Investment first to avoid economic crash

Paul Nowak on the challenges facing Labour and the unions with a new economic recovery plan

In its 150th year, the TUC faces some immediate and pressing challenges.

Britain has yet to secure the terms of its withdrawal from the European Union and the outcome of the Government’s negotiations with the EU 27 will undoubtedly have profound implications for the future of the UK, its economy and labour market. Anything but continued membership of the Single Market and Customs Union is likely to leave the country in a worse position. Brexit-driven uncertainty has led leading employers to echo union concerns about the impact of a Brexit deal that disrupts trade, and the implications for UK supply chains in key sectors such as automotive and aerospace. The TUC has spent the last 18 months pressing for a Brexit deal that secures jobs, employment rights and social protections, and the Good Friday agreement in Northern Ireland.

But it is clear that Brexit is not the only challenge facing the UK economy. As the TUC’s 2018 Budget submission pointed out, since the financial crash the UK economy has had its poorest decade for growth in the post-war era. Productivity lags 16% behind the G7 average; insecure work is endemic – with one in nine workers now employed in some form of insecure employment; and investment levels are low, with the UK ranking 34th out of 36 OECD countries for capital investment. With an economy still reliant on consumer spending, but seeing continuing and prolonged squeezes on wage growth and living standards, there has been an alarming increase in private debt. Unsecured borrowing has hit its second highest level since 2009. Devastating cuts have crippled public services, while slowing the economy. Our economic growth continues to be over-reliant on financial services, helping fuel huge inequalities between regions and nations, towns and cities.

These fundamental economic problems suggest that any Brexit deal has to be accompanied by a national recovery plan to bring more good jobs to communities across the country.

That means investing in our public services, and social and physical infrastructure, and winding back eight years of austerity. Providing real terms funding increases across the public sector would help rebuild public services and address the significant cuts to resources since 2010. In the medium term, UK spending on public services per capita should be raised in line with our comparators in Europe, like France and Germany.

Just as important as funding for public services is how this funding is spent and services are delivered. The collapse of Carillion at the beginning of 2018, the failure of Stagecoach and Virgin’s franchise to run the East Coast mainline rail service, and the early termination of 21 contracts to run probation services held by eight private firms this summer, have rightly raised questions about the role of private firms delivering public services in the UK. With the public mood beginning to reflect longstanding TUC calls for an increased role for public ownership there is scope to think again about how best to deliver public services in a way that delivers benefits for taxpayers and service users alike.

The TUC is also pressing the government to lay the ground for an investment-first economy with a meaningful industrial strategy, engaging unions, at its heart. Raising public investment to the OECD average of 3.5% of GDP and establishing a National Investment Bank with a remit to target communities where good quality and well-paid jobs are most needed, would be an important first step.

Finally, the TUC has also called on government to establish a new tri-partite future of work commission to help manage and shape the coming digital revolution which will have profound implications for workplaces up and down the country. Managing this transition, shaping education and social security systems to support it, engaging workers, and opening up a discussion about how the benefits of new technology are fairly shared, are essential if the UK economy is going to realise and fairly share a potential digital dividend worth £200bn a year. The government’s National Retraining Partnership involving the Department for Education, the CBI and TUC is a good first step, but it’s not enough. Government needs to raise both the scale of its ambition and investment to ensure increasing digitalisation doesn’t simply reinforce existing inequalities.

Underpinning this national recovery plan, the TUC is calling for a new deal for working people – with a focus on driving up the quality of working life. While employment levels are high, for far too many people – particularly young workers – work is increasingly pressured, insecure, low paid and unrewarding.

Over the last decade workers have borne the cost of labour market deregulation. Key employment rights have been weakened and the ability of unions to organise and represent working people has been undermined, including through the Trade Union Act. Enforcement agencies remain under-resourced making it harder for many to claim their workplace rights.

Across the economy we have seen the biggest squeeze on wages since the Napoleonic Wars. In part this downward pressure on wages has been driven by the pay freezes and pay caps – in fact, real terms pay cuts- imposed on public sector workers between 2010-2018. This has resulted in the pay packets of public sector workers being cut by an average £2,552 (in real terms, that is once inflation has been taken into account) over the course of the last decade.  Funding meaningful pay increases in the public sector, boosting the minimum wage to £10 an hour in the short-term, extending the coverage of the real-living wage, and supporting union efforts to extend collective bargaining would all help give Britain the pay-rise it needs and deserves.

But a new deal for working people will also need new individual and collective employment rights – raising workplace standards and redressing the fundamental imbalance of power in many British workplaces. That the current framework of employment law is struggling to keep pace with modern employment practices was explicitly recognised by the Prime Minister when she commissioned Matthew Taylor to look at this issue in October 2016. But while the Taylor review brought forward some useful recommendations – including calling for equal rights for agency workers and making it easier for employees to enforce employment tribunal awards – it fell far short of the root and branch reforms needed to make Britain’s workplaces fairer.

Alongside a ban on zero-hour contracts, equal rights for agency workers, and a reversal in the burden of proof in employment cases so workers are presumed to have rights unless their employer can show they are genuinely self-employed, the TUC is pressing for a range of measures designed to help workers enforce their rights.

For example, the TUC believes there should be a system of joint and several liability throughout supply chains for basic employment standards. This would mean that organisations who seek to transfer their obligations to other parties, can still be found liable for any breaches of the core employment rights of the people who do work for them.

Of course, the most effective way of driving up employment standards, helping workers enforce their employment rights, and reducing wage inequality stronger is to support the growth of unions and collective bargaining. Repealing the Trade Union Act 2016, restoring ACAS’s duty to promote collective bargaining, and giving trade unions the right to access workplaces to tell people about the benefits of joining a trade union would all help drive up employment standards. And this support for unions should could sit alongside other measures to improve worker voice at every level, including at a sectoral level and in Britain’s boardrooms.

Securing a decent Brexit deal, reshaping the UK economy, and delivering a new deal for workers, will all require a trade union movement capable of influencing employers, politicians and policy-makers.

Revitalising trade unionism would be greatly helped by a supportive government and a new positive legislative environment.  Labour’s 2017 manifesto for a fair deal at work, would represent that significant political shift. But it will also require unions to step up their efforts to reach out to the next generation of members and activists, and in particular to reach younger workers – less than 1 in 12 workers aged under 24 carry a union card.

Some recent developments provide some light at the end of the organising tunnel. The first is the small-scale, but surprising and welcome, upsurge in union activity amongst young workers in the private service sector. Throughout 2017 and 2018 groups of predominately younger workers have taken action against employers including TGI Fridays, McDonalds, Wetherspoons and Uber. Backed by smart social media campaigning and union legal strategies these campaigns have propelled trade unionism into the public eye and forced a response from both government and employers. Alongside Unite and BALPA’s recent success in securing recognition at the previously staunchly anti-union Ryanair suggests that unions can be confident of breaking new ground in the private service sector and amongst younger workers.

Reshaping Britain’s economy requires a strong, thriving trade union movement. That would be good for workers, good for business, good for our economy and society as a whole.

Paul Nowak

Paul Nowak is deputy General Secretary of the TUC.