Tony Blair’s leadership

The anniversary of Tony Blair’s election as Labour leader prompted several re-appraisals of the man and his time in power. Even though he has been vilified since leaving office, many on the centre left, and quite a few others too, look back on the Blair era with fondness.

I’ll leave others to talk about his political legacy and whether what he did was right or wrong. Whatever else you might say about Tony Blair, though, he had, and still has, the sort of confidence people look for in a leader. People are drawn to those who appear confident and Tony Blair always did. Blair would have known how to handle Nigel Farage, said Michael White after Nick Clegg’s disastrous attempt to take on the UKIP leader in televised debates.

No-one has any doubt that Nick Clegg believes passionately in the EU but, when faced by a bombastic opponent with a simple message, he just couldn’t win the argument. Something was lacking. Blair, on the other hand, famously tore Farage apart.

Tony Blair had that knack of sounding confident even after he or his side had made a cock-up. He would come on TV and say, “Hey, look….”, after which he would go on to explain that, yes, things hadn’t gone well but, y’know, in the grand scheme of things, we are still on the right track. He pulled it off many times and, on the whole, even after the most vicious tabloid attacks, the polls swung back his way again.

As Bob Sutton says, great leaders are confident even when they are not really sure. Blair had that self-belief that meant, whatever happened, he always reckoned he’d sort it all out in the end. That came across and people bought it. Even after the Iraq invasion. His popularity only collapsed when he started wavering. He wouldn’t say whether or not he would go, then he said he would but he wouldn’t say when. The certainty that had been the hallmark of his leadership was no more. The magic had gone and, with it, the voters.

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Chart via The Economist

One of the stories that got lost during the 2010 elections was how well Labour did in the council polls. As Tony Travers said, if you start from 2006 instead of 2005, there was a swing back to Labour in 2010. This is because, in 2006, Labour’s popularity had crashed spectacularly. The will-he, won’t-he uncertainty at the tail end of the Blair era destroyed the support built up over the previous decade. Blair’s selling point was confidence and, once he stopped exuding it, people deserted him.

That ability to sound confident and turn things round even when you are on shaky ground is something few of today’s politicians seem able to do. David Cameron tries to do the “Hey, look…” thing but never quite pulls it off. Ed Miliband, while perhaps firmer in many of his beliefs than Tony Blair, manages, nonetheless, to come across as very uncertain. No-one looks a match for the likes of Nigel Farage and Alex Salmond, with their easily understandable ‘it’s all crap and it’s all your fault’ messages.

Tony Blair had another swipe at UKIP yesterday, in a speech which got three standing ovations from the many who are still faithful. Some of this is because a lot of people think that, on the whole, most of what he did was right. But there is also a yearning for a style of leadership; a man who said that, even if things go off track sometimes, this is the right way to go, follow me! It may be irrational, people may even know it’s irrational, but they are still drawn to those who appear confident. Tony Blair had that confidence in spades. That, as much as anything else he did, is what won him three elections.

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Austerity: Yesterday’s news. And tomorrow’s!

Compared to previous years, there wasn’t much reaction to the OBR’s Fiscal Sustainability Report. OK, there was a hurrumph from Jeremy Warner, as you might expect, but that was about it. This may simply be because the OBR’s outlook was a little better than last time or, as Jeremy would have it, “not quite as unsustainable as it was a year ago”. But I wonder if something else is going on. Looking at the TV and newspapers recently, it’s almost as though austerity is yesterday’s news. The economy is growing, employment is up. OK, we’re still waiting for pay to rise but, on the whole, the recession is history.

Something else happened over the past year or so, though, which didn’t get much coverage. George Osborne eased off on austerity. Jonathan Portes noticed as did Simon Wren-Lewis and the IFS.

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The government’s original plan to reduce public expenditure by 4 percent in real terms by 2015 (see page 44 of the 2010 budget) is now going to take another 4 years. But the aspiration hasn’t gone away, it’s just been kicked into the next parliament. What we will get, therefore, is back-loaded austerity. The pattern for public services funding is cuts, followed by an easing off, then another set of cuts.

The overall picture looks like this, DEL being spending on public services. (I went into the maths of all this a couple of months ago.)

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Which means this for the NHS.

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Charts via The King’s Fund.

And this for local government.

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Chart via Local Government Association.

The funding problems in local government are like those for the overall public sector in microcosm. After taking out the nationally protected funding for health and schools, there are other services which local authorities are obliged, either by statute or by strong political pressure, to provide. This is, effectively, a further layer of protection. Inevitably, therefore, the cuts fall on those services without it.

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So far, the largest reductions have been made in regulatory areas like planning and in sport and leisure. These are the areas where the fewest people are likely to notice and where the impact of cuts may not be seen for some years.

There’s worse, though. (Come on, you knew there would be.) The LGA’s funding projections on the graph above assume that councils will make efficiency gains of around 2 percent per year and introduce or increase charges for some services.

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This level of efficiency gain should be just about do-able but, even with that, the LGA still reckons there will be a funding gap. It estimates that most councils’ reserves will be used by 2016/17 so, without an increase in funding, some services will simply disappear.

The overall picture, then, is one of back loaded austerity. Not only are the planned cuts over the next parliament bigger, they are likely to feel worse because the easy ones have already been made. To use Giles’s metaphor, if you give blood once, it seems easy. If you are then asked to give blood again and again over a short period, you will start to feel ill. Which is how a lot of public service providers will be feeling over the next few years.

At the moment, though, we seem to be in some kind of phoney war. The pressure has eased, the economy is on the up and no-one is mentioning the A-word. Or, fr that matter, the T-word. It’s as though the remaining deficit reduction has been taken as a done deal.

I know from Twitter that some organisations have been discussing the 2015 dilemma at length. I assume similar debates are taking place across the public sector. Among politicians and in much of the media, though, it really does feel as though austerity is yesterday’s news. It all feels a bit unreal when you look at how much of it is still to come.

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The self-employed: Not employees but not always business people either

Even though the number of employees is now rising steadily, self-employment continues to increase as well, hitting another record level this month.

As ever, the Resolution Foundation were quick off the mark with a chart.

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Politicians and journalists seem to have stopped hailing this as the sign of an entrepreneurial revolution, though, which it quite clearly isn’t.

The Social Market Foundation published a report last week comparing entrepreneurship across a number of different countries. They defined high value entrepreneurs as those who go into self employment because they see an opportunity and want to build a business which will increase their income.

Drawing on the data from the Global Entrepreneurship Monitor, they found that, despite having a relatively high rate of self-employment, the UK had a relatively low number of high value entrepreneurs.

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There is no relationship between the number of self-employed in a country and the number of people engaged in building new businesses. Countries with low self-employment, like Norway and the US, have higher percentages of entrepreneurs than countries with high self employment, like Spain and Italy. These findings are similar to those of a Centre for Policy Studies report a couple of months ago (see previous post). They found that, if anything, countries with high levels of self-employment were less likely to produce entrepreneurs. The number of self-employed people has no bearing on the creation of new businesses. The idea that persuading more people to go self-employed makes a new Apple or Google more likely is simply deluded.

Looking at the story of self-employment over the last decade and a half, it’s quite clear what has happened. Since 2000, the number of businesses employing people has increased roughly in line with the size of the workforce. Over the same period, the number employing only the owner has shot up.

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Chart via BIS.

Of these businesses, relatively few are turning over enough to be above the VAT threshold. Again, the growth over the past decade or so has been among low turnover businesses.

 

 

Businesses 2000-13

Source: BIS Business Population Estimates 2013

Recently, I have been invited to a number of round-table discussions on self-employment. The participants had varying backgrounds and a wide range of views on the subject but most of us came to the conclusion that, with the rapid increase in self-employment, we are seeing the rise of a different type of worker.

Traditionally, we have seen the self-employed as business people and public policy, for the most part, still treats them as such. However, an increasing number of them are not in business because they like running businesses. Their businesses are simply the means which enable them to do the sort of work they want, or are forced by circumstances, to do.

A study by the RSA earlier this year grouped the self-employed into tribes. Only around a third were business builders (the visionaries and classicals). The rest were self-employed for other reasons.

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The new self-employed are workers but not employees and business owners but not necessarily business people. They don’t behave like entrepreneurs or employees. They have different priorities and needs.

The rise in self-employment pre-dates the recession and, if current trends persist, it looks as though it will continue during the recovery. It’s possible, though I’m somewhat sceptical, that there will soon be more self-employed people than public sector workers. But, while this is a significant shift in the labour market, it’s not an entrepreneurial revolution. It’s something different, though as yet, we’re not quite sure what.

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Strikingly stupid

Conservative ministers used this week’s public sector strike as an opportunity to revive the idea of further legal restrictions on industrial action. Raising the threshold to 50 percent of  a those entitled to vote seems to be the most talked-about option and the one championed by Boris Johnson.

Union leaders and others were quick to point out that the mayor and most MPs were not elected by a majority of their constituents and that many did not even have the support of the majority of those that voted. The Coalition’s mandate is based on the votes of less than 39 percent of the electorate. If we were to apply the 50 percent rule to general elections we’d never get a government at all.

Of course, elections are different from yes/no votes, which is why referendums often have high thresholds, rather than simple majorities. The presence of many parties in elections mean that different rules apply.

There is one other way in which parliamentary, mayoral and council elections are different from strike ballots, though, and it’s a much more important one than the argument about majorities.

Political elections are binding on everyone. Unless you decide to emigrate, you have to abide by the laws the new government makes, regardless of how small its percentage of the vote was.

Strike ballots, on the other hand, are binding on absolutely nobody. If your union votes to strike, you are perfectly free to ignore it, as lots of public sector workers did on Thursday. There is nothing the union or anyone else can do about it. Unions are prevented by law from disciplining members who refuse to go on strike. Yes, there may be some peer pressure but if that extends to intimidation, the perpetrators could find themselves facing criminal charges.

All a strike ballot does is make it legal for those that want to go on strike to do so. That’s all. Everyone else can ignore it.

Putting the threshold up to 50 percent would mean that all abstentions would be counted as no votes. An apathetic majority could therefore stop a committed minority from exercising their right to strike.

Strikes are unpopular and people usually moan about them. Having said that, polls suggest that the public was broadly behind yesterday’s strikers. Withdrawing the right to strike, which, in effect, a 50 percent threshold might do, is a big step. No government has ever banned strikes in peacetime. Even in the aftermath of the General Strike, when there was a fear of communist insurrection, the Baldwin government’s anti-strike laws did not go as far as David Cameron is suggesting today.

If anything, the current law on strikes is biased in favour of those who don’t wish to strike. Whatever the result, they don’t have to. Those that want to strike must get a majority vote first. To tilt the balance any further against them would be unfair.

There is no need for more legal restrictions on strikes. There is no crisis and no threat to security or public safety from industrial action, nor is there likely to be in the near future. There is no compelling case for changing the law. Unless you count the desperate need for an eye-catching election policy as a good enough reason.

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Self-employment: the punch bag of the recession

A report by the Resolution Foundation this week highlights the mismatch between official employment and pay data. When it talks about employment and job creation, the government includes the self-employed. When it comes to pay, though, the incomes of the self-employed are left out.

This isn’t because the government is cooking the books. It’s been done this way for years. But because of the way the labour market has moved, this peculiarity shows the Coalition’s figures in the best possible light.

Total employment is up, mostly because of self-employment. Take out self employment and the figures would be rubbish. The government wouldn’t have had much to boast about until the back end of last year.

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Source: ONS Trends in Self-Employment

Leave the self-employed out of the pay calculations, though, and the full extent of the drop in earnings is disguised. The source of official earnings data, the Annual Survey of Hours and Earnings (ASHE), does not include the self-employed. The Resolution Foundation has used data from the Family Resources Survey (FRS) to calculate the gap between employee and self-employed earnings.

And it’s some gap!

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The median pay of the self-employed has been way below that of employees for some time. The mean, though, has often been higher, inflated by a few people with very high earnings at the top. The distribution of self-employment earnings is much wider than that for employees.

Since 2008, though, even the mean has fallen. This finding is consistent with the HMRC data which showed a drop of £8 billion in self-employment earnings between 2008 and 2012. That’s £8 billion less cash between 600,000 more self-employed people. Before allowing for inflation! This collapse in earnings was so severe that even the wealthy few at the top could not keep the mean pay figure for the self-employed from falling through the floor. Whatever measure you use, the pay of the self-employed is now well below that of employees.

Had the self-employed been included in the official figures, at first, the decline in pay after the recession would not have looked quite as bad, thanks to those high earners at the top. Over time, though, as the number of self-employed people rose and their pay crashed, the fall in earnings would have looked much worse.

This chart, then, gives us a much more accurate picture of the decline in pay since 2008.

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It is likely, then, that the fall in earnings up between 2008 and 2012 (which is as far as the FRS data goes) was around 10 percent, rather than the 8 percent in the official figures. The Resolution Foundation’s projections suggest that it may have fallen by over 12 percent by now.

If the self-employed are going to form a larger proportion of the workforce from now on, and it looks very likely that they will, it makes sense to include them in official earnings figures, along with those for employment. Not to do so is, as Gavin Kelly says, to ignore the canary in the mine. The collapse in self-employment pay has, until recently, been one of the untold stories of the recession.

Giles had this to say:

Gavin’s Guardian piece argues that the omission accounts for a 20-30% underestimation of the fall in earnings. Such a staggering number lends support to the view that the productivity fall is partly about labour market behaviour. For any fixed national income, our labour market is relentlessly good at getting people into work, in whatever form they can. Hence the numerator stagnates, the denominator expands, the ratio (productivity) falls. The damning residual.

This chart, from the ONS Trends in Self-Employment study published yesterday, illustrates his point.

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More self-employed people, not much extra work, so falling productivity, under-employment and collapsing pay.

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And, of course, reliance on state benefits.

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(Chart via Michael O’Connor.)

So, while the employment figures were looking fine, just about everything else wasn’t. Earnings, productivity, tax receipts and the benefits bill all went in the wrong direction. This was most acute among the self-employed. ‘Canaries in the mine’, is one way of putting it. Looking at all this, though, ‘punch bags of the recession’ sounds more apt.

 

 

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Why I’m striking today (Guest post from a public servant)

A couple of weeks ago, I was talking to a friend who said, “I’m going on strike on 10 July.”

I was so surprised (this person is a former Tory party member and about as un-militant as you can get) that I asked for a guest blog post.

Here it is, without any further comment from me. At least, for now.

 

Why I am joining the public sector strike today

I am a public servant. Like the majority of my colleagues, I take this service very seriously although you may find this hard to believe if you have been reading the Daily Mail and listening to the government over the past few years. Up until now I have always voted against strike action. I believe in consultation and negotiation as preferred ways to bring about change. It is because the government will not engage with the unions and instead its ministers prefer to run down the public sector (in both senses), that I will be on strike today for the first time in my life.

Run down is a good way to describe how many of my colleagues in schools, hospitals and other vital services are feeling.  As the cost of living increases and cuts to staffing and services are made, they bear the brunt of public dissatisfaction and contempt from Conservative ministers. Apart from the lowest paid (who are really low-paid) they are suffering a pay freeze which began four years ago and, if we are to believe what we read, will go on until 2018.

The Office for National statistics and Incomes Data services disagree over how much pay in the private and public sectors has risen or not risen as was recently pointed out in the Guardian. Duncan Brown of the CIPD says his evidence shows that the public over-estimates pay levels in the public sector. To add insult to injury, the government requires its servants to spend more public money if a cheaper options might look ostentatious. Did you know that civil servants are not allowed to take the cheapest train fare if that happens to be first class but must choose a more expensive, standard class fare? (No, I don’t understand train ticket pricing either but that’s for another day!)

This is all fascinating stuff but in my experience parties with different agendas could talk statistics until the end of time without reaching agreement and it is not the difference between sectors – real or perceived – which spurs me to take action tomorrow. Rather it is the absolute contempt with which the public sector is treated in the press and in statements from ministers and their accompanying attempts to pit private sector against public sector.  Just think of the language used about civil servants, who come in for especially derogatory treatment ‘faceless bureaucrats’ ‘relentless regulators’ ‘enemies of enterprise’ – except when suddenly you need a whole lot more of them to manage immigration and make sure people have their passports when the cuts you have made backfire. Or when anything goes wrong and there is an immediate call to ‘set up an enquiry’ needing – you’ve got it – more public servants!

It is disingenuous at best and malicious at worst to whip up antagonism towards public sector workers when the truth is that everyone has suffered and will continue to suffer as austerity bites again, as it surely will after the next election. I don’t think that people want run-down, cut price public services operated by run-down, badly paid public servants. I do believe that David Cameron and co have an ideological agenda. They will not hesitate to manipulate statistics and language, not to bring about changes to public services (there is no argument that lots of things do need to change) but to replace them altogether with private providers. The danger is that they will put profits before people and will have no truck with those who can’t afford to pay. That’s why I’m going to be supporting my union today.

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Immigration and the jobs miracle

Conservative MPs are demanding a cap on immigration from EU countries as part of whatever renegotiation of membership the government manages after the next election. David Cameron is making the sort of noises that will appease his backbenchers though I wonder if he really believes what he’s saying.

The Financial Times reckons he’s gotten himself into a right muddle:

The prime minister has repeatedly declared that the UK is in a global economic race and must boost its competitiveness if it is to emerge victorious from this contest. At the same time, Mr Cameron has pledged to reduce net migration: the difference between the numbers entering and leaving the UK. He would like to see it return “to the levels of 1990s – tens of thousands a year, not hundreds of thousands”.

A year before the general election, the flaw in this approach is evident. The prime minister wants Britain to be open for business but also be closed to immigrants. This is a difficult stance for any leader operating in a global economy – let alone one in a country facing skill shortages who advocates the need for competitiveness at all costs.

A few weeks ago, when the employment statistics came out, a succession of Conservative MPs stood up at Prime Minister’s Questions and, repeating a rote-learned figure, boasted about the number of jobs created since they came into office.

Trouble is, though, of the 1.6 million increase in employment since the first quarter of 2010, more than half of it has come from workers born outside the UK. (See table EMP06 here.)

Now it’s true that the rise in employment among non UK born workers goes back much further than the last four years. As Michael O’Connor said a few weeks ago, much of the net increase in employment over the last decade has come from foreign-born workers.

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Employment among the UK born seems to have peaked sometime around the middle of 2005 and has only recently started to recover. Another of those trends we associate with the recession but which actually started well before it.

Look into the figures a bit more closely though, as Michael has done, and an even more interesting picture emerges.

Close to half  the increase in employment since David Cameron took office has come from people who have arrived during the Coalition era. When it comes to full-time employee jobs, the figure is even higher. Those who have come to the UK since 2010 account for around 75 percent of the rise.

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Many of the migrants who are fuelling the job growth are very recent arrivals.

Now, of course, some will say all this proves we need a cap on immigration and that migrants are coming in and taking jobs that would otherwise be done by British people. It’s difficult to say what might have happened if we had allowed fewer migrants into the country but the research suggests that, even where immigration does have an impact on the employment of the existing population, it is usually small and temporary. As the economy recovered, some new jobs would have been created if immigration had been lower but it’s unlikely that the increase would have been as high. Without migration, especially from the EU, many of these jobs would probably not have been created in the first place.

All of which suggests that the rising number of immigrants in the workforce is simply another indicator of the changing character of our economy. Closing the door might, as the FT suggests, choke off the flow of talent just when we need it. That said, these figures are a bit surprising (well they are to me anyway) so I’d be interested to hear from anyone who can explain why recent jobs growth has been so migration dependent.

Next week, when the July employment figures are released, loyal government backbenchers will probably stand up again in the commons and repeat the number of jobs created since 2010. We may well see some of the same MPs demanding restrictions on immigration a few weeks later. Bragging about the increase in jobs but saying you want to lock out a lot of the people working in them is hardly fair though. Much of the Coalition’s employment increase has come, and continues to come, from foreigners who have moved here to work. If there really is a British jobs miracle, it’s a migrants’ jobs miracle too.

Update:

Couple of things to add.

Michael has also looked at where the post-2010 arrivals have come from.

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Jonathan Portes points out that the migrants’ share of jobs has kept pace with their share of the working population for the past few decades.

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It’s also worth remembering that there are lots of British people working elsewhere in the EU too. The traffic isn’t just one way. As Bill said in the comments thread, globalisation is not a la carte. You can’t pick the bits you like and reject all the rest.

Update 2: I had no idea when I posted this that the Migration Advisory Committee was just about to publish a report on migration and skills. Will comment once I’ve had time to read it.

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