Thursday, June 14, 2007

Tuesday, May 29, 2007

Email to John McDonnell

John McDonnell failed to get sufficient nominations to get on the ballot for Labour Leader. His campaign was not a personal vehicle but a challenge to the neo-liberal programme of the government. Where does it go now? John is producing a consultation paper. Here is an email I sent him dealing with the question of how socialists inside and outside the Party might continue to work together.

Dear John

I will be interested to read you consultation paper referred to on your latest blog entry. I think there have been two types of response to the fact that you failed to get on the ballot paper. On the Labour Left we have heard something along the lines of ‘we did all right, keep on keeping on’. Outside the Labour Party it has been seen as confirmation that you should all leave, e.g. the letter in the Guardian from Dave Nellist and the CNWP.

As somebody who is not about to rejoin the Labour Party, I still believe that a socialist alternative to Labour is necessary. However, such an alternative is not a prospect in the short term, owing to the sectarianism of the main socialist groups (such as the SWP and the SP) and as a result of the collapse of the electoral base of the Scottish Socialist Party. That is a discussion which no doubt will continue.

However, I think the most productive approach in the current situation, is to examine ways that socialists inside and outside the Labour Party can work together to build resistance to the attacks of the government on the working class.

At the same time the fact that the overwhelming majority of union sponsored MPs nominated Gordon Brown, the author of the government’s neo-liberal ‘reforms’ of the public sector, raises the question of why they are sponsored, and what the unions get in return.

This surely highlights the need to be more selective in sponsoring MPs and candidates. The GMB policy for instance, even if not yet vigorously applied, is that the union will not automatically sponsor Labour candidates, but only those who support the broad outline of union policy; above all, opposition to privatisation. I believe that this is a key issue on which socialists in the unions (be they Labour Party members or not) can collaborate. What is the point of our members’ money being handed over to MPs/candidates who do nothing to further their interests, but support job cuts, privatisation, and refuse to support even the not very radical Trade Union Freedom Bill? We require a major campaign across the affiliated unions on this. Let's only support candidates and MPs who support our members.

What framework is there for socialists inside and outside the Labour Party in which to work together? I’m not sure that the Labour Representation Committee is the vehicle for the simple reason that you have to be a Labour Party member to join it. OK, you can have associate membership (but no vote). This presents an obstacle probably to some thousands of socialists who are not members of the groups, would like to work with you, but will not join/rejoin the Labour Party, especially since most local parties are empty shells. Ironically, the RMT and FBU, both of which are affiliates of the LRC have supported candidates standing against Labour, yet they remain as participants. If this is no obstacle to these unions why present an obstacle to individuals? It does not make sense.

To attract such people you would either have to turn the LRC into an organisation which was not an internal Labour Party group, or consider another organisational vehicle.

Ironically, within the Labour Left there does exist some sectarianism in which acceptance of the ‘correct’ position on the Labour Party (to ‘reclaim’ it, or turn it into a vehicle for socialism) is seen as the key test for socialists. Those who ‘fail’ this test are seen as hopeless people who tend to be lectured.

Real life is different. You said in your last blog posting, assessing your campaign:

“More importantly the vast majority have expressed real determination to continue the campaign for socialist advance within and beyond our movement.”

The last phrase recognises the need to reach out beyond the Labour Party. Just as many people outside the Labour Party supported your campaign, they would be happy to continue to work with you and the left in the Party. However, if they are presented with the ultimatum that they must agree on the Labour Party question, then all the Labour Left will succeed in doing is isolating itself. We must find a means and a framework for uniting socialists in campaigning activity in order to rebuild the labour movement and to challenge the neo-liberal policy of the Brown government, and most importantly developing policy alternatives to neo-liberalism.


Martin Wicks

Wednesday, April 11, 2007

Private Equity – what response from the trades unions?

Until a few months ago ‘private equity’ meant little to anybody other than economists or investors. However, the prospect of take-overs by PE firms of major companies such as Sainsbury’s and Boots has prompted a discussion in the media about the nature of the private equity (PE) phenomenon and the implications for the economy overall. At the same time the GMB’s campaign highlighting the impact of private equity take-overs on workers has helped to put these companies on the defensive, protesting against being labeled as “asset strippers”. GMB members in the Automobile Association, Birds Eye, and National Car Parks, have all suffered high levels of job cuts, and intensification of work, contrasting with fantastic financial rewards for small numbers of managers.

To show what reasonable people they are the British Venture Capitalists Association conceded in March that there was a ‘genuine recognition’ of a need for a greater level of disclosure in relation to PE-backed deals. The signatories to their initiative said they believed there would be ‘real benefit’ to all ‘stakeholders’ if a regime of more effective disclosure was introduced. Hence the BVCA has formed a working party under the chairmanship of Sir David Walker, a former chairman of the Securities and Investment Board, to draw up a voluntary code on a ‘comply or explain’ basis to address the transparency of the industry and levels of disclosure.

Barbarians at the Gate

PE is not a new phenomenon. In 1988 there was a great deal of publicity over the acquisition of Nabisco by a private equity company for $21 billion dollars. The event was the occasion for a book and a film: The Barbarians at the Gate. The growth of PE, however, suffered as a result of the dotcom collapse and there was little money put into the private equity market. Over the last few years, however, there has been a phenomenal increase in the scale of the PE market and the size of acquisitions. In the US for instance, in 2001 there were just three deals over $1 billion dollars and none over $10 billion. Yet in 2006 there were 57 deals over $1 billion and nine over $10 billion. The latest record acquisition was a $45 billion buy out of TXU, the Texan utility company.

It is the scale of the growth in this market and the level of “leverage” (debt) used to make these acquisitions which has worried even supporters of ‘the market economy’. The Financial Services Authority report in November 2006 raised concerns as to the dangers of the level of debt associated with PE buy-outs, for the economy overall. In its assessment of the risks the FSA said:

“We reached the view that it was actually pretty much inevitable that some of these private equity backed companies would actually go bust. The more debt that is inherent in a company, the more likely it is that any major change in interest rates, any major rise in interest rates, or change in the economic circumstances of the country, could actually cause that company to get into distress.”

In particular the levels of “excessive leverage” associated with these deals gave the FSA cause for concern.

The big increase in the amount of credit associated with PE transactions, “may not in some circumstances be entirely prudent”, said the FSA with masterful understatement. So much so that “the default of a large private equity backed company or a cluster of smaller private equity back companies seems inevitable”. The FSA expressed concern that in “extreme circumstances” this would have negative implications for the financial stability of the UK economy. The amount traded may “substantially exceed” the amount of underlying assets.

A common ratio for PE acquisitions is 20% equity (money raised directly by the company taking control) and 80% debt, borrowed from financial institutions. When a company is bought it is common for the new owners to take on additional debt to finance large dividends through “dividend recapitalization”, enabling them to very quickly recoup a large part of their initial investment. For example KKK, Carlyle and Providence paid themselves a $250 million dividend in October 2004 a month after putting $550 million into a $4.1 billion deal for PanAmSat Corporation. This is not productive investment in plant, machinery or infrastructure. It simply burdens a company with a debt which has only one purpose – to hand over money to the PE firm.

Peter Rossman, Communications Director of the International Union of Foodworkers gave a briefing to a meeting of union sponsored MPs in the House of Commons, in which he said:

“What this means in practice is that the real economy of goods and services has been subordinated to the competitive logic of global financial markets. Food companies, for instance, are no longer simply competing in yogurt, or carbonated drinks, or processed meats. They are competing on global financial markets to deliver the fastest and biggest possible rates of return to these new impatient, financial investors.”

These methods lead to the saddling of acquired companies with massive debts which threaten to sink them. Permira (which took over the AA) bought the Germany chemical company Cognis in 2001 for $2.5 billion dollars, using only $450 million of their own money. In 2000, the company had an after-tax profit of €109 million. Despite rising sales last year it lost €136 million and has begun laying off workers. Yet Permira and Goldman Sachs have taken out €850 million.

Across the Irish Channel Eircom, which was privatized in 1998 was acquired by PE consortium Valentia in 2001. Eircom paid for the loans by issuing bonds which raised its debt from 25% to 70% of the value of its assets. As a result capital expenditure by the company fell from €700 million in 2001 to €200 million in 2004, the decline undoubtedly related to the €400 million dividend it paid to Valentia.

Ratings Agency Standard and Poor’s has said that PE funds that load take over targets with huge amounts of debt to pay management fees and dividends to investors, had contributed to a decline in the credit ratings of European companies. Their report announced that the amount of debt rated as “junk” (a rating which indicated a speculative investment with some risk of not getting repaid) rose to 17.2% in 2006 as compared with 1.2% 15 years previously. (It’s interesting to note that the proportion of junk-rated debt in the USA reached 50% at the end of last year.)

Regime of Bullying

The consequence of this is that repayment of increased debt levels and dividend payments leads to increased pressure to drive down wages and cut staff. GMB members in the AA experienced this, a kind of employers’ class war regime, which led to 3,500 job cuts and a regime of bullying. The company utilized a scab ‘union’ led by a former GMB official, to derecognize the GMB.

In Hull Birds Eye workers were made redundant when the company was taken over by a PE company.

In the case of NCP (where strike action by GMB members recently won a recognition agreement), PE firm 3i was appointed by ‘venture capitalists’ Cinven (who acquired NCP in 2005) to run the on-street business which provides parking wardens, vehicle clamping and removal services to 31 local authorities. Staff are under great pressure to ‘perform’ by issuing a certain number of parking tickets every day. 3i sold NCP to Australian Bank Maquarie in a deal which produced a profit of £245 million in just 18 months!

As Peter Rossman points out the impact of PE is not limited to the companies it acquires. “The funds have gotten so big that virtually every public listed company is now a take over target.” The response of stock market listed companies resisting a take over is usually to slash costs and staff numbers.

“A pre-bid environment hangs over the economy as a whole, meaning short-termism is institutionalised, bringing more job cuts and more attacks on wages and working conditions and more attacks on trade union rights.”

The PE industry insists that it creates value and creates jobs. However, they do not have to report in the way that listed companies do. So secretive are they that the Work Foundation, in preparing its recent report ( could not get a single private equity company to disclose information on job cuts in the companies they took over.

Vulnerable to systemic shocks

The Work Foundation report confirms what Rossman says:

“PE companies are highly vulnerable to systemic shocks and changes in interest rates due to the leverage model they employ. The exponential growth of PE in recent years exposes a greater proportion of the economy to these very real risks; the potential of greater instability exists as a result.”

The FSA expresses concern about the impact of private equity on the ‘public’ markets. According to them PE firms raised more funds in the first half of 006 than firms listed on the stock market (£11 billion compared with £10.4 billion). The UK equity market capitalisation shrank by a net £46.9 billion in the first half of 006 and has not grown since the last quarter of 004, according to the FSA.

Whilst the PE industry can point to some companies that have ‘grown the business’ they have taken over, even some of their supporters have said it is difficult to get an overall picture given the lack of transparency in the industry. The Work Foundation report underlines what is clearly a central feature, especially of “highly leveraged” deals: the level of exploitation of the work force is driven up and wages are depressed for the main body of the work force.

So how should the unions respond to this growth of private equity and the ‘pre-bid environment’ which Peter Rossman refers to? Industrial action is an obvious component to defend the wages, jobs and conditions of service of their members. But government policy is a factor as well. The GMB is right to demand of Gordon Brown that he end tax concessions which encourage the take over of companies by PE outfits. Why should these companies be allowed to create debt solely to provide big up-front dividends for a small coterie of managers? Why should they be allowed to invest as little as 20% of their own money, saddling a company with what may well prove to be unsustainable debts? The amount of debt being used to fund these buyouts has increased from an average of seven times earnings (of the acquired company) to over nine times in 2006.

According to the BCVA its members contributed only 5.4% of their revenues in tax for the year 2005-6. PE companies have been able to gain advantages via the tax-deductibility of interest simply by reason of the vast volumes of debt that they take on under their business model. Executives and partners in PE funds are able to gain a huge tax break by the treatment of their profits as capital gains rather than income. Compare this with the treatment of people who cannot receive many state benefits because they have the paltry sum of £16,000 or more savings!


The Work Foundation report further highlights a couple of important issues. Firstly pensions. Members of pension schemes “would be among the major losers if the PE train ever came off the rails”. It would be interesting to know how much money in PE acquisitions comes from pension funds. The trades unions should surely campaign against pension funds risking the money of their members in “highly leveraged” take-overs.

The Work Foundation says there is “a major potential conflict of interest for company managers who can see a huge personal gain for agreeing to a highly leveraged take-over.” Such transactions should be open to public scrutiny, of course.

They are certainly right to say:

“It cannot be allowed that a large portion of the private sector is immune from proper public oversight – especially as the risk-exposure levels involved in private equity may pose potential risk to the wider financial system.”


Another issue they highlight relates to TUPE (Transfer of Undertakings Protection of Employment). TUPE does not apply where undertakings are transferred through share purchases. We should obviously demand that TUPE should apply to these deals.

More fundamentally, what does PE tell us about the economic system under which we live? PE appears to be a means of overcoming the historical decline in the rate of profit which occurred after the end of the post-war Bretton Woods system. It is part and parcel of an international system in which most of the money that is made is from gambling on the stock markets; over 90% of which activity is unrelated to production. Making money out of money is easier than making money out of producing and selling things. What seems to be relatively new about the growth of private equity is that these ‘venture capitalists’ or PE kings are prepared to saddle companies they acquire with unsustainable levels of debt for which the work force must pay the price, and service provision worsens.

Brendan Barber, TUC General Secretary, writing in the Financial Times called for rapid international action “to stop private equity providing mega-bucks for a few at the expense of the social contract that ensures at least stability and equity.” He complains that companies are treated simply as “collections of assets to be bought and sold, not as social institutions or long term wealth creators.” You have to ask, where has Brendan been for the last 20 years? Since when did ‘public’ companies place the social interests of their workers before what the Americans call the bottom line?

The probable crash/crashes that the FSA believes inevitable may lead to a big collapse in the PE market. current PE mania is the product of an economic system in which ‘investment’ has been in large part detached from the productive economy. “Creative destruction” may well be, says Barber, “an inevitable part of the market economy”. Yet this ‘creative destruction’ actually destroys lives, impoverishes people, and ruthlessly exploits labour. Witness the ‘creative destruction’ of factories and the rush to China and other places where working conditions read like Engels writing on the condition of the English Working Classes in the 19th century.

Brendan Barber says that the growth of PE is “a way of getting round the social contract at the heart of our market economies”. At the heart of ‘modern economies’ is “a balance between the undoubted prosperity which markets deliver and measures to protect against the instability and damage that they can also wreak. That is why we expect companies to pay tax, to be transparent in the way they operate and why we regulate markets to guard against stability.”

What ‘social contract’ is this he’s talking about? It is a figment of Brendan’s imagination. He is well aware of the boasting of Brown and Blair about the low tax, light regulation regime that they have arranged, and the level of tax evasion by big corporations. PE is an extreme form of profiteering which is carried out at the expense of the workforce and the service provided.

A reversal of the ‘light regulation’ regime would be a step in the right direction. However, instead of counter-posing the lack of transparency of PE with Public Limited Companies, the unions should be exposing the fact that PE is an extension of the globalised financial markets, the purpose of which is to make profit unrelated to productive economic activity. Instead of seeking to ‘make globalization work for everyone’ (an impossibility) we should be challenging ‘globalization’ which was not the result of some natural evolution, but of political policy and practical decisions designed to free capital from all social and political contro

Wednesday, March 28, 2007

Home ownership falls

An interesting piece of news in the Guardian yesterday. Home ownership in England fell last year for the first time since 1953. There are 14.62 million owner occupied homes in 2006, 25,000 fewer than the previous year. There are 8.2 million mortgage holders.

If many people are being ‘priced out of the market’, some people are doing alright; there was a rise of 71,000 in the number of those buying their home outright. Home ownership stands at 70%, below the peak in 2000 when it rose to 71%.

David Stubbs from the University of the Bleedin’ Obvious (actually the Royal Institute of Chartered Surveyors), said that the key issue behind this was affordability. First time buyers are finding it harder to “get on the property ladder”. Since 1997 when the Reverend Blair moved into his new house (and started increasing his personal property portfolio) prices have increased by a staggering 11% a year. The problem has been exacerbated by the fact that “a strong buy-to-let sector is competing with first time buyers for property”.

In another stunning use of deductive powers Mr Stubbs added that the first fall in overall ownership was probably partly driven by rising inequality of income in Britain.

The figures undoudtedly also reflect the pressure that mortgage lenders are under. Mortgages today are based on five or more times the income of the mortgagee. Lenders are not too careful these days about checking the real income of individuals. This is the equivalent of what in the USA are called sub-prime mortgages (in which sector there is a crisis – 13% of borrowers are behind on their payments, and 30 of America’s sub-prime lenders have closed in the last 3 months); that is mortgages that people cannot really afford, and on which there is a good chance of default.

News recently emerged of a mortgage being given to a 102 year old – a 25 year mortgage!

This news probably indicates that home ownership has reached its limit. Moreover it underlines the need for a Council Housing building programme to address the housing crisis, something which the Blair government is ideologically opposed to. Since his government began in 1997 numbers on Council House waiting lists have increased by 1.5 million. However, need is undoubtedly much higher than that because many people will not have bothered to put their name on the list since they stand no chance of ever getting a home.

Monday, February 19, 2007

Living in the Ghetto?

I did not realise it but I live in a ghetto. Will Hutton, that doyen of the English middle class ‘progressive’ liberals says so. It must be true. Even worse I inhabit a ‘living tomb’.

“The truth is that council housing is a living tomb. You dare not give up the house because you might never get another, but staying is to be trapped in a ghetto of both place and mind.”

The context of these wild assertions of Hutton is the debate sparked by the spate of teenage murders in South London and the UNICEF report which put Britain at the bottom of the ‘league’ for children’s well-being. Step forward Hutton for the prosecution. The cause of these social problems is, according to him, the Council housing estate.

Curiously Hutton fails to even broach the question of why Council estates have ended up the way they have today, in contrast to what they were before Thatcher’s assault on them. If you visited a Council estate up to the 1970s you would have met a cross-section of working class life, from the engineering worker to the shop or office worker. Unemployment was very unusual then amongst tenants. This was a world in which people generally treated each other with respect. The degeneration of many estates dates from the time that Thatcher sought to launch her social engineering project. She wanted to undermine the electoral base of support for Labour which most council estates were. She introduced ‘the right to buy’, combined with an end to the building of new council houses. This was her 'property owning democracy' (as if you should not get a vote if you were not an owner).

The result was that the better-off Council tenants bought their houses at give away prices. Councils were left with the worst stock. The only people who did not buy were those who were too poor to afford even the low prices offered and the small minority of people who refused on principle to buy their house because they considered it collective, socially owned property.

In the absence of new housing being built, over time only the poorest people were left in Council housing, many with social problems. Hence something like 75% of tenants are eligible for benefit of one sort or another. To accumulate the points necessary to qualify for the decreasing number of units, applicants have to have large families, serious health problems, and/or serious levels of social deprivation. That is why there are 1.5 million people on Council housing waiting lists.

Despite this, Hutton’s generalisation that Council estates are ghettos is too sweeping a generalisation. The area I live in has its problems but I do not feel like a prisoner and I do not want to be ‘freed’. It is a quiet area. It is certainly no Peckham. On the only occasion when somebody tried to rob our house in the past 23 years, they escaped only with a pair of gloves, evidently disgusted that they did not find a TV or a coin metre for gas or electric. The rumour that they left a £10 note because they felt sorry for us is only apocryphal.

Hutton bemoans the fact that the “aspirations and expectations of the rest of society are not for you” if you live in a Council estate. On the contrary it is the “aspirations” which Thatcher encouraged and Blair views through the same prism as the “Iron Lady” in which resides the problem. Council housing was a collective solution to a social problem – poor and overcrowded private accommodation for those who could not afford to buy a house. Some of the post second world war council housing was neither well built nor well-planned. But for many of the generation of people who grew up before the Second World War, Council housing was a liberation. It provided them with cheap and decent accommodation in place of the poor and often unhealthy conditions that many working class people had to suffer. It did not have double-glazing or central heating but not much British housing did then.

Hutton wants me and other tenants to be freed from a ‘living tomb’. For what; the privilege of having a mortgage that I cannot afford in order to fulfil the ‘aspiration’ of being a home owner? There is nothing natural in the desire to own a home, as many other European countries show. They do not share the seeming British infatuation with home ownership. Contrary to myth, such an aspiration is a social phenomenon which has been engineered.

The Blair government’s contempt for Council housing and Council tenants is part and parcel of their abandonment of the collectivist outlook of the labour movement. It rests on the same prejudices as those of Thatcher who famously said there was no thing as society. The ‘aspirations’ which the Blairites worship are those of the self-interested individual who wants to ‘get on’ and is disinterested in the collective interests of working people. That is why for them any conception of a working class movement is completely alien.

For the middle and upper classes housing became very much an ‘investment’ rather than a place to live. From the 1980’s the rocketing prices meant that small and large fortunes were made as people moved from house to house, to take advantage of the inflated values. But current unprecedented levels of debt are the inevitable product of these inflated values. Millions of people struggle month to month to earn enough money to pay mortgages which they cannot realistically afford, at least without working themselves into the ground. The banks used to lend individuals around two and a half times their wages for a mortgage. Today they lend five times or more. This is unsustainable. It causes stress and illness amongst wide swathes of the population.

Many people who would previously have put their name on a Council house waiting list are today forced to take out a mortgage because they have no chance of getting council accommodation. In pre-Thatcher times there was no social stigma to living in a Council house. Today you are seen as a ‘failure’ if you live in Council accommodation. That is partly because the absence of new building means that less people live in them. For many people their view of Council estates is produced by what they read in the newspapers or see on the TV. If Hutton wants to visit this one he might recognise that his vision of a ‘tomb’ is preposterous.

He might also consider this question. Why if life is so uniformly appalling on Council estates have we seen the repeated experience of Council tenants voting against having their housings sold off, rejecting the propaganda of the government that breaking the link with a Council landlord will remarkably transform their lives? It is not because they love their Council. They often have problems with bureaucratic structures. It is because they fear private landlords or ‘not for profit’ Housing Associations, because of historical and more recent experience.

Hutton offers one ‘controversial option’, repeating the idea which Ruth Kelly has floated, allowing tenants to own ‘a fraction of the value of their home’. Ten per cent was the figure that Kelly suggested. This is presented as ‘the first step on the housing ladder’. Currently you can ‘buy’ as little as 25% of your home.

If up to 75% of tenants are on benefit how are they going to afford to pay a part-mortgage, on top of their rent. What would the motivation be? How could it be a first step when the chances are that even if the individuals concerned are working, often in part-time work, they are going to be earning low wages. As one mortgage broker quoted in the Observer says:

“You have to ask whether someone who can only afford a 10% stake should be getting on the property ladder in the first place. The whole point is that you increase your stake over time, with the aim that you eventually own the property outright. That is a struggle if you initially buy a 25% stake; it is near impossible with a 10% stake.”

The housing crisis in Britain results from the lack of what is called ‘affordable housing’. The ‘market’ so beloved of Blair will not deliver housing which low income families can afford to buy. For Kelly to propose a 10% stake in Council housing is remarkably stupid. Moreover, if you live in a ‘ghetto’ why would you buy 10% of your house? The government has failed to address the lack of ‘affordable housing’ because of its ideological prejudice against Council housing. Why does a government for whom ‘choice’ is a mantra deny Councils the right to invest directly in Council housing even when tenants have rejected government policy and voted to stay with their Council landlord? I suspect that to a large extent this is because if there was a major Council house building programme embarked upon this would tend to drag the price of private houses down because there would be less pressure on people to take out a mortgage.

Thanks Will and Ruth, but I don’t want to own 10% of my Council house; nor 100% for that matter. When I shuttle off this mortal coil I know that somebody who needs it (that’s different to demand in the market – human needs as opposed to the ability to pay) will become the new tenant. Indeed I have a friend who could afford to buy a house and decided to buy one because he and his partner thought they earned too much to justify living in a Council flat. So instead of earning a fast buck by buying it from the Council at a give-away price, they did the right thing and gave it back to the Council to put in a new tenant who needed it. They put this principle above their personal interests, a sentiment which is unimaginable for Blairites.

Like my friend I consider this house as social property which was not built to enrich individuals but as public provision in response to social need. That’s why I would not buy in on principle even though it would be in my interest to do so, if I was solely self-interested. Ironically, if Will were to wander around our estate, he would see that quite a few of the worst houses were one’s bought under ‘the right to buy’. It was too good an offer for some to refuse. It was cheaper to buy than to pay the rent. Yet many tenants did not think it through. They did not think about the cost of the upkeep of their house, of the cost of repairs, never mind the cost of modernisation.

That was what Thatcher wanted – tenants to see them selves as individuals with no other consideration than their personal interests. One of the founding tenets of Blairism was that the Labour Party had been wrong to oppose ‘the right to buy’. Blair consciously transformed Labour into the Party of the aspiring individual.

Hutton finishes his piece by saying that it is not ‘British civilisation that ails’. It is British Council estates. “We made them. Now we need to unmake them.” This is a staggering summation, for Hutton appears to have forgotten even some of the things which he himself has written. Council housing was not responsible for mass unemployment. It was not responsible for the worship of success, of the encouragement of naked self-interest. It was not responsible for the Blair government copying their beloved American economic and social template.

What is needed is not the destruction of Council housing but investment in it; investment in social facilities. The partial atomisation of the working class, which was conscious policy on the part of Thatcher, produced social conditions whereby sections of the poorest within society war against each other rather than seeing that their collective interests require building a labour movement which defends those interests. Individuals can ‘get on’; some can escape from their ‘ghetto’. Yet as America has shown, the free market solutions which are worshipped at the shrine of Blair (and Brown) allow individual success but cannot disguise the reality that in a competition of each against all, for each successful individual there any many more who are thrown into an impoverished existence, both materially and culturally. That is what the labour movement was formed to address. Addressing the social problems which Hutton refers to requires collective solutions, of which Council housing is one. We can discuss its weaknesses on the basis of experience, the need for greater tenant involvement and so on, but Hutton’s ‘solution’ is nothing more than a variant on the Thatcher/Blair outlook. It is out of the camp of rampant individualism, where everybody survives by their individual initiative, often at the expense of others.

Wednesday, January 17, 2007

Blair’s government declares: the right to strike is not a ‘fundamental social right’!

The British government has declared that strike action is not a ‘fundamental social right’. The government, represented by QC David Anderson (on January 11th) was giving evidence in the European Court of Justice in relation to strike action by Swedish trades unionists when the company Laval brought in Latvian workers to build a school in the Swedish town of Vaxholm. Laval is claiming that the union broke European law. The action was against paying Latvian wages rather than Swedish union negotiated rates for the work.

Also currently before the court is a case brought by Finnish company Viking Line against the International Transport Workers Federation. The case related to the threat by Finnish workers to strike when the company tried to register a liner in Estonia to take advantage of 60% lower wage costs. They were defending the wage rate for the job (negotiated by the Finnish Seamen’s Union) irrespective of the national origins of the crew. As it happened strike action did not take place.

In August 2004 Viking applied to the UK Commercial Court in London for an order to stop the ITF and the FSU from taking any action to prevent the re-flagging of the Rosella on the grounds that it would hinder their 'fundamental right of establishment and freedom to provide services'. Whereas the Commercial Court considered that the proposed action of the ITF and the FSU were contrary to European law, the UK Court of Appeal, in a judgement given on 3 November 2005, decided that the case raised important and difficult questions of European law and subsequently referred it to the European Court of Justice (see below). The judgement of the ECJ will become part of European law and apply to all EU members.

Hence these cases will potentially determine whether businesses can relocate to take advantage of cheap Eastern European labour without the threat of strike action, and whether EU law overrides national laws protecting workers from exploitation. Countries such as Finland, Denmark and Sweden have constitutional protection for trade union rights. A ruling in favour of Viking or Laval would mean EU law overriding domestic laws.

This would have disastrous implications for trades unions, effectively opening the way to using migrant labour at the rate for the home rather than the host country. This issue was a major source of dispute in the EU Services Directive which originally included the right to employ foreign labour at ‘country of origin’ wage rates rather than at the union negotiated rates in the country where the work was taking place.

Of the 15 countries making submissions to the European Court, the UK was the only one to state that strike action is not a fundamental social right. In effect the government is supporting the ‘right’ of employment of cheaper foreign labour to undermine trades unions. It is also supporting the ‘principle’ that free movement of labour is a more important right than the right of workers to withdraw their labour in order to defend their wages and conditions of work. This is nothing other than ‘free market fundamentalism’ of the worst kind. Perhaps Blair had this in mind when speaking of the ‘shared values’ which Britain is supposed to have in common with the United States.

Every Labour MP, especially those sponsored by the unions, should be put on the spot over this issue, with the demand that they express oppose the government's psoition. Any sponsored MP who refuses to support the unions in relation to such a fundamental issue should have their support stopped by Labour affiliated unions.

The ECJ will address the following questions:

· Should Member State ‘social models’ and labour law as determined in accordance with the principle of subsidiarity be made subject to the economic freedoms of the EC Treaty (Articles 43 & 49) i.e. in this case the Finnish constitutional right of workers and their organisations to negotiate collective agreements at an appropriate level of pay and to take industrial action in cases of conflict?

· What should determine the balance between guaranteeing economic freedoms (Title III) on the one hand and fundamental rights (Title XI & Charter of Fundamental Rights) on the other?

· Should the ECJ be the arbiter on matters of industrial action, expanding the EU's sphere of competence in this area and potentially impinging on national sovereignty?

· Should all industrial action that has the effect of restricting the freedom of movement be justified by trade unions before the courts, and ultimately before the ECJ?

Wednesday, November 15, 2006

National Shop Stewards Network

A national meeting called by the RMT attended by 250 union reps has agreed to launch a 'National Shop Stewards Network'.

At a national meeting organised by the RMT and supported by major unions including the TGWU, PCS, FBU, UCU and NUJ, it was decided to organise a delegate conference next year to launch a ‘National Shop Stewards Network’. A steering committee of 10 people was elected to organise it.

Bob Crow in his introduction said that the organisation of workplace reps had always been a barometer of the general health of the trade union movement.

“If we are to roll back the tide of privatisation and war…rebuilding the grassroots of the movement is an essential part of that process.”

Barry Camfield for the TGWU said:

“We need to change the centre of gravity towards shop floor reps if we are to create the conditions for change.”

Paul Mackney for the University & Colleges Union spoke about the need to rebuild a ‘cadre’ of workplace activists.

A statement drafted by the RMT was agreed. It said:

“We recognise that our ability to protect and advance these values (workers rights, solidarity, equality and unity) and to achieve our shared goals – such as the implementation of the Trade Union Freedom Bill – will be assisted by the development of the broadest possible unity of grassroots trade union activity at the workplace and between workplaces.”

The title ‘shop stewards network’ was shorthand for workplace reps; these could obviously include health & safety and other reps. So the Network would be comprised of workplace reps from TUC affiliated unions. Whilst full-time officials could participate they would only have observer status, with speaking rights.

The aims of the Network would be:

To offer support to TUC affiliated unions in their campaigns and industrial disputes;
To offer support to existing workplace reps and Trades Councils.

Obviously this is only a framework. To the extent that such a body developed it would determine and develop its agenda.

Such a Network could be an important development in the light of the crisis facing the unions. Aside from the loss of 5 million trade union members, the decline in workplace organisation has been steep. Despite ‘organising’ efforts there has yet to be a significant rise in union membership. This is not only as a result of a generation of defeats. It also results from the so-called ‘service model’ with its concentration on individual services, creating a culture of a passive membership with no understanding of their responsibility for building their own organisation.

In many industries shop stewards have been trained in the methods of ‘social partnership’, identifying the interests of the workforce with market ‘success’ of ‘their’ company. This has meant that the drive for profitability and productivity has been seen as primary, and some unions have collaborated in the destruction of jobs.

Aside from the obvious role of building support and solidarity, a Network could play a role a key role in developing a serious discussion about rebuilding workplace organisation. It could enable activists to exchange experience and to draw on positive organising efforts in other workplaces.

Jeremy Dear, NUJ General Secretary, speaking at the meeting reported on the experience of NUJ members at the Daily Star. They managed to stop the production of an article entitled the ‘Daily Fatwa’, a supposedly satirical piece directed against Muslims. They took action completely outside the framework of existing employment legislation, a rare event these days, and they got away with it.

Probably the only industry where the example of solidarity action has survived is the Royal Mail, where there is a tradition of refusing to touch mail coming from an area on strike. Challenging the anti-union laws, of course, depends on strong workplace organisation.

The Network which is being proposed will obviously be built at the national level. But its success will depend upon the building of networks in towns and cities, on a cross union basis. Trades Councils could play an important role in this regard. They should be able to participate in it. They strive, albeit under difficult conditions, to build a labour movement in a locality rather than leaving isolated individual unions ploughing their own furrow. A connection to

The rebuilding of the unions requires a different culture to the one that has dominated them since the Thatcher years: the building of an active membership which understands that the ‘service’ which a union provides depends upon the collective organisation of the membership on the ground. The role of the Network would include striving to develop a consciousness of the need for independent, fighting, and democratic unions, controlled at every level by the members.

As Dave Chapple said, “we need a democratic grassroots movement that is not dominated by any single party.” The Network should be a framework for practical work rather than an arena for flowery speeches, in which organisations compete against each other.

When John McDonnell spoke in Swindon recently he said that we were on the verge of losing what remains of the gains of the welfare state. The idea that in the face of such attacks, the neo-liberal Blair government can be persuaded to abandon its programme, is pure delusion. Only industrial action will have any impact on it. Yet there is no sign of an industrial response, for instance, in relation to the destruction of the NHS.

Building a Network of reps can play an important role in creating conditions in which the government’s programme is answered by struggle instead of the pleading of trade union leaders.