What happens in Greece will not stay there. Photo: Getty Images
Show Hide image

What happens in Greece will not stay there. The Prime Minister must act

Rachel Reeves surveys the scene ahead of the UK's budget and explains why she's backing Andy Burnham for Labour leader.

In the aftermath of the Greek referendum, the threat of instability in the Eurozone reminds us that Britain cannot insulate itself from global economic forces. So we need this week’s Budget to help build a more resilient economy – securing our public finances, productivity and competitiveness.

Tony Blair and Gordon Brown rightly kept us out of the single currency that was supposed to deliver stability - but is currently creating the opposite. Yet we would be naïve to think that disruption on our doorstep will not have consequences at home. In Europe and at the IMF the British Prime Minister and Chancellor should be arguing for a new deal for Greece, including proper restructuring of the Greek economy but also more time and greater debt write-downs. Without this, more austerity is simply going to deliver higher unemployment, lower output, and deeper deficits.

But uncertainty abroad also underscores the importance of securing our position at home.

Before the 2007 global financial crisis hit, Britain’s national debt was less than 40 per cent of GDP. Today it is more than 80 per cent. It will be the work of this, and future, parliaments to get it back to sustainable pre-crisis levels. This is not only so we can withstand external shocks, it is also essential for ending a situation where annual debt interest payments are set to exceed £50bn a year – more taxpayers’ money going to bondholders every year than we pay to the teachers in our schools or the nurses in our hospitals. We must deal with our debt precisely so we can release resources for the public services we believe in and the infrastructure our economy needs.

Labour is committed to this task. But we will need to be clearer than we were at the last election about a timetable for getting the deficit down and set a target for when we would get the national debt back to pre-crisis levels. The approach Labour committed to before the election could have seen debt still above 65 per cent in 2030. We must admit the mistakes of the past, and be clear that while spending on public services did not cause the financial crisis, the deficit that we were running when the shock hit meant we weren't as prepared as we should have been. Andy Burnham understands this, and this is exactly why I am backing him for Leader of the Labour Party. Looking forward, we should commit to run a surplus when the economy is growing at or above its historic average rate, allowing us to bring the debt down more quickly. And the Office for Budget Responsibility should be the independent arbiter of the government’s progress in this.

Getting our debt down as a share of GDP means cutting departmental spending as well as driving efficiency across all our public services. But crucially, it also means building a more productive and inclusive economy, raising earnings and reducing reliance on benefits and tax credits.

Early in the last Parliament, George Osborne promised to “rebalance the economy” with a “march of the makers”. But since then we have seen productivity stagnate, our current account deficit rise to record levels, and a fragile recovery that remains too reliant on household borrowing and which has yet to be felt in many parts of the country.

The underlying weaknesses and imbalances in our economy pose no less a risk to our future stability and prosperity than the unsustainable state of our public finances. We need a Budget that rises to both challenges.

Take social security spending, Labour supports the principle of a benefit cap to ensure our welfare system is fair, affordable and rewards hard work. But to make significant savings from social security we need a Budget to create more productive, high skilled, better paid jobs. Without this, cutting away support for low-paid workers, as this government plans, risks weakening work incentives and deepening the division and disadvantage that prevent us making the most of our country’s potential.

Now is not the time to be timid, now is the time to be bold and so on Wednesday, the Chancellor should announce an increase in the minimum wage. And with five million people paid less than living wage, there should be tax breaks for firms who will pay the living wage, better use of government procurement and a requirement on companies to report on whether they pay the living wage so consumers can vote with their purses and wallets.

And crucially, this week's budget needs to back the entrepreneurs and employers who create jobs – rewarding innovation and investment, improving access to finance, and doing what it takes to secure the research base, skilled workforce and world class infrastructure businesses need.

With a focus on economic credibility, constructive engagement with business and a bold plan for technical education and skills, Andy has shown that he gets this - and the need for Labour to lead the debate over Britain’s economic future.

That’s why I am pleased to be co-chairing Andy's Business Panel which launched last week alongside Graham Cole, chair of Augusta Westland, and Shabir Randeree, Chair of DCD group. This week the panel met for the first time to start the conversation in which we will work to engage businesses of all shapes and sizes throughout the country – so that Labour can best understand what businesses need to create the jobs and opportunities to grow our economy.

Dealing decisively with the deficit and the debt are essential to good economic management, but so is a strategy to raise the productivity of our workforce and the competitiveness of our businesses. If this week’s budget does not rise to this twin challenge, we in the Labour Party must show that we can.

Getty
Show Hide image

There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.