The Secret Cuts: Part Five, The Low-Pay Debate

Continuing their series on the Coalition's secret cuts, Alan White and Kate Belgrave explore how workers are being bludgeoned into accepting wages that are too low to live on.

There was a big story this week. It didn’t quite attract the level of coverage received by the royal baby, but it affected a lot more people. The Archbishop of York, John Sentamu (who is himself linked to a workfare scandal), described the low wages of millions of Britons as a "national scandal".

Salaries across the country are not only being cut - they’re being trashed, as the people we talked to for this article know all too well. They, like people all over the country, are locked in vicious disputes with their employers about proposals for wage cuts. Staff at One Housing Group, which is featured in this story, are striking today. They know that they’re being forced into a race to the bottom, but refuse to join it - or buy the line that employers can only compete if wages plunge.

This concerns everyone who needs a wage to live.

This video shows staff at a recent noisy picket outside the Southwark head office of Equinox Care. Equinox is a charity which provides support services for people with drug and alcohol problems and mental health conditions across the South East.

The staff are on strike today - as they have been several times this year - in protest at management plans to slash their wages. Their dispute with management is bitter and at an impasse. The wage cuts management insist on can’t be borne. Management say that they must be borne if the organisation is to survive. But staff and unions know that organisations won’t survive if services are reduced to rubble.

Earlier this year, Equinox workers and unions were presented with proposals for wage cuts which will leave huge holes in pay. Average annual pay cuts of £2,000 will be imposed on front line staff, with some people being told to accept reductions of £8,000. Staff say they’ll be downgraded and deskilled - but they’ll end up doing exactly the same jobs.

People are livid at management and particularly CEO Bill Puddicombe, who they say refuses to negotiate, or change his position. Outside HQ, they wave posters plastered with his picture - “Bill Puddicombe, the face of cuts in social care.”

Photograph: Charles Shearer at SnapsThoughts

The fury is tangible. Andy, an Equinox worker, tells us: “At one meeting about the cuts I saw a member of staff crying, because they were worried about losing their house. Then I saw a member of HR staff chuckling, and I had to ask him exactly why he was laughing.”

Ann says: “People don't know how they are going to be able to pay their rents and mortgages. It's just horrific.” John describes their work: “[We do] floating support and homeless prevention work - council tenants who are maybe on their final warning and get referred to us by caseworkers. It tends to be substance misuse, alcohol, addiction. We also work with ex offenders, [people with] mental health conditions, victims of domestic violence... and on the streets with street drinkers and rough sleepers to see what sort of accommodation they might be entitled to. They often use or drink in order to be able to survive on the streets.”

All say the work is rewarding, but like everyone else, they need to be paid for it. They’re also worried that if they don’t fight back now, the axe will be swung again. Ann says: “We haven't had a pay rise for the last three years, so in effect we've been taking pay cuts. We had our hours increased.”

The first strike took place at the end of May, but, says the union, the charity’s management did not respond. Things have now escalated. Unite’s regional officer said: “Rather than sitting down to negotiate with Unite, Equinox management appear to have spent their time striking off from their relief worker/locum list any worker who refused to cross the official picket lines, blacklisting them from all future employment with Equinox.” (When we speak to him, Puddicombe says Equinox is not blacklisting. We will stay in touch with workers to see how things go.)

In June, two more days of strike action followed. Protestors report that Puddicombe attempted to rush through the strikers without answering questions, but apparently found himself locked out of his own office. Perhaps the pressure was getting to him, because earlier this month, he snatched Unite placards that were being handed out at a care conference in Lewisham and tore them up. Around the same time, staff handed a no-confidence vote in him to Equinox’s board members. Then there were more strikes.

Puddicombe, when we catch up with him, does seem emotional. He demands to know how we found out about the protests and complains bitterly about Unite’s presentation of him. We put it to him that people are justified in their rage - who, after all, wouldn’t furiously oppose a cut in their wages? - and he accepts that, but he says people don’t understand the problems faced by smaller charities.

He says smaller charities like Equinox are being squeezed by much larger ones who have big marketing and tendering departments and can aggressively chase new business. He says that Equinox is committed to being a living wage employer. He also says, testily, that the environment is almost impossible: “Given that Equinox is principally reliant on public sector money for the charitable work we do - that money is decreasing. We can only pay the same level of wages that other organisations pay in our field. In 2011/2012, we lost a half a million pounds. We've just broken even in the last financial year.” (“We’ve got five years left at best” charities told the Guardian this week.)

But that’s not good enough for the staff who must lose thousands in pay. Nor can it be. People can’t take wage cuts. They can’t afford to. They can’t just leave the argument there. They’re not in a position to accept the line that lower wages will save an organisation - particularly when management isn’t sure that lower wages will ultimately do that. Puddicombe says he isn’t sure himself.

In this environment, people need a new tune. They want their employers to campaign against cuts and to pressure government and local government for funding and better contracts.

They wonder why they’re taking the hit in the public sector when others are not - MPs’ pay rises were a very big topic when we visited the pickets. Unite Housing Workers branch chair Paul Kershaw says that St Mungo’s - another care provider - “has a proposal that guarantees the pay of existing staff and limits the use of the new lower grade.” Unite wants to see sector agreements where competitive tendering processes do not compete on wage rates.

They want to go to the Advisory, Conciliation and Arbitration Service (ACAS), but Puddicombe won’t. “We haven't seen any sign that the union is willing to realistically engage with a conversation about change,” he says. The Unite people we spoke to were bemused by this. They say that’s the point of going to ACAS - to engage and have a conversation. Puddicombe says the Equinox board has “red flags” below which it won’t cut - but he also says that local authorities will probably look to cut budgets further in 2015. The future looks shaky and people know that. But they will not accept that they have to wear the worst of it. Why should they?

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And what of the bigger charities that are squeezing the smaller ones? Oddly enough, at the larger and profitable One Housing Group (OHG), exactly the same situation is unfolding. OHG has massively expanded - it’s over eight times the size it was in 2004, and the main way it grows is by taking contracts from other providers. That means it takes their terms and conditions on staff pay.

So it planned to “standardise” pay across the board, with £22-23k for those in inner London and £22k in outer London (which laughably included Southwark, Tower Hamlets and Lambeth). The argument was that due to local government cuts, pay would have to be slashed to allow the company to make lower bids.

“What we didn’t realise,” says Peter , an employee, “Is that the support arm of OHG had made a surplus over £1m. It was the highest in the sector. Our major competitors made losses or just broke even: St Mungo’s made a tiny surplus and didn’t bring in cuts. And that’s just support. OHG on its own made £12m. So they were cutting some people’s pay by £8,000 in a bid to save a total of £490,000 - even if they made no cuts at all they were still hundreds of thousands in surplus.”

A week before Christmas, 245 letters were sent out. They instructed everyone to sign up to the pay cuts before 21 December. There was a very low union membership at the time, but 70 per cent of the staff didn’t sign - and soon became unionised. “This triggered endless one-to-one consultations,” says Peter. “You would see members of staff in tears, talking about how they’d lose their house - we’d already had our pay frozen for four years previously. It was just an admin exercise, but we got the cuts delayed for 22 months. Now they’ll come in February 2014.”

In a statement OHG says: “One Housing Group has a workforce of over 1,200 people. Following an exhaustive consultation process, over 95 per cent of the 230 affected care and support staff have signed up to the new salary arrangements.”

It sounds promising, until you hear Unison’s response: “OHG management say that 95 per cent of staff have signed up to the cuts. Indeed they have. They were told in no uncertain terms that if they sign the new contracts they will have their pay cut in February 2014 and if they refuse to do so, they will have their pay cut with immediate effect. This is the sole reason they have signed the new contracts.”

Peter says: “There’s anger because we’ve won huge contracts - £1m for homeless and floating support from the Greater London Authority and £1.3m for work in Essex - neither makes a loss, there’s years of guaranteed funding, and yet shortly after they’re awarded people are told cuts have to be made. But we’re making a profit.

“This is the best way for management to get pay protection when they pick up contracts from other providers. It’s a sort of reverse egalitarianism - you can argue against claims made on basis of protected pay agreements for example, because everyone’s earning the same.”

Things would only get worse. Strike action was threatened and as a result a severance package for staff was agreed. Workers claim that it was funded by taking away staff bonuses: “It was stunning,” says Peter. “A guy earning £18,000 was now losing his £550 bonus to subsidise the pay off of a guy on £28,000.” OHG insists to us that this is not the case.

At the same time Mick Sweeney, the group’s CEO, accepted a pay increase of just over £30,000, taking his salary to £176,000. OHG refuses to explain to us why it quoted a lower figure of £150,075 in Inside Housing’s 2012 salary survey.

Even local councillors in Islington were outraged. They wrote to OHG and pointed out that at the council since 2010 they had cut the CEO’s salary by £50,000 and increased pay for workers on less than £21,000, while still saving £400,000 of management costs. Suddenly managers and support assistants who weren’t facing cuts began to unionise, and strikes began in June. The local councillors even attended the picket lines.

Peter says: “It felt like they were targeting the frontline guys purely because there was no history of standing up to them. The job market has changed - people are just hanging in their jobs. As the association expands it’s become more corporate - it’s a bit like working for Barclays now, with lots of talk of “business plans” and the “market” - that’s fine, but when you’re making a surplus you can’t really criticise the market. You’re left with demoralised workers who lose the voluntary ethos for extra work.

“They refused to go to ACAS - which even the likes of Balfour Beatty do. First they said they wouldn’t go because there’d never be a strike, then there was one and they just refused to pick up their phones.” OHG tell us: “Our consultation process left no stone unturned and considered all available options in order to secure the best possible deal for staff within the challenging environment. We did not feel there was anything further to be gained by going to ACAS."

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The voluntary sector is changing. Axemen like Puddicombe say that they’re trying to prepare their organisations for dark days ahead. But staff want to see something more constructive. As Andy tells us: “Puddicombe says he’s making these cuts so he can make tenders, but Equinox are primarily losing tenders because they don’t have a dedicated team.”

Puddicombe says that the organisation has “no hope” of achieving new business until salaries are cut to the “same level” as competitors and also because competing organisations have big tendering teams at their disposal. He does seem to concede that new business will not necessarily be on the cards even if salary cuts are made, though. “We can make the changes that we're making - after that, then we have to hope that we can find some dazzling opportunities to produce new business, that we can use the skills we have and make a bit of luck.” Doesn’t sound like much of a plan.

In the case of One Housing Group, the story is different. Here the money is rolling in, but as Peter tells us: “It used to be impossible to action the workforce across the supported housing sector, but now people are seeing that this is about building a war chest for when the local government cuts really bite.”

As Will , another Equinox worker tells us, it’s a strategy that might cost lives. “Coming off alcohol is one of the most dangerous things. It’s a potentially life-threatening thing. [Staff shortages] would pose in my mind a real risk.

“People don't want to see that service lost. People have put years into the job and a real commitment. What's being done is completely and utterly wrong. Lack of transparency, downright untruths, they're not negotiating with the unions, I think that is so wrong and it's good that people are standing up to it.”

All staff names have been changed.

You can read more articles from Alan White and Kate Belgrave's Secret Cuts series here

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MPs Seema Malhotra and Stephen Kinnock lay out a 6-point plan for Brexit:

Time for Theresa May to lay out her priorities and explain exactly what “Brexit means Brexit” really means.

Angela Merkel has called on Theresa May to “take her time” and “take a moment to identify Britain’s interests” before invoking Article 50. We know that is code for the “clock is ticking” and also that we hardly have any idea what the Prime Minister means by “Brexit means Brexit.”

We have no time to lose to seek to safeguard what is best in from our membership of the European Union. We also need to face some uncomfortable truths.

Yes, as remain campaigners we were incredibly disappointed by the result. However we also recognise the need to move forward with the strongest possible team to negotiate the best deal for Britain and maintain positive relationships with our nearest neighbours and allies. 
 
The first step will be to define what is meant by 'the best possible deal'. This needs to be a settlement that balances the economic imperative of access to the single market and access to skills with the political imperative to respond to the level of public opinion to reduce immigration from the EU. A significant proportion of people who voted Leave on 23 June did so due to concerns about immigration. We must now acknowledge the need to review and reform. 

We know that the single market is founded upon the so-called "four freedoms", namely the free movement of goods, capital, services and people & labour. As things stand, membership of the single market is on an all-or-nothing basis. 

We believe a focus for negotiations should be reforms to how the how the single market works. This should address how the movement of people and labour across the EU can exist alongside options for greater controls on immigration for EU states. 

We believe that there is an appetite for such reforms amongst a number of EU governments, and that it is essential for keeping public confidence in how well the EU is working.

So what should Britain’s priorities be? There are six vital principles that the three Cabinet Brexit Ministers should support now:

1. The UK should remain in the single market, to the greatest possible extent.

This is essential for our future prosperity as a country. A large proportion of the £17 billion of foreign direct investment that comes into the UK every year is linked to our tariff-free access to a market of 500 million consumers. 

Rather than seeking to strike a "package deal" across all four freedoms, we should instead sequence our approach, starting with an EU-wide review of the freedom of movement of people and labour. This review should explore whether the current system provides the right balance between consistency and flexibility for member states. Indeed, for the UK this should also address the issue of better registration of EU nationals in line with other nations and enforcement of existing rules. 

If we can secure a new EU-wide system for the movement of people and labour, we should then seek to retain full access to the free movement of goods, capital and services. This is not just in our interests, but in the interests of the EU. For other nation states to play hardball with Britain after we have grappled first with the complexity of the immigration debate would be to ignore rather than act early to address an issue that could eventually lead to the end of the EU as we know it.

2. In order to retain access to the single market we believe that it will be necessary to make a contribution to the EU budget.

Norway, not an EU member but with a high degree of access to the single market, makes approximately the same per capita contribution to the EU budget as the UK currently does. We must be realistic in our approach to this issue, and we insist that those who campaigned for Leave must now level with the British people. They must accept that if the British government wishes to retain access to the single market then it must make a contribution to the EU budget.

3. The UK should establish an immigration policy which is seen as fair, demonstrates that we remain a country that is open for business, and at the same time preventing unscrupulous firms from undercutting British workers by importing cheap foreign labour.  

We also need urgent confirmation that EU nationals who were settled here before the referendum as a minimum are guaranteed the right to remain, and that the same reassurance is urgently sought for Britons living in mainland Europe. The status of foreign students from the EU at our universities must be also be clarified and a strong message sent that they are welcomed and valued. 

4. The UK should protect its financial services industry, including passporting rights, vital to our national prosperity, while ensuring that the high standards of transparency and accountability agreed at an EU level are adhered to, alongside tough new rules against tax evasion and avoidance. In addition, our relationship with the European Investment Bank should continue. Industry should have the confidence that it is business as usual.

5. The UK should continue to shadow the EU’s employment legislation. People were promised that workers’ rights would be protected in a post-Brexit Britain. We need to make sure that we do not have weaker employment legislation than the rest of Europe.

6. The UK should continue to shadow the EU’s environmental legislation.

As with workers’ rights, we were promised that this too would be protected post-Brexit.  We must make sure we do not have weaker legislation on protecting the environment and combatting climate change. We must not become the weak link in Europe.

Finally, it is vital that the voice of Parliament and is heard, loud and clear. In a letter to the Prime Minister we called for new joint structures – a Special Parliamentary Committee - involving both Houses to be set up by October alongside the establishment of the new Brexit unit. There must be a clear role for opposition parties. It will be equally important to ensure that both Remain and Leave voices are represented and with clearly agreed advisory and scrutiny roles for parliament. Representation should be in the public domain, as with Select Committees.

However, it is also clear there will be a need for confidentiality, particularly when sensitive negotiating positions are being examined by the committee. 

We call for the establishment of a special vehicle – a Conference or National Convention to facilitate broader engagement of Parliament with MEPs, business organisations, the TUC, universities, elected Mayors, local government and devolved administrations. 

The UK’s exit from the EU has dominated the political and economic landscape since 23 June, and it will continue to do so for many years to come. It is essential that we enter into these negotiations with a clear plan. There can be no cutting of corners, and no half-baked proposals masquerading as "good old British pragmatism". 

The stakes are far too high for that.