Workfare – making unemployed people do unpaid work in jobs that would normally be done by paid workers – is triply unfair. Firstly, it is unfair to unemployed people –unpaid work is exploitation, pure and simple. Secondly, it is unfair to workers – when they have to compete with workfare conscripts some workers will lose their jobs, others will find that their pay, overtime or other conditions deteriorate (and the workers who lose most will be the weakest and lowest paid.)

Thirdly, it is unfair to other businesses. Employers who don’t use people on workfare will find it difficult to match competitors who are effectively being subsidised. You don’t hear this point very often, but progressive businesses have a very good reason to oppose workfare.

Workfare isn’t the only unpaid work that’s around at the moment. Plenty of government employment programmes offer “work experience” which may not be substituting for the work of other workers but still has all the other characteristics of a job.

Trades unionists know bad work experience when we come across it. We recognise it when unemployed people tell us about programme providers who send them off to do a few days’ work for no pay, with no training and no expectation of an interview, let alone a job offer. You have to suspect that this is simply about making an unscrupulous employer an offer they have no intention of refusing.

But work experience isn’t necessarily a problem. Where unions negotiate for voluntary paid work experience, leading to an interview or job offer and safeguards to protect existing workers it can be a win-win solution to a serious economic problem. Job guarantees, that create real jobs for unemployed people could help prevent the emergence of a ‘lost generation’ of young people.

The best answer of all would be is a growing economy, creating the jobs unemployed workers desperately want. And that means that the government must accept that austerity is choking growth.

Two weeks ago the TUC launched the pamphlet Making a Contribution: social security for the future, introducing the concept of the “nothing for something” welfare state and arguing that we should return to a system which is based more strongly on the contributory principle.

Many readers of this blog may be surprised to hear that Policy Exchange completely agrees: the welfare system must be made to better reflect contribution.

Our report, No rights without responsibility: rebalancing the welfare state, showed that there is still widespread public support for the contributory principle in welfare. We highlighted evidence from a poll on the attitudes of the public towards the welfare state and fairness that showed that 51% of people thought that benefits should only be paid to those who had contributed in tax and NICs. That is a startling result. Over half of those questioned thought that no benefits at all should be paid out unless a contribution had been made.

However, despite this support for the contributory principle, successive Governments have undermined the principle to a situation where there is barely a distinction between those who have contributed all of their lives and those who have not. This means that those who have paid in, expecting to see the rewards of their contributions should they fall on hard times, do not get back what they expected.

In this respect the pamphlet is right to say that a “nothing for something” situation has arisen. However, No rights without responsibility also outlined that a parallel situation of “something for nothing” has also arisen. This means that those who have not paid in receive much the same benefits as those who have and that the system does not do enough to ensure that all jobseekers are fulfilling their obligations to actively seek work: an obligation that the vast majority of jobseekers take very seriously.

These joint problems of “something for nothing” and “nothing for something” mean that widespread disillusionment with the welfare state has grown. This is unsurprising: those in work on low incomes and those on benefits struggling to make ends meet and doing all they can to find work now see that their previous contributions count for nothing. Others who have not contributed and do not try, can enjoy a better lifestyle than they do. These are the reasons that attitudes towards welfare and benefit recipients have hardened.

A return to the contributory principle can tackle these issues. By distinguishing benefit levels and conditionality requirements between those who have contributed and those who have not, the system can both recognise and encourage contribution. This would reward personal responsibility as well as building a strong sense of reciprocity into the welfare system.

The TUC pamphlet contributes to a growing discussion of how this could operate and Policy Exchange will publish our own thoughts later this year. Until then, continuing this debate around the return of the contributory principle will be key to ensuring that welfare system protects the vulnerable while incentivising and rewarding the right behaviour.

If anyone can be expected to know the price of things, it is of course Andrew Bailey. You may recognise him from your wallet or purse – as the Bank of England’s Chief Cashier, his signature is on all of our banknotes. But Bailey’s advocacy of fee-charging accounts seems to be based on some rather dubious logic. And it seems certain that any such move would reverse some of the successes of the financial inclusion agenda in recent years.

In fairness to Bailey, his objective is to enhance the stability, transparency and honesty of financial transactions. We already pay for current accounts, argues Bailey, through a series of more discrete charges. But if we started to pay a small, monthly fee up-front, would banks reduce, for instance, the high penalty payments that can result from going overdrawn? We also pay, in a more roundabout way, through the higher cost of other services, like bank loans, which is used to ‘subsidise’ free banking – Bailey thinks this kind of service might also be discounted following the introduction of monthly fees. On both counts, it remains to be seen.

The most direct way in which we pay for current accounts is of course through ‘interest foregone’. Interest is technically what the banks pay us, for lending them our money, but by offering lower interest rates on current accounts than on most other forms of banking, they are taking a bit of a rebate in order to cover their cost. In fact, the Vickers Commission recommended that banks explicitly tell us about the amount of interest we are hypothetically forgoing in this way. Andrew Bailey’s proposal goes much, much further.

Perhaps his most controversial argument is that, free from the burden of subsidising current accounts, banks would no longer feel the need to mis-sell products – Payment Protection Insurance being the best recent example – in order to make a profit. This has angered some commentators, such as The Guardian’s Phillip Inman:

Maybe he should explain his thinking to a judge. His defence of banks would be like a pickpocket saying he was forced to steal wallets because he was denied other sources of income. In his speech, Bailey seems to accept the industry argument that they should make mega-profits. He just wants them to do it in a more legitimate and sustainable fashion. Yet they should forget about mega-profits. Never again should they be seen as vehicles for shareholders to make their fortunes.

Inman’s reference to banks’ profits points towards another highly controversial aspect of Bailey’s argument, especially in the current political climate; that is, that we should simply accept that banks can and should make significant profits. If so, then he is probably right to say that the way in which they make profits should be as transparent as possible. But it is equally plausible to argue that financial products like current accounts are, in a financialised society, a basic need that it would be virtually impossible to function without. According to this alternative argument, although financial institutions like banks of course have to be sustainably financed, it should not be forgotten that they are the servants of the ‘real’ economy, and therefore duty-bound to offer things like current accounts for free (more or less). That this bargain does not quite work perfectly in practice does not mean we should rip it up entirely.

The status of financial institutions as our servants was underlined by the introduction of basic bank accounts (BBAs) in 2003, as part of the financial inclusion agenda. BBAs allow the deposit of wages and benefit payments automatically, direct debits to pay bills, and withdrawals at cash machines. But they have no overdraft facilities or cheque books, and limited debit card facilities. They were designed to help very low income customers, who banks were traditionally reluctant to offer services to. BBAs have already been undermined by branch closures, the growth of fee-charging cash machines, and the withdrawal of some providers from the BBA market. Would BBAs be exempt from monthly charges? It seems unlikely the banks would agree to this, in fear of customers (perhaps irrationally) switching to BBAs as a result. The introduction of charges could therefore leave accessible banking in a perilous state.

Specifically, three hours ago, Faisal tweeted:

“lessons from Germany” debate is hilarious. TUC came out with report on Deutsche social dem heaven. The IEA portrayed it as Beecroftland

— Faisal Islam (@faisalislam) May 24, 2012

I’m not sure we quite described the German model as heaven but, to be fair to Faisal, it’s hard to be nuanced in 140 characters. Our report was a snapshot based on visits to some major companies, in Germany and the UK. Those companies were Volkswagen, Siemens, ThyssenKrupp, BASF, Airbus, Bentley (which is owned by VW),  BMW and Roballo Engineering (which is owned by ThyssenKrupp). All but one were large companies, they all took on apprentices and they were all in those particular industries that Germany does well. So it was no surprise that Germany came out of the report very well. However, after our recommendations, we endorsed the German union IG Metall’s call for a minimum wage in Germany, because whilst 20% of German workers are union members and 60% are covered by collective agreements, that means that 40 per cent have no union defending their pay and, surprise, surprise, some of the most vulnerable in German society are among that 40%.

But what really impressed us about Germany was the Social Market economic model. Employers and unions that we spoke to in Germany defended it and it did seem to be a model that bound the company together. Where it operates (and it doesn’t operate everywhere) it creates a climate of fairness and trust. Workers voices are deemed welcome and necessary and, whilst unions and management still know how to have a fight when they feel the need, they have a joint commitment to the success of the company. As Martin Rosik from Volkswagen told us: “Here you don’t have the classic understanding of what is whose role in the game”.

Compare that with the UK. Earlier this week, both Ed Miliband and Nick Clegg addressed the Sutton Trust. At the forefront of both their minds was the issue of social mobility. The difference between the two, according to Andrew Grice in the Independent, was that whilst Nick Clegg rejected the idea that the solution was to redistribute income, Ed Milband said government could not improve social mobility without tackling inequality. There was no denying the inequality, simply a difference of opinion about how important it is to social mobility. I think inequality is very important, both to social mobility and because I think inequality is bad in and of itself. I’m not sure this would even be a debating point in Germany.

I haven’t read the IEA report that Faisal mentions, but if works council members on supervisory boards, influencing company strategy, is Beecroftland, I’d happily sign up for some of that.

As the GIB coalition argues today:

“GIB legislation is a pillar in the development of a low carbon economy. The bill must be strengthened to cement its operational independence and green mission. The bank has been prevented from borrowing independently and high carbon investment is not ruled out.  If the bank cannot borrow it has no hope of acting as a major catalyst for growth and job creation when the UK is in the midst of an economic crisis.”

KfW’s green drive was borne out of a coalition of unions, community and business organisations, led by the German trade union confederation (DGB). The DGB developed with the affiliated unions a programme to renovate existing buildings by energy saving and energy efficiency measures, with the annual work programme exceeding 300,000 jobs in recent years. Since 2001, KfW loans have helped insulate over 2m homes.

The KfW is serious about meeting Germany’s climate change targets of a 40% cut by 2020 and 80-95% by 2050, so it decided to deal with housing without delay. The same needs to happen in the UK. The key is very low interest rates, currently 1-2%. These are delivered via KfW’s top credit rating, topped up by further government subsidy of the interest rate. In 2011, the state put in just under €1bn, which KfW turned into €6.5bn in loans, which created a total investment of €18.5bn – that’s a 20-fold leverage on the state subsidy.

A last word to Richard Barwell, RBS economist quoted in today’s FT:

“The Germans have found a way of channeling cheap funds to SMEs [through the KfW] without breaching State Aid rules. We should copy it.”

But important as the severity of the double-dip is, the wider issue is the longer term stagnation of the UK economy. Today’s figures make clear that we have essentially no growth in the past 18 months.

It’s against this background that today’s FT features a whole range of ideas to boost growth – from boosting infrastructure spending (favoured by NIESR’s Jonathan Portes) to the a ‘balanced budget expansion’ (as argued for by the SMF’s Ian Mulheirn) to more inventive and expansionary monetary policy (the preferred Plan B of the IMF).

Nick Clegg yesterday signalled that he supports a ‘massive’ expansion of investment. Something the TUC would certainly support but until we get concrete details, it’s hard to get too excited by this intervention – especially as Clegg has made similar calls in the past (for example last September) which haven’t materialised.

The FT’s Chris Giles has written an interesting op-ed piece today, on the state of the economy and the policy debate and whilst I don’t agree with his conclusions, I’d recommend a read.

What really comes across from this article is the high degree of uncertainty about what has driven the UK’s poor economic performance over the past 18 months – was it the Eurozone crisis? A tightening of credit conditions? Austerity? A commodity price shock that increased inflation?

He writes that:

Deficit reduction plans might be hitting the economy harder than I and the UK authorities imagined. But the euro crisis and tighter credit conditions have also hit growth prospects.

The TUC has long argued that the government was under-estimating the impact that austerity would have on the wider economy. Of course events across the Channel have had an impact, the rise in the oil price pushed up inflation and a refusal by banks to expand credit (especially to SMEs) is holding back growth. But none of this means austerity has not had a major impact as well. Indeed I’d argue that when other factors are providing such a headwind to growth, the case for the government to be doing more to support growth is stronger not weaker.

But to be honest, all of this debate about led to the sharp slowdown in 2011 and the double-dip in recent quarters is ,to an extent, irrelevant.

I might think that austerity was a major factor and other might disagree, but what matter is what happens now. We can debate what is to blame for what happened in the past 18 months till we’re blue in the face, but it’d be more productive to spend time trying to reverse stagnation.

What is indisputable is that the initial projections from the OBR in June 2010 (for whatever reason) have turned out to be incredibly optimistic. The chart below compares what has actually happened to GDP since Q3 2010, the path then expected by the OBR (slight caveat the OBR in June 2010 only provided quarterly forecasts until the end of 2011, for Q1 2012 I’ve simply pro-rataed their full year 2012 forecast):

GDP has grown by 4.1% less than the OBR expected during this period – a huge miss. And yet fiscal policy has remained essentially unchanged (austerity has been extended by two years but the pre-planned tax rises and spending cuts for the period 2010-2015 remain).

Whether the cause of lower growth was austerity (and I think it was a major factor) or not, the simple fact is that the government’s fiscal plans are based on growth forecasts that have proven to be highly optimistic.

Given the evidence that the economy is not as strong as they hoped, they should think again. To continue with a plan deivised almost two years ago, even as the economy underperforms and stagnates isn’t building credibility, it’s simply reckless.

As Fact Check has noted, this is a claim the Prime Minister likes to repeat, even though it has been disproved a number of times; today’s figure simply updates similar data he quoted last year. This is surprising, because a closer look at the relevant statistics reveals a story that is less flattering to the government.

The Office for National Statistics publishes employment figures broken down by sector – the Public Sector Employment Statistics – quarterly, not monthly. The election took place in the middle of the second quarter of 2010, which ran from April to June. And it is true that in latest figures – for the final quarter of 2011 – private sector employment was 634,000 higher than it had been in the first quarter of 2010. Public sector employment was 381,000 lower.

But let’s look at the figures for each quarter and how they change:

That extra 314,000 private sector jobs in the second quarter of 2010 is important to the argument here. Without it, the government’s private sector job creation total falls to 320,000 – less than the 350,000 public sector jobs lost.

Fact Check have had a great deal of fun with a straight face, trying to work out how many of the 314,000 jobs were created in April and early May of 2010 and how many in late May and June. But of course, the government cannot plausibly claim responsibility for any of the increase that took place that quarter – if the change had been in the other direction we can be sure they’d have blamed it on Gordon Brown.

Why does the PM continue to draw our attention to figures that actually highlight one of his government’s failures? It’s a bit of a conundrum – any suggestions?

Each month, the Bank of England publishes a summary of the reports on business conditions from their agents in the regions and nations of the UK (more on the agents here). There are dozens of business and economic surveys these days, but this is one of just two or three that cannot be ignored because they tend to be proved right. (Or, as the Bank puts it, they often “have a high correlation with subsequently published ONS data”.)

As is often the case, today’s Agents’ Summary  is a bit of a mixed bag, but some of the measures I pay particular attention to look pretty dull. One is investment intentions (planned and possible spending over the next 12 months) which are important because investment is such a key influence on the economic cycle. Today’s report shows that the agents expect investment only to grow slowly, and it looks as though the improvement earlier in the year may have been cut off:

The summary characterises this as “further modest increases in capital spending over the coming year”, which sounds fair enough. Its yet another indication that we’re unlikely to see an investment-led recovery this year.

The other element I pay particular attention to is what the agents tell us about businesses and employment. The headline employment statistics have been looking good for six months, with employment rising and unemployment gradually coming down. But, as Duncan has pointed out, if the labour market was really tightening you’d expect to see real wages rising, when in fact they’ve been headed in the opposite direction. You’d also expect to see more employers having difficulty recruiting the right staff, but there’s no sign of that:

The run of better employment results may be short lived in any case, going by the survey’s results for employment intentions:

As the summary puts it, private sector employment looks likely to be “broadly unchanged over the next six months.” Given that the OBR expects public sector employment to fall 110,000 between the first quarter of 2012 and the first quarter of 2013 it would be brave to forecast anything other than a return to rising unemployment.

The Agents’ reports may err on the optimistic side. Today’s Industrial Trends survey from the CBI reports that manufacturers’  total order books are down with firms “anticipating that production will be broadly unchanged over the coming three months (a balance of -3%)” – which would represent a slowing down from recent results. The Markit Purchasing Managers’ Index for manufacturing results at the start of the month also showed manufacturing growth slowing down; (but the Index was still positive, and it is worth noting that the Services PMI results showed “solid growth“.)

David Cameron is a lone voice among the big five in opposing the tax. He told Hollande in Washington that an FTT would do nothing to stimulate growth which is staggering for a Prime Minister who has presided over the VAT increase , the pasty tax, the caravan tax… Apparently taxes on ordinary people are fine, but taxes on Cameron’s friends and funders in the City of London are unacceptable!

But in any case, he is wrong. The European Commission’s latest impact assessment suggests that, while the tax itself could reduce growth by 0.004% a year, if the revenues raised were re-invested in the economy, European growth would be raised by 0.2% to 0.4% – which may not be huge but it would bring the UK out of the recession that David Cameron’s government have plunged us back into. Independent estimates of the impact both of the revenue and the changes in market behaviour (a Robin Hood Tax would reduce the incentive to gaamble and speculate, and therefore encourage more long-term investment in infrastructure and manufacturing) suggest an FTT would produce even more growth than that.

The European Parliament was voting on a report from its Economic and Monetary Affairs Committee about the European Commission’s draft directive on FTT, although it is only advisory as the Parliament does not have control over tax policy. The report recognised that countries like the UK might not join in with the first wave of implementing the tax, and urged a smaller group of EU countries to get on with implementation regardless. It also proposed exempting pension fund investments, and extending measures to tackle tax evasion and tax avoidance.

Pat neatly sums up the state of British manufacturing. He says: “If we want a basic scorecard on manufacturing it would be that we make less than we once did, but more than we think we do.” Why do we make less? Pat correctly highlights the biggest wave of globalisation in human history and is right to point out that, with the exception of Germany, almost all other developed countries have lost some manufacturing capacity to Asian tigers to the East and to China in particular. What he doesn’t say is that during this time (and, sadly, on his government’s watch) the rate of job losses in manufacturing was much sharper in the UK than in comparative European countries. France, Spain and Italy all lost fewer manufacturing jobs than we did. I recognise that Italy and Spain have problems at the moment, so I understand that my last sentence may be interpreted as saying that the UK should have taken decisions which could have caused us similar difficulties. But the problems of Italy and Spain are complex and I don’t think it could be argued  that if the UK had pursued a more balanced economic policy, with less emphasis on the City and more on industry, we’d have a weaker economy than we have now.

Pat correctly points out that as productivity grows, employment per product will fall. This explains the continuing success of the UK automotive industry, even though it employs far fewer people than it did in the 1960s and 1970s. But whilst that provides an explanation, it leaves us with a problem, which Pat doesn’t tackle. How do we create jobs for the group of people that sociologists used to call the “skilled working class”? I think a modern manufacturing policy must focus on specific industrial sectors and there are ways that we could identify those sectors. I’ll say more about that below but, in the meantime, I think we should specifically focus on those technologies and industries that could provide decent, well-paid jobs to those youngsters who leave school but do not, for whatever reason, go to university. Economic and industrial policy must be for a purpose, or a number of purposes: this is surely one of them.

Pat talks about the specific issues affecting energy intensive industries, which the TUC has also done a lot of work on. He discusses the role of SMEs and mid-caps. The TUC talked about small and medium sized companies in our recent report, ‘German Lessons’. We made the case for a British version of the German mittelstand, acting as suppliers to large, world-class, exporters. That’s an ambitious target, but we are struck that UK policy debate focuses on either small, often micro-companies, or on large companies such as Rolls Royce. Medium sized firms barely get a mention and the need to grow small firms into medium sized companies even less so. Some firms are naturally small, but where a company could grow into a medium sized player, it should be encouraged to do so. I think Britain has indulged a “small is beautiful” mentality in this debate, seeing small firms as a good in themselves, as if they are a testament to a healthy capitalism. We need to be more ambitious here.

Pat discusses Sheffield Forgemasters and (quite rightly) resists the temptation to take a cheap shot at the Lib Dems, instead making, for me, one of the most important points of his report: the relationship between government and risk. On the issue of specific financial support for certain companies, in this case in the form of a loan, Pat says: “the least risky response would be to say no every time”. He points out the inevitable, that not every decision taken to support a company will work out, before adding: “But it is better to be trying to do so, succeeding sometimes and perhaps not at other times, than not be trying at all and letting key opportunities pass Britain by.” A few years ago, I wrote a report for the TUC about industrial policy in France. I was told that the French expect their government to support industry and recognise that, whilst this will fail sometimes, leading to a waste of taxpayers money, it is better to try overall. This is surely correct. Of course, government should not be frittering taxpayers’ money around, but there is role for reasonable risk in the industrial policy debate.

 Pat makes common sense points about skills and the image of manufacturing. He goes on to say – and is absolutely right to do so – that government needs to be an active player. Taking on the tired argument about picking winners, he says: “Picking winners isn’t the problem. It’s backing lots of losers which is the potential problem.” As he says, there must be conditions which determine how and when government intervenes. The TUC has long argued that the UK needs to focus on those strategic sectors which are or could become world leaders, capable of competiting in the age of globalisation, for years to come. That begs the question: how do we identify such sectors? ‘German Lessons’ suggested that we look at the work of the engineering giant Siemens and its focus on global mega-trends. We can try to match the way the world is going with the UK’s capacity to build the products that will be needed in the process, whilst always recognising that there are wider issues affecting industrial policy, including the need for job creation. However, whilst we must be as scientific as possible about identifying our strategic sectors, this will be, in part, a political decision. Germany is successful in the automotive sector because its government has focused on that as a key sector. I know the free-marketeers don’t like this, but there is a role for politics in industrial policy too.

Pat is correct to defend the need for a Department of Business (although I would still prefer a Department of Industry: sometimes, the name matters!). I also agree with his call for a British Investment Bank; expect to see more from the TUC on this issue later in the year.

I have saved the bit I didn’t like until the end. Discussing Jaguar Land Rover, Pat mentions the “appalling industrial relations” of the motor industry in the 1970s, before adding: “If there was an image that defined the industry then it would probably be a factory car park with thousands of workers putting their hands in the air to vote to go on strike”. That’s certainly one image, although there are others. But if 1970s industrial relations were the finest hour of none of us, then perhaps Pat could have balanced this with a mention of the very constructive work unions have been doing to underpin and strengthen so many manufacturing sectors since then, especially during the economic downturn. Pay freezes and shift closures caused real hardship to many of our members, yet they endured that hardship to protect their jobs and the jobs of their colleagues. Just last week, when Vauxhall committed to the future of car production at Ellesmere Port, the Business Secretary, Vince Cable, had the grace to say: “The unions and the Government … played a significant role in demonstrating to GM’s board that Vauxhall has a very flexible workforce…”

In ‘German Lessons’, the TUC makes the case for a Social Market Economy in the UK. We highlight the positive role that German unions play on works councils and supervisory boards, protecting their independence and defending their members, but working for the good of the company. We believe the UK could learn from this model, which is part of a more balanced, more equal, fairer and more prosperous economy. Sometimes in the UK, we talk as if the only stakeholders in industry are the management and the shareholders. The TUC rejects this approach. In our view, just as important are the workforce and the wider community, in areas such as Pat’s constituency of Wolverhampton. Unions have a positive role to play in the future of manufacturing. It would have been good if Pat’s report had said as much.

From this week, single parents will yet again feel the pinch. Single parents whose youngest child is five are no longer entitled to receive income support (IS). Instead, they will need to claim jobseeker’s allowance (JSA) or another benefit. This is one of the first provisions of the Welfare Reform Act 2012 to come into force. It is the latest in a steady stream of welfare-to-work initiatives targeted at single parents over the last 14 years.

Single parents on JSA will get the same amount of money as they did on IS but will have to show that they are actively looking for work in order to receive their fortnightly payment. But is it as simple as ‘off to work we go’?

124,000 single parents will be affected by the shake-up initially, but according to government estimates only one in five of this group will enter employment. At Gingerbread, our latest report throws a harsh light on the realities facing single parents with younger children who must now find work amid a backdrop of high unemployment and economic decline.

This is not to say that single parents will not, or cannot, find a job. Indeed, 57% of all single parents work and 54% of single parents with five and six year olds are already in paid employment. But the fact is that they need jobs that enable them to be both a worker and a parent. Part-time work is very important for single parents, and particularly for single parents of younger children. 75% of single parents in work with children under six have a part-time job. Suitable job opportunities, and in particular short-hours jobs (those of less than 16 hours a week), remain sparse. Over two-thirds (68%) of single parents enter low-waged occupations and will continue to struggle to make ends meet despite working.

Finding a job is not the only obstacle facing single parents. Securing sustainable employment is also a significant challenge.  For those who succeed in finding work that fits with their caring responsibilities, a substantial minority (20%) will move out of employment again within 12 months.

For single parents with young children who have been away from the labour market for some time, access to further education provides an important stepping stone back into work. Gaining a level 3 qualification makes a significant difference to the amount of money a single parent can earn. Single parents on JSA can receive a fee remission from Jobcentre Plus for their first level 3 course. However, they have to be prepared to give up their course if offered employment or face a payment sanction if they refuse – a complete waste of public money, not only in respect to loss of fees but also in light of future potential for earnings. We know that paid work is not a guaranteed route out of poverty for single parents; the poverty rate for single parent families where the parent works part time is 25%, and 19% where the parent works full time.

A better paid job can reduce reliance on in-work benefit payments and is a step towards single parents being able to move off benefits altogether in the long term. Rigid adherence to the conditions of jobseeker’s allowance in these circumstances inhibits, rather than enables, a single parent’s ability to find better paid employment.

The vast majority of single parents want to earn their own money and get off unemployment benefits. Ensuring that single parents can complete a further education course is a worthwhile investment; it requires a modicum of patience on the part of the government and a little bit of well-placed faith in the determination of single parents to work themselves and their children out of poverty.

The IMF says plan B should involve the Bank of England cutting interest rates from their already record-low level of 0.5% and chucking some more newly minted money at the economy through the process known as quantitative easing. Only if that fails to do the trick does the Fund think the chancellor should resort to fiscal policy – decisions affecting tax and spending – to boost demand. As far as the Fund is concerned, deliberately increasing borrowing in an attempt to stimulate demand is plan C not plan B.

The IMF is advocating a monetary stimulus first, followed by (if that doesn’t do the trick) a fiscal stimulus.  And their preferred form of fiscal stimulus would be an increase in investment funded by cuts/tax rises elsewhere. In other words, the balanced budget multiplier championed in the States by Robert Shiller and in the UK by the SMF’s Ian Mulheirn.

All very interesting, but I was somewhat surprised that the IMF argued for monetary stimulus first over a fiscal stimulus.

I’d argue that a monetary stimulus can certainly be helpful but at a time when the banks aren’t lending and the monetary transmission mechanism is broken there is always the worry that it fails to address the challenges in the real economy whilst boosting activity and profits in the financial sector (Aditya Chakrabortty’s column in today’s G2 is very good on this phenomenon).

But at least the IMF has implicitly, by recommending one over the other, recognised that monetary and fiscal stimulus are not the same thing (even if I disagree with them on which is more useful in the short term). This recognition is sadly lacking from much of the current government’s rhetoric.

David Cameron for example, speaking in Davos earlier this year argued that:

while we may be fiscal conservatives, we are monetary radicals injecting cash into the banking system and introducing credit easing measures to make it easier for small businesses to access finance.

George Osborne is equally fond of arguing that his tight fiscal policy allows the Bank of England room for monetary stimulus. The government seem, again implicitly, to argue that monetary and fiscal stimulus are close substitutes for each other. It doesn’t matter if the government is cutting back as the Bank can extend support.

I’m afraid I don’t really agree with this. Leaving aside my doubts on the effectiveness of a conventional (and QE is the ‘new’ conventional) monetary stimulus at a time when the financial system’s operations are impaired, fiscal and monetary stimulus impact upon the economy in different ways.

As Philippe Aghion (a Harvard professor and advisor to President Hollande) has recently argued the two are not really substitutes, drawing on work he has carried out for both the OECD and the Bank of International Settlements . He notes that:   

Countercyclical fiscal policy enhances growth more in sectors that are more dependent on external finance or in sectors with lower asset tangibility

…

Countercyclical monetary policy enhances growth more in industries that are more dependent on finance and in industries that are more dependent on liquidity

In other words, even in ‘normal’ times fiscal and monetary policy will impact upon different sectors in a different way.

Yes, any active policy to increase demand is to be welcomed at the moment – but we shouldn’t pretend that monetary easing will automatically offset fiscal tightening.

(And this is before we start talking about different types of fiscal stimulus such as investment, VAT cuts, etc, etc)

We need to know the numbers:

• how much new clean energy capacity needed up to 2030 from renewables, clean fossil fuels and nuclear power.
• the forward plan for carbon capture & storage projects.
• the contract prices available to investors.
• the long term cost of carbon.
• how the annual billions raised in carbon taxes will be recycled to industry and
  consumers for the green economy.
• the jobs and skills required to deliver clean energy to 2030.

By 2030, carbon emissions from power generation must fall to a tenth of today’s levels: from about 540 grammes of carbon dioxide per kilowatt hour (540gCO2/kWh) now to 50gCO2/kWh in 2030.

Concerns for the TUC and its Clean Coal Task Group as the Bill goes into a pre-legislative scrutiny include the danger of a new dash for gas. An emissions standard set too high will permit new gas fired power stations to be built with no carbon capture stipulations until the mid-2030s. Power station standards should enforce CCS on new coal and gas stations from the outset. We need early clarity on how CCS projects for fossil fuel power stations will be supported.  And an energy efficiency incentive is required to encourage firms that cut their energy use.

The jobs and skills opportunities for the power industry and its supply chains are enormous:

• 35,000 new employees up to the mid-2020s in the nuclear power sector that have to be recruited, trained and developed.
• 110,000 jobs in renewables now, and set to rise to 400,000 jobs to meet the 2020 renewable energy targets.
• 100,000 jobs across the UK by 2030 in CCS networks, worth £6.5 billion to the UK’s economy, if applied to our heavy industries and power stations in industrial areas.

According to the Green Economy report from the All Party Environmental Audit Committee, “There appears to be little priority in Government attached to moving to a green economy.” The government’s electricity market reforms provide a unique opportunity to link energy and industry policy and signal a commitment to growth through green investment. Alongside the Energy Bill, the government should heed their advice and set out a plan for energy jobs and growth.

As previously noted, the TUC has started tracking the different rates of inflation faced by the poorest 10% of households and the richest 10%. (The post linked to explains the methodology).

As can be seen in the chart below, the poorest 10% have faced higher inflation than the richest since August 2011. This is because they spend a greater proportion of their income on essentials such as food and utility bills, items where prices have been rising faster.

As headline CPI has now fallen back to 3.0%, the Bank of England is once again meeting its target of keeping inflation within 1% of 2.0%. This means there is no need for letter from the Governor to the Chancellor explaining what has gone wrong and what steps will be taken to address this.

But as our analysis shows, the inflation rate for the poorest 10% is still running at  3.7%. Maybe Sir Mervyn should write them a letter to tell them what he plans to do about this?

There is a striking difference between the Nordic countries and the rest of Europe, including the UK, in terms of economic inequality and social justice, and interestingly, levels of growth. Nordic countries not only top OECD indices on economic inequality and social justice but are also recovering from the economic crisis quicker than those countries such as the UK. Since the mid 1970s we have had a greater increase in income inequality among working age people than any other wealthy country, we trail the Nordic countries on social justice and, having adopted austerity measures, are not finding a quick path to growth. And all these issues are connected.

Clive Cowdrey from the Resolution Foundation, interviewed in the Guardian in  February 2011, noted that between 2003 and 2011, the income of the very richest in the UK had shot up such that the top 1% had swallowed 60% of economic growth. He also pointed out that the average pay in Britain would be no higher in 2015  than it was in 2003, after taking account of inflation.

In other words the issue is not just about the disparity between the rich and the poor, it’s about the growing disparity between the super-rich and everyone else. It’s also about the fact that, according to
research in the Financial Times in March, although the majority of generations have for a century always been better off than previous generations, that trend stopped in the UK in 2000.

There is increasing evidence that the Thatcherite/New Labour theory that wealth creation generates growth and therefore benefits everyone simply doesn’t work. If anything, it could be a contributory factor in the economic crisis. And as Richard Wilkinson and Kate Pickett argued in their 2009 book The Spirit Level, economically equal societies have happier, healthier and more successful populations.

So, if there is increasing evidence that an increase in inequality is a major contributory factor behind the economic crisis, why have the UK and much of the rest of Europe adopted austerity measures that undermine social justice and make inequality greater than ever?

As Stewart Lansley said in his 2011 book The Cost of Inequality: Three Decades of the Super-Rich and the Economy:

“The lesson – for the right as well as the left – is that capitalism that shares its output proportionately between profits and wages, and fairly amongst all citizens, is not just likely to be politically more stable, it will also deliver a more productive economy, faster growth and less turbulence.”

Once again the G8 have committed to promoting growth and jobs as their “imperative”, but they also commit “to implement fiscal consolidation” which is precisely what has plunged at least 9 EU countries (and maybe more) into recession. They commit to keeping Greece in the Eurozone while demanding it implement policies which its recent election suggests are the main impulse for Greece to leave. Such contradictions abound in such a short statement, which is also remarkably long on non-specifics like “structural reforms”, usually code for taking workers’ rights away – but strangely that’s not what they ever admit to.

So the slow puncture of the global economy will continue, and electorates will continue to be told that more and more cuts are the answer even as those cuts produce fewer job opportunities, more unemployment and lower wages. European electorates are beginning to show a courage that their leaders lack, however, and eventually, the leaders will have to follow their lead.

“Support for human rights is in our core national interest and deep in our DNA as a nation. But our ability to promote freedom and democracy is strengthened by a strong economy and a global role. Foreign policy is not something that exists in a vacuum. … It is not the plaything or pastime of Ministers, to be channelled into utopian schemes to remake the world.”

That was it. No mention of the Ruggie Principles, no mention of ethical sourcing, no mention of corporate social responsibility, compliance with the OECD guidelines on multinational enterprises, ILO core conventions on workers’ rights… It’s just business, as a mafia boss would say about butchering his brother.

Actually, I think the Foreign Secretary does believe deeply and genuinely in human rights. I think his historical writings suggest he absolutely gets the massive breakthrough in human rights that occurred at the end of the 18th century, although after the fashion of Edmund Burke rather than Thomas Paine. Under him, the FCO is still – as it was under his Labour predecessors – deeply committed on a day to day basis with the job of protecting people from oppression. He and his Ministers have responded positively and promptly when the TUC has sought assistance for trade unionists being abused in countries like Fiji or Iran.

His comment about playthings or pastimes is undoubtedly a rather snide reference to the late Robin Cook’s proud proclamation of an “ethical foreign policy” in 1997, but it does reflect the anguish which that pledge caused in the FCO when it had to confront the sometimes messy business of diplomacy and the requirement to deal with people democrats find repugnant. And it’s hardly surprising that a Conservative Foreign Secretary talking to a business audience didn’t launch a full-blown attack on corporate greed, malfeasance or misbehaviour.

But what I do think could have been expected was some challenge to business to do better, even if it came in the form of urging them to follow the best examples to be found in the corporate world. Or at the very least, some glimmer of expectation that they would need to live up to the requirements of the Ruggie Principles, international law and increasing corporate activism on human rights.

I would expect a Conservative to say that there was no contradiction between businesses doing well, and businesses doing good.

But William Hague blew it by just pandering to his audience, leaving them with a warm glow that could only have been enhanced by the fine wines and good food his CBI chums consumed. That’s not good government, even if – for one night at least – it felt like good politics.

Unions met with the Ministers and with employers for a tripartite social dialogue on the first morning, and I represented the TUC. Other trade unionists were there from Mexico of course, as well as fourteen other G20 nations, from South Africa to China, Saudi Arabia to Indonesia. We stressed the need for action as well as fine words, on job creation, tackling the youth jobs crisis and on green growth.

Despite differences of opinion with representatives of business (the B20) over precarious employment, unions (the L20, for Labour) were able to agree a common position to put to Ministers, covering employment, social protection and rights at work. For the Guadalajara meeting, we put forward a joint list of measures to take on youth unemployment.

We’re looking in particular for the Youth Employment Task Force to set out a series of actions Governments could take, and we want the Task Force to continue at least into the Russian G20 next year to check that these actions are being taken and consider what else to do if these measures don’t reduce youth joblessness. As I said to the tripartite session, “we’re not done with youth unemployment until young people have a future again.”

Unions also called – in a pre-summit submission which we’ve been using to lobby DWP Work Minister Chris Grayling – for public investment in infrastructure and green jobs; reduced income inequality; action against insecure work; social protection floors; and a global Youth Jobs Pact. The summit communique should be available over the weekend, and we can see how far Ministers have heeded our calls.