Minimum wage 'welcome' and 'an insult' say unions

For the fourth year in succession the national minimum wage will rise below the rate inflation, when it is uprated in October 2011.

LEAP has previously criticised the TUC for submitting below-inflation bids for the minimum wage, and then for welcoming an even lower rate.

This year with RPI at 5.5% and CPI at 4.4%, the national minimum wage rises only by 2.5% - up by 15p to £6.08. For younger people aged 18-20 it rises only by 1.2% and for 16-17 year olds by 1.1%.


Len McCluskey, the general secretary of Unite rightly condemned the rises

This small increase in the minimum wage is completely outstripped by the current rate of inflation. The rise will do little to help the lowest paid in our society keep up with the rising cost of food and fuel.

But he reserved his venom in defence of young workers:

The paltry increase in the minimum wage for the under twenties is an insult. There is no reason why younger workers should be paid less and have to struggle more to keep up with the cost of living - it's tantamount to exploitation. Workers should be paid the rate for the job regardless of age. This is yet another attack on young people by this Tory-led government.

Yet again though the TUC played its usual supine role, with Brendan Barber describing the real terms cut as "a welcome pay boost for around 840,000 low-paid workers in the UK."

Most outrageously though, Barber uses the bosses' arguments to defend below inflation rises:

"The LPC [Low Pay Commission] has taken great care to ensure that the new rates are set at a level that will not damage job creation in these uncertain economic times."

When corporate profitability is at an all-time high, the TUC is asking workers to accept declining pay in order to shore up corporate Britain's profit margins.

But while the TUC's general secretary was speaking for business not workers, this year's TUC President (and Unison general secretary) Dave Prentis set out the reality of what this means for low paid workers and put the economic case for a higher increase:

"This small increase is totally outstripped by the rising cost of essentials like food and fuel. The vast majority of a low paid worker’s pay is eaten up by basic living costs – so increases in inflation hit hard.

“We know that many low paid workers are already struggling with heavy debt. Others are cutting back on food, and what they spend on their children. Not only does this show that many families are really struggling – it’s also bad news for local shops and businesses.

“It’s wrong to suggest that a smaller rise in the young people’s rate is better for businesses. Hitting young people’s spending power is a direct hit on those businesses. We need strong demand in our economy to stimulate growth and recovery. Young people also need a helping hand – they are victims of a recession that they did nothing to cause.

“A bigger rise would have also helped restore the balance of fairness in our country – which is suffering hugely under the Tories. It seems incredible that MPs can claim expenses of £3.2 million in just two months, but young people are fobbed off with an extra 10 pence.”

These are welcome signs of unions shaking off the passivity of the TUC. Labour representation is an industrial issue, not just a political one.

March for a real alternative

Figures published on the eve of the Budget shed more light on an unrelenting global crisis that pays little or no attention to chancellor Osborne, or to his shadow-boxing 'critics' at the Trades Union Congress.

Ever since the TUC announced its March for the Alternative way back in October, it has been promoting the slogan – “Jobs, Growth, Justice”. In practice, it's no alternative at all.

To back up its central plea for growth, the TUC has been arguing that spending cuts announced last October and being implemented around the country by Labour and Tory councils alike, are just not necessary. They are simply part of a conspiracy by the government to favour the bankers who are really the culprits and should be made to pay the cost of the yawning deficit.

This simplistic, muddle-headed 'analysis' has, unfortunately, been picked up and broadcast onwards by people engaged in the most radical of actions. As one student in a college occupation said: “There are real alternatives to the problems facing higher education funding ... what we are seeing are ideological political choices, not necessities… It is the public sector, including students and lecturers, who are being made to pay, not the overzealous banking system who caused many problems that the country is now dealing with.”

At the heart of it all is a global crisis of capitalism, however, not just a bunch of crazed bankers who got out of hand. This can’t be sorted by pumping more money into the economy and can make even matters worse, as figures from the Office for National Statistics show. The injection of massive doses of credit to shock the stopped heart of global capital back to life after 2008 has at best put the economy back on the accelerating inflationary path it has been following for more than 10 years, whilst gross domestic product – the key measure of growth – has failed to recover.

The Consumer Prices Index annual rate of inflation has risen to 4.4%, while a more realistic index shows a rate of price increases of 5.5%. All the essentials are soaring: clothing, footwear, food and fuel. Diesel prices have passed 140 pence per litre at the pump in some areas. Clearly much worse is to come as events in the Middle East unfold.

The combined effect of the crisis and actions by governments has been to reduce the incomes of households in the UK. The real income of those in the middle of the income distribution will be 1.6% lower in 2011 than it was in 2008, wiping out all the gains made in the previous 50 years. Pensioner households saw their average income fall even further, by 2.4%. As Stephanie Flanders, the BBC’s economics editor has it, for most people “the recovery has been more painful so far than the recession”.

All the analysts agree on one thing: Osborne has little room for manoeuvre. So we’re likely to see plans to revive the Wild West-style low tax, low regulation, low-wage economy of enterprise zone of the 1980s. It's desperate stuff from a cornered government that, however, knows it faces little official opposition in Parliament or from the TUC.

This isn’t a peculiarly British phenomenon that can be fixed with more credit, or even by changing the government. The TUC’s policies of more taxes and higher public spending wilfully fail to address the real issue: the meltdown at the core of the economic system of production for profit, aka capitalism, for which there are no quick fixes. Avoiding the challenge of an alternative not-for-profit model of ecologically-sustainable production for need, simply strengthens the hand of Osborne and company.

See you in Hyde Park?

Gerry Gold
Economics editor
www.aworldtowin.net

King's speech wins Oscar for half-truths

As everyone who buys their own food and fuel knows, price rises are accelerating. Even in the unlikely event that the revolutionary uprisings in the Middle East and North Africa don’t push oil prices even higher, inflation in the UK is shooting past 4% and heading towards double that by the middle of the year.

The supermarkets which control 75% of groceries, have already doubled the inflation coming through the commodity markets. They’ve pushed the price of processed food up by as much as 6.5% as they try to protect their profits from falling demand.

As the world has seen, when rising prices push food beyond reach even the most autocratic governments feel the anger of the people.

Inflation is just one side of the global crisis. It is the direct and inevitable result of desperate attempts by governments and central banks to reverse the implosion of the global financial system in 2007-8. They poured in trillions of dollars, pounds, yen, and yuan, hoping to restart lending through commercial banks that they had rescued with money borrowed in advance – without asking – from billions of ordinary people, their children and grandchildren.

It was clear from the outset – at least to some – that the growth needed to repay the debt will never materialise. But they had to try. So another solution to the worsening debt crisis is now in play – higher taxes and cuts in government spending which have already provoked social upheaval throughout Europe.

Now the reality is hitting home. Mervyn King, governor of the Bank of England, told MPs yesterday:

The research makes it clear that the impact of these crises lasts for many years. It is not like an ordinary recession, where you lose output and get it back quickly. We may not get the lost output back for very many years, if ever.

And, he added something that should strike fear into the parliamentarians:

The price of this financial crisis is being borne by people who absolutely did not cause it. Now is the period when the cost is being paid, I'm surprised that the degree of public anger has not been greater than it has.

Maybe King is thinking of joining the national demonstration called by the TUC for March 26, which looks like turning into the Britain’s very own Day of Rage. King told the Treasury select committee that the billions spent bailing out the banks and the need for public spending cuts were the fault of the financial services sector. And so he’s now proposing that rather than rescuing ailing banks, ways should be found to allow them to fail, albeit gracefully.

But the bankers’ banker is only telling half the story, or at best one side of it, to shield the real villain in all this – the capitalist system of production for profit. This is the elephant in the room that few people want to speak of. Certainly not the TUC nor Ed Milband and his let's-build-a “prosperous capitalism”-party which we wrote about yesterday.

For decades, global growth of the capitalist economy was only made possible by an expansion of credit many times greater than the new value generated. It couldn’t last. When the limit was reached, meltdown took over. Then everything that was done to try and solve the crisis by treating its symptoms only made it worse.

Growth has been replaced by recession, and everything and anything that is done to try and deal with it just inflames the people affected most. King wonders why people are not angrier and out on the streets like the workers of North Africa. Don’t worry Mervyn. The rage is building and when it blows it needs to be directed not just against a few bankers but at the crazy capitalist system as a whole. At that point, you will be out of a job!

Gerry Gold
Economics editor
www.aworldtowin.net

Targeting the Tax Dodgers

Voting has started to find the UK's biggest tax shirker.

People can decide which corporation or individual has made the biggest contribution to the cause of robbing the poor to pay the rich.

There is a shortlist of 10 on the False Economy website.

Read the details behind the logos of the finalists – like Boots and Vodafone – and vote for the top shirker. There's also good reason to consider Barclays, which is being targeted by Right to Work.

The poll is organised by False Economy, PCS, War on Want and the TUC.

It highlights the fact that the public sector is being slashed while billions of pounds of tax is avoided, evaded, or uncollected.

PCS general secretary Mark Serwotka said:

“It is a national scandal that tens of billions of pounds are being sucked out of our economy every year by some very wealthy people, particularly at a time when we are told cuts are unavoidable.

“It is even more of a scandal that the government not only knows this is happening, but is pressing ahead with even more cuts to HMRC, the very department that should be taking action to ensure the tax dodgers are stopped in their tracks.”

Brendan Barber, TUC general secretary said:

“While ordinary people have no choice but to pay higher VAT, big corporations and the super-rich find it all too easy to get out of paying a fair tax contribution - we are certainly not all in this together.”

War on Want executive director John Hilary said:

“Every day brings a new revelation of yet another company failing to pay its tax dues. Now we learn that Barclays has more than 300 subsidiaries in tax havens, just as City bankers line up for their new year bonuses.

“The government must crack down on all tax dodgers as an urgent measure to rebalance public finances and stop the cuts.”

False Economy

The TUC has launched a new website - False Economy - spelling out "why cuts are the wrong cure".

This video sets out why we shouldn't be suffering for the crisis caused by the finance sector:

Why cuts are the wrong cure from False Economy on Vimeo.

There's also the ability to add details of the cuts in your area and provide testimony of how the cuts affect you.

Confirmed: Cuts will hit poorest hardest

Working people, the unemployed and the sick will be hit 10 times harder by spending cuts than previous Con-Dem predictions, a new TUC analysis revealed on Friday.

TUC-commissioned economists shattered myths peddled by Chancellor George Osborne and Deputy Prime Minister Nick Clegg that the spending review was about "fairness."

They revealed that the poorest 10 per cent will be hit 15 times harder than the richest 10 per cent.

The new analysis stands in stark contrast to government claims that overall the cuts would hit the worst off only five times more than the richest in society.

The TUC originally predicted in its Where The Money Goes report that cuts of 25 per cent by 2012-13 would mean that the poorest 10 per cent of households would lose around 20 per cent of their income.

But using data from the Spending Review the TUC showed that overall cuts to public spending - excluding benefits and tax credits - of £48 billion by 2014-15 will be even more regressive, partly because of deep cuts to services which are disproportionately used by the poorest households, such as social housing and social care.

TUC commissioned economist Howard Reed pointed out that if the cuts were examined by their social "function" rather than by department, the picture looks even bleaker.

"Social care will be cut by 20 per cent, social housing 24 per cent, policing 20 per cent and higher and further education 27 per cent," he said.

TUC general secretary Brendan Barber said: "Even when the effects of benefit changes are taken out of the equation, cuts to services surgically target the poorest households and leave the rich relatively untouched."

And Haringey Council leader Claire Kober warned that cuts to local budgets, services and housing allowances will make it impossible for local authorities to cope with the influx.

"We are being set up to fail," she said.

Left Economics Advisory Project co-ordinator Andrew Fisher called on the TUC to co-ordinate resistance to the coalition's "obscene attacks."

He said: "The TUC analysis of Osborne's spending review is to be congratulated and confirms what the IFS said the day before and what our instincts told us all immediately: the CSR was all-out class war.

"At the June Budget and again this week, Osborne lied to us that his cuts would be fair.

"Within a matter of hours again his lies have been irrefutably exposed."

*This article appeared in the Morning Star on Sat 23 Oct

Mervyn King backs the Tax Justice campaign?

Mervyn King addressed the TUC yesterday. Much of what he said - and the reaction to it - was fairly predictable (and there's a good report in the Morning Star).

However, King - who had assiduously avoided commenting on policy with a stock line "that's not for me to comment" - gave the tax justice campaign a shot in the arm with his cagey endorsement of the question put by PCS President Janice Godrich.

With the annual tax gap estimated to be around £120 billion, Janice asked if Mr King agreed with the union that tax loopholes should be closed, HM Revenue and Customs should increase staff rather than cut them and decisive action should be taken against tax evaders. Each tax compliance officer brings in £658,000 of revenue.

Mr King said he could not comment on tax policy but that the case seemed "persuasive" and was "irresistably" put.

Speaking afterwards, Janice said: "We have seen recently the massive problems caused by staff cuts in HMRC and with billions of pounds in tax revenue going uncollected every year, it makes absolutely no sense to go even further.

"If the chancellor of the exchequer was persuaded by our arguments as Mr King seems to be, and had even a fraction of this money in his coffers, it would change the terms of the debate about public spending overnight.

"Collecting the tax that is owed, largely by very wealthy individuals and organisations, is part of the real alternative to the government’s cuts that are being driven by dogma rather than good economics."

With the endorsement of the establishment Mr King, the £120 billion tax gap must now be a priority for the coalition government in place of devastating public sector cuts

The tax gap, as part of the alternative to public spending cuts, was all over the TUC this week - as Richard Murphy blogs - and hopefully the issue may find its way into the debate again at Labour Party conference.

National Minimum Wage disgrace

The uprating of the National Minimum Wage was announced today, with a meagre 2.2% . Regular readers of the LEAP blog, may want to refer back to our February post 'Inflation, the minimum wage and the TUC' and then have a look at this TUC press release.

Under-21s miss out on decent wage increase

Morning Star
by Lizzie Cocker

Below-inflation increases to the national minimum wage were branded "an insult" by equalities campaigners on Thursday.

The announcement of new minimum wage rates sparked outrage after failing to bring pay for under-21s up to the same level as their older counterparts.

But the introduction of a statutory minimum wage for apprentices was broadly welcomed despite being set at just £2.50 an hour.

The Low Pay Commission which recommend the changes announced on Thursday that the guarantee of a wage for apprentices for the first time "marks an important extension to minimum-wage protection across the UK."

British Youth Council vice-chairman Jack Rowley agreed that it was a step in the right direction but said: "At just £2.50 per hour, young apprentices will struggle to cover their basic living costs while trying to complete their apprenticeship and could earn nearly £40 more a week in a standard minimum-wage job."

From October the minimum hourly rate for over-21s will go up 2.2 per cent to £5.93, but younger workers will continue to lose out on equal pay as the rate for 18-20 year olds will rise to £4.92 and £3.63 for 16-17-year-olds.

Left Economics Advisory Panel co-ordinator Andrew Fisher slammed the changes saying: "With inflation at over 3 per cent, this derisory change to the minimum wage should be called what it is - a real-terms cut. This is an insult to people struggling on low wages.

"Inflation tends to hit the poorest harder than other groups (see the LEAP Inflation Report, September 2009). By failing to scrap the discriminatory lower rates for young workers, the Low Pay Commission has again failed to tackle low pay."

And Mr Rowley said that young people across Britain were "upset about this continued discrimination" as they face record levels of unemployment and rising living costs.

"Sixteen and 17-year-olds can get paid over £80 a week less with these rates for doing exactly the same 35-hour week as 21-year-olds," he said.

The GMB also condemned pay discrimination based on age but generally welcomed the increases.

However the union pledged to "continue to campaign for a much higher rate of at least £7 to move the figures closer to a living wage."

Inflation, the minimum wage and the TUC

Inflation figures out yesterday showed inflation had risen to 3.5% on the CPI measure and 3.7% on the RPI measure.

As LEAP research published in September 2009 showed, inflation tends to hit the poorest hardest.

All parties are threatening public sector pay freezes, and a freeze in the National Minimum Wage has been called for by the Association of Convenience Stores, British Chambers of Commerce, and by CIPD.

Let's be clear a freeze means a cut. In real terms, a freeze would be a 3.5% cut.

Thankfully, at the 2009 TUC, USDAW (not the most radical of trade unions) passed a motion calling on the Low Pay Commission (LPC) - of which the TUC is a part - to "significantly increase the National Minimum Wage". The motion also called for the full NMW to be payable from 18 (currently those aged 18-21 are paid a lower rate).

So when the TUC made its submission to the LPC what sort of significant increase did it call for? 20p. Yes the TUC - "the voice of Britain at work" - with clear Congress policy for a significant increase instead calls for the minimum wage to be increased by just 20p from £5.80 per hour to £6.00. The CBI, BCC and FSB must be laughing their arses off. We know they will call for a minimal increase and the LPC will settle somewhere in the middle.

20p by the way is 3.4% - around or slightly lower than many experts believe inflation will average this year. So the "significant increase" is a real terms freeze. And what of applying the NMW to all from 18? No, the TUC submission advocates all three age discriminating bands remain and all increase by 3.4% - so young workers won't even catch up.

Last Friday even New Labour was floating "a pledge to raise the minimum wage sharply" in the Independent. What incentive is there though for Brown to take a radical turn when even the TUC is not calling for a sharp increase?

On hearing the new inflation figures, TUC General Secretary Brendan Barber said:

"The inflation message is don't panic. The rise today has more to do with what was happening a year ago than anything new in the economy, and is likely to fall back to its target range in due course."

"Don't panic" - wasn't that the refrain of the ineffective Corporal Jones in Dad's Army?

Extra: Watch Paul Mason's piece on inflation on BBC Newsnight. It's followed by a debate between Tory spokesperson on competition John Redwood MP and PCS General Secretary Mark Serwotka over public sector pay policy

Extra 2: Unison calls for reopening of pay settlement in local government - obviously they are panicked, despite Mr Barber's reassurances ...

LEAP publishes Inflation report at TUC

LEAP has today published a major new research report on inflation.

Inflation Report 2009: why inflation is a class issue (free download) shows how in the past year inflation has disproportionately hit the poorest hardest.

The report, commissioned by the Trade Union Co-ordinating Group (TUCG) of eight trade unions, also argues that trades unions must fight for above inflation pay increases, especially for the lowest paid workers who have been hit hardest by inflation - as it is essential goods (which cost the poorest a higher proportion of their expenditure) that have had the highest rate of inflation in the last year.

The paper also proposes a new inflation measure: 'Essential Inflation', based on the inflation rate for the essential items that people are unable to cut back on.

Bob Crow, RMT General Secretary, said:

"It is clear from this important piece of research that the working class have taken by far and away the biggest hit in this recession.

"While pundits talk about falls in inflation, out there in the real world it's a day to day struggle for people to make ends meet as the cost of essentials continues to rise.

"Meanwhile, it's bonus time again in the casinos of the City of London. Those who got us into this mess have come out smiling while the workers who really make the economy tick have been hammered.

"RMT fights day after day against exactly this kind of injustice."

John McDonnell MP, TUCG Parliamentary Convenor, said:

"This paper demonstrates who has been hardest hit by the recession - and it's the lowest paid.

"This evidence will now shape trade unions' strategy in coming pay negotiations. Trade unions cannot be expected to stand back and allow the living standards of their members to be eroded when they've witnessed the return of the bankers' bonus culture."

Mark Serwotka, PCS General Secretary, said:

"Low paid workers in both the private and public sector are bearing the brunt of the recession. Hundreds of thousands of civil and public servants have experienced pay freezes leading to their pay being cut in real terms.

"PCS members who keep this country running know the true cost of inflation with 40% of staff who are helping people deal with recession getting no pay rise at all last year. This report lays bare the fact that it is the poorest in society who are hit by essential inflation."


The report's conclusions are:

• In current pay negotiations, where pay freezes are being proposed across organisations (e.g. British Airways) it is important to understand that a pay freeze is a real terms cut of nearly 2% in living standards for the poor, but a real terms increase for the richest. Unions are therefore correct to argue that low paid workers should not be treated the same in pay negotiations as senior management grades (even ignoring arguments about reducing existing pay differentials).


• It also means that unions representing the lowest paid workers should be calling for pay increases of at least 2% just to maintain living standards.


• Government must ensure that in areas it regulates – many of which are covered in the Essential Inflation measure – that rises are kept down so as not to disproportionately affect the poorest.


• The Government must also ask the Low Pay Commission to reconsider its recommendations that the National Minimum Wage (NMW) rates rise by only 1.1% in October 2009 – less than the rate of inflation for the second consecutive year. This would represent a decline in relative living standards for low paid workers, if there pay is increased only in line with the NMW uprating. Likewise upratings to social security benefits and the basic state pension this year must also be more generous.

Performance-related pay? Hypocrisy rules in UK plc

The Guardian reports that UK executive pay has risen by 10% in the last year - this is a year in which the share values of these companies had a record decline. Many of the finance companies would not even be in existence today were it not for the public bailouts and liquidity injections.

These companies have laid off hundreds of thousands of workers in the last year to make savings and many more workers are suffering short-term working.

With the Government and private sector employers calling for pay freezes for low paid workers, this should be a wake-up call to trade unions and workers who once again are being forced to pay for a recession not of their making.

The TUC is meeting in Liverpool this week - let's hope some militancy and unity will emerge.

Public pensions - the myth

In the ongoing saga of which party can cut most, public sector pensions have come under the attack from both the Tories and the Lib Dems.

Of course the whole terms of the debate are nonsense. The budgetary deficit has been caused by the bank bailout rather than runaway public spending - let alone alleged 'feather-bedded' public sector pensions. This argument was comprehensively dismantled by LEAP's Graham Turner* in an article earlier this year. Public spending has only increased by 1.9% in the last year.

Looking at public sector pensions, the myth that somehow public sector workers are retiring into luxury is somewhat punctured by the fact that over 100,000 retired civil servants are on pensions of less than £2,000 per year. A further 100,000 are on less than £4,000 per year - hardly munching their morning muesli with Moet are they?

TUC research published on Wednesday also shows that 2.5 times as much of public sector money is spent subsidising private sector pensions through tax relief - and that 60% of this tax relief is for higher rate earners.

So yet again, the Tories and the Lib Dems are scapegoating the poorest - without any evidence base. Unusually New Labour has not jumped on this bandwagon yet.

Today's Morning Star highlights where the fat cat pensions really are.

*Graham Turner also has a new book 'No Way to Run an Economy' out now.