CORNISHING PAY

I noted way back in this post in 2009 that the Conservatives were seriously thinking about localised pay (and benefits) and in several posts I have explored the issue, especially the advantage for public sector workers in Cornwall of national pay rates. I have listed those posts at the foot of this one. Now the Tory Libdem government is preparing to implement localised pay in this week’s budget, firstly in the civil service but soon for other public sector workers currently with national pay agreements like teachers and nurses.

Economic efficiency
Public sector workers will have their pay Cornished, that is cut or frozen until it matches local private pay. The justification for this is economic efficiency, a level playing field in pay between the public and private so that one does not artificially out-recruit and out-retain the other. In most of Britain this will mean public sector pay ultimately falling.

8 percent gap?
The advantage of public over private pay averages about 8 percent in terms of hourly pay. This hides variation. The explanation for 8 percent is set out in this ONS study which reaches the figure after taking into account differences in the two sectors such as age and qualifications. That study does have some significant caveats; for example, the ASHE data relates only to employees not to self-employed people and the data is about April which is a time when bonuses in the private sector are not paid, both of which are likely to reduce the gap.

The regional figures for the public and private hourly pay gap in April 2011 are in Table 25.5a here.

Consequences for Cornwall
If public sector pay in Cornwall is cut or stalls to reflect the lower private sector pay, will Cornwall still attract, for example, the best nurses and teachers and administrators to build a career here? Will the landscape attractions of the county and the way of life outmatch the high cost of buying a house here and the increasing cost of petrol and travel to work in a dispersed county with poor public transport on lower pay? I don’t think so. Will teachers and nurses on Cornish pay be able to afford a suitable house and if they can’t will they come here? I think some people here overestimate the comparative attractiveness of Cornwall; there are other places in England as beautiful and with an attractive way of life – and with lower housing costs. Man cannot live on surf and Ozymandias engine houses alone.

Of course occupational pensions, based on career average pay, will depend on people’s pay too so it is not only now that living standards will be affected but in old age too.

Localised public sector pay could turn out to disastrous for Cornwall, adversely affecting the quality and performance of its public sector.

Taking money out of the Cornwall economy
What the Tory Libdems will be doing is taking money out of the Cornwall economy: those Cornished public sector workers will have less to spend and that will not help our county economy. Cornwall GDP is 72 percent of the EU average so for a third time we shall qualify for EU aid (though the GDP figures do not well reflect individual experience but rather the disproportionate number of retired people and the nature of jobs here). I suppose removing the pay advantage of the public sector here might in theory encourage the private to step up its endeavours and be able to recruit the talented more easily. A decade of EU aid appears to have achieved too little economically that is solid and lasting and does taking money out of such an economy make sense? Isn’t there a lively danger of government localisation trapping the people of Cornwall in a longterm low wage economy?

Party politics
I think I should add that regionalising pay and benefits is not a clear-cut party political issue. Labour between 1997 and 2010 considered regionalised pay and writing in the Daily Telegraph this 28 January Liam Byrne, Labour’s shadow for Works and Pensions, argued for a regionalised benefits cap asking, “How can a ‘one-size-fits-all’ cap be fair to working people in both London and Rotherham?” And see this 2006 report that says that “Since at least 2003, Gordon Brown has been toying with the idea of having different regional pay settlements across the UK.”

Sources

ONS ASHE data about regional pay Table 25 for April 2011 (Table 25.5a shows that male fulltime gross median hourly pay rates in the south west region were £15.15 in the public sector and £11.50 in the private sector. The mean average figures were £17.41 and £14.04)

Growing number of myths about local pay determination Alastair HATCHETT 17 January 2012

Estimating differences in public and private sector pay Andrew DAMANT and Jamie JENKINS July 2011

Public sector pensions and pay Carl EMMERSON and Wanchao JIN February 2012

Regional pay: Can it work this time?Stephen BEVAN 30 November 2011

Earlier posts

Cutting Cornwall 1 December 2011

Localising benefits 31 July 2010

Tory-Libdems to localise NHS pay in Cornwall 19 July 2010

Vote Tory today, cry tomorrow 1 February 2010

Tories eye benefits and wages in Cornwall 6 September 2009

And see this (‘£7,000 pay gap for Westcountry workers’ in Western Morning News 16 December 2011)

ADDENDUM 23 March 2012: This is the NHS employers organisation submission to the NHS pay review body on market facing pay, March 2012

---

CORNWALL UNEMPLOYMENT AND JOB VACANCIES

The Tory Libdem management of the economy is failing: their austerity grows and economic growth doesn’t and unemployment is rising. I have charted this rise in the regularly updated Cornwall data post.

The latest claimant count figures for Cornwall – which do not present unemployment in its entirety – are dispiriting.

However, the TUC blog Touchstones has published its analysis of August 2011 claimant count figures and vacancies and their ratio for local authorities in England, Scotland, and Wales (scroll to “Download our analysis for every area”). There are 152 local authorities in England and in terms of arithmetically how many claimants there are for each vacancy Cornwall sits at 32nd (where 1st is best, the fewest claimants for each vacancy). Cornwall is thus at the 80th percentile, that is the ratio for Cornwall is as good as or better than 80 percent of England local authorities.

For Cornwall there are 3.5 claimants per vacancy. The mean average for England is 5.3 and the ratio ranges from 2.0 to 22.8 (disregarding the extremely low figures for the City of London and Isles of Scilly).

Thus Cornwall is not bottom of the table and is doing comparatively well. That will not help or comfort the 8384 current claimants in our county and I expect the figures will get worse. Of course the ratio will vary across Cornwall too.

---

ENGLISH AND CORNISH DEVOLUTION

In this post I am briefly looking at two related devolutionary issues: the constitutional and financial arrangements of the UK. PESA is the annual Public Expenditure Statistical Analyses by the Treasury.

PESA 2010-2011
The PESA figures for 2010/2011 (tables 9.2 and 9.4) are a catastrophe for the present financial (and constitutional) arrangements of the UK. They show that the latest percapita identified public spending for the four countries of the UK in £:
Northern Ireland 10 706
Scotland 10 212
Wales 9829
England 8588

As an index the figures are Northern Ireland 121, Scotland 115, Wales 111, England 97, UK 100.

Although there are regional figures there are no separate ones for Cornwall.

Imbalance
This imbalance is the result of the discredited 1978 Barnett formula which redistributes tax money on the basis of population not need. The differences above have continued over many years.

The main publically noted contrast is between England and Scotland though there are Barnett distributive effects in Wales and Northern Ireland.

People in England, including Cornwall, are increasingly aware that through the Barnett formula Scotland gets more UK identified public spending per head than England and is enabled to provide a range of free public services that charge in England. For example, prescriptions are free in Scotland but each item on a prescription costs the patient in England £7.40 (though there are exemptions); and compare tuition fees at the university at Falmouth which are to be £9000 a year, and no tuition fees at a Scottish university for a resident of Scotland. The financial differences are there in everyday life.

There is an England again
As for constitutional devolution, the debate for some years has been dominated by the issue of Scottish independence. While the Scottish nationalists prepare for a referendum on independence in a couple of years’ time, slowly, very slowly but discernibly, people in England are now questioning whether the present devolutionary (and financial) arrangements benefit England and are just. People in England are beginning to think positively about issues like English devolution, English-only votes on English-only matters in the Commons, an English parliament, and even independence from the UK. If, as seems possible, Scotland chooses independence outside the UK, the total effect on the other three countries of the UK is difficult to forecast. Parliament at Westminster would become in effect an English parliament with a handful of MPs from Wales and Northern Ireland but that assumes Wales and Northern Ireland choose to remain in the UK on the present terms.

Anyway, after years of manufactured invisibility there is an England again.

Parties
Putting aside Scottish independence and the consequent permutations for the remnant countries, the Barnett distribution and Labour’s asymmetrical devolution, which left England out in the cold, look set to be the end of the UK if the main parties continue to turn away from the England question – the twins of the financial and constitutional issues. This double issue won’t go away.

Cornwall
For Cornish nationalists too all this brings difficulties. There are two central weaknesses in claims for Cornish devolution.

First, exactly what status for Cornwall do nationalists want? I think they are seriously divided: independent British country outside the UK, independent country in the UK, semi-independent part of England, souped up county, an assembly, a parliament? How do they envisage the UK: separate countries, a federal UK with federal and independent institutions, pretty much the present set up with England and Cornwall joining the other three or two, a republic, still a monarchy …? It’s time the nationalists set out their status vision clearly.

Second, the economy and finance. Who will pay for an autonomous Cornwall? That depends to an extent on the shape of desired Cornish constitutional devolution. No one seriously believes Cornwall can live only on the money it could raise; the devolution schemes produced so far certainly do not suggest a financially self-sufficient Cornwall but rather one dependent on others’ largess. A Barnett formula solution? Really? A Guernsey-style offshore model? Really? I don’t think either is now politically practical. This is a pressing question for nationalists: how would Cornwall be financed?

So, Cornish nationalists should be crystal clear what it is they seek in terms of constitutional status and accompanying financial arrangements. The questions are simple: What constitutional status for Cornwall? Who pays?

Earlier posts
Hokey kokey devolution 14 December 2009

How should Cornwall be governed? 24 October 2009

Don’t mention the formula 1 June 2009

Cornwall pays 5 January 2009

Barnett formula to go 25 May 2008

External sites
Letter from the City of London 3 March 2009 to the House of Lords Select Committee on the Barnett formula

Memorandum by CEBR March 2009 (Centre for economic and business research) to the House of Lords Select Committee on the Barnett formula

Unequal shares: the definitive guide to the Barnett formula 2008

Yougov poll August 2011, page 12 of the poll

---

CORNWALL AND GUERNSEY

Let me heartily recommend Treasure islands by Nicholas Shaxson which I’m reading.

It’s an analytical, detailed, and illuminating look at offshore tax havens/security jurisdictions of which Shaxson says there are about sixty in the world. There is a website which introduces the book and discusses its contents.

Tax havens are places that offer companies and mainly rich individuals comparatively low or even nil tax rates on income and capital and inheritance and a way of avoiding or minimising the higher taxes levied in other countries. I think whether one sees them as legitimate tax efficiency for individuals and companies or as depriving countries and people of tax revenue ultimately depends on how one sees taxes: a necessary evil to be minimised or underpinning civilisation. I incline to the latter view.

Read this for a measured argument about the damaging effects of tax havens. There have been recent agreements which limit the scope of some of them but critics dispute their adequacy. Tax havens still flourish.

The ‘British’ tax havens are the crown dependencies (that is, the Channel Islands and the Isle of Man) and the overseas territories like the Cayman Islands and Gibraltar. See this article in the Financial Times 25 March 2010 about Guernsey, one of the tax havens.

Cornwall
I think there is an additional Cornwall interest because of this study about what Cornwall can learn in autonomous governance from Guernsey.

It might be said that the interest is the government model not the financial model. I’m not sure one can separate them easily in 2011 – I think the economy and finance are central to the success of any constitutional entity in the world whether or not recognised formally in a constitution – and it will be interesting to see what the study says on this.

SHAXSON Nicholas Treasure islands: tax havens and the men who stole the world (2011) Bodley Head

Addendum 23 September 2011
An update though little is said. And nothing about the financial model.

And here’s a later post on Guernsey’s finances and economy.

---

OIL AND TUPPENCE: GROWTH IN CORNWALL

The other day in the post Cornwall: build and grow I focused primarily on the positive arguments for more houses in Cornwall. In this post I am looking at the reasons for supporting rational economic growth.

Yesterday and today
First think on this: a house, like the others in the street, with no inside lavatory, no running hot water, no central heating, a candle the only light in the cold bedroom. No car, no television, no computer, no telephone, no washing machine, no bathroom.

This is not 1337. It is yesterday. My life as a child here in England. Given then and today, I choose today. I’ve experienced first hand life without and unhesitatingly prefer life with.

All that limiting, monkish stuff has gone because of economic growth and its confreres innovation, enterprise, work, pay, tax revenues, welfare, consumer goods, houses, and a freer society. Yes, a flush lavatory indoors for everyone is part of the consumer society, is a result of economic growth and a progressive demand for a better material life for all. That materialism is an inlet to happiness.

Growth matters because it generates the funds and resources to provide and improve services like education, public health, transport, and urban and rural environments. It makes redistribution politically feasible; it enables us to redistribute some of the generated wealth to reduce inequalities, to share the fruits of regulated capitalism. It brings longer lives and better living standards. For individuals and families and communities growth gives the prospect of a better tomorrow. It brings individuals more freedom, more choice, scope for their talents and encouragement for their enterprise and room to achieve.

Shall the poor stay poor?
We are not in Cornwall on a devil’s carousel of unbridled economic growth, development, house building, consumerism, supermarkets, and concrete. We are not heading for Apocalypse Kernow.

Yes, there are always the dangers in Britain (and everywhere) of excess, greed, and despoliation: these are moral challenges to defeat not arguments against economic growth. We are humans with minds and skills: we can manage stuff, we can control stuff. For example, we can tackle with effect tax evasion; we can reduce grotesque inequalities; we can pulverise poverty; we can keep up our environment and national parks and special places. We can do these progressive things and politics is about how much we try to do them and growth is one of our major weapons for equality and against poverty. Without growth our sallies against inequality and poverty and unemployment will be ineffective; without growth the poor will stay poor.

Oil and tuppence and possibilities
Sydney Smith, an amiable nineteenth-century Anglican parson, said that the Samaritan needed oil and tuppence to do his work. Economic growth is the oil and tuppence, it gives the funds and resources by which we can help others out of the slough of deprivation and disengagement and despair and open up the possibilities of life for everyone; and by which we can experience a better life ourselves.

---

CORNWALL: LOCAL GOVERNMENT FUNDING

How did Cornwall do in the recent local government financial settlement?

The issue has been befuddled by the Tory Libdem government’s introduction of the novel concept of spending power. This adds in council tax revenue and some NHS funds to central government grants to local authorities and the result is a much lower figure for the reduction in funds than from the usual way of presenting the local government financial settlement, that is, changes in the core formula grant.

The formula grant is basically most but not all of the money given by central government to local government authorities. The various amounts paid to each authority aim to reflect the particular circumstances of the authorities taking account of levels of deprivation, number of pupils, the composition of the population, and so on. (See the note at the end about adjustment which makes meaningful year-on-year comparisons possible.)

Anyway, here are the £ million figures for Cornwall funding for the current and next financial years.

Formula grant
2010/11 £245.3 m
2011/12 £216.9 m
down 11.6 percent

Spending power
2010/11 £524.3 m
2011/12 £507.5 m
down 3.2 percent.

These cuts in funding are not just figures: they mean the loss of jobs and the removal or reduction of public services. Cornwall council has already produced an emergency budget to take account of the deficit-reducing program of the government and seems to have forecast the cut accurately.

How does Cornwall funding that of compare to other councils?

Looking at the funding of other councils, it is very clear that Cornwall has not been singled out for unfair funding. There is nothing here to support the victim agenda. Councils in areas with noticeable levels of deprivation, like Hackney and Liverpool, however have grounds for concern about their losses. Compare council ranks in the index of multiple deprivation (LA summaries) and the cuts in the local government financial settlement.

NOTE
The 2010/11 formula grant is the adjusted figure, that is the grant adjusted to take account of changes in services included in it so that one year can be compared with another. Cornwall will not receive any of the transition grant which will temporarily cushion the drop in funds of some urban authorities.
_______________________________________

FRAUD

Yesterday David Cameron promised the government would tackle benefit fraud. Well, I’m all for that. Fraud is wrong, should be identified, stopped, and the perpetrators dealt with appropriately.

Benefit fraud, for example, has been estimated in the Annual Fraud Indicator (published January 2010) to be about £1 billion a year. That’s about 0.8% of all benefits payments. Cameron gives larger figures.

The fraud indicator sets out all the various fraud figures and how they are reached and how reliable they are.

Of course, illegal tax evasion (not legal tax avoidance) is estimated at about £7 billion a year (or £15 billion if ‘hidden economy’ and ‘criminal attacks’ are counted in, see page 14 of the fraud indicator). That’s very much more than estimated benefit fraud. The late Labour government didn’t take tax evasion seriously enough and the present Tory Libdem doesn’t either. It’s both technically easier and politically more rewarding to tackle fraudulent welfare claims than tax evasion.

The government should be more ambitious. Let’s have a determined effort to combat fraud, all fraud, including illegal tax evasion.

___________________________________________________

VORSPRUNG CORNWALL 7

I shall post here continuing good news for Cornwall, developments which will positively help the people of Cornwall and the local economy and everyday lives. Everyone who wants the people of Cornwall to succeed in the modern world will welcome them. This post covers the first half of 2010. Vorsprung Cornwall 1 and 2 cover 2007, Vorsprung Cornwall 3 and 4 cover 2008, and Vorsprung Cornwall 5 and 6 cover 2009.

* The annual week’s festival of Golowan has ended in Penzance with a spectacular Mazey Day. It is good to see people thoroughly enjoying themselves and a local Cornish festival thriving, having been successfully revived for some years now. (June 2010)

* The building of fifty four affordable houses mainly for rent but with some for part-purchase at St Ives has begun. Completion is due spring 2011. This is a project of Devon and Cornwall Housing Association/Penwith Housing Association and ROK Construction and is largely financed by the taxpayer through the Homes and Communities Agency (HCA, called the Housing Corporation until late 2008). More details here. (June 2010)

* A formal agreement has been made between Orascom Development and Imerys to establish a company, Eco-Bos, to develop an ‘eco-town’ in the clay country around St Austell. The plan includes more than five thousand houses and the first phase begins in the first half of 2011. This is an exciting, pioneering initiative which will help the Cornwall economy and provide eco homes for people. Read the details here. (May 2010)

* Camborne, (including Roskear and Tuckingmill) have got £520 000 from the Heritage Lottery Fund to repair the town’s historic buildings. The project includes skills training, and the involvement of local people in creating proposals for looking after conservation areas and local six-formers in energy-saving research. There are some more details here. (May 2010)

* mycornwall.tv , launched last summer, has a fresh look access website. It’s a lively enterprise, offering a genuine county service with programs about Eden, the Pirates rugby match, an election meeting in St Ives, and an events diary, for example. It’s chock-a-block with stuff about life and enterprise in Cornwall. (May 2010)

* From October 2010 the mandatory national minimum wage will rise to £5.93 an hour (full adult rate). The present rate is £5.80 an hour. The rise is modest and responsible and will continue to help very many people in Cornwall. (March 2010)

* From next month, April 2010, the rents of social housing in Cornwall will go down; the average fall of Penwith social housing rents will be 1.6 percent. This reflects a fall in the retail price index last September and a government decision to carry that through to social rents throughout England. This will give a small increase in income to tenants which they will probably spend in the local economy. There is a possible downside: the rental income of the housing association will fall and that could impact adversely on their spending on housing. (March 2010)

* Cornwall has been awarded £69 million from the Labour government’s Building schools for the future program for a first stage of school physical improvements. Initially six schools will benefit from rebuilding or refurbishment: Camborne, Humphry Davy Penzance, Poltair, Pool, and Redruth secondary schools, and Curnow special school. Read about it here. (March 2010)

* Work progresses on the wave hub project in west Cornwall. An electricity substation is to be built at Hayle and preparatory work is beginning now. Read here. (March 2010)

* Two companies based in west Cornwall are prospering. PTT (Providers of telecommunications training) has won a contract with BT to be part of its apprenticeship training scheme. The day that, a photographic company, has now opened a USA office. Additionally, in east Cornwall, Cornish Crabbers, which builds yachts, has forward orders until June; good news after previous difficulties in 2008.

All very good news for the Cornwall economy and workers.

* St Austell is one of four areas taking part in the building of evironmental homes. See here.St Austell clay country villages will receive £9.55 million from the government in 2009/10 and between £2 and £6 million in 2010/11 for homes, along with £300 000 for ‘greening’ schools. Apprenticeships and other jobs will be created by the project. (February 2010)

---

VAT AND THE LIBDEMS

Addendum 7 July 2010: Erasing history
The Libdem party press release about Clegg and the Tory VAT bombshell linked to in my first paragraph below has now been removed from the Libdem site.

ORIGINAL POST 2 July 2010
The leader of the Libdems, Nick Clegg, said on 8 April 2010 at the launch of a Libdem poster campaign against what they said was a ‘Tory VAT bombshell’ that “Liberal Democrats have costed, in full, our proposals for tax cuts. We can tell you, penny for penny, pound for pound, who pays for them. We will not have to raise VAT to deliver our promises. The Conservatives will. Let me repeat that: Our plans do not require a rise in VAT. The Tory plans do. Their tax promises… come with a secret VAT bombshell close behind.” See the poster here.

On 9 April 2010 the Daily Telegraph reported: “When questioned, Mr Clegg himself repeatedly declined to promise explicitly that VAT would not rise under the Lib Dems, before eventually saying it would not.”

Vince Cable, the business secretary in the Tory Libdem government, and the Tories and Libdems have said that the budget VAT rise is necessary to reduce the deficit. Cable has explained the pre-election VAT-bombshell campaign thus: “We were trying to score a point against the Conservatives, if you like. Okay, well that was in the election. We have now moved past the election.”

TORY-LIBDEMS END HELP FOR YOUNG UNEMPLOYED IN CORNWALL

UPDATE 20 January 2012
The total number of job placements in Cornwall under the Future Job Fund (FJF) from October 2009, when the FJF began, was 650 comprising by parliamentary constituency 160 in Camborne Redruth, 110 in North Cornwall, 140 in St Austell Newquay, 80 in St Ives, 70 in South East Cornwall, and 90 in Truro Falmouth [Parliamentary Library, DEP 2011-2026, 5 December 20121]. The last applications for FJF placements were in March 2011.

ORIGINAL POST 29 May 2010
The Tory-Libdem government has abolished the Future Jobs Fund (FJF). This is wrongheaded and sadly in a while, too late to do any good, the Tory-Libdems will agree.

This scheme was about getting back into work people, especially those aged 18-24, who had been unemployed for six months. Young people in Cornwall benefited and stood to benefit more. Cornwall Council, working with partners in the private sector, successfully bid for £500 000 in autumn 2009 to create eighty three additional jobs; in this spring it successfully bid for £1.3 million for two hundred jobs for young people in Cornwall.

Thus the FJF helps young people here get back into work, another example of Labour’s positive achievements for the people of our county. The scheme isn’t perfect, the jobs are temporary, but the jobs pay at least the minimum wage, and take people away from unemployment into work and to learn new work skills. Had the scheme continued more out-of-work people in Cornwall would have got work through the FJF. Abolishing the scheme will hurt young people in Cornwall.

Do the Conservative and Libdem coalition MPs for Cornwall approve of this destructive decision of their government to abolish the FJF? Do they think this abolition helps unemployed young people in Cornwall?

The council’s media statements on its participation are here (30 July 2009) and here (17 March 2010)

Addendum 27 November 2010
There is an account of a successful FJF scheme here.

---