|
Previous Training Updates and Articles
April 2010 February 2010 November 2009 Archives |
 |
Introduction
Change is never easy, never more so than when that change is of a government. All those familiar institutions to which we had grown accustomed over 13 years of Labour administration disappeared almost overnight as Gordon Brown vacated 10 Downing Street. A disaffected electorate had spoken: suddenly: the language was of “engagement”, “responsibility” and “community involvement”; representing a profound ideological change after the public cynicism that followed the MPs’ allowances and banking scandals.
The initial feeling of relief that David Cameron and Nick Clegg had been able to form an effective coalition government (the first for more than 50 years) was short lived. It was replaced by the current prevailing mood of deep uncertainty. This mood is exacerbated by the instability of the Euro and European economies (particularly Greece), the UK budget deficit and the failure of BP to stop its oil belching out into the Gulf of Mexico. The subsequent fall in BP’s share price has reduced it to near junk bond status and caused a ripple of fear through the UK pension funds.
Economy
The brief clearly was not to frighten the horses, as both party leaders struggled to retain the confidence of their troubled members. By 20 May the two leaders had produced an impressive glossy 36-page document, The Coalition our programme for Government, with a sub-title aspiring to “Freedom, Fairness and Responsibility”. The first paragraph of the Foreword states: “This is a historic document in British politics: the first time in over half a century two parties have come together to put forward a programme for partnership government”. This programme hammers out the details of the agreement achieved in the post-election negotiations and covers the whole range of policies, from the regulation of banking to business, civil liberties, local government, consumer protection, crime and policing, defence, environment, employment, immigration, welfare, and even the Olympics.
The coalition government wasted no time in spelling out its new policies and the Queen’s speech at the state opening of the new parliament on 25 May was designed to reassure a sceptical electorate.
The new business secretary Vince Cable sought to reassure business with government plans “to curb excessive regulation to encourage growth.” This move that was generally welcomed by the Federation of Small Businesses and the CBI but left some feeling slightly uncomfortable as the failures of regulation in the Gulf of Mexico oil spill became all too evident.
Budget Deficit
It did not take the new chancellor George Osborne long to set his sights on the budget deficit which has dominated the headlines and shaped coalition economic policy. In May Osborne set up the Office for Budget Responsibility (OBR) under the chairmanship of the macroeconomist Sir Alan Budd, to make independent assessments and forecasts of public finances and the economy.
The newly-formed body immediately caused controversy by reporting that Britain’s annual borrowing rate would be more than £20bn lower than the figure of £155bn first predicted. However, the OBR reduced the growth forecast down to 2.6%, slower than the 3.25% predicted in Alastair Darling’s March budget. The new chancellor claimed that the forecasts were “damming evidence that the mess the previous government left behind is even bigger than we thought.” He was roundly supported by Deputy Prime Minister Nick Clegg who, in a speech to the Institute for Government, blamed “a terrible legacy” left by Labour and warned Britain that its deficit could control its future.
To demonstrate just how serious things were Danny Alexander, Chief Secretary to the Treasury, announced the scrapping or suspension of 10.5bn Labour projects, many of them set up by Lord Mandelson, then business secretary, in the run up to the election. Among these was an £80m loan to Sheffield Forgemasters, an engineering company in Mr Clegg’s own constituency. Commenting, Nick Clegg said: “The truth is that this loan was promised by the outgoing Labour government as a calculated ploy to win support in Sheffield just ahead of the election when they knew all along that there simply wasn’t the money to keep to that pledge”.
UK Budget 2010
After such dire predictions on 22 June when the chancellor George Osborne eventually delivered his budget speech, the initial feeling seemed to be one of relief that perhaps it was not quite as bad as expected. The VAT increase to 20%, although not popular, would not come in until January 2011 and the implications of the 25% spending cuts could only be guessed at. Mr Osborne himself described the package as “tough but fair” while not unexpectedly, Harriet Harman as acting leader of the Labour Party did not agree, calling it “reckless”. The British Chambers of Commerce gave the Budget their cautious approval, describing it as “a defining moment in UK”, a view shared by the Telegraph. Brendan Barber commenting for the TUC condemned the budget as economically dangerous and socially divisive”. He accused the coalition government of slowing recovery and getting “the big judgement about the economy wrong”.
Public Sector Pay and Cuts
The Prime Minister was clearly shocked to learn on coming to office that 172 civil servants earned more than his £142,000 p.a. salary. The top earner is John Fingleton, the chief executive of the Office of Fair Trading, whose take-home pay with allowances is worth up to £279,999. Some 140 quango chiefs earn even more, it was revealed in the Independent.
The 2010 Emergency Budget levied a two-year freeze on public sector pay, relying on the private sector to provide the required growth. It was not long before the true extent of the planned job cuts became apparent. In an exclusive report the Guardian leaked the news of the Treasury’s unpublished estimates of job losses resulting from the government’s biggest squeeze on public spending since the Second World War. The Guardian claimed that 1.3m jobs would be lost as a result of the austerity budget. In answer to Questions in the Commons David Cameron confirmed that the Office for Budget Responsibility (OBR) forecast suggested 600,000 public sector jobs would go in the next six years.
Ironically Business Secretary Vince Cable’s department for growth - otherwise known as Business Innovation and Skills (BIS) - became the first casualty of the public sector job cuts directed by George Osborne. Reports have put the estimate as high as 25% of the 3,000 staff employed by BIS as it embarks on a voluntary redundancy programme, but it certainly has to cut £38m from its budget. Vince Cable who resigned from his position as deputy leader of the Liberal Democrats to concentrate on the challenges currently faced by business can be forgiven for wondering if he has been handed a poisoned chalice, (or as Genista McIntosh famously remarked on resigning her post as chief executive of the Royal Opera House: “I didn’t see a chalice.”)
Hounded by the Labour Party, and described by Harriet Harman as turning from “national treasure into a Treasury poodle” he was clearly angered by Ed Ball’s taunts when they both appeared on BBC Question Time. The normally urbane Dr Cable responded by condemning “pious Labour for leaving the country in a mess and a parlous state”. He agreed that he had changed his mind since coming to office but his judgements were now based on facts after extensive consultation with the Central Bank “facing a firestorm raging across Europe”.
The Business Secretary has also warned the car industry it can no longer expect direct government funding. In an interview with the Telegraph Vince Cable said the government will stand by with “genuinely affordable support” but “can’t fight” and “can’t win” a subsidy war. Carl-Peter Forster, chief executive of Tata Motors, owners of Jaguar Land Rover, supported Vince Cable’s approach. Earlier in June he told the BBC that the company was to build “at least two models in China and was looking for a local partner in the project.” He denied that the move would result in job losses in the UK, saying they remained committed to manufacture in the country. The HR director Des Thurby, in an interview with People Management Magazine, confirmed that Jaguar Land Rover plans more than 1,000 new jobs at two plants in England over the next 12 months.
International Budget Deficit
David Cameron’s plans to tackle the UK’s £156bn fiscal deficit received strong international support. During his first EU summit in Brussels, European Commission President Jose Manuel Barroso described the measures “as exactly the right medicine” and endorsed the fact that “growth is the key”. Cameron warmly welcomed the Commissioner’s remarks, not least because Barroso had previously enjoyed close relationships with Tony Blair and Gordon Brown. Under pressure from Labour for tackling the deficit too soon and too quickly, thereby risking a double dip recession, Cameron said: “I very much admire his approach as president of the commission. What he said about the importance of getting our public finances in order – that there can be no growth without confidence and that getting our public finances in order is the key to confidence – is absolutely right.”
However the Euro sceptic tendency back home urged the Prime Minister to stand firm against the German Chancellor Angela Merkel and other European leaders’ plans to change the European rules to share details of their budgets. At the June Toronto G8 summit, Chancellor Merkel reassured President Obama who was anxious that the global recovery might be delayed by the deep budget cuts announced by the European countries. He had previously expressed his concerns about the speed of the European budget cuts in a letter to the G20 leaders. The German Chancellor insisted there was “a lot of mutual understanding” and that “growth and intelligent austerity measures don’t have to be contradictions.”
The G20 summit followed the G8 finance ministers’ meeting in Canada and once again witnessed violent clashes as 500 demonstrators were arrested. The G20 leaders also agreed to cut national budget deficits by 2013, while at the same time promoting economic growth. The Canadian Prime Minister, Stephen Harper, who hosted the G20 said short-term stimulus measures would be needed to get economies moving but confirmed that proposals for a global levy on banks had been dropped. The Canadian government’s huge success at controlling its own deficit in the 1990s is much admired by the coalition who has enthusiastically embraced its austere approach to reduce the UK budget deficit.
Unemployment and Industrial Relations
Unemployment continues to rise, with the employment rate for the three months to April 2010 falling to 72.1%, down 0.1% on the quarter according to official government figures. The jobless total now stands at 2.47m, an increase of 23,000 people in the last three months.
David Cameron lamented any increase in unemployment as a “tragedy” but it was the price to be paid for “clearing up the mess left by Labour”. He said that it was a mixed picture, with the actual number of people in employment increasing by 5,000 to 28.9m. The chief economic adviser at the Chartered Institute of Personnel and Development (CIPD) Dr John Phillpot revised upwards previous CIPD estimates that the unemployment figures in 2010 would have peaked at 2.65m. Writing in People Management magazine he predicted that the government’s deficit reduction measures could stall any recovery in the UK jobs market and that unemployment might reach a peak of 3m.
The Work and Pensions Secretary Iain Duncan Smith’s radical proposals to reform the complex benefits system on coming to office met with a swift response from the TUC. On the day the welfare reform bill was announced in the Queen’s speech Brendan Barber, TUC general secretary, issued a statement condemning the government’s plans as a “heavy handed, punitive approach”. The general secretary of the Communication Workers Union (CWU), Billy Hayes, described coalition plans to privatise Royal Mail as “old politics” and the RMT announced it was to launch “an unprecedented challenge to the UK’s anti-trade union laws in the European Court of Human Rights”.
Since then attitudes to trade unions seem to have hardened with calls for changes the Labour laws in the face of increased industrial action. Foremost among them is the Confederation of British Industry (CBI) who has, published a report Making Britain the Place to Work, which recommends changes to industrial relations legislation and in particular the rules surrounding ballots. The TUC condemned the proposals as a charter for exploitation at work and in a press statement TUC general secretary Brendan Barber said: “The UK already has some of the toughest legal restrictions on the right to strike in the advanced world. The courts regularly strike down democratic ballots that clearly show majority support for action. The number of days lost to industrial action is historically low and less than in many other countries.”
Vince Cable Business Secretary apparently shares the TUC secretary’s views. In an interview with the Times he attacked fat cat pay awards as “socially unacceptable” while praising the trade unions record for their restraint. Dr Cable ruled out putting a legislative cap on senior executive pay saying: “I think people should show restraint and they should show an awareness of their responsibilities. There are some extreme differentials which are socially unacceptable”. He also said he was opposed to a reform of the law to restrict trade union activity and praised the co-operation between management and trade unions that had characterised the response to the recession saying: “Many of the unions deserve a lot of credit. They were extremely pragmatic and very positive. I’m not waving an axe at the trade unions. We haven’t any problems with unions in the private sector”.
Meanwhile the bitter British Airways (BA) dispute with its cabin crew rumbles on, although flights continue as normal as Unite postpone their strike ballot to consider a fresh offer. Philip Hammond, the new Transport Minister, adopted a conciliatory tone, urging both BA and Unite to hold further talks. He said: “I do understand the impact on people in a changing economy.” The eventual sticking point appeared to be the withdrawal of travel perks for striking staff. For those of us who have forgotten exactly what it’s all about the BBC has published a useful breakdown of BA’s HR issues surrounding the perks, and profiles of the three main players in this long running and very personal dispute. Strained relations between the management negotiating team and Unite were not assisted by joint-general secretary Derek Simpson having to apologise for “tweeting” during their negotiations. He had sent out a running commentary during sensitive talks with BA on Twitter provoking yet another misuse of the internet scandal. BT also face a ballot calling for strike action from its 50,000 CWU union members. They want a 5% pay rise after what they say is a two-year pay freeze and round of redundancies.
Banking Regulation
On 15 June Chancellor George Osborne used his first Mansion House speech to confirm that he would give the Bank of England the key role in regulating the UK financial sector and the Financial Services FSA would be stripped of its regulatory powers. He criticised the tripartite system set up under Gordon Brown which divided responsibility between the Bank of England, the FSA and the Treasury. In future the FSA will carry out a reduced role as a full subsidiary of the Bank of England managing a new Consumer protection Agency and Economic Crime Agency. The FSA has certainly enjoyed greater success of late in prosecuting high profile fraud cases. Hector Sants former chairman of the FSA will now stay on to oversee the two year transition, as will the chairman Lord Turner. Adair Turner was a favourite of the former Labour administration and author of the Turner Review a response to the regulatory crisis in banking which was published in March 2009 at the time of the successful G20 summit hosted by Gordon Brown in London.
Mr Osborne also announced he would set up a new independent banking commission to overhaul the City under the chairmanship of Sir John Vickers a former Bank of England economist and head of the Office of Fair Trading. This will examine breaking up the major banks; the competitiveness of the City; whether power is too concentrated among leading city institutions; an whether there should be restrictions on bank activities.
Meanwhile the Business Secretary Vince Cable’s attention has been directed at the thorny subject of whether or not to change the regulatory position on mergers and acquisitions following the hostile takeover of Cadbury. Dr Cable said that “short term speculators should not determine the outcome of takeovers”. His department for Business Innovation and Skills (BIS) will respond to the recent critical select committee report chaired by Peter Luff MP on the controversial takeover of Cadbury by US food giant Kraft before the summer recess.
Youth Unemployment
According to the latest government statistics for May the youth unemployment rate (which included students) has now risen to 17.9%, compared with a rate of 6.5% for those aged 25-49. This figure represents an increase of 5.7% since the recession began, compared with 2.6% for those aged under 50. In real terms it means there are now 351,000 young people unemployed, an increase of 15,000 on the previous month’s survey, with the number in full time education also rising to 277,000.
Graduates
Among the young unemployed graduates shouldering a vast burden of student debt are at a particular disadvantage. According to official statistics from the Higher Education Statistics Agency the jobless rate among 2009 graduates is now 10% and up from 8% the year before. The number of graduates who managed to find employment within six months has also dropped from 62% to 59%. Even more alarming for graduates is the results of a survey by the Association of Graduate Recruiters who say that intense competition for graduate jobs with an average of 69 applicants chasing every vacancy means that three quarters of employers require a 2:1.
Interns and Apprenticeships
Against the background of rising youth unemployment it is perhaps surprising to see that the government has now closed the Backing Young Britain campaign a scheme launched by the government in March last year to promote internships and apprenticeships and boost the employability of 16-24 year olds. Visitors to the Backing Young Britain Website are directed instead to the website of the employers’ pages of the National Apprenticeship Service, Apprentice and the Graduate Pool, the scheme set up to match interns with suitable employers. Both are excellent schemes, the apprenticeship service is responsible for vastly improving the quality of work-based training and one of the achievements of the previous government. The talents of celebrities such as Sir Alan Sugar and Marco Pierre White have been pressed into service improving perceptions of the new model apprenticeships. In opposition Nick Clegg pressed for the extension of paid internships in his report Lifebelt for a Lost Generation; the coalition should be careful not to throw out the baby with the bath water at this time of rocketing youth unemployment purely in the interests of cost saving.
John Hayes the Minister for Further Education has certainly promised to create 50,000 new this year and improve the quality of skills training. While Universities Minister David Willets has put his weight behind demands for paid internships backing the Institute for Public Policy Research who say the practice discriminates against the less well off and is socially divisive. CIPD recommend that a minimum wage of £2.50 should be introduced to stop the widespread abuse particularly in the fashion industry and which has recently attracted a great deal of press debate inspired by a colourful 4-page article by Richard Dennen in Tatler entitled The Interns: Never have so many battled to get coffee for so few.
Education - Universities
The new universities minister David Willetts wasted little time in announcing a radical overhaul of the universities. A full review of university funding is being conducted by Lord Browne (formerly BP) who is expected to report in the autumn. It is widely believed that Lord Browne will recommend an increase in student tuition fees, a policy vehemently opposed by the Liberal Democrats in the past. At a speech in Oxford David Willetts said: “Labour yet again left a system on shaky financial foundations without a viable long-term future.” Labour had left university funding “in a mess” and the coalition needs to make £700m savings; he promised that “big decisions would follow the Browne Review”.
The university admissions systems will also be overhauled as competition for university places increases. UCAS, the admissions agency, will review the current tariff system designed for A Levels which has become outdated with the introduction of a much wider range of qualifications for higher education. It has been estimated that more than 100,000 students will compete for a university place despite there being only 10,000 extra places. Last year more than 630,000 applied, while only 480,000 applicants were successful in gaining a place.
Schools
Home Secretary Theresa May announced the controversial vetting and barring scheme is to be put on hold so there can be a review and it can be taken back to common sense levels. Compulsory registration with the Independent Safeguarding Authority was due to begin in July but Mrs May described the measures as “draconian”. In May the Telegraph published a report of its investigation in to allegations of child abuse by teachers which revealed that two in three teachers accused of abuse are exonerated.
The new Education Secretary Michael Gove has also hit the ground running immediately introducing an Academies Bill in the Queen’s Speech. The Bill allows an opt out of local authority control for primary and secondary schools assessed as outstanding by school inspectors. The Bill will also make it easier for parents and other providers to set up new academies. The department of Education has also reviewed the previous Labour government’s Building for Schools for the Future Programme which it was hoped would stimulate the construction industry. As a result hundreds of school building projects have been axed and Mr Gove said 719 agreed school improvements projects would now not take place. In Kent plans to rebuild 36 schools have been stopped. Since making the announcement, however, the Education Secretary has had to “apologise unreservedly” for misleading some councils that projects would go ahead when they had been scrapped.
