Last night I watched Prof Tom Devine, one of Scotland's greatest living historians, on TV.
I like Tom Devine and I like what he has to say. He has as fine an understanding of Scotland and what it is to be Scottish as anyone.
Talking about the Independence Referendum we take part in three months from now he said, "This is about the identity and the future of the nation".
I agree with Tom Devine on this.
He described how a collective sentiment of the people of Scotland as a nation exists. He also described how our sense of Scottishness and Britishness changes too. For it is a duality that we have and it is elastic and adaptable to different times. But nonetheless it is a duality of identity.
I believed 2 years ago and believe today that this referendum is a head and heart thing. That while there are many factors for each of us to consider it is at root about two things - the practicalities of economics and about our identity as a nation. Are we simply Scottish or is that duality of Britishness and Scottishness atill relevant?
I believe that that duality is still relevant and therefore a devolved settlement with as federal a structure as we can make it is the way forward. For me independence is not the way. It is not the solution that is either practical or best reflects who we are.
Friday, 20 June 2014
Friday, 19 July 2013
I originally posted this in 2011 (from a British perspective). Tonight, as Detroit files for bankruptcy it seems worth revisiting it.
At a time where public sector pensions have been at the heart of our national debate its worth thinking about what happened in the United States. Why? Because expensive and outdated pension schemes have destroyed the auto manufacturing industry in Detroit and with it the city!
Detroit is a city built around the car manufacturing industry. It used to be dominated by the big 3 auto companies – GM, Chrysler and Ford. In recent years the industry and the city have collapsed. In the 1950s 1.8 million people lived in Detroit. Today it is less than 800,000. There has been a 25% decline in population in the last 10 years alone. At the root of this has been the decline and fall of the car manufacturers at the heart of the economy.
Why have the big 3 auto companies declined? Well, they had been relying too much on SUV sales and not making enough small and hybrid cars and they have been dogged by poor quality. However, the biggest single reason has been the massive cost of their employee benefits and pensions programme.
Between 1993 and 2007, GM poured $103 billion into funding their pensions and healthcare scheme. Over the same period they could only afford to pay out $13 billion in dividends. GM also had to work hard to play catch up as funding payments into the scheme fell behind. At the start of the 2000s it had to pay an additional $20 billion to catch up payments and agreed to pay a further $30 billion to fund future healthcare liabilities. Note I am talking billions here, not millions!
The point is the pensions and benefits schemes totally starved GM of investment and made a massive contribution to GM falling behind developments in the US car market. Chrysler and Ford had similar stories.
Many other car companies based in southern or mid western states have been able to come in with far cheaper operating costs and beat the big 3 Detroit firms in competition. Notably Nissan whose costs per worker in the US were more than 40% cheaper – largely because of the costs of the employee benefits package.
The Big 3 employee benefits package had been set up in 1950 in a deal arranged by the Union of Auto Workers UAW that became known as the Treaty of Detroit. In a time of full employment and little competition the industry committed itself to open ended final salary arrangements with fixed guarantees. As the workforce has grown and aged and as workers have lived longer these have become more and more expensive than ever envisaged and the companies have found themselves locked into open ended arrangements where they cannot control the costs.
Detroit and the car companies have been not alone in their pension schemes causing catastrophic loses. A huge pension liability created a budgetary nightmare for New Jersey and the city of Vallejo in California actually filed for bankruptcy because it couldn’t handle the costs of police department pensions.
Roger Lowenstein wrote about this further in his 2008 book “While America Aged: How pension debts ruined General Motors, stopped the NYC subways, bankrupted San Diego and loom as the next financial crisis.”
Change is unavoidable in the UK
The UK faces similar issues. Through the 50s and 60s – a time of effective full employment - there was a massive growth in Final Salary pension schemes. The UK developed a parallel system of occupational pensions provision for those in the public sector and larger companies along with growing state provision.
13% of the population had been in occupational schemes before the war – mostly in the public sector. By the end of the 1960s this figure was 53%. However, in 1961 life expectancy for men was 68 years and just under 72 years for women. In 1908, when the first state pensions were introduced they kicked in at 70, an age many failed to ever attain! Today life expectancy in the UK is 77.9 for men and 82 for women - and growing every year.
Longevity – the fact that we are living longer is making pensions provision more and more expensive. There are of course other factors like salary inflation but this factor alone is at the root of the problem. After the war people were retiring at age 65 and expected to live on average about 5 years or so in retirement. Today people, in pension schemes are retiring at 60 and can expect to live to 80 on average – 4 times longer than envisaged when the pension schemes were conceived.
Private sector Final Salary pension schemes in the UK are therefore dead! They have been for the last 5 – 10 years. While existing members are still in the schemes, they are all closed to new entrants. Companies can no longer afford them and given that the benefits are fixed and guaranteed they are an open ended and growing commitment. They are no longer commercially tenable and are a risk to the business. That is why they are dead.
One pensions commentator, I think it was Tom McPhail, said last week that we will probably all have to spend a little less, save a little more and work a little longer to fund our retirements in future. I think this is sound and reasonable advice and actually one of the most intelligent things I heard last week.
Final Salary pensions continue in the public sector – unfunded by investment and paid for by general taxation. Yes, their projected costs are set to fall with CPI rather than RPI indexation and workers make a contribution. But the projected fall in costs are because of these small reforms already in the pipeline. They are still hugely expensive.
Pensions are in fact deferred pay. Today, because of the current pensions position it often pays far more working for the public sector than for the private sector. This means the wider population are being asked to fund pensions which are far more generous than anything available to them. This means funding something akin to our entire defence spending budget. And no economy is going to last for very long where it is more attractive to work for the public sector than for the private sector!
Ros Altmann, the Director General of Saga and something of an expert on UK pensions, argues that Final Salary pensions are actually fundamentally unfair as they disproportionately award high flyers being based on one year’s salary at the end of their career rather than taking into account, say, a lifetime of service and contributions. It is right to reward high flyers when they are working – maybe not to continue to do so often for many years longer than they actually worked for their employer!
The true costs of final salary schemes are unsustainable to fund as the private sector has discovered. Employers can’t underwrite unquantifiable, open-ended commitments for decades in the future. Neither can the state or future tax payers – change is unavoidable.
What to do?
It seems to me that the real issue here is that our occupational pension infra-structure – both private and public is broken.
The government is introducing auto enrolment so that everyone will have a modest occupational pension. This will help a little with the many who are not in any pension scheme at all.
However, it is very modest provision. In the second half of the 20th century companies fulfilled a social welfare function providing generous pensions – using tax advantages to provide deferred salary in effect.
With jobs for life long gone and guaranteed final salary schemes for life long gone, companies don’t do social welfare anymore – nor can we really count on them to do so. Unfortunately, many employers have been replacing old generous schemes with much less generous ‘money-purchase’ schemes with no guarantees and all the investment risk is with the employee. The new auto enrolment provisions, while welcome for some, just accelerates this levelling down affect.
I’m told both the USA and Australia have been much more effective than the British at replacing old unsustainable pension schemes with new money purchase provision.
I think the public sector unions have a real opportunity here. They need to be constructive. Accept the old pensions are unsustainable and come up with some good alternatives. If they are sustainable and something new that provides decent pensions takes its place, market forces in the labour market could lead the way to improvements in the private sector too.
We all need to save more and we all need something that is more sustainable!
Tuesday, 21 May 2013
Tonight I just wanted to record some important words that I feel need spoken again.
In January 1941 America's greatest president, Franklin Roosevelt, delivered his State of the Union address to Congress. It was to be one of the great speeches and one of the most important expositions of political liberalism.
It is known as The Four Freedoms Speech.
"...The basic things expected by our people of their political and economic systems are simple. They are:
Equality of opportunity for youth and for others.
Jobs for those who can work.
Security for those who need it.
The ending of special privilege for the few.
The preservation of civil liberties for all.
The enjoyment -- The enjoyment of the fruits of scientific progress in a wider and constantly rising standard of living.
These are the simple, the basic things that must never be lost sight of in the turmoil and unbelievable complexity of our modern world. The inner and abiding strength of our economic and political systems is dependent upon the degree to which they fulfill these expectations.
Many subjects connected with our social economy call for immediate improvement. As examples:
We should bring more citizens under the coverage of old-age pensions and unemployment insurance.
We should bring more citizens under the coverage of old-age pensions and unemployment insurance.
We should widen the opportunities for adequate medical care.
We should plan a better system by which persons deserving or needing gainful employment may obtain it.
I have called for personal sacrifice, and I am assured of the willingness of almost all Americans to respond to that call. A part of the sacrifice means the payment of more money in taxes. In my budget message I will recommend that a greater portion of this great defense program be paid for from taxation than we are paying for today. No person should try, or be allowed to get rich out of the program, and the principle of tax payments in accordance with ability to pay should be constantly before our eyes to guide our legislation.
If the Congress maintains these principles the voters, putting patriotism ahead of pocketbooks, will give you their applause.
In the future days, which we seek to make secure, we look forward to a world founded upon four essential human freedoms.
The first is freedom of speech and expression -- everywhere in the world.
The second is freedom of every person to worship God in his own way -- everywhere in the world.
The third is freedom from want, which, translated into world terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants -- everywhere in the world.
The fourth is freedom from fear, which, translated into world terms, means a world-wide reduction of armaments to such a point and in such a thorough fashion that no nation will be in a position to commit an act of physical aggression against any neighbor -- anywhere in the world.
That is no vision of a distant millennium. It is a definite basis for a kind of world attainable in our own time and generation. That kind of world is the very antithesis of the so-called “new order” of tyranny which the dictators seek to create with the crash of a bomb.
To that new order we oppose the greater conception -- the moral order. A good society is able to face schemes of world domination and foreign revolutions alike without fear.
Since the beginning of our American history we have been engaged in change, in a perpetual, peaceful revolution, a revolution which goes on steadily, quietly, adjusting itself to changing conditions without the concentration camp or the quicklime in the ditch. The world order which we seek is the cooperation of free countries, working together in a friendly, civilized society.
This nation has placed its destiny in the hands and heads and hearts of its millions of free men and women, and its faith in freedom under the guidance of God. Freedom means the supremacy of human rights everywhere. Our support goes to those who struggle to gain those rights and keep them. Our strength is our unity of purpose.
To that high concept there can be no end save victory."
If you wish to read the speech in its entirety is is here.
Monday, 20 May 2013
1. The Conservative Party has never understood nor accepted coalition.
2. The Conservatives have never really accepted they didn't win the election in 2010.
3. The Conservatives historically have always eaten themselves every generation or so over tariff reform / Europe.
4. The Conservative Party are split between two generations and split over Europe.
5. The Conservatives head for the next election split from head to foot, somewhat directionless and their idealistic drive for public sector cuts and excessive austerity (too deep, too quick and no plan B) discredited.
6. The Labour Party are struggling to find their soul and with an uncharismatic leader.
7. The Labour Party are caught between the economic policy they know they would have to deliver and what they would like to deliver.
8 The SNP are caught with a somewhat shallow policy and a tendency to grandstand for the purposes of delivering independence.
9 The SNP's proposition of low taxes plus increased social justice is wearing thin and intellectually dishonest.
10 The SNP may still have the political prowess to take advantage of the situation but their credibility is diminishing.
11. This vacuum of political disappointment in times of global financial crisis may yet help the LibDems.
12 But the LibDem brand is damaged and Clegg may lack the charisma or political nouce to take advantage. These are both his challenges and his opportunities.
13 Into this vacuum floods UKIP but what is their point? Their solutions are shallow, ill formed, populist, mean and stand up to little scrutiny.
14 So, there is all to play for - we live in interesting times!
Sunday, 19 May 2013
It is with this interest that I read the latest Panelbase Poll on Scotland and Scottish Independence. It shows the following:
44% No, 36% Yes, 20% Don't know. (sample 1004, survey May 10-16)
Interestingly IPSOS Mori showed:
59 % No, 31% Yes, 10% Don't know (sample 1001, survey April 29- May 5)
The first showed a small drop in the No vote, the second showed a drop in the Yes vote.
Hmmmm - a little contradictory in terms of how big the No vote is and how many undecideds there are. We shall see how other polls measure this and how the trends go.
My own view is this; the Yes camp has been stuck on around a third for a while and this matches pretty much the level of support Independence has had in Scotland since the 1970s give or take a couple of blips around devolution being introduced, Alex Salmond winning a majority in Holyrood and the introduction of the poll tax over 20 years ago.
Yes seem to be losing. The Heather has failed to catch light. And while millions moved in the streets of Barcelona, the Catalan capital, for their national movement, Scotland's just about filled the Ross Bandstand in Princes Street Gardens.
Yes seem increasingly on the backfoot under close scrutiny on the currency and several aspects of the consequences for pensions - both public sector and private. Fissures have been appearing between the SNP on one hand who want to keep the Pound, the Queen and the Bank of England as well as shared financial regulation (funny independence that - may as well keep some political union if that's the game!); and on the other hand, the hard left who support a more recognisable independence complete with Scotland's own currency, a republic and withdrawal from NATO.
Other aspects of the movement's vision appeared to be wearing thin. Strike out for freedom and let 1,000 flowers to bloom. We could be a Nordic paradise free from Westminster austerity and injustice.
Is this from the SNP whose tax cutting agenda (Community Charge freeze, Corporation Tax, Air Passenger Duty and VAT) promises to deliver a social justice nirvana at the same time? Or is it with a hard left agenda that presumably will bring with it high unemployment, accelerating economic decline and nothing but social justice disappointments?
It doesn't really add up does it?
But one thing could change the direction of this debate - Europe.
As the Conservatives set about trying to destroy themselves once more over Europe, an In/Out referendum for Britain in Europe looms large and exiting the EU a real possibility. Note what today's Panelbase poll says:
If the UK is going to leave he EU the vote on Scottish Independence becomes:
44% No, 44% Yes, 12% undecided. A dead heat!
The EU shenanigans may be about to open the field up again for the Scottish Independence Referendum.
I have just one set of thoughts I wanted to put down about this today. That this is the electorate's gut reaction of the last few days as this issue has exploded onto the scene once more. It is not yet a considered view in the light of analysis and discussion of the pros and cons of the various options. Simplistically I believe the various options line up like this for a would be independent Scotland:
Scotland in EU, Rest of UK in EU
As you were, the Independence debate is framed as it was.
Scotland in EU, Rest of UK out of EU
Nightmare. This is a nightmare for the single market that we hitherto shared with England. The currency, financial regulation, and the operation of all sorts of cross border institutions become an even bigger problem. And what of Schengen and border controls in this sceanario. Nightmare.
Scotland out of EU, Rest of UK out of EU
Even bigger nightmare. Not in the UK, not in the EU, small and on the fringes of Europe, and dealing with tariffs and a regulatory environment from the outside.
It actually strikes me that if the rest of the UK leaves Europe, which I think it would be mad to do, Scotland may well be better remaining part of that UK.
Another alternative may be to share a regulatory and monetary environment with the rest of the UK - both outside the EU, but that is not really independence is it. Again, we might as well have a democratic political say in such a union if that is to be the case.
(And yes I know you could have Scotland out of Europe and the rest of the UK in but I think that is unlikely and if it were to come to pass I don't see that scenario as being too clever either).
Which all goes to show that as we consider what all this means, I think uncertainty over Europe actually makes a Yes vote for Scottish Independence even more unlikely!!
These are my initial thoughts. I await developments and further analysis with interest. And more polling too!
Sunday, 21 April 2013
Scottish nationalists will often argue that they are not separatists, rather they believe in Scotland having political independence with social ties remaining intact within a British social union. I have heard this while comparing being Scandinavian with being from the British Isles.
This is a clever conceit and one that deserves serious consideration. It is all the more clever because it is impossible to prove or disprove. In that sense I need to go with my gut here. However, I think it is important to test and challenge this argument because it is an all too easy one to make and ultimately, I believe, a false proposition.
The reason I think it is a false proposition is this. If Scotland were to separate from the United Kingdom there is no Britain anymore and everything changes. Yes we have a shared language, yes we have shared geography and yes we have a largely shared culture. But it would be rather like a divorced couple. The old family has gone, the old household is no more. They no longer share the same life. Sure there are ties, shared memories, shared children, shared friends even, but they are no longer married and they live separate lives. If Scotland becomes independent, Britain will have ceased to be and very quickly no one in the south will be that interested anymore - it is no longer their business and we are no longer theirs.
To suggest that life after independence is just the same except for eliminating the possibility of a Tory government is disingenuous and wrong.
Michael Ignatieff, the commentator and ex Canadian politician, drawing on Quebec and the Canadian experience, has pointed out that everything will change whatever the result. Alex Salmond says we will have the Queen, the Pound and the BBC; Unionists say nothing will change because the nationalists will lose. Ignatieff thinks both are wrong. A lot will change and will change quickly. Pointing to the Quebec experience, Ignatieff says that the rest of Canada no longer have much to say to each other and that is without the step of full independence.
No, we should be in no doubt, if we become independent there will not be a continuing sort of quasi country existing in the form of a social union without the political union. Britain will have ceased to be.
In fact the idea of a social union (with political autonomy) describes what we have with devolution and what we can have all the more with some form of developed devolution - not with independence. Call it what you will - Devo Max/Plus, Home Rule or Federalism - developing devolution is the far more likely outcome of the Independence Referendum. So, I believe we should be concentrating more discussion on that, what form it takes, how it fits within a wider UK settlement and how we get there.
Given there is far more that binds us than separates us - culturally, linguistically and geographically; and given our separate identity within a United Kingdom of regions and nations, a significantly devolved Scotland within a United Kingdom remains, as it has always done, by far the most natural settlement. That is how you preserve a social union. Independence is the anti-social union.