opportunity of a lifetime…to…alter the landscape of local government....the traditional, contractual culture which dominates public procurement has to change. Success will depend on developing flexible and true partnership based relationships between commissioners and providers. That will mean councils identifying a partner which will help them deliver their desired outcomes, rather than a contractor provider focused on a particular service. This new approach presents a real challenge for providers, whether they are in the public, private or third sector. Ahead of any procurement they have to be able and ready to work openly with commissioners to define how the services might be delivered.146
Capgemini, Grant Thornton, the Leadership Centre for local government and London Councils, moreover, are currently funding an extensive research project on Total Place by the NLGN – ‘the provisional wing of the consulting and contracting sector’ (Sir Jeremy Beecham) – who maintain that:
There is much speculation about the potential savings achievable if the intentions of the ‘Total Place’ programme are viable. The concept is a strong one: rather than see individual agencies or local authorities structure their expenditure in silos, a strategic approach to the deployment of total local spending could yield big savings. Yet despite the ongoing pilots, there remains a major gap between theory and practice. The key question is no longer what could be achieved but how it can be achieved....Learning lessons from across the globe where local public services have been revolutionised by collective commissioning arrangements, NLGN intends to set out the steps necessary for the delivery of truly integrated place-based decision-making.147
Thus NLGN obfuscates the reasons why private contractors and consultants support Total Place – which they see as providing the ‘opportunity of a lifetime’ (Nick Sharman) in the present cuts conjuncture to boost privatisation – and perpetuates the myth that there are some painless options for reducing spending without cutting services or reducing staff: which, as Blair McPherson who is a senior manager in a large local authority concludes, could ‘end up doing less and doing it less well’.148
PFF also fails to acknowledge, as shown in Chapter 6, that most public spending is now controlled by the unelected ‘quango state’ with local councillors responsible for only five per cent of the total public spending in their areas; and therefore contains no proposals to reverse this ‘democratic deficit’.
PFF’s most radical proposals, moreover, are: to retain the regressive council tax with the ‘addition of more bands at both the top and the bottom of the scale…to make it a more genuinely progressive tax’; scrapping the council tax cap; further localisation of business rates to ‘restore local government’s link with the business community and give it a share of the growth of the business tax base’; and billing households for council tax ‘net of any rebate entitlement, but with a responsibility to inform the Government if the details on which it was calculated were incorrect’.149 New Labour’s 2010 general election Manifesto, however, pledged to retain the council tax cap; not ‘hold a Council Tax revaluation in the next Parliament’; and ‘establish a cross-party commission to review the future of local government finance’.150
Strategies to defeat big business control
Dexter Whitfield provides a useful summary of ‘the action which can be taken to minimise the impact of marketisation and privatisation’151:
-
Mobilise against specific policies and projects
-
Organise coalitions and alliances
-
Intervene in the modernisation process
-
Promote alternative policies
-
Prevent the extension of marketisation though the European Union and World Trade Organisation.152
Intervention in the modernisation process focuses on the need to:
-
prepare ‘critiques of options appraisals’
-
make ‘the case for the exclusion of support services from the private finance initiative/public private partnership projects’
-
research and challenge ‘the local and regional content of private contractors’ production and supply chains’
-
organise and recruit the staff of private contractors supplying public services
-
demand that council scrutiny committees ‘investigate the performance of contracts and partnerships, procurement policies and projects using integrated impact assessment to identify the full effects on services, jobs, economies and communities’
-
intervene in procurement and commissioning processes
-
demand that ‘all policies and projects should be subjected to a social impact assessment at both the planning and post-implementation stages’
-
ensure service and efficiency reviews fully engage front line staff and users in a comprehensive review and scrutiny process’
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maximise ‘employment protection particularly by advocating the secondment model and pensions protection’
-
demand re-regulation of markets and private companies
-
build in-house capacity and ‘retention of public sector intellectual capital by minimising use of consultants’
-
maintain a high level of trade union organisation and representation in arms length companies/trusts and make the case for their transfer back to public sector control.153
The discussion below includes the other strategies referred to by Whitefield. For, as he also emphasises, ‘organised opposition to marketisation and privatisation must initially come from alliances and coalitions of local trade union and community organisations’: because 1) most ‘local government organisations which opposed similar Tory policies in the 1990s are embedded in the Blairite agenda’; and 2) national trade union opposition prior to New Labour's defeat at the general election was ‘tempered by constraining local activity arising from traditional control mechanisms and the unwritten part of the Warwick Agreement of not mobilising opposition to Labour policies’.154 Examples of the latter included the decision by both the Scottish and Welsh TUCs in 2009 not to support the People’s Charter155: though, as shown below, on the last day the 2009 British TUC Congress supported the Charter. Furthermore, as Carolyn Jones notes
any motion with the slightest controversy was shunted to the last day of conference. Instead of embracing change, demanding reform, questioning the system…the TUC agenda looked at how to manage the downturn by limiting its impact…arguing for improved redundancy pay or extending the minimum wage is important. And putting the case for compensation for short-time working may be ‘realistic’ demands in the current climate. But in reality such demands are timid and minimalist. They reflect a defeatist acceptance that the present economic and political system is as good as it gets. They suggest that the role of unions is to beg for a few more crumbs from the capitalist table rather than to fight for a socialist agenda.156
The timidity of the TUC and most of its affiliated unions, moreover, is not new. For, as Ted Knight – the Marxist Leader of Lambeth Labour Council from 1978 to 1986 – stated in 1981:
The reforms gained by the working class over decades of struggle can no longer be sustained by the capitalist class....This is a total change in the post-war period: the movement is entering a new situation, the TUC leadership is not geared to it and they are not even in sympathy with the ideology which is needed to break that conflict situation. The TUC leadership is frightened that forces are going to grow which they won't be able to control. So, apart from the inertia of its bureaucracy, the TUC's hesitation in helping initiate and organise a national movement is ideological...Any compromise with the right wing of the Labour Party is a compromise with the position of accepting that the crisis of capitalism must be overcome at the expense of the working class.157
The need for an alternative economic and political strategy
By October 2009, the estimated cost of the bailout to prevent the collapse of the banks and money markets by the British government was over a trillion pounds or £1,183 billion.158 Conversely, in the five years up to the start of the credit crunch – 2002/03 to 2006/07 – the finance sector only paid £203 billion in taxes and employed no more than 6.5 per cent of the workforce: which dispels the pernicious notion that it is vital to the British economy.159 The IMF's April 2009 Global Financial Stability Report also estimated the net cost of financial stabilisation, as a percentage of GDP, as 4.4 in Canada, 1.8 in France, 3.1 in Germany, 0.9 in Italy, 1.7 in Japan, 9.1 in Britain and 12.7 in the US over the next five years. These estimates were based on support measures announced by mid-February 2009; and ‘net cost’ is defined as ‘gross support minus recovery over the next five years.’160 Though, as Richard Peston notes, the original figure for Britain was 13.4 per of GDP: but this was withdrawn following pressure from the Treasury.161 This was the equivalent of £190 billion, which the IMF then also downgraded to £130 billion: but this was still twice the amount forecasted in Alistair Darling’s 2009 Budget. The IMF also suggested that a further $250 billion of capital would be needed for British banks.162
Meanwhile City experts considered that up to 80 per cent of the £50 billion in the October 2008 ‘quantitative easing’ (QE) package could have gone offshore. For example, former Bank of England official Danny Gabay estimated that probably two thirds of the Bank of England’s QE bonds to reflate the economy have been bought by overseas institutions. Hence, on 7 May 2009 – in response to growing concern that QE was failing to turn the economy around – the Bank of England increased its QE programme by £50 billion.163 On 6 August 2009, moreover, the Bank of England decided it would take its QE scheme up to £175 billion, breaking the £150 billion limit set by Chancellor Alistair Darling. Bank Governor Mervyn King, in his letter to Darling, said that the Monetary Policy Committee was worried that ongoing problems in the banking sector and still-large debts among consumers could put the brakes on any recovery. The British Chambers of Commerce, which had been virtually alone in calling for the Bank to push QE up to £180 billion, said even more may still be needed later in the year.164 And, when in November 2009 the Bank increased QE by only a further £25 billion in the following three months, The Guardian editorial entitled ‘The treatment isn’t working’ stated that this was:
No surprise, but a huge worry, since the economy remains very far from anything that looks like a sustainable recovery. Indeed it may be heading next spring for something considerably worse: a massive relapse back into slump….If monetary policy is not having the desired effect and the economy is having a near-death experience next year then the government will have to spend more. Otherwise the spectre of the great depression is likely to return.165
Alistair Darling – in his July 2009 White Paper, which ruled out caps on bankers' bonuses166 – also opposed proposals by King, the Tories and Liberal Democrats to break up big financial institutions.167 Moreover, on 20 October 2009, King – in his clearest call yet for retail and investment banking operations to be separated, as was done in the United States in 1933 under the Glass-Steagall Act, which was repealed in 1999 – told business leaders in Edinburgh that:
We shall all be paying for the impact of this crisis on the public finances for a generation….never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform.168
Soon after, however, the European Union forced New Labour to do a U-turn by carving out three new banks from the Royal Bank of Scotland, Lloyds Banking Group and Northern Rock at an estimated cost of another £40 billion to the taxpayer.169 But, as Will Hutton noted, the bank “break-up” was ‘no such thing. The City wants as little change as possible. And it has won.’170 Moreover, as Left Economics Advisory Panel co-ordinator Andrew Fisher said:
The government is rescuing the banks and protecting profits and bonuses, but it is providing no guarantees for the workforce or mortgage holders struggling to make repayments. This is not nationalisation, but simply welfare for the corporate sector, which will be paid for by cutting welfare and public services for the majority.171
Similarly, on 12 August 2009 – when official data showed that unemployment had increased in June 2009 to almost 2.5 million172 with 19.1 per cent of those aged 16 to 24 jobless173 – the Financial Services Authority (FSA) caved into pressure from the banks. That is, the FSA draft remuneration code had originally required two-thirds of bonuses to be deferred; for firms not to pay bonuses at all if they reported losses; and for pay to be linked to the entire firm, not just a particular division. These matters will now be treated as guidance rather than principles; and the code excludes
non-UK firms...unless they are part of a group that contains UK banks and building societies that have total regulatory capital exceeding £1bn or BIPRU 730k firms that have total regulatory capital exceeding £750m. As a result only about 26 firms will fall within the scope, against around 47 under the (original P.L.) proposals….174
Moreover, the proposal in the November 2009 Queen’s speech to “tear up” those individual contracts for bankers that inflame risk only applies to contracts that are not yet written.175 For, as the Centre for Research on Socio-Cultural Change points out, the ‘inaction of government’ on banking reform ‘results from the influence of the “distributional coalition” in and around the City of London, which has co-opted the political leadership of both major parties’.176 And GMB General Secretary Paul Kenny – commenting on reports that City banks plan to pay multimillion-pound bonuses – said:
The notion that these bonuses are actually earned by high-flyer, exceptionally talented banker types is a myth. These rewards bear no relationship to the jobs they actually do. The reality is that investment banking is an oligopoly. Lack of competition allows these banks to overcharge for their services and pay these bonuses. There needs to be action by government and the competition authorities to correct the underlying lack of competition in this sector. If the overcharging is stopped there will not be the funds to pay the bonuses.177
The IMF now considers that the present crisis of British capitalism is much more severe than the 1973-77, 1980-83 and 1900-94. First, because the crisis is global, it will be hard for any country – least of all Britain, with its depleted manufacturing base – ‘to grow out of its problems through exports’.178 Second:
In the run-up to the crisis household debt increased to 175 per cent of disposable income – one of the highest levels among advanced countries….and…. Net household wealth in the UK is estimated to have declined by about 15 percent in 2008, and may fall further in 2009.179
Third, research suggests that recessions linked to financial crises are deeper and last longer than other recessions.180 For example, Carmen Reinhart and Kenneth Rogoff found that:
On a peak-to-trough basis, real housing price declines average 35 per cent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years….The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls an average of over 9 per cent, although the duration of the downturn is considerably shorter than for unemployment. The real value of government debt tends to explode, rising an average of 86 per cent in the major post-World War II episodes.181
And they add that:
The collapse in tax revenues in the wake of deep and prolonged economic contractions is a critical factor in explaining the large budget deficits and increases in debt that follow the crisis. Our estimates of the rise in government debt are likely to be conservative, as these do not include increases in government guarantees, which also expand briskly during these episodes.182
David Blanchflower argues that John Maynard Keynes’s lucid warning in 1930 equally applies today:
The duration of the slump may be much more prolonged than most people are expecting and…much will be changed both in our ideas and in our methods before we emerge. Not, of course the duration of the acute phase of the slump, but that of the long, dragging conditions of semi-slump, or at least sub-normal prosperity, which may be expected to succeed the acute phase.183
The level of Britain's gross domestic product in 1930, moreover, was not reached again until 1934. The annual unemployment rate of 1929, 8.2 per cent, was lower than in every year during the 1930s, reaching a high of 17.6 per cent in 1932. Predicting a protracted recovery, Blanchflower pointed to manufacturing output – a key indicator – which continues to decline, and is at a 17-year low with 430,000 jobs lost in Britain since April 2008.
Rapidly rising unemployment in Britain's industrial heartlands has sent the real level of joblessness surging to well over three million during the recession, according to Professor Steve Fothergill, author of a report for the Industrial Communities Alliance: which shows that the real level of unemployment is close to 3.4 million, more than double the 1.6 million claimant count total once those ineligible for benefits and the hidden unemployed on incapacity benefits are taken into account. The report underlines the extent to which the old industrial areas were quite a distance from full employment even before the recession started. But since the recession began, there has been a big jump in joblessness in the old industrial areas, which in many places is in excess of 10 per cent of the workforce. Scotland, Wales, the West Midlands and the north bore the brunt of job cuts in the 1980s, when most of Britain's mines were closed and large numbers of factories shut down. Despite attempts to create new jobs through retail parks and call centres, the traditional manufacturing heartlands had still lagged behind the richer parts of Britain in terms of employment when the downturn began 18 months ago. The study found hopes in the industrial regions that the financial crisis would leave manufacturing relatively unscathed had been dashed. Factory output has dropped by more than 13 per cent since the recession began in early 2008, more than double the six per cent drop in economic output overall. Once more, manufacturing has been badly hit, and as a result the greatest job losses have often been in Britain's older industrial areas where manufacturing is a key component of the local economy. In effect, the current recession has been hitting many of the same areas that bore the brunt of the recessions in the 1980s and 1990s, and it is some of the least well-off people that have again been worst affected. Of the list of the top 20 districts for unemployment none is south of a line from the Wash to the Severn. Although the government's claimant count measure of unemployment puts the jobless rate at five per cent, the report found it was three times higher in many industrial districts. Blaenau Gwent, Wolverhampton, Knowsley and Stoke-on-Trent have more than 15 per cent of the workforce jobless. Unemployment increases had been particularly acute in the West Midlands, which remained heavily reliant on manufacturing. But the study found every part of England with a high concentration of industry had suffered from the fall in demand. The report calls for a five-point programme: a rebalancing of the economy in favour of manufacturing; a selective short-time working subsidy to keep jobs and capacity intact; more support for the workless, including training for older workers; a bigger role for local government in economic regeneration; and a new priority for job creation.184
The Local Government Association’s analysis of the growth of claimant unemployment to vacancy ratio by local authority area since May 2008 (see Table 14.1) showed that:
-
In May 2009 the highest claimant to vacancy ratio in England and Wales was in Blaenau Gwent, which had also recorded the biggest rise in claimant unemployment over the previous 12 months
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The lowest claimant to vacancy ratio was in the Corporation of London
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The number of live unfilled vacancies in May 2009 was 202,500 (down from 349,300 in May 2008)
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The number of Job Seeker Allowance claimants had increased to 1,390,000 (up from 734,800 in May 2008)
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Thus there were seven job seekers to every vacancy (up from 2.1 in May 2008)
-
Regional variations were evident with significant pockets in South Wales, London, the North East and South East 185
Table 14.1: Claimants per vacancy, May 2009
Highest ratios
|
Ratio
|
Lowest ratios
|
Ratio
|
Blaenau Gwent
|
31.3
|
Taunton Deane
|
3.22
|
South Tyneside
|
29.1
|
Brentwood
|
3.17
|
Neath Port Talbot
|
28.4
|
Stratford-on-Avon
|
3.15
|
Lewisham
|
25.0
|
Winchester
|
3.11
|
Tameside
|
24.5
|
Purbeck
|
3.10
|
Greenwich
|
24.3
|
Exeter
|
3.04
|
Kingston upon Hull
|
24.2
|
Derbyshire Dales
|
3.03
|
Caerphilly
|
23.2
|
Runnymede
|
3.01
|
Oadby and Wigston
|
22.1
|
York
|
2.79
|
Redcar and Cleveland
|
22.0
|
Cotswold
|
2.68
|
Newham
|
21.8
|
Rushmoor
|
2.52
|
Sandwell
|
20.8
|
West Somerset
|
2.46
|
Rossendale
|
20.8
|
Harrogate
|
2.42
|
Merthyr Tydfil
|
20.4
|
Windsor and Maidenhead
|
2.34
|
Medway
|
19.9
|
West Dorset
|
2.26
|
Adur
|
19.6
|
Epsom and Ewell
|
2.06
|
Lambeth
|
19.6
|
South Lakeland
|
1.82
|
Dudley
|
19.1
|
Eden
|
1.73
|
Rhondda Cynon Taff
|
18.9
|
Fylde
|
1.40
|
Thanet
|
18.6
|
Corporation of London
|
0.68
|
Source: Local Government Association, 2009d, p. 2
The recession has also caused a sharp drop in English council income of £4 billion in 2009/10 compared to 2007/08: sales of land, council buildings and other capital projects fell by £2.7 billion; and interest earned on councils’ cash deposits fell by £1.3 billion due to low interest rates.186 These figures, moreover, do not include property search income (down 48 per cent on the previous year); planning fees income (down 11 per cent); building control income (down 14 per cent); and car parking income (down 6 per cent). Therefore the £4 billion figure massively understates the drop in councils’ income.187 The LGA’s survey of the impact of the economic downturn on all English local authorities in June 2009 found that 85 per cent of respondents reported an increase in the number of empty properties in town centres over the past six months; and 52 per cent thought that the economic downturn had resulted in more people from managerial and professional occupations seeking their help.188 The main challenges identified were balancing budgets (59 per cent), reduced income (57 per cent), and increased demand for services (49 per cent).189 Existing public sector capital schemes, according to 62 per cent of respondents, had been adversely affected by the downturn; and 86 per cent of respondents indicated that private sector schemes had been similarly affected by the downturn. The main factors behind this were developers’ lack of finance (86 per cent of those reporting difficulties), developers’ lack of business confidence (83 per cent), and falls in land value (58 per cent).190 And 60 per cent of respondents thought that there was no evidence in their area that an upturn in the economy was imminent.191
Analysis by data company Experian also shows that the recession – in terms of unemployment, debt, fraud and increasing demand for public services – will not hit some areas for another seven months and, in some places, will be felt for many years after growth resumes. Experian found that the south, from Kent through to Cornwall, was feeling the least impact from the recession; the midlands, Wales and the north-east the severest impact; with Scotland between the two extremes. Local authority areas that would be hit hardest, according to the report, were Blaenau Gwent, Kingston-upon-Hull, Inverclyde, Glasgow and Wolverhampton. Areas that would suffer the least included the City of London, Kensington and Chelsea, and Westminster. Over the next 10 years, Experian expects London, Edinburgh and Leeds, as well as a number of other major northern cities, to prosper the most. However, many Scottish locations such as Dumfries and Galloway, East Dunbartonshire, South Ayrshire and Argyll and Bute as well as English local authorities including Copeland, Malvern Hills, Weymouth and Portland, West Somerset and Stafford will take much longer to recover from recession due to persistent unemployment and deprivation problems. According to the research, the people who will experience the greatest levels of financial stress are young single people on limited incomes who rent small flats from local councils or housing associations, and older pensioners who have found their retirement incomes eroded by inflation and are dependent on state pensions. Groups that will also suffer include families on modest incomes or on benefits, the unemployed, single parents or the long-term sick.192
The Chartered Institute of Personnel and Development’s work audits, moreover, show that the overall impact of the recession on the workforce has been much deeper than the headline employment and unemployment figures indicate:
|
