Posts Tagged ‘Economy and Society’

Brexit assessments: ignorance isn’t bliss — quantitative forecasts do matter

Costas Milas When questioned about the government’s Brexit sectoral impact assessments, David Davis said there were none, because “economic forecasts do not work”. Costas Milas explains why this excuse does not hold up to reality.

Quizzed at a hearing of the Exiting the European Union Committee, Brexit Secretary David Davis stated that there are no sectoral impact assessments on Brexit. In fact, Davis ‘justified’ the apparent lack of quantitative impact within the notorious 850-page dossier on the grounds that “an impact assessment consists of a quantitative forecast” and “as we have said….economic forecasts do not work”.

Yet, quantitative forecasts are an essential part of our daily routine. Consider, for instance, a simple trip from Stoke-on-Trent to Wembley. Drivers interested in this trip do not have any hesitation to consult the ‘router planner’ of the AA website which suggests up to three alternative routes. These routes are based on a very simple quantitative model which provides three different ‘forecasts’ of the arrival time to Wembley. Ignoring forecasting because, in the words of Mr Davis, “when you have a paradigm change as in 2008, all the models are wrong” is hardly the point. Indeed, by returning to the example of the AA route planner, drivers understand (or should understand) that the alternative quantitative ‘forecasts’ provided are on the grounds that nothing will go spectacularly wrong – say a traffic jam or a car breakdown.

In fact, economic forecasting prior to the recent financial crisis and all the way up to the current time has not gone spectacularly bad. To fix ideas, Figure 1 plots the 1-year GDP growth forecast (this is the ‘mode’, or most likely outcome, based on market expectations of interest rates) produced by the Monetary Policy Committee (MPC) of the Bank of England together with the actual outcome. The MPC has overestimated, since 2006, 1-year ahead GDP growth by 0.8% (based on the Median statistic). Post-financial crisis (2010-2017), however, the MPC’s GDP growth forecast has definitely improved with the ‘Median prediction bias’ dropping to 0.55%.

Source: GDP growth comes from the ONS database. 1-year ahead GDP growth forecast comes from successive Bank of England Inflation Reports.

The main point is that economic forecasters have tried to improve their forecasting performance since the crisis. In fact, the financial crisis triggered a lively debate among policy-makers and forecasters. For instance, the President of the Federal Reserve Bank of Boston, Eric Rosengren, pointed out in 2010 that the seriousness of the crisis was underestimated by economic forecasters because financial links, such as provision of liquidity, to the real economy were “only crudely incorporated into most macroeconomic modeling”. Adding to this, the Head of the Monetary and Economic Department at the Bank of International Settlements, Claudio Borio, noted in 2012 that for most of the post-war period “financial factors had progressively disappeared from macroeconomists’ radar screen”. Building on these very comments, I recently co-authored an academic paper which showed that an empirical model which distinguishes between illiquid and liquid stock market conditions in the UK is able to out-perform the MPC’s GDP growth forecasts.

Obviously, further improvements in our forecasting ability need to be put in place as we move into the complex and indeed challenging Brexit era. Yet, let us not forget that the outcome of the referendum is arguably also based on a ‘quantitative forecast’. Indeed, a 51.9% versus 48.1% vote in favour of Brexit was, in essence, a quantitative forecast of the electorate’s opinion as it was based “only” on a 72.2% turnout.

With this in mind, the pressing question which remains unanswered is the following: why does David Davis appear happy to fully trust the quantitative forecast of the vote but, at the same time, refuse to consider any other UK sectoral forecasts that build on the very Brexit vote? This very lack of information is a serious worry when we try to work out which ‘business model’ is the most suitable to carry forward in our future trading with Europe and the rest of the world.

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About the Author

Costas Milas is Professor of Finance at the University of Liverpool.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Number 10, Flickr (CC BY-NC)

 

Reforming modern employment: have the Conservatives done enough to be the party of workers?

Have the Conservatives fulfilled Theresa May’s pledge to become Britain’s ‘workers’ party’? Not as it currently stands, writes Tonia Novitz. She explains what the actual plight of British workers is, what steps have been taken by May’s government to address it, and why they fall short of what is needed.

Can the Tories can become ‘the workers’ party’? This was the latest ambition of Robert Halfon, a Conservative MP. Observing the decline in support from women and those under 30, he sought a rebranding to revitalize Conservative popularity. His pitch for a ‘workers’ charter’ might be equated with what is currently envisaged in the Taylor Review initiated by the government, but if so such a charter would be hollow and inadequate. Much more would need to be done.

Theresa May’s aspirations

As Home Secretary, Theresa May’s preoccupation lay with immigration offences, the enactment of the Modern Slavery Act 2015, and criminal penalties for those implicated in slavery, forced labour and trafficking, sometimes confusing these objectives. As Prime Minister at the Conservative Party Conference in October 2016, she evinced less sympathy for the exceptional victim and more for the ‘ordinary working class’, stating that ‘we are the party of workers’, while restating her concerns about the effects on the labour market of immigration.

Similarly, chapter 5 of a recent White Paper on ‘controlling immigration’ asserted that Brexit would fix the ‘downward pressure on wages for people on the lowest incomes’. Chapter 7 claimed that ‘workers’ rights’ would be retained and improved, noting the Review already underway to ‘consider how employment rules need to change in order to keep pace with modern business models’.

The actual plight of British workers

There is, contrary to popular belief, little evidence that free movement rules operating in the UK by virtue of its EU membership have had a depressive effect on wages or affected the availability of jobs. Instead, studies reveal that they tend to boost economic growth. The ‘posted workers’ regime, which enables temporary posting of workers between EU Member States may well have negative effects and accordingly is the subject of proposals for reform by the European Commission, which have been agreed to in principle by the European Council.

Of greater concern is the increasing frequency of hiring of workers through agencies or under zero hours contracts, such that secure employment has become scarcer, while real wages decline. These modes of employment have also become associated with what has been described as ‘platform work’, whereby drivers, couriers, carers and others sign up to an ‘app’ under contractual conditions designed to prevent them claiming rights under the most privileged legal category ‘employee’ (such as protection from dismissal) and even as a lower status ‘worker’ (such as the National Living Wage, paid holidays, and maximum working hours). At present, it is estimated that no more than 15% of the workforce are currently affected by such practices, but there are fears that, as such technology pervades the labour market, these modes of hiring will become more prevalent.

In a series of very recent cases from 2016-2017, businesses such as Addison Lee, Citysprint and perhaps most notably Uber, have all sought to evade their responsibilities for those who work for them in these ways. Employment tribunals and the Employment Appeal Tribunal have firmly rejected their arguments that the drivers and couriers are not ‘workers’ and have found in favour of claims to wages and working time protections. In the care sector, even an express statement that a contract entailed ‘zero hours’ and led to no employment rights was found to be unenforceable.

To this extent, the courts are using current British employment law to try and protect those at work. They were recently joined by the Court of Justice of the European Union, which also found an ostensibly self-employed worker paid on commission to be entitled to extensive compensation for unpaid holiday pay. The notable exception is the rejection by the Central Arbitration Committee of an application for statutory trade union recognition of Deliveroo drivers in November 2017, on the basis that they were not ‘workers’. The unilateral introduction of ‘new contracts’ by Deliveroo that enabled drivers to choose substitutes to carry out the work for them (such that there was no ‘personal service’) prevented them from claiming that status.

Credit: Pixabay/Public Domain.

The current recommendations

Published in July 2017, the Review on Modern Working Practices sought to address these forms of precarity emerging in the British labour market. It made no reference to workers who are EU nationals, despite this stumbling block in current Brexit negotiations. Instead, the Taylor Review made a series of recommendations for ‘Good Work’ regarding precarious work. A response was expected from the current government by the end of 2017, although it now looks set for early 2018.

In the meantime, two House of Commons Committees (on Work and Pensions and on Business, Energy and Industrial Strategy) have intervened with their own joint Report published in November, proposing concrete legislative initiatives in support of the Taylor Review proposals. Indeed, the Report begins with Theresa May’s commitment to legislate for workers on the steps of Downing Street. Not to be outdone, so that it will not only be the Conservatives who are the ‘party of workers’, the Report pledges cross-party support for the reforms. The difficulty lies in what is proposed and its paucity.

The Report adopts the Taylor Review recommendation for legislative clarification of the tests for ‘employee’ and ‘worker’. The difficulty is that the list of legislative tests proposed seem more exacting than the practical approach advocated by the UK Supreme Court which takes account of the inequality of bargaining power between employer and employee (or worker). Moreover, the new statutory definition of ‘worker’ would still exclude the situation where an employer imposes a substitution clause to be used ‘freely’ in practice by the workforce, so the outcome in the Deliveroo case above would be unchanged.

Reversing the burden of proof regarding who will be regarded as a worker might seem superficially helpful, and will only be as helpful as the tests to be applied. Trade union representation could be better understood as a fundamental human right and should not be dependent on such technical definitions according to the International Labour Organisation. An entitlement to a one-sided written statement by the employer of one’s terms and conditions which would extend beyond employees to workers is also likely to have limited effect. Further, a premium on payment of non-guaranteed hours above the National Minimum Wage and National Living Wage does nothing for workers whose wages may be above this level, but who cannot rely on work in any given week, so that their overall income remains at poverty levels. The issue of fictional choice neglected in the Taylor Review is barely addressed in the committees’ joint Report.

Similarly the Report neglects worker representation. The Taylor Review proposed that the threshold for application of the Information and Consultation of Employees Regulations be lowered to enable casual employees to speak out in the workplace. In his evidence to the committees, Matthew Taylor argued that otherwise workers could not stand up to employers, for example, on matters of health and safety.

Yet information and consultation which does not require an employer to act on workers’ views is vastly inferior in effect to collective bargaining backed up by recourse to effective industrial action. It is the latter which really needs to be protected, as the application in respect of the Deliveroo drivers demonstrates. The Trade Union Act 2016 and the draconian reforms therein which limited worker voice are not even mentioned by the Taylor Review or the joint Report. If the constraints on the choices and voices of those who work are not acknowledged, it is difficult to see how any legislation will ameliorate their current vulnerability. If the Conservatives simply follow these limited recommendations, they will not have acquired Lord Halfon’s ‘workers’ charter’; nor can they or will they be the party of the workers.

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Note: the above draws on the author’s PolicyBristol report (with Katie Bales and Alan Bogg) ‘Choice’ and ‘voice’ in modern working practices; an evidence informed response to the Taylor Review.

About the Author

Tonia Novitz is Professor of Labour Law at the University of Bristol Law School.

 

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

Britain’s social (in)security system: welfare conditionality and its impact on social citizenship

There is a stark disconnect between social citizenship as narrated by politicians, and social citizenship as it is lived from below, writes Ruth Patrick. She explains why we need to rethink how citizenship is experienced by those at the sharp end of the rapid escalation of welfare conditionality.

In today’s Britain, the idea of a welfare state and social security system that provides effective anti-poverty provision and adequate support is increasingly under threat. Indeed, our safety net has been described as ‘in tatters’. Successive rounds of welfare reform and reductions in the generosity and eligibility conditions of benefits have taken a very clear toll.

Take just three statistics:

  • 25 million people, including 300,000 children, are destitute in the UK;
  • Over a million three-day emergency food parcels were handed out by the largest network of food banks, the Trussell Trust, in 2016/17;
  • The Institute for Fiscal Studies estimate that 37% of all children will be living in relative poverty by 2022, undoing all the progress made in reducing child poverty over the last twenty years.

There is a gaping mismatch between politicians’ endless promises to make work pay, and ensure that the vulnerable are properly protected, and the significant and enduring hardship pointed to by these figures. The contemporary status quo feels a long way from the ideal articulated by classical liberal citizenship theorist, T H Marshall. His model of citizenship placed emphasis on the importance of providing social rights to all citizens, as part of a tripartite structure of social, political, and civil citizenship rights. Social rights, Marshall argued, should enable individuals to enjoy at least a ‘modicum of economic welfare and security.’ Almost seventy years later, the social rights of citizenship have become increasingly conditional and fractured, leaving many to ask what if anything social citizenship today offers to individuals living in poverty and affected by welfare reform.

Over the past seven years, I have interviewed a small group of single parents, disabled people, and young jobseekers as they experienced changes to their benefits. By following people over time through repeat interviews, I have been able to track the impact of welfare reform on individual lives, and – in so doing – contrast the policy rhetoric with lived realities for those at the sharp end of the social security system.

What my research uncovers is a stark disconnect between social citizenship as it is narrated from above, and social citizenship as it is lived and experienced from below. Drawing a distinction between how dominant political narratives conceptualise ideas of citizenship and what has been described as the ‘everyday world’ of citizenship enables a better and richer understanding of the consequences of welfare reform. Within the dominant narrative – citizenship from above – there is an explicit suggestion that benefit changes and, in particular, a ratcheting up of welfare conditionality will enable greater citizenship inclusion by supporting and enabling transitions from ‘welfare’ to ‘work’. This argument, which we have heard from politicians on both the left and right, is underpinned by the assumption that paid employment (and paid employment alone) is the marker of the responsible and dutiful citizen. This neglects the various other forms of socially valuable contribution – care work, parenting, volunteering – that could form part of a more inclusive understanding of citizenship.

Further, the dominant narrative of citizenship from above places responsibility on benefit recipients to take steps to secure paid employment, and suggests that this is a reasonable requirement if they are to claim social rights. Over the past 35 years, we have seen a considerable extension and intensification of these responsibilities (operated via welfare conditionality) such that many single parents, disabled people, and even those in-work but reliant on forms of in-work state support, are expected to participate in work-related activities and efforts to secure (more) work, or risk benefit sanctions. Welfare conditionality is a cornerstone of contemporary welfare provision. It is underpinned by a political framing that implies that conditionality operates effectively to support and engineer welfare-to-work transitions, and so enables greater citizenship inclusion for targeted individuals.

In fact, as my own and other research demonstrates, welfare conditionality often operates to push people further away rather than closer to the paid labour market, and can have perverse consequences given the adverse effect it may have on relationships between advisers and claimants, and on the mental health and employment prospects of individuals directly affected by sanctions.

Indeed, what an examination of citizenship from below illustrates is the ways in which the undermining of the social security system has created a situation of chronic insecurity for affected individuals, who find everyday life incredibly difficult given the extent of their financial hardship, and the fear that so often accompanies current and anticipated future rounds of welfare reform. This fear is particularly prevalent among disabled people, who can be subject to repeat reassessments of their eligibility for support. As one participant put it, when commenting on these assessments:

It puts a lot of stress on [me]…I think about it all the time.

As a result of the reduction in social security support, individuals regularly have to make very hard choices and are going without in their efforts to get by. Cath explained:

[earlier] this year, I needed underwear so I didn’t pay my gas and electric that fortnight.

While the citizenship narrative from above suggests that welfare reform and conditionality are mechanisms of inclusion, they often have exclusionary outcomes, where individuals are left feeling excluded from mainstream society as a result of their poverty. Cath felt unable to attend a mental health support group as it met in a local museum café:

I know I bang on about money but, with meeting in place where a cup of tea’s £1.75. I want a hundred tea bags and two pints of milk for that.

Where individuals are affected by benefit sanctions, they report immediate and severe hardship, and this often affects children, as in the case of Chloe, who had two young children, but was sanctioned shortly after she was placed on Jobseeker’s Allowance when her youngest child started school:

We’re paupers, we’re so poor. It’s like we’re living in – you know when you see all those adverts – please feed our children – feed my bloody children.

Engaging with the everyday worlds of citizenship for individuals affected by welfare reform underlines the extent to which social citizenship is no longer providing adequate security for those in receipt of out-of-work benefits. It highlights the disconnect between citizenship from above and below, and illustrates the very real need to reimagine social citizenship for contemporary times.

Social citizenship today seems to operate most often as a tool of social control and a mechanism of governance, employed rhetorically to call for greater responsibility on the part of ‘welfare dependants’. Despite this, there is still scope to regain its emancipatory potential. For this to be effective, we need to place sustained effort on seeking to better understand the everyday worlds of citizenship, particularly for those at the sharp end of the rapid escalation of welfare conditionality. My research suggests that what Loïc Wacquant observes in the USA as the ‘normalization of social insecurity’ is also evident on this side of the Atlantic. Contrasting the status quo with more egalitarian ideals of social citizenship illustrates just how much would need to change if the welfare state is to offer meaningful security to all of its citizens.

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About the Author

Ruth Patrick is Postdoctoral Researcher in the School of Law and Social Justice at the University of Liverpool. Her latest book For Whose Benefit? The Everyday Realities of Welfare Reform was published by Policy Press in 2017.

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay/Public Domain.

How effective is online communication between the elected and their electors?

In its early days, some considered the internet to be the silver bullet that could deal with the deficits of representative democracy. Others had been less optimistic vis-à-vis its potential to foster democracy. Hartwig Pautz looks at whether the e-democracy tool WriteToThem allows for meaningful communication between citizens and their elected representatives.

Since its creation, the internet has been hailed by some as an instrument that can ‘fix’ representative democracy, or even make deliberative or direct democracy possible on a mass scale. On the opposite side, some have pondered whether ‘democracy can survive the internet’ in the face of post-truth politics and given the use of the internet to spread lies and ‘alternative facts’.

Amongst the modest claims about the internet’s potential positive impacts on democratic practice is that it can facilitate exchange and communication – in other words, higher levels of interactivity between voters and their elected representatives. Among those believing in the internet as a technology to make democracy better are MySociety – a ‘brand’ of the UK Citizens Online Democracy charity. They have produced tools such as TheyWorkForYou; FixMyStreet; WhatDoTheyKnow; FixMyTransport; PledgeBank; and HearFromYourMP. A further tool is WriteToThem, more or less the internet version of 1990s FaxYourMP.

WTT allows users to input their postcode and find their representatives – on the local, sub-national, national and EU levels – in order to send them an email. MySociety believe ‘that the internet can meaningfully lower the barriers to taking the first civic or democratic steps in a citizen’s life, and that it can do so at scale’, WTT was set up to facilitate this. This assumption however begs a question: what kind of interactivity does WTT actually facilitate? My research seeks to give answer this question by exploring WTT through research with Members of the Scottish Parliament (MSPs) and Scottish local councillors.

This exploration is approached through how those elected evaluate WTT as a tool that allows citizens to reach out to them. On the positive side, e-survey and interview data show that WTT is well-used, as both MSPs and local councillors demonstrate a keenness on interacting with WTT users. Few, if any, emails go unanswered. But the data also shows that people do not use WTT as planned by its makers. Rather than being used to bring the concerns of individuals to their representative’s attention, WTT is often used by campaigning organisations, albeit indirectly so.

This is done by campaigners who ask their followers to ‘copy and paste’ standardised demand letters into WTT. Replies are not expected, let alone an exchange of views with the MSP or councillor. When asked about this aspect of WTT, one MSP remarked that ‘WTT is ideal for special interest groups trying to generate a pressure of numbers in respect of any issue’. Such usage is unlikely to generate interactivity as WTT becomes little more than a one-way communication tool. Similarly, MSPs and councillors think of many emails through WTT as a call ‘to sort it’.

But the research also showed some positive findings. Some interviewees describe WTT as one of many mechanisms through which to communicate with citizens: ‘I think WriteToThem and things like that are really helpful because it means I have contact, however fleeting, with a wider range of people’, as one local councillor said. Contact, however, does not equal better insight into what is important for constituents. Just over a third of MSPs and only less than a quarter of councillors indicated that they had gained better insight into what concerns citizens through WTT.

It seems therefore that WTT is of limited use for better fulfilling the ‘constituency service role’. Indeed, doing so is further complicated by the competition which WTT messages create when the user decides to send them to all councillors in a multi-member ward or to constituency and list MSP. This can lead to the elected trying ‘to sort it’ all at the same time and thus unnecessarily binding government resources or duplicating officials’ efforts. Yet some respondents regard this competition as healthy for it provides an incentive to react to constituents’ concerns quickly.

What are the conclusions then? Data presented here shows that only very rarely the instigators of a communication via WTT move communication beyond the initial email and the representative’s response. Instead, many WTT users, despite attempts by MySociety to block such usage, send emails written by campaign organisations. And when email-based iterative exchanges do occur, the representatives do not find them very fruitful.

The research confirms that ‘the internet’ itself cannot stimulate democracy or revitalise the relationship between the represented and the representative. This is not surprising, as technological determinism was always displaced. Nonetheless, WTT is seen by many representatives as a helpful tool for citizens to contact them. What also emerged was that the makers of WTT could have made their tool more attractive to the elected. Some councillors and MSPs voiced unease about the fact that they were never consulted over WTT or their inclusion in its database: ‘I would be in favour of more communication with MySociety.org because I’ve never had communication from them. So, they’re asking me to engage on a site with constituents but they’ve never actually engaged with me to tell me what the purpose of the site is, what they expect of me, how they rate things’, as one MSP said. This is problematic as e-democracy tools ought to be considered legitimate by all involved. Otherwise, they might contribute to the existing distrust in parliaments and their members.

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About the Author

Hartwig Pautz is Lecturer in social sciences at the University of the West of Scotland.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Image credit: Pixabay/Public Domain.

Ending shareholder monopoly: why workers’ votes promote good corporate governance

A consensus is emerging that votes at work promote good corporate governance, argues Ewan McGaughey. Here he outlines behavioural, qualitative and quantitative evidence, and explains that votes at work in Britain have among the longest, richest histories in the world.

The UK is about to stop shareholders monopolising votes for company boards, with worker voice. Currently, asset managers control most shareholder votes in public companies. They have systemic conflicts of interest, because shareholder votes can influence companies to buy asset managers’ financial products (e.g. defined contribution pensions). But now this is changing. One small step, following government consultation, is that the Financial Reporting Council will write new ‘comply or explain’ rules in the UK Corporate Governance Code, so that listed companies introduce: (1) ‘a designated non-executive director’ responsible for employee engagement, (2) ‘a formal employee advisory council’ or (3) ‘a director from the workforce’.

Theory and evidence on votes at work

Without any credible evidence, a minority of corporate lawyers and economists still argue that worker voice will damage productivity. For example, Oliver Williamson argued shareholders make ‘firm-specific investments’ that cannot be protected without controlling boards. Others argued it is essential that every voting right ‘flows with the residual interest in the firm’. These arguments had no empirical basis, and even in their own theoretical terms, no factual basis. Shareholders, who exercise votes, are mostly asset managers and banks. They make no firm-specific investments at all. They bear no risk from insolvency. They appropriate votes on ‘other people’s money’. The true, ultimate investors are beneficiaries of pension funds, life-insurance policies or mutual funds: usually employees saving for retirement.

A second type of argument is that with multiple interests on boards, people will squabble and business will become slower. This theory was advanced in valuable work by Detlev Vagts and Henry Hansmann. But the same argument was used by Johannes Zahn, the Nazi banker and corporate lawyer who drafted the German Public Companies Act 1937. Zahn wanted banks and boards to control everything, so ‘democracy of capital will vanish just as it did in politics’. After WW2, the reverse happened: capital dispersed, and votes at work have spread, with a majority of OECD (and EU) countries now having some form of codetermination law.

Yet a third argument is that codetermination does not happen voluntarily, only by coercive law, because it is inherently inefficient. This is historically inaccurate. Elsewhere, I have explained how codetermination in Germany began with collective agreements, which only later were codified by law. But also, behavioural, qualitative, and quantitative empirical evidence strongly suggests votes at work are essential for productive companies.

First, behavioural evidence supports ‘the participation hypothesis’. That is, ‘changes in human behavior can be brought about rapidly only if people ‘participate in deciding what the change shall be and how it shall be made.’ Votes at work also empower people to ensure they are fairly paid. All modern behavioural evidence suggests that, unless people are fairly treated and paid, they lose motivation to work. The arguments of Ronald Coase or Easterbrook and Fischel, that distribution is unconnected to efficient production, are evidence-free.

Second, qualitative evidence supports worker voice, not least because conflicts need to be resolved, not suppressed. But also, multiple interest groups on boards can and do work well. In 1978, worker representation at the UK Post Office board was lauded in its own annual report as having ‘contributed much to the major decisions that have to be taken about the future’. Similarly, long experience in UK pension funds shows ‘on the whole they function as relatively harmonious bodies’. By contrast, there is no evidence beyond anecdote to show that codetermined boards do not work well.

Third, preliminary quantitative evidence suggests legal systems with votes at work are superior in productivity and economic development. Cambridge’s Centre for Business Research has compiled a Labour Regulation Index of 117 countries’ labour laws, and their change since 1970. Results are still in preliminary stages, but will probably confirm what behavioural and qualitative evidence has already said: votes at work are essential for long-term success of companies.

History of British codetermination

The fact that there is not already a general codetermination law in the UK is surprising because its corporations with the greatest long-term success – universities – have incorporated worker voice at least since the Oxford University Commission of 1852. Hardly a radical body, it was determined to reverse ‘successive interventions by which the government of the University was reduced to a narrow oligarchy.’ Today almost all universities ensure staff have votes at work. The LSE does it for staff and students (see article 10.5 but see amendments). So why is there no general plan yet?

Two reasons have been (1) an old view that to get votes, people should invest property, by buying shares and (2) uncertainty in the labour movement. Both have now gone. Outside universities, the South Metropolitan Gas Act 1896 and the Port of London Act 1908 enabled worker representatives on boards. The Gas Act had depended on workers investing money through an employee share scheme. This reflected old prejudice that male ownership of property was a key to participation in public life. Yet the Port of London Act enabled worker votes solely by the investment of labour. After WW1, Lloyd George in coalition with Conservatives attempted to pass codetermination for Railways. But, as a previously secret memorandum shows, it failed against management opposition and unions who only wanted nationalisation.

Why did organised labour not bargain hard for votes at work? First, employee share schemes had given worker representation a bad name: workers were told to save in an Enron-style undiversified portfolio, and given no meaningful voice. As LSE founders Sidney and Beatrice Webb said, employee share schemes were advocated ‘by the most reactionary persons’. Second, it was recognised by the Webbs after WW1 that worker representation, purely by investment of labour, could be ‘a real social gain’. But Sidney Webb was also writing the UK Labour Party’s clause IV, committing to ‘nationalisation of the means of production’. The drive for public ownership was conflated with worker voice, as if socialisation of ownership was necessary for socialisation of power. At the same time, British labour with government support, had substantial influence (if not real votes) through strong union membership, collective bargaining, and strikes. Voice at work with collective bargaining created prosperity and a more equal society. But it was all destroyed from 1979. Unions’ decline and soaring inequality were a mirror image:

Over the mid-20th century, through labour policy documents, trade unions were a ‘single channel’ of voice, and there were many codetermination experiments. The Iron and Steel Act 1967, the Industry Act 1975, and the Post Office Act 1977 all required worker directors. The Bullock Report of 1977 proposed a general Act, but it divided all sides. Half the board would be worker representatives, half shareholders, and a government representative would break any deadlock. Such detailed plans, rather than minimum standards, could not command enough consensus. After the government flipped its proposals to a two-tier board structure, and its White Paper flopped, the 1979 election seemed to be the end.

Or not quite ‘the end’. Universities still had codetermination. Moreover, collective agreements for pension plan management ensured codetermination in worker capital. After a scandal of pensions being stolen by Robert Maxwell, the Conservative government passed the Pensions Act 1995, for one third representation in all pensions unless firms positively opted out. The Pensions Act 2004 removed the opt-out. The Secretary of State required one-half by statutory instrument. It is not the world’s best system: Australia, Belgium or Sweden do better. But, surprisingly, British codetermination in pensions supports more worker voice than in Germany. Far from an alien tradition, British codetermination has among the richest histories in the world.

Proposals today

This leads to the essential question: how should companies, employees, and unions build votes at work today? It is essential to keep in mind that if Labour regains office, corporate governance will reform further. At Labour’s 2016 conference, policy ‘Composite 4’ committed to reform. This means, said the Shadow Chancellor, adopting the Manifesto for Labour Law. This says every ‘board must have worker directors’ and that workers ‘should have a minimum percentage of the vote in general meetings of the company’. This is what British universities have done for centuries. The need for votes at work are a new political consensus in Britain: the question is not so much ‘if’, but ‘how’.

So, how should companies and trade unions approach the Financial Report Council’s options? Given the social and economic benefits from embracing employee voice, the most advisable approach for corporate boardrooms would be to get ahead of the curve. They can look to successful competitors across Europe – in the Netherlands, Denmark, Sweden, Norway – for advice. There are three further points to consider.

First, by far the simplest option will be that the workforce elects at least one director. Two worker directors will bring diversity and mutual support. Trade unions may well bargain to choose the board representatives, so it is important to understand there are many alternative models. For instance, trade unions already nominate many pension trustees, but also many have workforce ballots and unions put up candidates. Abroad, employees may delegate votes to their union, or their vote can be automatically delegated unless employees opt to send instructions.

Second, there is a choice about the range of employees to include. Again, the simplest option is to ensure employees of the corporate group (readily defined for group accounts and tax) are included in ballots for the board. A successful company will see every reason to include workers from its subsidiaries overseas. All voting can be arranged electronically with simple, safe software.

Third, a union’s support will be essential in ensuring good communication with the workforce. One of the best reasons for voice on boards has always been the reduction of industrial conflict. The overwhelming experience is that worker representatives will genuinely seek to defend employees’ interests, but do so in a cooperative way. Employees and unions will want meaningful progress. So will member nominated trustees in pension funds. If it can be done – and there is every indication it can – worker voice will promote the success of all companies.

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Note: the above draws on the author’s published work in the Industrial Law Journal (Votes at work in Britain: Shareholder Monopolisation and the ‘Single Channel; free on SSRN).

About the Author

Ewan McGaughey is Lecturer in Private Law at King’s College London.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

How the youth of Britain’s Roma, Gypsy, and Traveller communities fight the injustices they face

The youth of the Roma, Gypsy, and Traveller communities are committed to fighting the injustices they face, writes Colin Clark. He argues that this form of activism may finally end the racism and stigma against them.

A recent article by Cassie Marie McDonagh in The Guardian reflected on her negative and discriminatory experiences of the state education system as an Irish Traveller woman, and the fact that similar experiences are continuing for younger generations of Traveller children today. This inequality of access, take-up, and delivery of education to the approximately 300,000 plus Roma, Gypsy, and Traveller communities in Britain is emblematic of a second-class citizenship that needs to end. The communities are no longer silent and biting their tongues, instead choosing to speak out and challenge such discrimination when it appears. This enactment of Traveller agency – telling it exactly how it is to those who will not usually listen – is just one way that the last ‘acceptable’ form of racism towards the communities will end.

Powerfully, Cassie also reflected on the findings of a recent YouGov poll that demonstrated the lack of progress in terms of combatting anti-Traveller prejudice across many areas of everyday life. This poll found that many settled people (40%) have a serious issue with close relatives forming relationships – that is, falling in love – with someone from the Roma, Gypsy, and Traveller communities. Further, despite what racial equalities legislation has guaranteed for decades now, 34% of the sample still do not consider Gypsies and Travellers to be a ‘proper’ ethnic group. Challenging this denial of ethnic identity is another important way to combat everyday racism.

Nor is such racialized, systematic exclusion confined to UK education systems. In Parliament and in the press – and most likely on the outskirts of your own town – the communities endure forms of hostile treatment that many assumed had been confined to the vaults of genocidal history. This is not the case. Various forms of legislative and public policy discrimination continue across all the key UK social policy areas: evidence demonstrates that Roma, Gypsy, and Traveller people are the neighbours, workers, patients and pupils that no one wants. It is surely shaming that in 2017 Beveridge’s infamous ‘Five Giants’ continue to thrive amongst our most marginalised communities? This unacceptable situation must end.

Cassie also mentions recent debates in Parliament and a new report from The Traveller Movement as illustrative of the struggles that remain to secure justice, equality, and fair treatment for the communities. And she is right. In that House of Commons debate, like most others, Roma, Gypsies, and Travellers are represented in a static, stereotyped, and two-dimensional light; a Parliamentary spotlight that tends to either demonise or, very rarely, romanticize the communities. This is unhelpful at either end of the spectrum and our elected officials have a duty of not just representation but also of care towards the diverse communities they serve. A sense of perspective and balance is important and words need to be chosen carefully by our MPs, lest they come back to haunt them.

Likewise, items carried by national and local press are often inaccurate, hostile, and tend to inflame situations rather than offer factual and balanced reporting. This is particularly the case regarding so-called ‘illegal sites’ – or, in another form of words more meaningful to Gypsy and Traveller families, ‘roadside encampments’. Indeed, Communities Minister Alok Sharma recently announced another review of planning and trespass laws that are already explicitly designed to prevent Gypsy and Traveller families from owning their own land as well as evicting them from their trailers – that is, their homes – if they are fortunate enough to purchase land to build sites on with the required planning permission. He suggested that the current position isn’t working and there is a perception that: ‘There is one law for Travellers and one for the rest of society.’ This inaccurate view is widespread and is based, almost entirely, on post-Dale Farm campaigns of misinformation, designed to ensure larger sites are forever curtailed.

And it isn’t just the issue of roadside sites where the spotlight will glare, as it did recently in Cromer, Norfolk. It is on Roma, Gypsy and Traveller children as well. The Times recently launched a lurid investigative report into Roma communities from central and Eastern Europe living in Govanhill, Glasgow. In its lead article, journalist Marc Horne stated that ‘children [are being] sold for sex on the streets of Govanhill’. Yet this shocking claim was not supported by evidence taken to the police, but rather on pub gossip and local hearsay.

A local Roma-led NGO, Friends of Romano Lav – of which I am a trustee – reacted to the article, issuing a statement that condemned the inflammatory reporting and suggested that issues of child protection should not be ‘racialised’ but rather, where evidence exists, should be taken forward to the police. At the time of writing, an enquiry has been launched but no such evidence has been presented to the authorities. The nature of the reporting on Govanhill was remarkably similar to the moral panic over the case of ‘Maria’, supposedly ‘stolen by Gypsies’ in Greece in 2013, as well as a recent case in Norfolk of human slavery.

It has been evident that life after ‘My Big Fat Gypsy Wedding’ and its various spin-offs has been an awakening for the Roma, Gypsy, and Traveller communities of Britain. Used to being on the fringes, trying to live quiet, everyday lives, suddenly the glare of a harsh spotlight fell on families who were unaccustomed to such attention. It could be argued that some unintended benefits have arisen from this televised form of invasive ‘door-stepping’. For one thing, a new generation of mainly young women activists have stepped-forwards to claim space, tell their stories, and challenge what is said about them and their kith and kin.

This, in many ways, is exactly how the last ‘acceptable’ form of racism will end: a new generation who are brave, empowered, and committed to fight the injustices they see around them. As John Lydon once put it, ‘anger is an energy’ and today this anger is fuelling a new wave of Roma, Gypsy, and Traveller consciousness and activism that may well spell the beginning of the end of their stigmatization.

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About the Author

Colin Clark (@profcolinclark) is Professor of Sociology and Social Policy at the University of the West of Scotland and a Trustee of Romano Lav.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay/Public Domain.

 

How the Conservatives’ austerity rhetoric won them GE2015, and almost cost them GE2017

Paul Whiteley, Harold D. Clarke, and Marianne Stewart explain why austerity is no longer an election winner – neither economically nor politically. They argue that David Cameron’s government reaped political rewards through its austerity rhetoric, but the strategy backfired in the next election, when many voters believed a Conservative government would impose more hardship on them.

In our book on the 2015 general election we showed that economic recovery was the most important factor in explaining the surprise victory for the Conservatives. It played a key role in the 2017 general election as well. So the story of these two elections supports the longstanding proposition that incumbent parties are rewarded by the voters for a good economic performance and are punished by a bad one. To repeat a famous phrase coined by James Carville, a chief campaign advisor to Bill Clinton in the 1992 US presidential election: ‘It’s the economy, stupid!’

However, the story is not as straightforward as it seems, since the initial economic policy adopted by George Osborne when he became Chancellor of the Exchequer in 2010 would have almost certainly lost the election for the Conservatives had he not changed course in the middle of the Parliament. The original austerity plan embedded in the Coalition Agreement of 2010 derived from a mixture of theoretical ideas about how the economy works, but it was also the product of a conscious electoral strategy.

In the 2010 campaign the Conservatives made much of the argument that Britain faced imminent bankruptcy and was in a similar position to Greece and other cash-strapped EU countries. This rhetoric was driven by the need to provide a radical alternative narrative to that of the Labour Party. This narrative enabled both Coalition partners to blame Gordon Brown and Labour policies for the Great Recession. This claim was very wide of the mark since the crash started when a real estate bubble in the US burst, and it spread quickly to banks and other financial institutions which themselves had been creating opaque and highly risky financial instruments that proved valueless when the crisis broke.

However, the Conservatives’ economic argument proved to be a very potent message in the 2010 general election, so much so that echoes of it were still being heard in 2015 and again in 2017. The focus on the size of the budget deficit as the root cause of the problem was an essential campaign strategy because the economy was recovering at that time. With the recovery taking place they needed to frame the debate by focusing on the bad news of debt and ignoring the good news of growth.

That said, the budget deficit in 2009-10 was very high by historical standards, but not so much that it triggered serious problems for a government trying to borrow in financial markets. We know this by looking at long-term interest rates in Britain which measure the extent to which British governments can fund their borrowing. If borrowing is so high as to trigger a fear of default, then foreign lenders would require a premium on the interest payments they receive in order to compensate them for the extra risks. This would drive long-term interest rates higher, something which actually happened to Greece. In fact, long-term interest rates in Britain declined during this period, largely because the country was experiencing deflation and also the policy of quantitative easing kept rates at a low level.

Having ousted Labour from Downing Street in 2010, the Chancellor then proceeded to follow through on the cuts. This was because he had bought the idea that austerity brings recovery. His views were set out in a speech delivered in April 2009 before the election: ‘The crisis has also exposed two fundamental arguments. The first is whether, when you are already borrowing too much, you should deliberately try to borrow your way out of debt. David Cameron and I have consistently argued against this irresponsible course of action.’

This meant that the newly-formed government embarked on a policy of deflation in a context in which traditional policy-making would have taken the opposite course of action. But following the 2010 election, the British public mood darkened as the Coalition Government’s stringent austerity policy medicine was prescribed and the country’s economic misery deepened. Evaluations of the national economy and personal financial circumstances became deeply pessimistic and, for a time, it appeared that the Government would be punished severely in 2015 for its harsh, and apparently failed, attempt to restore the country’s economic well-being.

Figure 1 shows the actual and forecast budget deficits as a percentage of GDP published by the Office of Budgetary Responsibility in June 2010 and then again in December 2014. The budget deficit reduction strategy was on course to reduce the deficit to zero by 2015-16 up until 2012-13, at which point it went into reverse. In later years, the budget squeeze continued, but at a much slower rate than set out in the original plans. The result was that the gap between those plans and outcomes widened each year reaching 2.6% of GDP by the time of the 2015 election.

As a consequence of this deft change of strategy, the economic situation began to brighten. Statistics on key economic indicators such as growth and employment started to improve and as did the public’s economic mood. The trend accelerated as the election approached and our analysis showed that while the economy was not the only issue that mattered in the election, it was the most important factor when it came to influencing support for the major parties. The Conservatives gained and Labour, the Liberal Democrats, and UKIP all lost ground.

The Conservatives hoped to repeat the strategy in 2017 with the slogan of ‘strong and stable leadership’, but by then support for what was left of austerity had rapidly waned among the voters. Seven years of cuts involving flat-lining real wages and a severe cash crisis in the public services began to show. One group in particular which had been heavily-hit by the austerity policies were the young. A rising burden of debt produced by burgeoning fees and usurious interest rates charged on loans to students became a key political issue. Similarly, those under the age of 25 were excluded from the increase in the minimum wage introduced in April 2016 and they were increasingly aware of being left behind. As a consequence, Labour won 65% of the youth vote in 2017 on a much higher turnout of this group.

Figure 2 shows the relationship between real growth in the economy and the size of the national debt as a percentage of GDP over the period from 1950 to 2016. The data are from the Bank of England and with a very weak positive correlation between the two (+.15) it shows that there is essentially no reliable relationship between debt and growth. If anything, the positive correlation suggests that increased debt has been associated with higher, not lower, growth rates. As Mark Blyth points out in his excellent book on the history of Austerity: ‘Austerity has been tried and will keep being tried, at least for the Eurozone, until it’s either abandoned or voted out.  It doesn’t work’.

In the end, austerity looks to be a loser, both economically and politically. The Cameron-Osborne Conservatives reaped political rewards in 2015 not by enforcing austerity but by relaxing it to revitalize the economy in the run-up to that year’s general election. But, as Theresa May will testify, they did go far enough. In 2017, many voters, particularly young people, believed a May-led Conservative government would impose more hardship on them in the years ahead. That prospect proved decidedly unpopular and in the wake of their near-defeat, with the Prime Minister and her colleagues now scrambling to replace both the rhetoric and the reality of austerity.

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Note: the above draws on the authors’ chapter “The Rhetoric and Reality of Austerity: Electoral Politics in Britain 2010 to 2015“, in State, Institutions and Democracy.

About the Authors
paul_wPaul Whiteley is Professor at the Department of Government, University of Essex.

 

 

Clarke_1Harold D. Clarke is Ashbel Smith Professor, School of Economic, Political and Policy Sciences, University of Texas at Dallas, and Adjunct Professor, Department of Government, University of Essex.

 

Marianne Stewart is Professor in the School of Economic, Political and Policy Sciences at the University of Texas at Dallas.

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Conservatives (Flickr/CC BY-NC-ND 2.0)

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