Address by Grahame Smith, Scottish Trade Union Congress, to 45th plenary in Glasgow

 

I'm delighted to have been asked to address such an august body of British and Irish Parliamentarians. It is indeed an honour.

I understand that this is the first time the Council has met in Glasgow and only second time in Scotland, so on behalf of the Scottish trades union movement we are delighted to have you here.

As those Glasgow MPs and MSPs amongst you will of course tell you, Glasgow is a wonderful city and in recent years a much changed city.

Of course it still has too many of its citizens living in poverty; and too many out of work (Glasgow unemployment is 77% higher than it was in 2008 and there are 9 JSA claimants chasing every vacancy)

But it's smokestack and heavy industries have been replaced by those industries that are a feature of all modern economies. Shopping now rivals shipbuilding in importance. And while we still build ships on the Clyde our expertise is in the high-tech systems within them as well as in their fabrication. And while we still do engineering, its bio-engineering that's of increasing importance.

And while oil and gas may be the driver of the economy of the north east of Scotland, renewable energy has a substantial presence in this city, with world leading expertise at the University of Strathclyde. And the headquarters of the offshore energy catapult, a £50million technology innovation project funded by the technology strategy board, will be located within the flagship international technology and renewable energy zone in the city.

And, of course, we are looking forward to hosting the commonwealth games in 2014 and the opportunities that and the new hydro Centre will bring to boost tourism.

And Glasgow also has a great labour and trade union history. It was at the heart of red Clydeside, the era of post first world war political radicalism, which is such an important part of the history of the trade union and labour movement in the UK but particularly of Scotland.

And Glasgow and its surrounding areas produced some of the great labour and trade union leaders, people like Willie Gallagher; John Maclean; Mary Barbour; and Manny Shinwell.

And of course from its shipyards and engineering works came the likes of Billy Connelly and Sir Alex Ferguson, who was a leader of apprentices strikes in the ‘60's.

I'm sure while you are here you'll be able to see some of the city and enjoy some of its world famous hospitality, and of course spread the message of what Glasgow and Scotland has to offer its visitors.

The forthcoming Referendum on Independence is for better of worse the dominant issue in Scottish political life - if not yet for the vast majority of Scottish workers and trades unionists.

I hadn't intended to talk about the views of the Scottish Trades Union Movement on the constitutional question this morning but i am happy to do so if you wish and if time permits.

Before i move on to the main issue i want to talk about this morning, which is our perspective on the current state of the Scottish economy and the labour market, i should perhaps say something about the Scottish TUC.

The STUC is the umbrella organisation of Scotland's trades unions. We represent over 635,000 trade unionists, the members of 37 affiliated unions and 22 trades union councils (bodies that bring unions together in local communities). In our role, we seek to represent the interests of trade unionists as workers and as citizens.

We are, unlike the Wales TUC, completely autonomous from the TUC (British TUC), having seceded in 1897 over a disagreement about the role of trades councils (local community based bodies) and the desire of Scottish unions to support the emerging labour party as its parliamentary arm.

Union membership has held steady in these difficult times. It is around the same as it was at the end of the 1990s is higher than when i became general secretary in 2006 (the two things are not related).

We will still represent almost a third of the working population and have a presence in almost 45% of workplaces.

Union density is of course much higher in the public sector at around 66%.

Although the density figure for the private sector is much less (the official figure is 15%) unions still are of major relevance to the private sector economy.

Most of Scotland's major private sector employers - domestic and foreign owned - and most successful companies - across our key industrial sectors - are union organised - Scottish power, Scottish and southern energy, ineos (our largest exporter by far); Rolls Royce; BAE systems; BT; Diagio; the first group; the Clydesdale bank, i could go on.

A union member in Scotland is more likely to be a female graduate professional than a male manual worker.

We place great value our relationships with the Irish Congress of Trades Unions, the British TUC and the WTUC.

We meet regularly with colleagues from the Irish Congress from both sides of the border. And we meet annually with them and our colleagues in the British TUC and Wales TUC in the Trade Union Council of the Isles.

As you know, one of the strands of the 1998 Northern Ireland "Good Friday" agreement includes a mechanism, "The British - Irish Council", to promote east - west dialogue and co-operation between Britain and Ireland, which involves representatives of the devolved administrations within the UK and the British and Irish governments.

At the time the agreement was signed, the trade union centres in Britain and Ireland agreed to establish a similar body to promote trade union dialogue and co-operation on cross border issues, with the intention that the body meet annually. The twelfth meeting of the Council of the Isles will take place in Cardiff in January.

And, of course, many of those whose ancestors came from Ireland and settled in Scotland have been stalwarts of the Scottish Trades Union Movement.

In fact I've yet to meet a Scottish trades unionist with Irish ancestry who hasn't claimed to be related to James Connelly.

Connelly was of course a scot born of Irish parents who before returning to Ireland was an active trades unionist and a delegate to the Dundee Trades Council.

In fact I've met many Scottish trades unionists with no Irish ancestry who also claim Connelly as a relative.

So our connections with our colleagues from across these isles are many, varied and deep-seated - although I'm afraid I can't claim that these connections extend to the Isle of Man, Guernsey or Jersey, apart, of course, through TUC affiliates with a presence there.

The Scottish Economy

I would like to take a few minutes to give you our assessment of the state of the Scottish economy, particularly the state of the labour market, and of some of the challenges we face and some of the solutions we advocate.

I know that one of the issues you are concerned about is boosting trade and tourism and learning from the Scottish experience. I am not going to talk specifically about these issues but the more general issues I intend to mention are very relevant to the challenges faced by the tourism sector in Scotland and in boosting our exports.

Unfortunately, I too often begin my assessment of the Scottish economy by saying that I am reluctantly pessimistic. That is not to say that the position is uniform across the country or across sectors.

The situation in the north east, given the impact of the oil and gas sector, is considerably different from the situation in the west of Scotland, for example.

I was in Aberdeen last week as part of a group looking at the skills challenges faced by the oil and gas sector, which is having difficulties recruiting sufficient engineers, for example, and noticed that Costa actually has to advertise for baristas.

Contrast that with the position in west Dunbartonshire where according to the latest unemployment figures, 40 JSA claimants are chasing every full time vacancy, and unemployment is 90% higher than before the crash in 2008 (in Aberdeen city it is 2 claimants for ever vacancy).

In terms of sector, the situation in energy, life sciences or indeed financial and business services is different from construction or manufacturing. Manufacturing saw a 2.2% decline in output in the second quarter of this year.

Our tourism sector has faced significant challenges in recent years as a result of wider economic conditions and is unlikely to meet the Scottish government's target of 50% growth by 2015.

Every month we survey our main union affiliates and the picture we get from them is one that in the most matches that painted by the official statistics.

Output

On output, the latest GDP statistics published last week (second quarter of 2012 lagging a quarter behind the UK as a whole) confirm that the double-dip recession extended into the second quarter of 2012 - the third quarter the economy has contracted; and the 9th quarter out of 16 to see contraction since the initial downturn in 2008.

But most worryingly, output is still below pre (2008) recession levels. Manufacturing, exports and construction are all significantly below pre-recession levels. And we haven't seen much evidence that the economy is rebalancing.

Unemployment

On both the ILO and claimant count measures, unemployment has doubled since 2008. Youth unemployment has also doubled but much more worryingly long term youth unemployment has risen by over 400% and continues to rise at an annualised rate of over 5%.

Last week figures showed a rise in ILO unemployment of 7000 in the three months to August, so while the ‘productivity conundrum' continues to persist at a UK level, with the scale of the fall in output not being matched by a related rise in unemployment, in Scotland it seems that jobs are falling with output.

However, the headline statistics don't describe the totality of the very significant changes the Scottish labour market has witnessed over the last four years:

The 100,000 full-time jobs lost (the biggest percentage fall in any UK nation/region);

Or the staggering 242,000 people identified as underemployed - that is forced to work in part-time and temporary positions because they can't find the full-time, permanent positions they need for a decent standard of living, or indeed are working in jobs nominally described as full-time but failing to provide sufficient hours to allow them to get by.

The increase in self- employment we have seen is not a sign of a rising entrepreneurial tide but people trying to scratch a living doing what they used to do as employees, which has been an important factor in explaining plummeting productivity.

Commentary throughout this prolonged slump has emphasised the benefits of so called labour market flexibility in allowing more people to stay in work through reductions in hours and wages.

And while recent figures suggest that the situation is not persisting in Scotland, with Scotland experiencing a fall in employment significantly worse than the UK average, and in line now it seems with the fall in output, it is the case that overall, unemployment in Scotland has not reach the levels feared given the scale of output decline.

Indeed, unions have negotiated agreements with a number of employers on hours reductions and wage freezes, to keep members in work, which has contributed to this situation. However, that was never going to be sustainable as we now see.

However, what this actually means for the working lives and living standards of people in and out of work is rarely addressed in public debate.

My concern is that when the labour market eventually emerges from its current depressed state it will be even more polarised than it was pre-recession. In union organised workplace we would expect to see both hours and wage levels restored.

However, in the unorganised sectors of the economy, significantly more people will be working in low wage, insecure, part-time and/or temporary jobs. Many of these workers will spend extended periods moving between insecure work and unemployment. This will have detrimental consequences for their skills and future job and health prospects and it will also leave the economy much less fair, equal and democratic and more unstable and prone to systemic crises - hence my reluctant pessimism.

Prospects for improvement

So what are the prospects for improvement?

Domestically, the unnecessary, unfair and regressive fiscal consolidation which we are experiencing has led to plummeting consumer and investor confidence.

Real wages and household incomes are under severe pressure. Corporations are sitting on a cash pile of £1trillion but are on an investment strike refusing to invest as the demand for the goods and services they produce vanishes.

International pressures are unlikely to ease significantly. The Eurozone crisis has yet to be resolved, and rapid consolidation next year could push the us economy back into recession and growth has slowed in key developing economies.

The opportunity to export our way to recovery looks bleak.

Despite the sterling efforts of SCDI, our internationalisation agency, the Scottish Government's target of doubling our exports by 2020 looks increasingly unachievable.

The bleak prospects domestically and internationally will impact on all sectors to some degree.

Although there will be real opportunities for our tourist sector from the Ryder cup, the commonwealth games and the next homecoming, some of the recent gains made in the domestic market could be squeezed if the troubles in the domestic economy continue and if overseas markets in Europe and the US don't pick up, which looks increasingly likely, expected growth there will not materialise.

Challenges

So what are the key challenges we face and how should they be addressed.

The first is to understand the real factors that lead to economic success.

There has been a general political consensus supporting the myth that deregulation or so called cutting red tape and low business taxes are a prerequisite for economic success.

Until recently there has been little or no recognition of the importance of reducing inequality. Thankfully that is changing if not yet in government. There is a growing acceptance that inequality was a proximate cause of the crisis in the UK and the US.

Wage share in the economy has decline by 11% since the mid 1970's (which is a UK figure - not been able to calculate a figure for Scotland) which means that on eve of crisis workers were taking home over £250bn less than that they would have been if wages had stayed at mid 1970s levels, that is roughly twice size of whole Scottish economy!

If the post recession labour market is characterised as I mentioned earlier, the only way the products and services the economy produces can be consumed is through rising debt - hardly the foundations of a stable, prosperous economy or society.

Indeed the front page of yesterday's Sunday Express, not a paper I normally look at but my son has a paper-round, highlighted a ‘which' report that found that five million Britons are borrowing and raiding their savings to pay for essentials - for food and to heat their homes.

Unless the repression of real wages is reversed we are in real danger of simply repeating the mistakes of the past. This might be uncomfortable for some to address but unless the economy's equalising institutions - trade unions, progressive taxation and living wages are rebuilt, that will be the case.

Another major challenge for the Scottish economy will be to maximise the employment benefits from genuine opportunities such as renewable energy and the move to a low carbon economy in areas where Scotland undoubtedly enjoys first mover advantage such as in marine technologies.

The challenge then will be connecting these jobs to the areas of the country that need them most. This will require a radically different approach to economic development, where addressing regional inequity drives policy rather than being merely an unintended consequence.

The investment instruments that now sit as part of the Scottish investment bank, an arm of Scottish Enterprise, the creation of which the STUC can claim much of the credit for, could have a major role to play in ensuring the availability of the patient committed capital required by growing Scottish businesses helping to reverse Scotland's longstanding deficit in innovation, R&D and capital stock.

But fundamentally we require the reform of the financial system.

We need to move beyond the rhetoric about rebalancing the economy to design and implement a modern industrial strategy for Scotland to sustain manufacturing employment at current levels and hopefully grow it in the future.

Again this will require a new kind of financial sector but also a different approach by government; more interventionist than has been the fashion in the last 30 years.

For too long policymakers in the UK have shied away from any intervention, or even discussion, that could be interpreted as seeking to open the black box of the firm - nothing it seems must impinge on managerial prerogative.

But in so many respects it is what happens in the workplace that leads to productivity improvement and determines success, not just of the individual firm but of the economy.

Important in that will be investment in skills, through apprenticeships and through re-training and up-skilling (talk for hours about what unions are doing about this through the STUC's learning arm Scottish Union Learning). But investment in skills will not necessarily produce a productivity dividend if it is not part of an innovation strategy.

A recent Nesta report estimated that investment in innovation by British businesses has fallen by £24billion since 2008 and that Scotland could benefit by around £12 billion a year in the next 10 years, by getting innovation right, greater than the annual tax take from north sea oil.

It also identified that process innovation has a greater impact on employment growth than product innovation. That means that the any productivity dividend, arising from investment in skills or technology, will not be realised if work is poorly organised, if jobs are badly designed, if there is a deficit in leadership and management; if employees are de-motivated and disengaged, if business models are based on low skill, low reward, and high labour turnover, and if there is a lack of trust in the relationship between employer and union.

A sustainable improvement in Scotland's productivity rate is not to be found in command and control workplaces and in the intensification of work.
It is to be found in workplaces and in industries where there is strong partnership between employers and unions, as is the case in some of Europe's most successful companies and economies.

Under current constitutional arrangements responsibility for much of what i have been discussing rests at Westminster although there is a significant role for the Scottish Government, particularly in relation to economic development, industry strategies and company support, including access to finance, skills, internationalisation, and commercialisation.

I hope that gives you some idea of the perspective of the trade union movement on these fundamentally important issues.

I haven't mentioned the current Constitutional debate and the potential impact on our economy but I am happy to take questions in it if that would be helpful.

Thank you again for the opportunity to speak to you this morning.

ENDS