The Northern Ireland Economy – towards a high skill equilibrium?
Issued : Tuesday 6 November, 2007
Speech by Mark Langhammer at UNITE / TGWU Race and Equality conference
.Introduction: Brothers and Sisters, thank you for your invitation today.
The draft budget and Programme for Government (PfG) announced two weeks ago by the Northern Ireland Executive was welcomed by the CBI, the IoD, the FSB and by all and sundry in the media. It was agreed unanimously by all 4 parties in the Executive Committee - the DUP and Sinn Fein of course, but also the UUP and SDLP more grudgingly (on grounds that they did the "heavy lifting" in the last administration). There is nothing in the budget that could not and would not have been undertaken by New Labour, and nothing in it to worry Gordon Brown or Alastair Darling. It is written within a free market, neo-liberal orthodoxy. It talks of year on year "efficiency savings", talks down the public sector as oversized, sets out 23 Public Service Agreements, proposes the sale of significant public assets and hitches a vast capital expenditure to an aggressive privatisation and marketisation programme.
Context: The Budget is poor in providing either political or macro economic context. The macro economic context for Northern Ireland is largely set by the political, and particularly the foreign policy, choices of the United Kingdom Government.
The current British state is over three hundred years old. It has, for several centuries, adopted an adventurous foreign policy and has developed - at the core of the state - an instinctive understanding that there is a symbiotic relationship between the development of free trade on one hand and pro-active engagement in warfare on the other. This is as true of the Labour and Socialist movement as it is of the Conservative tradition.
Aside from an historically brief period when the invention of the industrial revolution saw Britain lead the world as a productive economy, it's "balancing powers" instinct in foreign policy (what Churchill called the "instinctive tradition") has reaped rewards. Britain has been largely successful, to the present, in "living off the world".
In today's economy, the United Kingdom as a whole lives a lifestyle well beyond its visible means. The UK is, allegedly, the 4th largest economy in the world, yet it is remarkably unproductive. We make very little, manufacture very little; we grow very little, we extract or mine very little. A £7 billion balance of payments deficit is, apparently, to made up from "invisibles" - the result of a vibrant financial services sector! The health of the City of London as a financial centre is of paramount importance to this, and previous, UK Governments.
The general outlook of the ICTU in regard to the northern economy is set out within the document "Old Wine in New Bottles"
I think that Mike Morrissey led our thinking on this and it is a good general vision which seeks a high skill, added value, productive economy with high quality public services, consciously looking towards the Scandinavian model. It is not one, however, that is realisable within the current UK paradigm.
The requirements for an economy driven by an active, adventurist foreign policy, and by the needs of financial and tradeable services and the home based service sector, differ greatly from the needs of a productive economy driven by manufacturing and research and development. Accountants, actuaries, lawyers and a decent Army in the field are more to the point than a high skilled, high productivity workforce.
Since the end of the Cold War, Britain (having shown signs in the 1970's under Heath and Wilson successively of adopting a role in the world more in keeping with its more modest post Empire and Post World War position) is now actively engaged in military and political interventions across the globe. Settling down to peace and productivity in the manner of a Scandanavian country, for instance, is unlikely to be on the agenda in the near future.
It was Mr Blair who noted at the time of the Kosovo war that the "kaleidoscope" of world affairs had been shaken, and that "now was the time" to remake the world in our image. Several wars later, and with a new adventure under active consideration in regard to Iran, the approach of the Brown government is unlikely to change in anything other than tone. Indeed, the Brown approach is likely to see more "humanitarian intervention" in Africa, in particular. Brown, a son of the manse, is less gung-ho in rhetoric, but nonetheless is comfortable with the civilizing mission of empire- white man's burden.
Within this macro political and foreign policy environment, the alleged aim of "moving up the value chain" is, at best, politically problematic.
Post War Britain: In essence we have had two distinct periods of political development in post war Britain including - to a greater or lesser degree - Northern Ireland. From 1940 onwards, a former leader of this union, Ernest Bevin, was to the fore in establishing a social and welfare consensus. It was a consensus that put people first. It decided that people needed to be housed and fed, that proper arrangements be put in place for a national health service, for free universal education, and proper social welfare arrangements. This was decided as political policy, with the means to be found thereafter.
By the late 1960's and early 1970's this consensus needed to be renewed. Capital and Management no longer had the capacity to run affairs faced with a strong labour and union movement. Equally, our side needed to take the step change from a strong adversarial, bloc, to a movement with the instincts to take over control and management of the economy. We weren't up to the task. From Barbara Castle's "In place of strife" to Ted Heath's "Tri-partite" proposals to Bullock's proposals for industrial democracy and worker management, we as a labour and trade union movement, did not come up to the mark. We declined to take responsibility, and the electorate, accordingly, decided that unions needed their wings clipped!
This allowed Thatcher to break from Bevin's social and welfare consensus.
The Thatcherite consensus, of which New Labour is an adaptation, has resulted in a society were rampant individualism is the order of the day - a greedy country of extreme individualism, consumed by consumption.
Ireland today, North and South rewards gushing, brash, manipulative, speculative and vulgar wealth. And this flaunting of ostentacious wealth strikes at the very basis of responsible and inclusive citizenship. An economy propped up by easy credit, consumer acquisitiveness and a housing speculation 'bubble'. We have low levels of social protection, whether measured by company regulation, labour market protections or by expenditure of health, childcare, youth services, care for the elderly or the provision of well tended public spaces. The very concept of public service is being destroyed, the ethos of public service eroded. Those who work in public service, far from being appreciated for work they do with fellow citizens, are reviled and abused. Our rail network and our bus services are inadequate; our postal service is being "salami-sliced" to the margins; our privately cleaned hospitals are dirty; public house building has slowed to a trickle; the squalor of the public realm has been improved under New Labour, but does not compare favourably with the derided economies of "Old Europe" - Scandinavia, Holland, Germany or France. Away from the glitzy downtown finance and shiny glass fronted corporate blocks, our public realm is sub-standard.
This neo-liberal model stands for an extended and stressful "long hours" working life from which basic guarantees won by generations of struggle have been stripped. In the name of labour market flexibility, new forms of exploitation emerge, often directed at the most vulnerable of employees - the low paid and migrant workers.
The invitation of the Right is for an existence as an insatiable, isolated, individual consumer. Our response on the Left has been disjointed - but if it ios to become anything, it must be grounded on the values of solidarity, equality, co-operation, collectivism and justice.
A High Skill Equilibrium - "moving up the value chain"
The political background I've set out does not obviate the need to address that the Northern Ireland economy is relatively insular, lower skilled, risk averse. Despite the rhetoric of a "knowledge based economy" made up of high skill, highly autonomous workers, current evidence confirm that the UK in general remains locked into hierarchical management systems, with strong control on workforces, few opportunities for meaningful employee consultation or influence over their workplace or working practices. The recent Work Skills in Britain Survey, 1986-2007, demonstrated that task discretion has been in sharp decline across the whole economy, particularly pronounced for professional knowledge workers).
And there are significant macro political constraints that lock Northern Ireland (and the UK as a whole) into the current "low skill equilibrium". It is important that we understand the extent of these constraints.
Macro political constraints
Company Law: The Anglo American, free enterprise, model of capitalism adopted within the United Kingdom in the past twenty years tends to emphasise shareholder returns above all else. The drive for short term shareholder gain overrides the development of the company as a productive entity. Institutional investors are unlikely to get to know the company, or help grow it. I'll say more about this later on.
i) Tax: The prevailing political mainstream for some twenty five years has favoured a low tax consensus. Labour, for instance, is widely seen as having lost the 1992 election on tax. Even now that there is an increase in the overall tax burden, New Labour feels inhibited about arguing for increases in mainstream income taxes preferring collecting "stealth" taxes. The recent debacle which saw New Labour cave in to a "give away" to the rich on inheritance tax showed how atrophied within the political realm are the arguments in favour of taxing unearned income.
ii) Culture of Cost Minimisaton: The consequences, particularly in Northern Ireland where we are heavily reliant on the public sector, is that public services are run increasingly on private sector lines, with cost minimisation, CCT, "best value", outsourcing and efficiency gains the public sector equivalent of shareholder value. And there is no more dedicated advocate of this free market rhetorical dogma that our Executive Minister for Finance, Peter Robinson. A culture of cost minimisation, whatever its merits, is not likely to be a friend of developing workforce skills.
iii) Few Regulatory Levers: These factors are exacerbated by the absence of regulatory pressures to encourage employers to train or develop staff. Within our de-regulated labour market, with fewer employment rights, fewer trade union organisational rights, with no statutory levy on employers (as in France) or statutory framework for co-determination (as in Germany), it is inevitable, indeed rational, that employers will not risk investing in in-depth front loaded skills formation, or on generic skills development - but provide only narrow, non transferable training of a type and level below what is socially optimal.
So, What Needs to be Done!
I hope what I've said has not been a counsel of despair, because there are things that we can do - and things that we should do.
i) Greedy Bastards: First, there is what I would call the Greedy Bastard agenda. There is an instinctive majority against the failure to act to contain the super-rich. My union, the GMB, has run a very effective campaign against the anti-social Private Equity merchants with only a few people researching out of a back office. We need to do more of that.
Equally, we need to re-educate and restate the progressive nature of taxation. The ease with which large sections of the very privileged and well-off avoid tax is seen throughout Ireland, culturally, in a Robin Hood-ish way. That needs tackled. As a movement we need to propagandise for fair taxation, and name and shame the tax dodging rich. We should set resources aside for this work, as we're on the side of the angels on this one. We'd get widespread public support.
We even have the spectacle of all Stormont parties campaigning to lower corporation tax when over one third of British companies pay no tax at all is something to behold! We should campaign for more company tax inspectors.
We also tend to frame this debate in terms like "growing inequality" and the "gap between rich and poor". We need tobe more direct and connect with the public- the debate should target "greedy bastards" - and "tax avoiding spongers".
ii) Company Law: Second, and in the light of the Seagate debacle, there is a need to do more to legislate for a more broadly based, civilised, conception of company law. Traditionally, companies were invented by "companions" who banded together to share risk to perform a vital economic or other function from which they would profit. They would petition the state for a licence to practice and accept reciprocal societal obligations in return. This classic conception of company has been debased by the narrow notion of short term shareholder return, a notion which will consider quicker routes to shareholder return than investing in people to develop a great organisation. Merger and acquisition to extend market share, tying senior management to stock market performance through share options, increased managerial opportunism and the use of performance related pay for middle and junior managers to effect cost minimisation all serve to reinforce the short term view of the company, rather than the need to invest in skills development.
We, as a union movement, need to develop a narrative around what a broadly defined and progressive company, with environmental and societal obligations, should look like.
iii) Socialist work organisation: I will speak later on about the Bolivarian Revolution in Venezuela. One of the striking things about that development is the explosion in co-operative development, worker shareholding, mutual associations and so on. We are not nearly interested enough, as a movement, in developing and supporting our own forms of socialist work organisation.
iv) Political & Financial Muscle: We need to use our political and financial muscle to better effect. In the case of the TWGU and its relationship with the British Labour Party, it would appear that the Warwick Accord is a poor return on the many thousands of pounds of members money. The relationship appears to be that the unions hand their money over and bend over, whilst New Labour takes its pleasure. You need to ensure that every penny of members political contributions help the rights and welfare of working people - you need to get more 'bang for your buck', or - in language that New Labour would understand - to get your "RoI" - Return of Investment.
The notion of union members paying a Government party to bring in below inflation pay settlements of 2% in a context where inflation is running at 3.8 to 4.8% and when average Directors pay is rising by 37% is no longer acceptable.
Locally, we should have a united campaign aimed at the Minister for Enterprise, Nigel Dodds to ensure that public funds can never again go to union busting operations like Seagate and that civilised industrial relations should be an essential requirement in receiving economic development state aid in Northern Ireland. A focussed campaign on the standards required to receive state aid could be effective.
Equally, outside the political sphere, we are not nearly sophisticated enough - within the financial instruments where we do have influence (pension funds, for instance). I recently listened to a fascinating lecture from representatives from the American union, the SEUI who have set up a sizeable Department to promote "Active Shareholding" where the union uses is financial strength on Pension Funds and Investment Trusts on which their money is invested to promote wider worker aims.
v) Infrastructure: Political pressure also needs to be exerted locally too in terms of infrastructure The PfG correctly points out the need for Northern Ireland to develop a world class infrastructure. Whilst telecommunications can be considered to be doing well, and the implementation of a ubiquitous access to broadband technologies is welcome, other parts of our infrastructure are woeful, having suffered from years of underinvestment. The Water and Sewage infrastructure has been underfunded for years and is antiquated. In railways, the current network has insufficient critical mass to resist an unkind political environment for public transport. The train from London/Derry to Belfast is reputed to have been quicker in the 1880's that it is today! The private car is the dominant form of transport.
The solutions proposed in the Programme for Government, and in the 2004 Economic Vision, and elsewhere throughout the administration, are ideological in conception and are inappropriate to the needs of Northern Ireland. In particular, the Government obsession with use of Private Finance mechanisms for public capital procurement represents poor value for money, both in the short term and long term. The Reinvestment and Reform Initiative (agreed by all parties), driven by the Strategic Investment Board, proposes to improve public infrastructure, but only at the significant cost of taking public services out of the public and democratic realm. Sucking scarce resources from public utilities and services to service the profit imperatives and shareholder expectations of the private interest is a scandalous waste of public resources.
Both the DUP and Sinn Fein are vulnerable on this - as, in economic terms alone, it is very risky, dangerous and poor value for money. The "sore thumb" example of the PFI scheme at Belfast's Balmoral High School (where a school built under PFI a few years ago will close this year, but be paid for from revenue budgets until 2025/26!! PFI is now well understood as the private sector "having a laugh" at public expense. And the Executive parties are content that the Strategic Investment Board - a voracious and ideologically charged private sector 'advisory' body - is leading the charge for a rapacious and self interested private sector interest. The local parties which are "catch all" communal parties with no real social or ideological bearings, need help (and pressure) for them to resist the privatisers.
vi) Over Reliant on an overblown Public Sector? The Programme for Government repeats the contention within the 2004 Economic Vision and within Strategy 2010 that Northern Ireland is over reliant on an overblown and bloated public sector. We need to take issue with this contention. In most progressive countries in Europe, the extent of public provision of services is regarded as a positive indicator of social and economic health. The argument that is advanced that the Public Sector is "crowding " out the private sector and preventing commerce and entrepreneurship, is simply bogus. The relative size of the public sector is clearly not the cause of the lower employment rate in Northern Ireland, which is due largely to the decline in large scale manufacturing and heavy engineering.
The major employment groups are Health and Social Services and Education, which jointly account for around 70% of public sector jobs, with the Civil Service accounting for 17% of jobs outside the reserved functions. The size of the Civil Service has of course been influenced by the creation of the NI Executive and the insistence on expanding to 11 Departments including the Office of the First and Deputy First Minister, specifically to accommodate an overblown Assembly and Executive and to satisfy the expansive state funding of communal political capacity deemed to be required within the current political process. .
In demographic terms Northern Ireland is expected to follow the trend of most industrialised countries with the population of those aged 18 and under falling while the proportion of those aged 65 and over will rise. As a consequence of this and the levels of deprivation, there will an increased need for health professionals and a decline in teacher numbers.
The reality is that the Public Sector in Northern Ireland has provided the underpinning of the economy and to some extent has had a progressive influence on other employers in its commitment to civilised industrial relations processes and the training and development of its staff.
Finally, I would like to say a bit about one area where I think there is ground for the labour and trade union movement to punch back beyond our weight - within the Skills Agenda.
The Skills Agenda: We should take issue with one critical policy driver - the policy aimed at achieving a target of 50% of young people entering Higher Education. The retention of the "50% access" policy mantra flows in the face of significant and mounting evidence questioning its logic.
There is growing evidence that the supply of graduates massively outstrips the demand in the economy for graduate labour. This picture runs across the country but is especially pronounced in some regions, including Northern Ireland.
In some sectors such as steel and computer services employers are making good use of the skills of graduates. In others, particularly in service sector and retailing, graduates appear to occupy jobs that do not require their skills
The second Work Skills in Britain Survey (2002) indicated that only 13.4% sampled from the UK Labour Force felt they were using a degree level qualification in their current job (ie they needed it to get the job and it was essential or fairly essential to carry out the work competently.
Like manyNew Labour policies, the "50% access" policy has been drawn largely from the USA, but even in the USA, projections are that only 21.8% of jobs by 2010 will require a basic or higher degree. The economic case for further expansion of Higher Education is, at best, patchy. With graduates progressively filling jobs that do not require high skill levels, it would be safer to say that traditional notions of a graduate job have been rendered fairly meaningless.
The "50% access" mantra is also likely to have unintended negative consequences for vocational education, and for the "bottom 50%". If the 50% access to Higher Education target is to be met, it can only be from inducing those currently capable of achieving a Level 3 qualification to go on to Higher Education. How then are the substantial number of craft, technician and associate professional jobs requiring Level 3 qualifications to be filled? Relative to our European competitors, our main "gap" or "weakness" is at Level 3, not in Higher Education. The sort of apprenticeship route that delivers technicians craftspeople and associate professional workers across Europe has atrophied to a remarkable degree in Northern Ireland and the UK. The potential dearth of appropriately qualified young people to fill craft, technician and associate professional posts has begun to alarm employers.
The consequences of the growth of Higher Education for the vocational route would appear, to us, to be seriously damaging to the economy. The social consequences, where it is estimated that the expansion of higher education will disproportionately benefit the higher social classes, are equally alarming.
The effects of "50% access" has on the "bottom 50%" are also concerning. People with Level 3 qualifications will be crowded out of craft and technician jobs. And recruitment to large swathes of the service sector place little weight on qualifications per se, with greater emphasis on personal characteristics and work discipline skills. Nonetheless, even in low status service jobs, personal characteristics and social capital will tend to favour the middle class.
Our movement should make two particular recommendations on these matters.
i) Higher Education compact: First, that the Minister for Employment and Learning review the policy of 50% access to Higher Education. We should ask Sir Reg Empey to note that the "50% access" policy is a cost free option for employers. Employers currently make very limited direct contributions to the cost of Higher Education. We would ask the Minister to implement the "compact" suggested by Lord Dearing whereby the costs of Higher Education should be shared between the state, individuals and the employers of graduates. No other measure would provide a better test for the efficacy of Higher Education in meeting the needs that the Northern Ireland Skills Strategy professes to espouse.
ii) Excellence in Apprenticeships: Secondly, that the current Priority Sectors approach adopted be built upon by developing a rigorous, quality, apprenticeship system for only priority sectors with productive or manufacturing functions. Such apprenticeship frameworks should be developed within tripartite structures involving the State, the Employers (perhaps through the relevant Sector Skills Council) and the Employees representatives (Unions). Moving away from a "voluntaristic" model of apprenticeships which has largely failed to a front loaded, and long term planned and rigorous programme of study and work experience.
All other apprenticeship frameworks, notably those in the services sector, should be scrapped (with each of these sectors relying on the National Vocational Qualification system, employer training and "on the job" training). A high quality apprenticeship programme should also be built-in as an integral part of the £16 billion capital and infrastructure programme.
Regional Autonomy?: A final difficulty with the PfG and the Budget Priorities) is that these were dominated by political imperatives on which Northern Ireland can only be a bystander. Public sector efficiency became a key battleground several years ago when then Conservative Party Shadow Chancellor Oliver Letwin suggested a range of efficiency savings which the Conservatives would wish to make. New Labour, in its accustomed tactic of "triangulation" - ie moving onto the political ground of its opponents - appointed Peter Gershon to undertake a quick Efficiency Review and implemented serious "efficiency" cuts on the civil service and public service generally. This efficiency saving was the sub text of the Budget Priorities 2005-08 and remains so for the2008-11 round.
There is very little evidence that the local Executive political parties have brought any new thinking to the game!
