less to spend than ever. 11. It will increase legal challenges. Public sector employers have been developing pay systems that would reduce the number of potential equal pay challenges. Paying different rates of pay for people doing like work and for no good reason would potentially increase the number of equal pay challenges about unfair treatment. 12. This fundamentally fails to understand how to stimulate growth. The UK economy is suffering a demand crisis and the governments austerity programme is only making things worse. Only jobs and growth will generate the level of tax receipts required and that requires maintaining employment and a stimulus that reaches ordinary households. Instead the government has chosen to focus on worsening the conditions of three million workers outside of the south east which will only compound errors. Conservative ministers would be wise not to appear to use public sector workers as scapegoats for the governments failure to date to deliver a sustained economic recovery.

The Government will be reporting on its review in July. The TUC and public sector unions will be working closely with unions to take on the Chancellor and kill-off this poisonous policy. However we will also be building broad alliances with retailers who rightly recognise that reduced pay in the regions will mean less spending power and less trade at the tills. This policy reveals in one snapshot the false assumptions of too many politicians from too many parties when it comes to pay. They believe pay is a luxury that needs to be frozen in tough times yet they think its fine to subsidise the largest and most profitable companies in the country They believe that public sector workers can and should be squeezed while taxing the richest is deemed to be anti-aspiration or the politics of envy Those who avoid their correct share of tax shouldnt be arrested by invited into government And the biggest lie of all that cutting public spending will boost our economy - when as we know we now have 17 year high unemployment, strangled growth and tipping our communities into a social recession as a result of austerity. That is why we should never apologise for talking about pay. You cannot talk about boost social justice without boosting pay for the majority. You cannot accelerate economic growth without boosting spending power for the majority. And we cannot build a sustained recovery without clamping down on the practices, scams and perks of the wealthiest minority. This is not the politics of envy. For millions of ordinary working people it is the politics of survival. Thank you. Neil Foster Policy and Campaigns Officer, Northern TUC