Monthly Archives: August 2013

Britain, Business, Economic, Government, Society

Zero-hours employment contracts should be reformed, not outlawed…

ZERO HOURS CONTRACTS

In 2008 there were around 100,000 people employed on ‘zero-hours’ contracts offering them no guarantee of day-to-day work. That number has steadily risen since. In the last few days the Office for National Statistics upped its previous estimate by a quarter to 250,000. Other sources have quoted the figure nearer to one million, which equates to more than 3 per cent of the labour market.  Such employer tactics are not just restricted to sectors with sharply fluctuating demand such hospitality; the NHS, Amazon and large retail outlets such as sportsdirect.com also use them.

Employers benefit from arrangements under which they have a contingent workforce on call but must pay only when it is active. Some employees will appreciate the flexibility too, earning at times sums of money that may help them in their work-life balance, particularly as zero-hour contracts fluctuate with the seasons. More importantly still, in times of economic and financial uncertainty, when companies might otherwise not be hiring, it is better to have unpredictable and unsociable hours than no job at all. For small firms, in particular, such adaptability by having a flexible workforce will be a crucial factor for survival.

The problem, though, is that too often zero-hours contracts are a licence for employer exploitation. Commonly registered complaints include employees being required to be permanently available, despite there being no certainty of work. Many staff are also displeased with no entitlement to standard benefits such as maternity pay, sick pay or pension contributions. Holiday pay is another contentious area, although some firms offer discretionary holiday payments for some staff employed on zero-hours.

There is also an unhealthy concentration of power in the hands of individual departmental managers, who may allocate hours or withdraw them according to personal preference. In theory, at least, workers may turn down work, but most assume – probably rightly – that such a refusal would mean no further offers, with little or no hope of redress.

As estimates of the working-based concept inexorably rise, there have been calls for zero-hours contracts to be banned. The Business Secretary, Vince Cable MP – who is reviewing the situation – is resisting such moves. He is right to do so. The issue is not so much the contracts themselves, but more as to how and why they are used.

Consider a case in point: social care. Social care has long been disproportionately reliant on zero-hours contract arrangements because government funding is way too low to pay anything but meagre wages. As the population ages, and more people are expected to live longer into retirement, the situation will only worsen. By banning them, is to allow the specifics of one, very particular sector to skew a policy affecting all.

There are things, however, that should be done. The first priority for the Business Secretary will be to establish the true scale of the issue, and there is a strong case for reform. For instance, staff required to be always ‘on call’ should be compensated given the inconvenience involved. Basic employee rights should also be enforced. It might also be argued that businesses above a certain size, such as 50 employees, should be required by law to provide a minimum number of hours. For larger companies, what excuse do they have for passing on risks they can well afford?

It should come as no surprise that the number of zero-hours contracts has risen significantly since the recession of 2008. Economic stagnation has forced many firms to cut their workforces, but have required a degree of flexibility in the knowledge that expansion and growth would return. But as the outlook improves, it is essential that staff are given more typical terms. If the current spike in zero hours terms is no cyclical occurrence but, instead, is an emergence of a new and insecure, low-paid workforce, then the price of flexibility being asked of people will be too high.

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Britain, Government, Intelligence, National Security, United States

What amount of time does GCHQ and the intelligence services have for snooping?

CONFRONTING THREATS

In recent days and weeks, GCHQ – the British Government’s eavesdropping and listening centre – has been the subject of a number of startling revelations, most recently that it received funding over the last three years from America’s National Security Agency (NSA) in return for access and influence to its work.

For many people, a distinct impression has been given – the emergence of an all-powerful Orwellian state, in which government vetted employees in Cheltenham and Fort Meade can access and read the personal emails of everyone without anything but the most cursory regard for law or conscience.

However, the very same leaked documents from the former NSA employee, Edward Snowden, who has now been granted 12-months asylum status in Russia, also remind us of something else. Intelligence officials at GCHQ point out that Britain and its computer systems are under severe and sustained attack from foreign powers, especially from Russia and China, to a far greater extent than Whitehall have yet admitted. Implicit, then, should be an understanding that our cyber-spies and counter-electronic espionage staff are on a war footing, against a ruthless and determined enemy.

With the need to confront such inventive and external threats, as well as British intelligence services monitoring suspected terrorists and other internal and external dangers, suggests they will have very little time to snoop and trail through people’s private lives to the extent which has been reported.

GCHQ and the intelligence agencies are accountable to Parliament with ministerial oversight over their activities and methods of working. Given this oversight, it is assumed that they are acting within the law, and are monitored scrupulously. With threats that are evolving and intensifying by the day, public discourse risks restricting their ability to respond to threats in a timely manner.

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Banking, Britain, Economic, European Union, Financial Markets, Government

Lloyd’s Banking Group: A return to profit but there are still too many unresolved issues…

UK BANKING MARKET

Lloyds reported last Wednesday a return to profit in the first half of 2013. There has been an air of quiet satisfaction both in the City and in Whitehall following the banking calamity of 2008.

The Government is now preparing for a sale of its 39 per cent stake in the lender. For the first time since 2008, the bank’s chief executive, Antonio Horta Osorio, is considering paying shareholders a dividend. Expectations of a dividend payment sent the share price up to 74p following the disclosure of the bank’s half-yearly profits.

But the market shouldn’t be so optimistic. A swathe of unresolved issues surrounds Lloyds Banking Group, not to mention the structure and impending reforms of the wider UK banking system.

Ministers in Whitehall have spoken about getting the best possible value for taxpayers from the sale of its stake in Lloyds, but suspicions remain that they will offload the bank at a price that effectively short-changes the public.

Selling above 61p will mean the national debt falling, below that price it rises. The attractiveness of a quick sale at the current market price for a Chancellor who has been embarrassed by his inability to bring down the national debt on his promised timetable should be obvious.

The price the previous government paid for its £20bn in shares was 74p a share. That amounts to being the true ‘break-even’ price, and sales below that should not be countenanced. Even at that price it is meaningless to suggest a ‘profit’ because one should only think what returns the state could have received for that £20bn investment elsewhere. The accounting is important to understand.

Then there is the matter of Lloyds’ lending to the real economy. The bank says it increased its net supply of credit to small firms by 5 per cent in the first half of the year. Financial analysts will hope that is accurate because the most recent figures from the Bank of England (which only go to March) tell a strikingly different story. They suggest Lloyds has contracted its lending to households and firms by some £6.6bn since last August, while availing itself of £3bn of cheap funding from the Bank of England.

And what about the size issue? Following the disastrous merger with HBOS in 2009, Lloyds is enormous. Lloyd’s Bank now accounts for twice as much of the loan stock to home and businesses as the next biggest bank, the Royal Bank of Scotland. The size of Lloyd’s balance sheet will fall next year when 630 branches are floated off following an EU directive, but the bank will still be excessively large. UK firms and borrowers need a broad range of credit providers, not a market dominated by a few such as RBS, Lloyds and Barclays.

Lloyds has increased its provision for the mis-selling of payment protection insurance. This is a reminder of how just egregious the bank (and other high street banks) behaved towards its customers in the boom years. Leaving this cartel untouched would risk this kind of abuse happening again.

A return to profit by Lloyd’s is good news. But we need a bank – and a wider banking system – that is able to sustainably serve the needs of the real economy.

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