While some pension and investment fund managers have delivered excellent growth, for others the profit generated for customers is being significantly eroded by fund fees and charges. Many of these costs are ‘hidden’ and not disclosed to savers, or are so confusing that even those in the industry find it hard to quantify what they are.

Our analysis shows that savers and investors in the UK are paying around £18.5 billion a year in hidden costs and fees.  This is completely unacceptable and significantly reduces the opportunity for the majority seeking to build a nest-egg for themselves and their families. 

Don’t get me wrong, I’m not against fund managers charging a fair fee for the service they deliver but it is critical that they disclose, in full the total cost, so that savers can compare the amount they pay for a pensions or investment fund, with the returns they are likely to receive.

Savers then have the option to decide whether they think the price they are paying represents fair value. In many cases the fees and charges paid deliver a healthy pot for the fund manager and others on the investment chain but an unhealthy pot for savers and investors.

If a pension or investment is growing by 5% a year, you assume inflation is running at 2.5% per year, and costs and fees are another 2% of top of this; there wouldn’t be a lot of return left in an investor’s pocket.

In real terms this would mean that the 5% growth you think you’re getting for your pension or savings is actually just 0.5% after charges and inflation are factored in – and in many cases the real return can be reduced to zero, or worse.

Eighteen months ago we launched The True and Fair Campaign with the aim of ending the shoddy practice of hidden costs, and called for the fund management industry to act in the interests of consumers by publishing, in full, 100% of their fees, in one number.  Research we conducted in January 2013 found that 92% of people wanted these costs in one number.

Our call was initially met with ridicule and derision, and with bankrupt intellectual arguments.  We persevered, and the fund management industry, the Investment Management Association and the Financial Conduct Authority have now acknowledged that hidden fees and charges are an issue that needs to be addressed.

This is welcome but it does not equate to action.

Pensioners and savers still have no idea what they pay in fees and charges for their investments. In no other industry would it be acceptable to hide the cost of purchasing, or the ticket price, from consumers.

To address this and ensure there is a practical solution that gives consumers transparency sooner rather than later, we at The True and Fair Campaign have spent the last five months developing a free-online clarity tool that launched on the 22nd May, The True and Fair Calculator – www.trueandfaircalculator.com

This tool allows savers for the first time to see what they are really paying for investments and how these costs can impact the likely returns back in their pockets.  The costs and returns are presented in one figure, in pounds and pence, and as a percentage.  The Investment Management Association has recently been saying that they now support initiatives designed to ‘help investors better understand fund charges and costs’; a very welcomed step forward from their earlier claim that hidden charges were a ‘myth’.  The True and Fair Calculator is unique as it also shows the relationship between cost, risk and returns; as well as allowing users to compare completely different investment or savings options side by side.

We very much hope that savers, company pension administrators, consultants, trustees and the financial advice industry will use this Calculator to gain a better idea of the costs of investing in pension and investment funds and make their own judgement about whether these are justified by the performance.

For those pension and investment funds that deliver value, the True and Fair Calculator is presumably something they will welcome.  Driving transparency is after all something that their customers want.   For those with less than impressive performance which is being eroded by high fees, then the calculator ensures there is nowhere left to hide and will protect consumers by empowering them with more knowledge.

Continuing to withhold details on the costs and fees paid by savers is utterly unacceptable and does nothing to re-build trust in financial services. It will not help us plug the pension and saving gap that exists in the UK.

If people need to save more for their future, then they need confidence in the financial services industry that they entrust to manage and build their money.  We hope the True and Fair Calculator advances this cause and starts a consumer movement for change and value.

It shows the depth of the recession in 2008/09 with GDP falling back some 6.3% between Q1 2008 and Q2 2009 and the poor state of the recovery to date with GDP still 2.6% below its pre-recession level.

But more than that the chart also demonstrates that the ‘recovery’ to date has come in two stages. In the five quarters till Q3 2010 the economy grew by 2.7% – a respectable if not spectacular performance. However in the ten quarters since that time, growth has been just 1.2%.

2.7% in five quarters versus just 1.2% in ten.

If the recovery had maintained it’s “stage 1″ pace in the last 30 months, GDP would now almost 5% higher than it currently is and over 2% above it’s pre-recession level.

There are off course several reasons why the pace of the recovery slowed sharply – the impact of the Eurocrisis on exports & the global commodity prices on inflation and incomes being two. But whilst recognising the impact of ‘global factors’ in slowing growth it would be foolish not to consider the impact of fiscal policy. (Indeed I would go further and argue that faced with unexpected global shocks there was a strong role for fiscal policy to react by doing more to support growth).

The following chart from the Bank of England shows, very clearly, the extent of the fiscal tightening over the last few years.

It may of course be the case that fiscal tightening in 2011/12 and 2012/13 accompanying poor growth whilst fiscal loosening accompanied stronger growth in 2009/10 is entirely coincidental. But it is more likely to be the case that a change in fiscal policy explains at least some fo the weakness since late 2010, this certainly the view of most observers with the IMF being the latest this week to say that fiscal tightening has been a drag on growth.  This is also the clear view of the OBR.

We’ve been hearing a lot recently about how the ‘economy is healing’ but is was healing a lot faster in 2009/10 when fiscal policy was supporting rather than subtracting from growth.

Trade unions had strongly opposed the Commission’s plans – as had employers, the industry and the government. We opposed the plans in principle, because the Commission had seriously misunderstood the nature of UK pensions provision, and our protection regime, and over-estimated the feasibility of cross-border provision. And we opposed them on practical grounds after an initial impact study by the European Insurance and Occupational Pensions Authority (EIOPA) indicated possible solvency requirement costs of £400 billion for UK pension funds.

The Commission will proceed with some aspects of its plans for a revised ‘IORPs’ directive (IORPs stands for ‘institutions of occupational retirement provision’ – what we know as defined benefit trusts). It will seek to apply the second and third pillars of Solvency II, on governance and disclosure. The UK has less to fear from such measures – it is likely that our pension funds are already compliant, much more so than our insurance companies are with the original Solvency II – and it is also possible that a collective European approach to these issues would lead to some positive changes in the interests of pension scheme members.

Of course, these measures would not address the main problems with defined benefit pension provision in the UK. The problems are more about the small-scale nature of many schemes (which Labour will today issue proposed remedies for), valuation and accountancy rules, and the stuttering economic recovery. But like quantitative solvency requirements, these are issues best addressed at the national level, given the unique characteristics of how pension systems operate in different member-states.

There are two related developments emanating from Europe that are worth mentioning. The first is the Commission’s recent green paper on long-term investment. This is a very interesting document, with several good ideas for boosting long-term investment across the European economy. It was noteworthy most of all, however, for acknowledging the profound importance of DB trusts in capital investment – a role that the Commission’s proposals for a pension Solvency II would have put in jeopardy.

The second is EIOPA’s publication of a discussion paper (pending a full consultation) on personal pensions. Again, this is potentially good news. More competition might lead to better deals for consumers, and EU regulation could lead to higher standards. There are however huge question marks, again, about the efficacy of European regulation. The paper defines personal pensions as products where ‘employers do not play a role in establishing a [personal pension] but may pay contributions to an individual [personal pension] on behalf, or for the benefit, of the employee, self-employed person or other individual’.

This seems to be a rather clumsy attempt to capture the diversity of how personal pensions are used across Europe. In the UK, regrettably, personal pensions actually masquerade as occupational pensions in many workplaces (and many more after auto-enrolment is embedded). Employers play a much bigger role than simply making contributions – they actually collaborate with providers in setting up ‘group personal pension’ schemes for their staff. A single market in personal pensions might make these products better in some ways, but what we really need is to import the governance features of real occupational pensions into the prevision of work-based personal pensions.

Through the debate on IORPs we are starting to learn about the ways in which Brussels can assist trade unions’ agenda in support of UK pension savers, but also the limitations of European-level regulation. The abandonment of Solvency II is a signal that the Commission is learning too. Hopefully it will now provide the space and resources for work in areas where their contribution will help rather than hinder.

The government has abolished Disability Living Allowance, the benefit that helps disabled people with mobility or care-related costs. The replacement, Personal Independence Payment, will lead to hundreds of thousands of people being worse off. I’ve recorded a short video to explain why unions are opposing this change.

Before the recession, the trend rate of growth for services was about 4 per cent a year. Since the end of the recession it’s been about 1.5 per cent.

If you break these figures down into four large service sectors an interesting picture emerges. Growth in transport, storage and communications is lower than pre-recession but the decline isn’t so disastrous:

And much the same can be said of distribution, hotels and restaurants:

The picture for government and other services is rather different:

There’s much less of a dip during the recession, reflecting the last government’s decision to fight the crisis by stimulating demand. The other really noticeable factor is that growth pre-crisis (Jan 2000 to Dec 2007) in these mainly public sector services (averaging 2.5 per cent) was lower than for distribution, hotels and restaurants (3.2 per cent average), transport, storage and communications (5.1 per cent average) and business services and finance (5.4 per cent average). So much for the last government losing control of public service expenditure.

And it is business services and finance that explain most of the stagnation in overall services:

Growth before the recession averaged 5.4 per cent, since the recession ended it has been just under 1 per cent.

Every year, people with health problems and disabilities who want claim Employment and Support Allowance (ESA) have to ‘pass’ the Work Capability Assessment . Thousands who are found ‘fit for work’ appeal and in Derbyshire, many come to the Derbyshire Unemployed Workers’ Centres for support.  We have represented over 1000 disabled people, winning around 75% of those that have eventually reached an oral appeal.

There has been much discussion and focus on the WCA concerning both how it is conducted and its adequacy as an indicator of ‘fitness for work’.  In our experience people feel that the process takes little or no account of medical evidence from doctors, consultants and other practitioners.  Many feel that they are pushed through a system with little or no dignity.  These are, no doubt, very serious concerns.  However, the main thrust of the ESA regime, introduced by the last Labour Government, was to bring people closer to the labour market and back into work. With the spotlight mostly on the WCA and ATOS, the firm carrying out the assessments, the impact on the individual’s contact with the labour market has been lost, being ignored, for the most part, by politicians and the media.

Our report emerged from our concern about this. We interviewed 50 people by telephone that had both failed the WCA and lost at Appeal. Our interviews, conducted by volunteers, found that:

• Only one person was in full time work at the time of the interviews.
• Only nine people were in part time work at the time of the interviews.
• 80% of the people were not in work when interviewed despite being found fit for work months earlier.
• All fifty had experienced difficulties in finding work because of their health condition.
• 68% of the people thought that they would never return to work.

The study together with our everyday experience of dealing with ESA claimants and their concerns has led us to put forward the following recommendations:

• The level of JSA should be raised to, at least, the same level of payments as ESA. If the Government is right that claimants are claiming the wrong benefit they should be incentivised to present themselves as fit for work and claim JSA with all that that entails.
• Increase the demand for labour. Areas of the country where there are few people on ESA correlate highly with those that have a buoyant labour market. We need a robust regional economic policy to combat the low level of employment opportunities. There need to be incentives for job creation and properly co-ordinated training programmes linked to real employment opportunities. Government must come out of denial that it can make little difference to the availability of work.  Imagine if a small portion of the monies poured into the banking crisis had been used for education, research and job creation.
• There needs to be more help and support for people with health limiting conditions. Many people have told us that they would like to work but feel the help is not provided to make that possible.  Employers will, in most cases choose those that are not presenting themselves with health issues.
• The system of assessing fitness for work needs to be properly scrutinised and overhauled in the light of the overwhelming evidence of its human cost.  There needs to be penalties for ‘getting it wrong’.  There is little or no incentive for the firms awarded the contracts to get it right even by their own standards. Claimants face benefit loss and sanctions while multinational firms are rewarded even when continually get it wrong. If we are to continue testing fitness for work then people need to have the confidence that they are to be treated with dignity and that the companies doing the testing are accountable for the fallout of the reports that the DWP act upon.

For copies of our report, please visit http://www.duwc.org.uk and go to “recent publications”.

I’ve recorded this video taking a look at May’s employment figures. The headlines were very worrying, with employment down and unemployment up. But the news on average earnings was even more depressing. Record low increases in average earnings give a hint that Britain may be moving towards a low productivity, low quality, low paid economy with stagnant living standards. This country desperately needs a plan for growth.

The case that we are now experiencing a recovery relies upon looking at the upgrades to GDP forecasts but, as I noted this morning, real wages are still falling.

Taking stock of current forecasts, when exactly can we call a recovery in the UK?

First we need to define exactly what we are talking about because depending on the measure chosen, we’ll get very different numbers.

GDP is expected to reach its 2008 level at some point in 2014. By this measure then we could argue that the economy will have ‘recovered’ within 18 months.

But GDP per capita (which accounts for population change) is not expected to reach its 2008 level until 2017. So by this measure, which is more reflective of most people’ s experience than headline GDP, ‘recovery’ is still some four years away.

But even GDP per capita is a poor measure of most people’s experience – it is a mean rather than median and so is distorted by inequality, a huge increase in the income of the top 1% could boost GDP per capita whilst living standards continued to flat-line for everyone else.

If we look at median real wages then we won’t be back (on current forecasts) to 2008 levels until the early 2020s*. ‘Recovery’ measured through median real wages is a decade away.

We have heard a lot recently about how the economy is ‘recovering’, for most people though recovery seems an awfully long way away.

*The Resolution Foundation forecast only runs until 2017, at which point real median wages will still be 11% below their 2008 level.

The Bank now expects growth in 2013 to come in around the 1.2% mark, an upward revision from the 1.0% it expected in February and twice as high as the OBR’s own estimate of 0.6%.

Presented with this information, one response is to hail ‘Good news Britain’ and point out that the Bank now expects a recovery twice as fast as the OBR. Another and I would argue more correct response, is to note that whilst growth of 1.2% is obviously preferable to growth of 0.6% it is nothing to shout about.

Indeed the OBR expected growth of 1.2% in 2013 as recently as last December. Last week’s upward revisions from the BOE simply take us back to where we were 6 months ago. The initial OBR forecast for 2013, on which the Government’s fiscal plans were based, was for growth of 2.9%.  No one now thinks 2.9% growth in 2013 is remotely plausible.

The economy might be healing in as much as it is showing some tentative signs of growth but whether compared to the original forecasts, to international experience or to the UK’s own history this is an appallingly weak recovery.

As I noted a few weeks ago, on the IMF’s forecasts (as good as any) the UK is set to experience a lost decade of GDP per capita growth. This is not what a ‘healing economy’ looks like.

And for most people this recovery does not feel like a recovery in any meaningful sense of the word.

Today we learned that inflation dropped a touch in April, but it remains well above the pace of earnings growth. Real wages in the UK have been falling for three years. The chart below shows average weekly earnings (total pay including bonuses) in real terms (March 2013 prices using RPI).

As can been seen real wages have fallen by a huge 8.5% over the past three years.

Even leaving aside inflation, nominal earnings have been falling since last summer.  And, as James Plunkett notes on twitter, the level of people in employment has dropped since the end of 2012.

It is an odd recovery indeed that is accompanied by falling employment and falling incomes and it is even odder that anyone can look at the UK data and see much to celebrate.

So, if the labour market is stagnant and real incomes are squeezed, where is this modest recovery coming from? One answer can be found in the housing market where prices are once again rising. As I wrote after the Budget:

in the June 2010 Budget, the Chancellor expected 57% of all growth to come from his preferred (and ‘sustainable’) sources of business investment and net trade. By this time last year, that contribution had fallen to around 52%, lower but still more than half of all growth.

Yesterday’s forecasts have business investment and net trade contributing only 31% of all growth to 2017…

Three years ago George Osborne argued that “that we cannot go back to the last decade’s debt-fueled model of growth”. As I listened to his housing market announcements yesterday, I thought “it sounds like he is going to try”.

The early indications are that the Chancellor’s interventions in the housing market are starting to bear fruit, prices are heading north and activity is picking up.

Last year I wrote than I expected a weak recovery.

So I foresee three possible scenarios for the UK economy in the next three or four years (in the absence of rapid rebalancing towards a net trade or investment led recovery and in the absence of a change in fiscal or monetary policy):

• First, and most preferable but most unlikely, we get strong growth in real incomes as inflation falls back towards 2% and wage growth increases. If that happens consumption growth will be stronger and the economy will grow at a decent pace.
• Second, and what I think is the most likely outcome  – my central ‘forecast’ if you will – household income growth will be weak and the savings ratio will not drop by much. The result will be weak consumption growth and an economy that is growing, but growing slowly – in the order of 1-1.5% a year. In historical terms of recovery from recession this is pretty much a disaster.
• Third, it is possible that we still get weak income growth but that the savings ratio drops rapidly. In this scenario we’d see faster consumption growth and hence faster overall growth. This however would be accompanied by a big increase in household debt. It might give us 3 – 4 years of decent growth, but at the risk of increasing the financial imbalances that got us into trouble in the first place.

I hope for the first outcome, expect the second and worry about the third.

Strong income growth seems increasingly unlikely, we are likely to get either my second or third scenario – the real worry now is that the Government’s housing interventions (that push up prices not building) will mean we get the third. Some will no doubt argue that a few years of faster growth are a better out turn than stagnation. Whilst this is true we shouldn’t kid ourselves that an asset price, consumer debt led recovery is a good, or sustainable, outcome.

There is of course an alternative.

…spending on infrastructure (assuming some positive external effects and that the economy is depressed – neither of which are heroic assumptions) could easily result in a lower debt/GDP ratio, not a higher one. We get the boost to growth, we get lower unemployment, we get the additional infrastructure and it ultimately pays for itself.

This is a close to a “free lunch” as macroeconomic policy makers will ever get. In the context of an economy ambling through a lost decade it would be madness not to seize this chance.

My pessimistic scenarios were crucially based on there being no change in monetary or fiscal policy. Since I wrote that post the case for a change in fiscal policy has become much stronger.

But unions need to beware of standing on the sidelines. The stakes are too high. We need to shift the terms of the debate back from Britain’s relationship with Europe to the economic crisis. As ATL General Secretary Mary Bousted put it last week “I wish they’d obsess about jobs, instead of Europe!”

First, the persistent bidding war is pushing the main party in the coalition to escalate the good things offered by the EU that they would willingly ditch – guaranteed holidays and rest breaks, health and safety generally, employment rights and influence over global issues like climate change, tax avoidance and so on. We can rely only so far on the Liberal Democrats to prevent this becoming the policy of the UK Government: in his otherwise excellent attack on Lord Lawson’s call for a Brexit last Thursday, Vince Cable still stooped low enough to take a swipe at health and safety standards as burdensome.

Second, the overwhelming noise generated by the UKIP-Conservative conflict about who can be tougher, amplified by a media generally hostile to the EU, could shift the political centre rightwards, emboldening europhobes in Labour’s ranks and frightening the timid triangulators who conceive of political leadership as slavishly following simplistic opinion polls rather than developing narratives that move public opinion in a progressive direction.

What this means in practice is that when people ask what is the cause of the problems they face in their everyday lives, the EU becomes the target (or migrants, or scroungers – the right is nothing if not replete with potential scapegoats), and Brexit the solution. There is some scope for arguing the toss on this, as Lord Howe has, Vince Cable did on Thursday and Lord Mandelson is doing today (although I’m not sure any of them are convincing advocates.)

But what is more likely to succeed is a remorseless focus on the alternative narrative, that pins the blame for the economic woes facing families and communities – higher prices, lower or stagnant wages, rapidly worsening public services – on austerity economics, growing inequality and a tax system based on one rule for us and no rules for the rich.

There is a place for the EU in that narrative, but only if it changes course itself, for example ending the hatchet job on the ‘programme countries’ and workplace rights; building on the youth guarantee and a significant and sustainable investment stimulus; and tackling tax havens, base erosion and profit shifting. Only on the last issue is the EU beginning to move, and there is a lot more to do, as the ETUC social compact proposes.

Thanks to another Freedom of Information (FOI) request from Friends of the Earth, the government revealed that over the past three years the number of civil servants working on Defra’s climate change adaptation activity fell from 38 staff in 2009/10 to 32.5 in 2011/12. Defra faces fresh cuts of £37m by 2015, so staff working on the department’s overarching Adapting to Climate Change programme fall back to just six full-time employees. Wasn’t 2012 England’s wettest year for a century?

John Ashton, the former UK Special Representative for Climate Change, gave a brilliant speech  at the RSA last night. At one point he had 11 members of the UK government playing Germany in an international football match. One of the 11 “own goals” scored by the UK government’s Ministerial team is this move by Owen Paterson: cut the number of staff dedicated to climate adaptation work just as ”a major new report that Defra has itself commissioned warns of growing climate disruption in our countryside,” Ashton said.

Friends of the Earth’s Andy Atkins, who hosted the RSA event, accused the government of cutting back on crucial work at a time when climate impacts are having an ever greater bearing on the UK economy.”After a year that has already brought flooding and other extreme weather to the UK, it’s shocking that the department responsible for protecting us against the effects of climate change is to pare its staff to the bone,” he said.

The FBU also revealed that Northern Ireland firefighters went to three times more flood incidents in 2012 than they did in 2011; in Wales the response more than doubled. Despite this, the government has still not given the fire service a legal duty to respond to floods in England and Wales, unlike the services in Scotland and Northern Ireland.

Matt Wrack, General Secretary of the Fire Brigades Union, said: “With the government’s climate change projections predicting higher incidences of flooding in years to come, it is absurd that no-one is legally responsible for responding to them in England and Wales. Quite rightly, the public expects firefighters to assist them in these emergencies. But the government must commit to funding the service accordingly, making sure there are the right number of firefighters, boats and other kit available. Providing the fire service with a statutory duty to respond to floods will reassure the public that resources are available to ensure their safety should they be required.”

Here’s UKIP’s energy guru, Roger Helmer MEP: ‘As I like to put it, “We’re not talking green jobs. We’re talking green unemployment”’.

The TUC approach has always been to welcome the bill: we have supported every step that has improved the position for lesbian, gay, bisexual and transgender people however limited the progress may be.  While almost all the publicity has attached itself to the vociferous claims of those who are actually opposed to equality to win exemptions for people who don’t support our equality from having to comply with the law, others have tried – so far without success – to improve it.  Amid all the hullaballoo about allowing registrars to ignore the requirements of their jobs and teachers not to have to promote equality for all their pupils, amendments have also been proposed that will strengthen equality and the TUC, many unions and campaigns such as Liberty have been campaigning in their support.

Take pensions, for example. Under existing law, survivor benefits only apply from the date of the Civil Partnership Act (2005). The government intends to replicate this in the new law. Where an opted-out occupational pension scheme pays survivor benefits, these can be backdated to 1988 (thanks to a successful TUC-led campaign back in 2004-5), but that still isn’t equality. In truth, as Maria Miller acknowledged during the committee stage, a large proportion of pension schemes have voluntarily agreed to make equal provision. That being the case, how can there be a problem with putting this into the law?  There has been a European Court of Justice decision (Maruko, 2008) that sees this as illegal discrimination, and now we’ve had a UK employment tribunal reach the same conclusion (Walker v. Innospec Ltd, 2012).

Caroline Lucas MP has now tabled an amendment to end this pensions inequality with the backing of Liberty. The TUC is pleased to associate itself with this. If you have a link to your MP, please encourage them to turn up on Monday and support this principled approach.

The trade union movement is also supporting attempts to extend civil partnerships to heterosexual couples.  Why? Because, firstly, it’s basic equality. But it’s also important for the many same sex couples currently in civil partnerships who do not plan to get married once this bill is enacted (for many different reasons) that CPs do not become segregated and seen as second class relationships.  The government doesn’t want to extend CPs, they want to retain marriage as “the gold standard”. But since we feel that people ought to receive equal respect for their relationship, whatever it’s called, we don’t accept this approach. So we want Parliament to agree that CPs should be available to all, regardless of their sexuality.

The debate in Parliament will do no doubt continue to be dominated by those from the right who want to derail this bill.  It has to be hoped that the government will stand firm and resist attempts to extend exemptions that would undermine equality.  Every attempt so far to appease the enemies of equality – such as the infamous “quadruple lock” -  has just led them to come back for more.  So we will have to be vigilant – and then prepare ourselves for further obstacles certain to be raised when the measure reaches the Lords in early June.

Next Tuesday Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and former Secretary of Labour in the Clinton administration, will be speaking at the TUC, and holding an interview with Channel 4’s Economics Editor, Faisal Islam. In advance of his appearance Professor Reich has recorded us a short video clip setting out his views on the state of the UK economy.

Time magazine named Professor Reich one of the ten most effective cabinet secretaries of the last century. He is a best-selling author of thirteen books including Aftershock and The Work of Nations. He features in ‘Inequality for All’, a film about widening US income inequality and winner of the 2013 Sundance Festival Special Jury Award.

However, there are some strong pressures for change in this area, including the rise of information-based industrial sectors and a growing expectation amongst both younger people and the most senior employees that time and place of work matter less than getting the job done.

Better technology  is a necessary condition for enabling new ways of working, but change is not driven by technology alone. Also crucial  is the formal and informal culture of the enterprise and the  interplay between what senior managers, other managers and workers want. In some cases, a serious gap may open up between formal company policy and what middle managers actually do, as they may feel threatened by the new issues that will need managing.

It is therefore important to get the structure and the culture right so that home-workers are fully integrated into the working life of the enterprise. For those who mainly work from home, this is likely to include ensuring that there are regular opportunities to communicate with colleagues, including some face-to-face meetings, making sure that home-workers are always in the loop, that their health and safety is protected and ensuring that they are not passed over for promotion.

Unions have traditionally been quite sceptical about homeworking, but this has been changing as the nature of such work has changed. As a result,  many unions now have branches and on-line resources for homeworkers and freelancers.

nowadays the employees who are most likely to work from home are high-status managers and professionals, and it is also perhaps suggestive that these days  65 per cent of homeworkers are men. Unions try to help workers get what they want, and the government’s Work-Life Balance survey suggests that a further 4.5 million people would like to work form home at least some of the time.

National Work From Home Day is the right time for employees to think about whether they want to work from home if technically possible. For employers, its a good time to think about whether the business might benefit from allowing homeworking. Some companies have reported that their homeworkers are more productive and stay with them longer than employees who come in to the work-place in the traditional way.

Other reading:

• Regional and gender statistics on homeworking during the recession.
• Frances O’Grady, TUC General Secretary, weighs up these findings on the WorkWise UK blog.
• WorkWise UK website: The TUC and a number of leading business organisation work together in WorkWiseUK to promote smarter working practices such as high-quality homeworking

But it’s worth reflecting on why 34 of the world’s biggest retail and textile companies have finally agreed to sign the global union Accord on Fire and Building Safety in Bangladesh. And why so many of the companies signing the deal are British, rather than from the USA or continental Europe. In part at least, it’s because of years of engagement with corporates on supply chain strategies, eg through the Ethical Trading Initiative (ETI).

Of course, one grisly prompt for action has been the deaths of at least 1100 ready-made garment workers (that’s the point at which the authorities stopped counting – in fact, it’s likely that over 2,000 died). But even that horrific statistic hasn’t been enough yet to persuade Wal-mart or the Gap to sign up. Piles of corpses alone don’t seem to be enough for some companies. We should look at why there have been more sign-ups in the UK than in the two other main textile markets – the US and the Eurozone – although there are significant signers there like Inditex (Zara) and H&M, and more may follow eventually.

Of course, the USA is home to some particularly hard-nosed (is inhuman too strong a word?) businesses. Wal-mart claim that they have their own solution which would work much better than the union Accord, although it’s clear from the cemeteries around Dhaka that their voluntary approach hasn’t been as successful so far as they suggest.

US corporate social responsibility approaches have often been voluntary and corporate-led, which has led to almost complete failure to change matters for the better, as the AFLCIO’s recent report set out in forensic detail. But that doesn’t explain why there has been so little movement to date in the far less free-market Eurozone countries. And the UK is itself not without its proponents of milksop corporate social responsibility approaches.

What the UK does have, though, is a long track-record of union engagement with corporate supply chains, and engagement in the tripartite (corporates, NGOs and unions, including global union federations and the ITUC) Ethical Trading Initiative. The ETI and other engagement experiences (eg in the Playfair2012 campaign) have provided unions with contacts, greater understanding of how companies operate and make decisions, and leverage with the UK end of the global supply chains which we are seeking to influence. The work involved is often tortuous and frustrating, but it does seem to have paid off in the case of the Bangladesh Accord.

The past week has seen TUC and union officers (from General Secretaries down) hitting the phones to corporate contacts. We’ve applied what we call ‘the strength of our arguments as well as the argument of our strength’, as phone calls and letters have been backed up by mass e-actions and the potential mobilisation of media and consumer pressure. The ETI – who have provided an arena for months for discussion on these issues between unions and corporates – urged their members to sign the Accord, and 13 of the 34 who have signed so far are ETI members (9 are UK-based). It’s been intriguing to watch flat denials that the Accord would be signed by anyone in the industry turn into plaintive requests for more time and then the final email that says “we’ve signed”. Sometimes that process has taken days. In a few cases it’s been just hours!

So, the lesson of this week is that corporate engagement strategies take a long time to have an immediate effect, that global multinationals can be persuaded to the bargaining table, and that union global solidarity works.

These are powers are vitally important. Previously, a tribunal could only address the symptoms and not the causes of workplace discrimination: it could award employees compensation, but not get an employer to change their ways, especially where the victim had left the workplace, as they do in most cases.

So since 2010 tribunals can also recommend that employers take steps such as training managers or rewriting policies of equal opportunities to weed out discrimination, which is often rooted in workplace culture or practices.

The government has advanced two contradictory arguments to scrap this power: that it is onerous and irrelevant. Neither of them has any merit.

It’s too onerous

Firstly, the government has uncritically cited “employer fears of excessive or inappropriate recommendations” as a reason to scrap the provision. This is based on an old 2007 survey – three years before the power was enacted. Outdated impressions are hardly the basis for sound policy making.

Under the government’s own worst case scenario, 0.00078 percent of employers subject to a discrimination claim would be asked by a tribunal to conduct a training session or rewrite a policy (and yes, that’s “asked” and not “required”). Across the entire British economy this is expected to cost up to £67,000, “with the best estimate being £16,000”. Is this really spreading waves of panic across the boardrooms of Britain? 

It’s irrelevant

Secondly, the government then says that there is “very little empirical evidence of the power’s usage”. So not only is it driving fear, but it is irrelevant, according to a government unfazed by its own cognitive dissonance. 

To underline that case, the government says that employers already make positive changes after a discrimination claim regardless of tribunal recommendations. Apparently 56% of them do according to one government survey. But that just leaves me worried about the 46% that do nothing.

Let me show you what victims of discrimination and employment tribunals are dealing with:

• In Stone v Ramsay Health Care, the tribunal said that there was a “thorough and abject failure by the [employer] to have protected the claimant from pregnancy and maternity discrimination” (at para 126). And the employer, “tolerates and even seems to encourage a culture in which there is a worrying lack of understanding” of maternity and pregnancy rights (at para 126).
• In Crisp v Iceland Foods, a HR manager’s awareness of mental disability was “no less than woeful”.
• In Austin v Samuel Grant (North East) Ltd it was the managing director that had a long track record of sending racist and sexist emails, and the HR manager had failed to properly deal with the issue.

These are cases of serious ignorance and prejudice running through the senior levels of business. Asking them to sort this out is the very least the justice system should be able to do.

While recommendations are rarely issued by tribunals – there are only four cases that I am aware of – they send a powerful signal across the workplace, and the wider legal and HR community advising business that discrimination is unacceptable.

We need many more powerful signals, because tribunal cases alone will never be enough. To say that they only touch the tip of the iceberg of workplace discrimination would be to grossly exaggerate their effect.  According to a landmark study by the then Equal Opportunities Commission in 2005, less than 1 in 30 women discriminated against because of pregnancy or maternity leave took their case to an employment tribunal because of a range of fears (see page 25). Even then, those with the resources and courage to take a matter to tribunal are less successful than not.

But it’s a shamefully large problem. Nearly half of the women surveyed said they experienced dismissal or disadvantageous treatment at work because of their pregnancy. That translated to an estimated 190,000 women back in 2005 – a staggering number that has surely increased.

So the tribunal power to make recommendations is a small but critical tool in tackling this problem. (Of course the best tool is unions and employers working together to rooting out prejudice and discrimination before it ruins people’s lives in the first place).

So why does the government really want to get rid of it? The front page of the impact assessment says, “This provision goes beyond EU law.” And that is probably the heart of the matter. The repeal of tribunal powers to make wider recommendations is part of a process of stripping away protections at work back to the lower set of minimum rights that 27 EU member states could agree on. This is the opposite of so-called “gold plating” of EU law. It’s the “rust plating” of UK equality law.

The speech addressed all those issues (and more) and I think that what Ivan set out on those issues was pretty much exactly what we’d want to see. There is still work to be done on how some of the challenges he acknowledged are addressed (such as tackling inequality within emerging economies, ensuring decent work is deeply embedded in DFID priorities), but I think Ivan has made significant progress in identifying how a Labour-run DFID would be different from the current incarnation, especially how he would deal with consultants and business, as was trailled in the Daily Telegraph (online only, unfortunately.) He needs to flesh out Labour’s response to Tory policies on promoting private sector development, the numbers game on things like bed nets, and how DFID should address fragile and conflict-affected states. On the latter point he announced a positive new initiative led by Lord McConnell which the TUC welcomes and will engage with.

I think he has done enough to demonstrate a cross-party consensus on aid volumes (even if the Tory right aren’t comfortable with being in that consensus) although I also think that more needs to be done to flush out Liberal Democrat differences with the Conservatives over development policy. That may not really be Ivan’s job though!

Now the detail.

On leadership, he didn’t say all that I wanted to hear on the Government’s failure to legislate on the 0.7% GNI aid commitment, although he was unequivocal in condemning the lack of leadership shown by the Conservatives. My concern is more that, instead of attempting to build bridges with the junior Liberal Democrat coalition partners, whom I think still back the pledge, he included them in the lack of leadership camp. It’s always a judgment call whether the challenge or entice potential allies, but I’d have gone for the latter. He may well be right, though – the Liberal Democrats have indeed been silent on the abandonment of yet another pledge (Nick Clegg could surely at leats have recorded another “Sorry” video?)

Structural change did run through the speech, and I think this is where Ivan is doing best. Opposition spokespeople with experience of the ministerial brief that they are shadowing are not that common, but Ivan clearly understands the issues of international development, and wants to do something radical if he gets the chance. I sometimes worry that he knows too much, and there was certainly enough detail in the speech for development policy wonks to get their teeth into! He committed, explicitly, to a development manifesto rather than an aid manifesto, and if anything demonstrates that he grasps the structural challenge, though, it is this passage, which I think bears expanding in the future:

“Sustainable development has three legs: environmental, economic and social.  It requires us to consider some of the greatest challenges we will face in the future: climate change, sustainable energy, sustainable food supply, population growth and urbanisation as well as the social agendas around decent work, education, health services, access to technology and information.”

On putting people first, rather than countries, he did of course reiterate the point about most poor people being in middle income countries, and he took a restrained potshot at the incredibly clumsy DFID announcement that British bilateral aid to South Africa would be ended. He definitely met the target I set on inequality (“I call on the UN High Level Panel to recommend a new focus on inequality, not simply poverty,”) but I think there is more work to do – by us and the development community as much as by him – on how focusing on people in poverty rather than country rankings should affect DFID policies and practices.

And on decent work, I think Ivan did what we hoped for, especially mentioning the work the TUC is doing with corporates to elaborate the role of decent work in development, and reiterating his pledge to restore DFID funding for the ILO. He stressed the role of decent work, jobs, social protection and so on in helping people to escape from poverty, and we look forward to working more with him on fleshing out those policies over the coming months and years. A key passage of the speech is this, starting with what he would want DFID’s relationship with responsible capitalists to be:

“Businesses will have to demonstrate their activities are sustainable and make a positive contribution to the environment. They will be required to show they are paying fair and transparent taxes both in the UK and in developing countries. Also, against the background of the recent horrendous factory tragedy in Bangladesh, they will be expected to demonstrate a proactive commitment to decent labour standards throughout their supply chain.

“That is why I have asked the TUC and private sector to undertake a substantive piece of work, bringing together representatives from the trade union movement and business to examine what the UK government is doing to support the creation of decent jobs by the private sector in the developing world and what steps will be necessary to ensure this becomes a key element of future UK policy. To be clear, a Labour Government will reinstate DFID’s support for the ILO.”

So, I think it was a good speech. Ivan is, rightly, engaging with trade unions on development just as he would with any other stakeholder, and taking on board those union priorities and policies which would assist in driving forward the progressive vision of development he is elaborating. That’s a welcome change from the ideological pro-free market position, and the tacking towards British interests first, of the current Government.

Figures from the US Bureau of Labor Statistics help us compare inflation rates across the major developed economies. Looking at the inflation figures for the twelve months to March (the most recent figures), the UK has the highest of any G7 economy. The Organisation for Economic Co-operation and Development’s most recent data also has the UK’s inflation as the highest in the G7.

View a larger version of the infographic here or click on the image.

Global Race: Part of the Global Race series; looking at Britain’s economic growth in comparison to other major economies.

Auto-enrolment and a single tier state pension are the central tenets of what Nigel Stanley and I call the third consensus in post-war pensions policy in the UK. You can read the argument in full in our Touchstone Extra pamphlet, Third Time Lucky. The third consensus has been spluttering into existence ever since the Pensions Commission, chaired by Adair Turner, wrote the obituary for the second consensus in 2005.

But let’s start with the first consensus. In the immediate post-war era, employees could build up a generous state retirement pension through their National Insurance contributions (NICs). Outcomes were based – as they remain today for the most part – on the length of time spent in work, and the benefit kept its value once in payment through being linked to rises in average earnings.

On top of this many people at work (or perhaps more accurately many men) had the opportunity to build up an occupational pension linked to their earnings, usually their final salary. Crucially, responsible employers saw it as their duty to provide such pensions. And in the 1960s, when occupational scheme membership was at its peak, Barbara Castle added to state provision an additional pension for those with no access to an occupational pension through their work. This too was linked to earnings and was thus called SERPS – the state earnings-related pension system.

Unfortunately, the first consensus was based on a ‘male breadwinner’ social structure that bears no resemblance to modern life. Many people, such as those without a long history of labour market engagement, fell through the cracks in first consensus provision. Employers became less and less willing to provide guaranteed pensions as part of a social wage as the workforce expanded, manufacturing declined and international competitive pressures increased.

The first consensus, however, was replaced by something palpably worse. The Thatcher government eschewed collective pension provision altogether. They allowed the value of state pensions to erode, and encouraged individuals and employers to ditch earnings-related occupational pensions in favour of riskier ‘defined contribution’ investment products. Pensioner poverty levels increased enormously, and the private pensions system became engulfed in mis-selling scandals.

The Labour government in office from 1997 sought to correct some of the flaws of second consensus provision, but left its basic structures in place. They strengthened the safety net of means-tested benefits for pensioners in poverty, but left the contributory state pension largely untouched. They sought to increase access to a workplace pension scheme, but did little to regulate the defined contribution marketplace that left individuals to fend for themselves.

Saving rates continued to fall and pensioner poverty persisted. In an ageing society, both problems would soon become increasingly acute without a different approach. In pensions policy, because policy change take decades to work through into practice and outcomes, and because the system depends on the co-operation of many different parties, we must always start from where we are. This is why the Pensions Commission essentially accepted the emergence of defined contribution pensions. But they insisted that employers contribute to their workers’ pension pots above minimum levels, and they established NEST as a government-sponsored default provider to set a benchmark for the rest of the pensions industry.

The Pensions Commission also recommended that state pension provision should become simpler, to provide a solid platform for private savings, and at the same time more generous to people contributing to society beyond formal labour market engagement. The government’s plans for a single tier state pension upholds the same principles, but is far too cavalier about the messy legacy issues that convinced the Commission to establish a very gradual path towards a universal, flat-rate state pension. And it will be set at a level far too low to achieve its objectives in a fair manner, ultimately undermining people’s willingness to save privately.

Few people would design from scratch the pensions system that we have now. But going back to the drawing board is not a realistic option. Instead, we have to seize the chance to make the third consensus work. We believe we are at a crossroads between a positive path, where defined contribution pensions dominate but are governed in the interests of savers, and there is a progressive incentive structure to encourage saving – or a negative path upon which standards and contributions are levelled down to the statutory minimum. In this scenario, employers would discharge their duties through products with weak governance and high charges, and workers are unwilling to put a greater portion of their income at risk.

The key is ensuring the correct alignment of interests. Employers have a strong interest in providing good pensions for their workers, but not in shouldering unknowable risks and taking on high administrative costs. Individuals have an interest in saving more towards a decent standard of living in retirement, but not in untrustworthy products where their savings are subject to high charges. The pensions industry has an interest in the success of auto-enrolment, because it will hugely expand their customer base – but this means we must end the asymmetrical consumer/provider relationship whereby the industry can exploit the general public’s inherently limited knowledge of pensions saving.

Third Time Lucky outlines some of the policy measures that are necessary to align these interests. The coalition government is actually in the right place on some of these issues, for example the recent announcement banning consultancy charges. But on some issues, such as their plan for small pension pots, they remain wedded to a flawed second consensus philosophy.

It is also well worth reading Labour’s take on where pensions policy goes next, as outlined by shadow pensions minister Gregg McClymont in Pensions At Work, That Work. McClymont’s plans for cost transparency, trust-based scheme governance and an end to the restrictions on NEST would go a long way towards setting the third consensus on the right path.