TUC found that between 2007 and 2015 in the UK, real wages fell by 10.4%, the joint lowest in OECD countries

I think this is one of the real reasons for Brexit.  No wonder so many people feel angry and betrayed in the face of such a massive cut in wages. 

Employment may be relatively high but evidently most of these jobs are insecure and have rotten pay. Low skilled, low paid jobs with little or no rights for workers breed fear and resentment. 

So encouraged by populist nationalism they blamed johnny foreigner for all their ills and not the excesses and imbalances of capitalism that caused it. 

"A report by the Trades Union Congress (TUC) has shown that Britain has suffered a bigger fall in real wages since the financial crisis than any other advanced country apart from Greece. The TUC said earnings in Britain have fallen by 10% since the credit crunch began in 2007. 

Using data from the OECD’s recent employment outlook, the TUC found that over the same 2007-2015 period, real wages grew in Poland by 23%, in Germany by 14%, and in France by 11%. Across OECD countries, real wages increased by an average of 6.7%. 

The TUC’s general secretary, Frances O'Grady, commented: “Wages fell off the cliff after the financial crisis, and have barely begun to recover. Working people must not foot the bill for a Brexit downturn in the way they did for the bankers’ crash.”

The Guardian, Page: 1,4 The Times, Page: 43

3 Million People Struggle to Feed & Clothe their Children in UK: Official (& What to do about it)

This is the post I was going to publish on Boxing Day but thought that by doing so I would be a bit of a Christmas misery. Instead I posted this. 

In the run up to Christmas, the information and campaigning Group InequalityBriefing.org produced the above report on the 3 million people in this country who live in poverty (or "severe material deprivation" as defined by the ONS). This affects at least 5% of our population.

Next they published a briefing that showed the richest 1% in our society have got richer. In 1978 the top 1% got 6% of national income while in 2009 (latest figures - note under a Labour government) they got 14%!

Finally, on 20 December they published a report called "Can you live on a minimum wage?". They used figures from my Borough Newham (which is one of least expensive places to live in London) which shows if you survive on a minimum wage you would have £4 per week after paying for your essential living expenses. Of course people can't live on that and either work all the hours they can,  have 2 or 3 jobs, use food banks or depend on loan sharks (legal or otherwise).

I spent Christmas in North Wales and visited members of my family who do really difficult jobs and are bringing up kids on a minimum wage and insecure employment contracts. Life is really tough for them.

So what is the answer to widespread poverty and inequality in Britain?

The answer in my view (apology for rant) has got to include:- 

• A Living Wage for all as the new minimum wage. A Living Wage that will (eventually) also pay a living pension, decent sickness benefits and employment rights.
• Binding Wage councils between trade union and employers in sectors that can afford more than a living wage. 
• Truly progressive taxation to make sure that those who can really afford it - pay their fair share.
• Democratise shareholding to make sure that our Pension and insurance funds take their responsibility of ownership serious and stop us being ripped off by excessive executive remuneration.
• Re-balance power in the workplace and enable trade unions to protect workers and win back a greater share of national income for wages.
• Quality and well funded public services designed to prevent people falling into poverty in the first place and bringing them out if they do.
• Better regulation and intervention by local and national government to fix broken markets and protect consumers.

Regardless of the rights and wrongs of each particular policy above, unless there is change then I am convinced that the long term future of this country as a free (but imperfect) stable Parliamentary democracy subject to the rule of law is at risk.

If the rich keep getting richer and the poor keep getting poorer then you don't have to have a degree in history to know what will eventually happen. The Labour Party needs to resume its historic mission to act and save capitalism from itself.

#Lab13 While Labour was resuming its historic mission to save Capitalism - from itself

I have now had over a week to reflect (and recover) on the highs and lows from the Labour Conference 2013 (and also to enjoy the faux outrage of the Tories and some big businesses).

The high of the conference was I think the re-balance of British Labour politics however so slightly to "the left".

What Ed Miliband is proposing is a small but still significant shift away from a view that capitalism always "knows best" towards a more hard headed, pragmatic and interventionist stance.

But nothing has really happened to scare the horses. Do not forget that most Tories believe in an active role for the state. With only their most reactionary swivel eyed loons calling for the privatisation of the Royal family or the Brigade of Guards (mind you there were few of these in Manchester last week).

It is a question of balance. The evidence of the financial crisis of 2007 is surely that left to itself, capitalism will destroy itself (and us with it). 

There was also some excellent fringes and debates on the conference floor. It was great to meet up with people from all over the UK and talk "politics".

While on the downside I experienced yet another MP having a strop because I didn't know he was a MP and had innocently asked what he was doing at conference? At a late night reception a certain journalist refused to speak to me because he claimed that I had misquoted him in a post. He then did a very poor Jimmy Cagney impersonation before flouting off.

I also witnessed some incredible rudeness by extremely self important individuals whose size of their ego's made me wonder how on earth they managed to walk through doorways?

Yet such incidents were very much in the minority and the vast majority of Party members, delegates and visitors behaved impeccably and were a joy to be with. My MP Lyn Brown was asked by a delegate at the London reception where she was from and she replied "Oh, I'm from West Ham CLP".

I think this conference is a game changer that has enhanced the standing of Ed Miliband.  Probably the greatest inverted compliment is that the only reason the Daily Mail launched its recent disgusting attack on his dead father is because they see Ed as a future Labour Prime Minister.

Roll on 2015.

(picture of the traditional singing of "The Red Flag" at  close of conference)

Payday loan pension scandal? Disinvest or engage?

I have been very critical about the Social Housing Pension Scheme (SHPS) on their decision to raise contributions to the scheme for what I think are "artificial" deficits.

Yet I think that industry magazine "Inside Housing" has got the wrong end of the stick about its front page story on Friday "Revealed - Pay Day Loan Pension Scandal".

The "Scandal" is that the £2.6 billion SHPS invests less than 1% of its money in rip off Pay Day loan providers as does the Cheshire Local Government Pension Scheme (LGPS)

My view on this are similar to the post I made about the similar pickle the Church of England Pension fund found itself in last month.

Pay Day lenders have "despicable business model based on ripping off its vulnerable customer base but hey, "welcome to capitalism", this is what happens when you get poor corporate governance of a company coupled with wholly inadequate state regulation.....engagement by responsible investors with the companies they own is key".

Pension Scheme trustees have a fiduciary duty to run funds in the interests of beneficiaries.  They have an obligation to take advice from their professional advisers on where they should invest beneficiaries money.

To ignore this advice there is very slippery legal and practical slope if you decide to call for disinvestment on "ethical grounds". If you are a Muslim then you would probably want to call for disinvestment in all companies that lend money for interest (its all "usury"). So no investment in any banks or insurance companies then? If you are a vegetarian or vegan you would be unhappy in any investment in companies that take part in the production and sale of meat. So no investment in supermarkets or shopping centres?

Teetotallers would object to companies that sell alcohol, animal rights activists would object to investments in pharmaceuticals and environmentalists would not want their money in oil companies or mines. I can go on and on - but I think you get the picture.

What all pension trustees should be doing is making sure that they and their fund managers engage with all the companies that they own to try and ensure that they are socially responsible.  SHPS should be working with other pension funds to firstly in private, try and change pay day loan business models. If (and when) this fails then they should instructing their fund managers to vote out the company Board and Executive team at the next AGM.

Now, I am currently unclear whether SHPS do any engagement? I am not sure either about the quote in "Inside Housing" from Cheshire LGPS that  they do "not operate a socially responsible investment policy". Since it is clear from their statement of Investment Principles that they do (if appropriate) - and they are members of the Local Authority Pension Fund Forum (LAPFF), who are very well known for their active engagement with companies on a whole range of socially responsible investment issues.

I think that the key development in pension fund governance in recent years is the rising (not total) acceptance that you will in the long run get better returns from investing in well managed and responsible companies and that trustees have a duty as owners to try and ensure the companies they invest in act in this way.

The real "scandal" of Pay Days loans is the failure of successful governments (including Labour) to properly regulate the sector. Hopefully the next government will sort this out. In the meantime the SHPS, the Pensions Trust, the LGPS and all the Pension funds in the Community and Voluntary sector ought to be working together to bring about meaningful change in the companies they own.

Why the Archbishop is wrong over pension investing in Wonga

I think that the Archbishop of Canterbury is a decent, honourable man and I certainly support his campaign for the Church of England to help credit unions compete and drive Wonga out of the payday loan business.

It was obviously embarrassing for him to find out a day after the launch of his campaign that his £5.5 billion Church pension fund had a small investment in Wonga but I think he was wrong to call for its disinvestment.  Wonga has a despicable business model based on ripping off its vulnerable customer base but hey, "welcome to capitalism", this is what happens when you get poor corporate governance of a company coupled with wholly inadequate state regulation.

Engagement by responsible investors with the companies they own is key. If the Church of England pension fund just sells up and leaves every company it has a problem with then this will just undermine other responsible owners who may be trying to change it for the better.

According to this BBC report the Church Pension fund can already invest in companies that benefit from "3% of their income from pornography, 10% from military products and services, or 25% from other industries such as gambling, alcohol and high interest rate lenders". 

What the Church pension fund should be doing (and to be fair it does good work on this already) is working with other responsible investors in trying to challenge and change their business practices.

Engagement does have its limits. Last Wednesday evening I went to a social event run by the pension website Mallowstreet. I had a discussion with people present who support engagement but believe that fund managers should be allowed to invest in any publicly quoted company that complies with the law. I disagree. There must be the exception that proves the rule. What do you do with a company or market that engagement has just totally failed? Engagement must have some bite and as a last resort - disinvestment must be a final option. I think of South Africa in the 1980's and the worldwide Tobacco industry now.

"Can pension funds shape the future of capitalism?"

Catching up on things. Last month I went straight from the TUC Trustee Pension Conference to the Fair Pension's Guest Lecture at the House of Commons. This was the second presentation I had been to that day on "Capitalism and pensions". I was with a notoriously quiet and reserved UNISON colleague who is a Local Government Pension (LGPS) expert. The lecture was given by Professor Keith Ambachtsheer, Director of the Rotman Institute for Pension Management (left of picture).

He was introduced by John Cruddas MP who is the Chair of the All Party Parliamentary Committee for Responsible Investment. The meeting was Chaired by Catherine Howarth of Fair Pensions.

You can read an account of his speech (and that of Mark Fawcett, Chief Investment Officer at NEST - right of picture) and the full text here. My take on Ambachtsheer is that he believes that Capitalism must be transformed by those who invest in pensions acting as active owners and demanding that capitalism is transformed into a sustainable and wealth creating model. Rather than mainly benefiting "agents" and being subject to their whims.

What I also found striking in his speech was that the traditional argument over pensions about which is best: Defined Benefit or Defined Contribution? Is the wrong question to ask. Instead you should be more concerned with Scale (size of fund), Governance, Investment belief and Fees.  I asked a question about the Local Government Pensions Scheme (LGPS) which has around £140 billion in assets but is split into 101 different funds. Ambachtsheer thought this was just completely wrong to have so many small funds.

Afterwards we went to the St Stephens Tavern where we had some very "interesting" conversations about the future of the LGPS from across the political divide.

TUC Trustee Conference 2011: Saving Capitalism

The presentation was actually called "How funds can benefit from dysfunctional markets - and help save capitalism".  You might enjoy the irony of someone speaking at a  TUC event about saving capitalism - but I couldn't possibly comment.

The speaker Dr Paul Woolley is an interesting bloke. A former stockbroker, fund manager and economist at the IMF. He is now a Senior Fellow at the LSE and set up his own research team there on "Dysfunctional markets". I believe he has funded this on the large amounts of money he made as a fund manager. 

He argues (convincingly in my view) that there needs to be a Revolution to save Capitalism. There are too many "bubbles and crashes" which ends up with fund managers being more wealthy than investors. Vast profits are made by the financial sector and not by shareholders. There is not mild inefficiencies but fundamental problems. Woolley talks about "Principles and Agents". Pension funds and shareholders (Principles) are basically ripped off by our financial services (Agents) who capture "excess profits". Fund managers are paid whether or not they do well. This is a moral hazard and results in bloated... short term-ism and instability. Regulation will not work since the Government is in hock to the financial sector. It is down to us (pension fund trustees and the like) to stop the abuse of our capital. We need to incentivise the UK industrial sector and shrink the financial. Say No to performance fees and No to any alternative investments which rarely delivering superior returns and can be cons. We need total transparency, full disclosure and the monitoring of all charges. Unless this happens it will mean the end of market capitalism. 

In the Q&A I asked him a question that since it would appear that many financial service interests are against us, whether it would be best for large funds such as the Local Government Pension scheme to employ directly their own advisers and fund managers (Australian model)? Paul was broadly supportive. He later finished by telling us that many of the current free market theories are "duds" and future generations will think we are off our rockers for believing in them. 

After the TUC Pension conference I went to a Guest lecture at the House of Commons organised by Fair Pensions by Keith Ambachsteer called "Can Pension Funds Shape the Future of Capitalism? Yes, we can!" Which I will post upon another day.

I also heard Paul speak at the LAPFF conference last month in a presentation called "What Pension Funds should do now" and make similar hard hitting arguments. Since then I have heard the ABI and others make similar arguments about us Principals being ripped off by Agents. I have brought up the issue at two different pension fund trustee meetings. This whole important debate (I sincerely hope) may finally have legs.