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?

*

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."

*

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

Photo: Getty
Show Hide image

The Future of the Left: A new start requires a new economy

Creating a "sharing economy" can get the left out of its post-crunch malaise, says Stewart Lansley.

Despite the opportunity created by the 2008 crisis, British social democracy is today largely directionless. Post-2010 governments have filled this political void by imposing policies – from austerity to a shrinking state - that have been as economically damaging as they have been socially divisive.

Excessive freedom for markets has brought a society ever more divided between super-affluence and impoverishment, but also an increasingly fragile economy, and too often, as in housing, complete dysfunction.   Productivity is stagnating, undermined by a model of capitalism that can make big money for its owners and managers without the wealth creation essential for future economic health. The lessons of the meltdown have too often been ignored, with the balance of power – economic and political – even more entrenched in favour of a small, unaccountable and self-serving financial elite.

In response, the left should be building an alliance for a new political economy, with new goals and instruments that provide an alternative to austerity, that tackle the root causes of ever-growing inequality and poverty and strengthen a weakening productive base. Central to this strategy should be the idea of a “sharing economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. This is not just a matter of fairness, it is an economic imperative. The evidence is clear: allowing the fruits of growth to be colonised by the few has weakened growth and made the economy much more prone to crisis.

To deliver a new sharing political economy, major shifts in direction are needed. First, with measures that tackle, directly, the over-dominance of private capital. This could best be achieved by the creation of one or more social wealth funds, collectively held financial funds, created from the pooling of existing resources and fully owned by the public. Such funds are a potentially powerful new tool in the progressive policy armoury and would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not for the interests of the few.

Britain’s first social wealth fund should be created by pooling all publicly owned assets,  including land and property , estimated to be worth some £1.2 trillion, into a single ring-fenced fund to form a giant pool of commonly held wealth. This move - offering a compromise between nationalisation and privatization - would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

A new book, A Sharing Economy, shows how such funds could reduce inequality, tackle austerity and, by strengthening the public asset base, rebalance the public finances.

Secondly, we need a new fail safe system of social security with a guaranteed income floor in an age of deepening economic and job insecurity. A universal basic income, a guaranteed weekly, unconditional income for all as a right of citizenship, would replace much of the existing and increasingly means-tested, punitive and authoritarian model of income support. . By restoring universality as a core principle, such a scheme would offer much greater security in what is set to become an increasingly fragile labour market. A basic income, buttressed by a social wealth fund, would be key instruments for ensuring that the potential productivity gains from the gathering automation revolution, with machines displacing jobs, are shared by all.  

Thirdly, a new political economy needs a radical shift in wider economic management. The mix of monetary expansion and fiscal contraction has proved a blunderbuss strategy that has missed its target while benefitting the rich and affluent at the expense of the poor. By failing to tackle the central problem  – a gaping deficit of demand (one inflamed by the long wage squeeze and sliding investment)  - the strategy has slowed recovery.  The mass printing of money (quantitative easing) may have helped prevent a second great depression, but has also  created new and unsustainable asset bubbles, while austerity has added to the drag on the economy. Meanwhile, record low interest rates have failed to boost private investment and productivity, but by hiking house prices, have handed a great bonanza to home owners at the expense of renters.

Building economic resilience will require a more central role for the state in boosting and steering investment programmes, in part through the creation of a state investment bank (which could be partially financed from the proposed new social wealth fund) aimed at steering more resources into the wealth creating activities private capital has failed to fund.

With too much private credit used for financial speculation and property, and too little to small companies and infrastructure, government needs to play a much more direct role in creating credit, while restricting the almost total freedom currently handed to private banks.  Tackling the next downturn, widely predicted to land within the next 2-3 years, will need a very different approach, including a more active fiscal policy. To ensure a speedier recovery from recessions, future rounds of quantitative easing should, within clear constraints, boost the economy directly by financing public investment programmes and cash handouts (‘helicopter money’).  Such a police mix – on investment, credit and stimulus - would be more effective in boosting the real economic base, and would be much less pro-rich and anti-poor in its consequences.

These core changes would greatly reform the existing Anglo-Saxon model of capitalism and provide the foundations for building support for a new direction for progressive politics. They would pioneer new tools for building a fairer, more dynamic and more stable economy. They could draw on experience elsewhere such as the Alaskan annual citizen’s dividend (financed by a sovereign wealth fund) and the pilot basic income schemes launching in the Netherlands, Finland and France.  Even mainstream economists, including Adair Turner, former chairman of the Financial Services Authority, are now talking up the principle of ‘helicopter money’. For these reasons, parts of the package are likely to prove publicly popular and command support across the political divide. Together they would contribute to a more stable economy, less inequality, and a more even balance of power and opportunity.

 

Stewart Lansley is the author of A Sharing Economy, published in March by Policy Press and of Breadline Britain, The Rise of Mass Impoverishment (with Joanna Mack).