Public sector jobs disappearing more quickly than forecast

Yesterday's depressing unemployment figures from the Office for National Statistics revealed that public sector employment in the UK fell by 132,000 last year. About half were central government - about half of those 66,000 were in the education sector.

Worryingly, at the macro level, the loss of jobs in public sector is running at more than twice the rate predicted by the Office for Budget Responsibility. (The rate is even higher than the initial OBR estimates.) Clearly the OBR has been caught off-guard by the front-loading of the grant cuts to local government and the responses of councils. This may be only a timing effect but in these uncertain times it may affect confidence more generally.

Hutton's pensions report: The Deal and the reaction

This morning Lord Hutton of Furness published his report in to public sector pension including his Deal for public service workers and taxpayers (see above). With 200 pages of recommendations and analysis but few surprises, the report arrived in time for the Radio Four Today programme.

On Today Dave Prentis of Unison responded to the report in very reasonable terms. It appeared that he was more concerned about the hikes in employee pension contributions starting in 2012 than the actual report. He did express concern that the government might cherry pick the report at the expense of public sector workers.

(I have blogged a few times about the 3% pension levy and its potential implications for the local government pension scheme. The 3% levy followed Hutton’s interim report which pointed out that increased contributions allowed short-term savings. In the interim and the final report Hutton deftly handed over the issue of contribution rates over to the government.)

There is a more militant and wider-ranging response from the Public and Commercial Services union. PCS have warned: “any increase to contributions and the pension age for civil and public servants would be an unfair and unnecessary tax on working in the public sector and will be fiercely opposed”. (Of course, the threat of less take home pay in just over 12 months is more potent in getting the brothers and sisters out and around the picket line brazier than the prospect of a year or two or three of work possibly several decades hence.)

It does look likely that there will be co-ordinated strikes over pensions - perhaps even a million strong strike. However, I suspect that Hutton is playing almost a cameo role.

The final Hutton Report on public sector pensions – more signs of unrest

On Thursday Lord Hutton publishes his final report on public sector pensions. (Strangely, the publication date was only announced at the end of February.) A shift away from final salary to average salary pensions is likely to be proposed. The increased employee pension contributions advocated in his earlier interim report are already meeting union opposition.

In yesterday’s Observer a report pointed out:

Strike laws dictate that workers can only call action over a change to their pay or conditions and pensions are the only single reform that affects all public sector workers, justifying a general walkout. Some unions are already agitating for such a move.

At a time of pay freezes pension contribution rises are particularly painful for the “squeezed middle”. To the extent that lower paid workers are protected, the greater the rises for their better paid colleagues.

In a portent for the future, last week the University and Colleges Union voted at 67 universities by two thirds for strike action and 82% voting for action short of a strike. A series of rolling strikes will take place from 21 March if a resolution cannot be found to a dispute over changes to the Universities Superannuation Scheme.

In the news: academies, free schools and university technical colleges

In today’s Guardian an interview with former Tory education secretary Lord Baker highlights his recent work with Labour’s academies programme and now the Coalition on University Technical Colleges:

He is reviving the long-forgotten technical schools, which were enshrined, alongside grammar schools, in the 1944 Education Act, but which never got off the ground. They will be grandly, if rather confusingly, called university technical colleges (UTCs). One has already opened in Staffordshire – across the road from its sponsor, the big machinery maker JCB – and Baker has government support and funding to set up another 15. But that's just the start. "I want a hundred by 2015," Baker says. "After about 10 years, there will probably be 200 to 300." At the minimum, the initial costs will be £3m each. To hear Baker talk, you'd think the words "deficit reduction" had never been uttered; his fellow ministers used to say he was never knowingly underbid in public spending rounds. He has no truck with suggestions that the colleges are experimental. "This has become a movement," he proclaims.

The UTCs will cater for 14-to19-year-olds and offer a technical curriculum. The students will undertake 40-80 days' work experience each year on top of a nine hour day for 40 weeks a year. Lord Baker claims the support of Jaguar, Rolls-Royce, National Grid, British Aerospace, Siemens and Toyota for his movement.

The UTCs have been under the political and media radar. That might well change.

Selection and admission policies are always visible. This morning the Daily Telegraph reports (or maybe warns its readers) that the Coalition will consult over changes to the school admissions code in England which would give academies and free schools the freedom to prioritise deprived children when places are oversubscribed.

Today’s Financial Times highlights the problems of the Department for Education – in particular its ability to deliver the reform policies set out in the DfE business plan (pdf available). It notes the delays in changing planning rules to allow free schools in a variety of non-educational buildings.

Education Executive reports on the Free School Kit from Partnerships for Schools which will assist parents and others in their search for a site for a new school. The Kit is available online and allows parents to explore the geographical area where they propose setting up a new school, helping them to understand more about the existing educational landscape including pupil attainment, the percentage of pupils eligible for free school meals, Ofsted ratings, surplus places, etc. It is intended to find the “hot spots” of unmet parental demand.

Women on Boards: as the public and third sectors do better than PLCs, is there anything to worry about?

In November I blogged on the possibility that Lord Davies’s independent review into Women on Boards would recommend mandatory quotas for boardrooms. Yesterday, Lord Davies’ report was launched; I opens with the bald fact: at the current rate of change it will take over 70 years to achieve gender-balanced boardrooms in the UK. However, his report does not recommend quotas. It recommends that FTSE 100 companies should be setting their own targets for a minimum of 25% female board member representation by 2015.

Lord Davies’ report also recommends that the Financial Reporting Council should amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity. This would include how they would implement such a policy and require an annual disclosure summarising progress made.

Corporate Governance Code requirements usually flow through to the governance codes and requirements in the public and third sectors. Targets of 25% would not make sense in many organisations where women are well represented. (Last week I was presenting at a housing conference. When I started talking about gender balance on boards, one of the seminar participants pointed out that housing associations do much better than the 7.8% figure for women on the boards of FSE250 companies.)

While sectors such as housing associations may do better but there is no room for complacency when 37% of board members are women and only 21% of board chairs and chief executives.

Mind the [narrowing college funding] gap: the impact on school sixth forms

In the media coverage of the cuts there has been surprisingly little coverage of sixth forms. While overall 16-18 funding is set within the constraints of the deficit reduction program, there is the policy expectation that increased participation levels from raising the school leaving age should be funded by efficiency gains. In addition, schools are to be funded at the same (lower) rate as colleges. While there is “transitional protection” limiting losses in any one year, austerity will bite.

What does this mean? The local press around the country is starting to pick up on the implications. Staffordshire County Council is warning schools to prepare for significant challenges and to look at whether their courses will remain viable. This means collaboration and – for small uneconomic school sixth forms – closure. While in Croydon the Council wants schools and colleges to share sixth forms.

It is ironic that in the early noughties the Learning and Skills Council was expected to reshape 16-18 education with unviable school sixth forms being reorganised out of existence. Now the LSC is gone, this might well happen.

LGPS – mounting opposition to increased contributions

I was doubtful that the Coalition was retreating on public sector pensions when it was announced that the consultation period for the 3% pensions levy on most public sector workers would end three months later than previously planned. However, I think there is now a real chance that the Coalition may U-turn on the planned increase in employee contributions Local Government Pension Scheme.

There is mounting opposition to the suggestion that LGPS members should pay an extra 1% each year from 2012 for three years. First a group of London pension “administering authorities”. Then the Conservative leader of the Local Government Association. These concerns are on top of and different from the unions’ resistance.

The new opposition are concerned about the effect of the 3% pensions levy on the sustainability of the LGPS if it triggers a “mass opt-out” and spiralling contributions as the contributing membership shrinks.

The alternative advocated by some of these opponents is a paring back of pension entitlements within LGPS. There case makes a lot of sense. However, the savings will be over decades – George Osborne’s Spending Review was looking for about £3billion for the LGPS employers and the rest of the public sector by 2015. How can that gap be filled if the Coalition does another full or partial U-turn?

In the news: demographic pressures and failing secondary schools

A "youth bulge" may have been at work in the Tunisian and Egyptian revolts but demography has political implications closer to home. Since the turn of the millennium many education providers have been conscious of demographic decline. Now there is a recognition that rising birth rates are starting to feed into demand for primary school places as an extra 100,000 babies every year are fed into the equation.

This week the quality media has turned its attention to the longer term and post-11 places.

The Financial Times reports that secondary schools will be affected by both rising birth rates and slower rates of migration of middle-class families out of cities. The FT analysis of official projections indicates that an extra 80,000 secondary school places will be needed in England by 2016/17 in areas of population growth. However, in those areas, there is space for only 50,000 students at schools that meet government targets. In addition there are currently 6,000 places available in schools that do not meet the government’s minimum “floor standards”. This might become a major political issue unless new places are created through the free schools and other policies.

The ever excellent Guardian DataBlog maps the location of the current surplus capacity. It’s a shocking statistic that 225 schools - 7% of England's school estate - are more than a third empty and most of these have poor GCSE results. (Off course some may have poor results due to challenging circumstances but the persistence of such concentration of educational disadvantage remains a serious social issue.)

The OECD on Housing and the Economy – arguments and evidence

Yesterday I stumbled on an OECD survey Housing and the Economy: Policies for Renovation. The report seemed to have been overlooked by the UK press apart from the Financial Times. Even Inside Housing appears to have overlooked it.

The report recommends reforms to financial sector oversight, taxation, land use policies, rental sector regulation and social housing provision. It argues that these changes will improve the functioning of the housing market and benefit the economy more generally. (The relevance of the report can be seen in US’s jobless recovery where negative equity is hindering the ability of America’s unemployed to move for work.)

As housing has been a casualty of the financial crisis and now the deficit reduction plan, it might have been expected that this objective, balanced and well-researched report might have been read by someone. Even if it had not been carefully studied, chunks could easily be copied and pasted to provide fodder for arguments on all sides.

Advocates of the Coalition’s housing benefit curbs could point to:

Where housing supply is constrained in the short run, however, part of the benefit of government rent allowances may shift from renters to landlords without necessarily enhancing housing availability for needy households. Indeed, there is some evidence that rent allowances are passed onto higher rents.

Opponents of the government’s moves to weaken security of tenure in social housing could signpost:

means-tested social housing systems may potentially reduce job seeking incentives amongst the unemployed, or discourage low-wage workers from seeking higher paid jobs if social housing is withdrawn or rents are increased as earned income grows.

Even abuse and manipulation of the report might have been better than being ignored.

The report is written to draw conclusions from across the OECD’s membership of advanced industrial countries. Inevitably this means that the report’s recommendations may not all be relevant to all 30 countries. Even where the recommendations such as looser land use policies, freer rental markets and more reliance on rent allowances than social housing may be appropriate, there are practical and distributional concerns. However, the study is worth reading with an open mind.

Inside Housing’s board performance survey: cause for concern?

This week's Inside Housing has a survey of governance in the social housing sector. My initial reaction (or rather tweet) was: Shock! Horror! 82% of board members in #socialhousing think they do a good job - "only" 71% of chief execs agree

More important that some mismatch in satisfaction with board performance is the level (and again) some mismatch in the level of dissatisfaction with board performance: about one in ten board members was "dissatisfied or very dissatisfied" with board performance and a little more than that among chief executives, company secretaries and governance officers.

Arguably more serious than all of this is the problem of weak boards not realising that they are failing and not doing anything about this. (History shows us that often such weakness is only diagnosed after the event by regulators for all sorts of reasons.)

In the world of corporate governance good practice, external facilitation of board performance reviews are increasingly seen as important. I doubt many housing boards have accepted that challenge. Maybe something for the next Inside Housing survey?

The notes to the survey report need to be read:

95 valid responses were recorded. 62% were from board members, 9% from chief executives and 22% from company secretaries and governance managers.

I struggle to get those percentages to get anywhere near 100% - even allowing for roundings on all the figures. Am I missing something or is there a typo? (The percentages in the report are different from those in the article but do still fall short.)

The fact that we are talking about a survey of 95 must mean that we have to treat the findings with some caution. You do not need to be a statistical boffin to recognise that the margins of error may be somewhat substantial – possibly bigger than some of the mismatches between executives and non-executives. If 9% of the 95 were chief executives and 22% were company secretaries and governance officers, we are talking about 29 people.

Inside Housing should be applauded for commissioning the survey. However, a larger survey might have allowed some of the issues to have been probed more effectively and robustly.

The IFS Green Budget: public finance challenges and public sector pay premiums

Much of the media coverage of the Institute for Fiscal Studies’ (IFS) Green Budget (press release and full document pdfs available) has focused on the message that George Osborne should resist the temptation to have a giveaway Budget. A quick look at Google News suggests that there are fewer headlines about the Green Budget on desirability of a Plan B.

The IFS forecasts that the government will borrow slightly less in 2010/11 than the Office for Budget Responsibility (OBR) forecasts. Will the Chancellor splash out or even give a gentle stimulus when the recovery stalled in the fourth quarter last year?

There has been speculation that the Chancellor may delay the planned fuel duty rise. I had wondered if he may find some loose change for 16-18 students who lose the EMA grants.

The IFS’s warning against a giveaway on 23 March arise from two downside risks for the public finances.

1) the economy might not grow as quickly as the OBR expects, and even if it does the public finances might not bounce back as strongly as it forecasts.

2) the planned spending cuts might prove formidably hard to deliver.

Other commentators have suggested that the cuts may be hard to stomach. The IFS warn that the success in reducing public spending in the 1990s is of limited relevant. This is “the tightest five-year period for public spending since at least the Second World War”.

The IFS notes that

Spending plans set out in the October 2010 Spending Review imply a significant public pay freeze and large employment cuts.

Controversially it goes on:

Before the financial crisis, public sector employees were, on average, paid at levels roughly in line with their private sector counterparts once observed differences in skill composition were taken into account. Since 2008, a significant public pay premium has appeared. We do not therefore believe that the planned two-year pay freeze will lead to widespread recruitment problems in the public sector in the near future. However, the average pay differential hides large variations in relative pay between different areas of the country. Consequently, some public sector vacancies, especially in London and the South-East, will remain hard to fill.

Talk of a 6% public sector premium for men and over 10% for women could well show up in this spring’s debates about pay and pensions.

Government “retreat” on public sector pensions levy?

Yesterday Guardian readers who work in the public sector may have been pleasantly surprised to learn: “Treasury retreats over public sector pensions reforms”. The article went on:

The government has retreated over reforms to public sector pensions, saying it will not have proposals ready until the summer rather than pressing ahead with planned higher contributions in the March budget

In plain English: this means is that the consultation period for the *3% pensions levy on most public sector workers will end three months later than previously planned. This is hardly a U-turn. It could be seen as a tactical move to avoid industrial action on pensions before the May local elections.

More significantly this week it became clear that the extra pensions contributions for public sector workers would be the rallying cry for co-ordinated industrial action. Strikes really should start featuring on risk registers across the public sector.


* The 3% may actually be significantly more for some if lower paid workers’ contributions are kept constant.

16-19 academies: free schools meet sixth form colleges

The Education Bill published today makes provision for 16-19 academies. Until now many academies offered courses for 16-19 year olds. But this is more radical. It is a development of the free schools policy.

I am not sure how many people were listening last week when the media was full of Alan Johnson, Ed Balls and Andy Coulson but David Cameron gave a speech on Modern Public Services. It included this:

For the first time, charities, universities, businesses, teachers and groups of parents will be allowed to establish their own academies where there is a lack of suitable education for 16-19 year olds.

Based on the same principles that underpin our Free School programme, this will widen the range of options available to young people and encouraging them to continue in education beyond their GCSEs.

Incumbents in the 16-19 market had better be aware of this new challenge.

PAC on academies: some thoughts on governance and regulation

Today is a big-ish day for education policy. At 11.30am Michael Gove published his Education Bill although the contents are previewed in parts of the media. Until then we can read about the cross-party Public Accounts Committee report on the Academies programme.

The parliamentary PAC report expresses concern over financial control in the academies sector. Unfortunately the headlines have overlooked the good news in the report’s Executive Summary:
sponsored academies… have performed impressively to date, achieving rapid academic improvements and raising aspirations in some of the most deprived areas in the country. In many cases this has been achieved through high-quality leadership, a relentless focus on standards, and innovative approaches to learning and to the school timetable.

However, the Summary goes on to make serious criticisms:

Many academies have inadequate financial controls and governance to assure the proper use of public money, and the Department and Agency have not been sufficiently rigorous in requiring compliance with guidance. In developing a new financial handbook and governance framework, the Agency should make it compulsory for all academies – sponsored and converter – to comply with basic standards of governance and financial management. This should include segregation of key roles and responsibilities, and timely submission of annual accounts.

Academies will have to consider and act on the concerns raised in relation to governance:

We heard evidence of non-separation of roles, for example the chair of the governing body also being the chair of the finance committee, the responsible officer also chairing the governing body, and the responsible officer also chairing the finance committee. All of these roles should be clearly separated. There was further evidence of a shortfall in financial assurance and challenge owing to academies not having audit committees – against Departmental recommendations and Charity Commission good practice. We also heard that not all academy finance directors are CCAB-qualified accountants, again counter to recommendations in the Academies Financial Handbook.

Quite a few academies may not like all or some of these criticisms. It is a fair point that academies may struggle to arrange their governance structures with a standalone audit committee when so many claim that they have difficulty recruiting one governor who is an accountant or auditor. If academies do not move on these issues, they will find that they are censured by the YPLA auditors.

Even without the PAC report, there was a strong case for academies to review and strengthen their governance and financial management. They are high-profile and publicly funded organisations with their reputations at risk if they do not demonstrate compliance with high standards of governance.

(I should declare an interest: I work with academies and provide Responsible Officer services – the quasi internal audit of basic financial controls mandated by the Academies Financial Handbook.)

The report touches on the nature of regulation for the academies sector:

In future [sic] there must be greater clarity about what is required as opposed to what is recommended. Too much in the current framework is permissive, and there is insufficient mandated practice to prevent individual academies adopting practices which do not comply with basic standards of good financial management and governance.

I would agree that there is a need for a clearer distinction between “must” and “should”, particularly in the Academies Financial Handbook. However, I believe that academies should be encouraged and cajoled individually and collectively to raise their standards of governance so that regulatory input can be focused rather than broad-brush and heavy-handed. For a long time I have argued for a code of governance agreed by and for the academies sector leveling-up standards with a “comply or explain” approach. It works in other sectors.

Strangely the report is out-of-date on one issue before it is published when it states:

From January 2011, all academy trusts became exempt charities. This means that the Secretary of State for Education has replaced the Charity Commission in the role of Principal Regulator, and academy trusts submit their accounts to the Department only

Due to delays, the Charity Commission is - for now – the Principal Regulator. Hopefully, when there is a new Principal Regulator (presumably the YPLA and then its successor the EFA), they will use the right mix of regulation, self-regulation and governance to strengthen internal financial control across the academies sector.

IT, productivity and culture

On the LSE Politics and Policy Blog there is an article highlighting how the productivity of the Department for Work and Pensions fell for much of the last two decades. The explanation is not the traditional Aunt Sally of allegedly lazy or incompetent public servants – it’s more complex than that as well as relevant beyond Whitehall.

Policy churn, organisational change and personnel turnover at ministerial change partly explain the dismal performance at DWP. More significantly, Patrick Dunleavy and Leandro Carrera suggest that a conservative mindset hindered the adoption of IT for improving productivity:

Three main organisational culture problems inside DWP prevented top officials even considering a shift to digital-era governance. First, senior officials with little or no IT background themselves did not believe that the poorer households and individuals receiving welfare benefits would ever get Internet access. However, in 2008 they discovered to their surprise that 51 percent of DWP ‘clients’ were already online with broadband Internet access.

Second, for years top civil servants saw the web as merely a place for posting static billboards of information and had no conception of creating a more interactive Web experience. Third, internal organisational power over policy on IT was concentrated among officials (aged in their 40s and 50s) running the big-budget mainframe computer systems, who saw web processes as a financially trivial (and hence organisationally irrelevant) sideline.

While these issues may be particularly acute in parts of central government, some of those attitudes can be found throughout the public and third sectors.

Hindmarch’s hints on college turnaround

Today's Guardian has an interview with the Colin Hindmarch - the principal credited with Harlow College's turnaround. The article includes advice on organisational recovery:

For turning around a college

• Keep students at the heart of everything you do

• Create a clear strategy for teaching and learning that is understood by everyone

• Be bold and brave and don't be afraid to take risks

• Create a culture where everyone accepts responsibility for students' successes and failures

• Always be truthful about what is going on at the college. Never deceive anyone else or yourself

A spring of disgruntlement? Strikes, pay and pensions in the public sector

Today the teaching union ATL announced that it would be balloting its members on industrial action over the proposed increase in teachers’ pension contributions. Meanwhile in colleges and universities UCU is doing likewise on the issues of jobs, pay and pensions.

Beyond schools, colleges and universities are we facing a spring of disgruntlement?

How will public sector unions respond to the austerity that is affecting their members’ jobs, pay and conditions?

Headlines may inflame matter when they highlight the remuneration packages of se senior management. The Daily Telegraph this weekend reported on pay rises enjoyed by university vice chancellors. (The paper’s survey found that three-quarters of vice chancellors saw pay packages, including salary, pensions and other benefits, increase during the year to August 2010. Eleven of the 87 surveyed benefited from rises of more than 10 per cent.)

The issue of pensions is likely to be a highly sensitive one. The Hutton Commission final report on public sector pensions is due in March 2011. The exact date has not been published but the 2011 Budget is on Wednesday March 23 – this would be an obvious candidate. The final report is likely to recommend pension entitlements based on a career average salary rather than “final salary”.

Public sector pensions are not “gold-plated” but public sector pension schemes do give workers a certainty about the timing of retirement and a level of entitlements that most private sector workers lack. I suspect that not all public sector workers recognise the full value of their pension schemes. Unions have not mobilised against the change in inflation indexation introduced last year. However, the increased pension contributions likely to kick in across the public sector from 2012 will be harder to swallow - as seen in the case of ATL members in schools - when pay is frozen for most of the public sector. Whether unions will enjoy public sympathy is another issue.

Quiet zone: the public sector whispering when Twittering

Maybe it is inevitable that last week Facebook complained that social media is not used enough by public agencies in the US. Perhaps as a relative newbie to the world of Twitter, I should not criticise those who are even later to the party than me. However, I have noticed that in the world of Twitter some UK public and third sector organisations have a presence that is worse than useless.

Fundamentally too many organisations do not know who they are talking to (Users? Other stakeholders? Media? Opinion formers?). Let alone what they are trying to convey.

Quite a few organisations lose interest after setting up their Twitter profile – why have a corporate presence if you have nothing to say?

Some struggle to get any followers at all. This is hardly surprising. They forget that you need to follow others in order to attract attention. A few hashtags might encourage people to take a look.

Too often tweets do not have any links - so the content becomes a dead-end rather than a path to a corporate website or other media content. (These cul-de-sacs do nothing in terms of search engine optimisation.)

It is sad that some organisations cannot even be criticised for using social media for “broadcasting” their messages rather than engaging in dialogue. So many organisations are half-heartedly whispering rather than broadcasting.

Is fraud rocketing? Even if it isn’t, what should you do about it?

Last week Public Finance was reporting that levels of fraud rocketed during 2010. There is plenty of media coverage of fraud. This week I joined in tweeting a link to a
blog about Portsmouth University and MacIntyre Hudson’s survey of public sector fraud.

It is worth emphasising that the Public Finance’s report was based on KPMG’s Fraud Barometer which tracks fraud cases in UK Crown Courts. So detected fraud is “soaring” – is actual fraud up?

Recessions, credit crunches, austerity, etc have a tendency to expose financial chicanery. Just ask Max Madoff. I am sure that Bob Maxwell would agree.

To borrow a great quote from Warren Buffett and use it in a different context:

It's only when the tide goes out that you learn who's been swimming naked.

Of course, total – detected and undetected – fraud may be up too – in line with media coverage. For example, some of the squeezed middle may resort to white collar crime in hard times. Media coverage may even have a copycat effect – MPs are not the only ones who may be susceptible to the feeling that if colleagues’ snouts are in the trough, they should no be missing out. Experts point to need, opportunity and justification driving fraud - "others doing it" offers a self-justification for some.

Organisations should treat the fraud threat seriously. They should ensure that internal audit allocate sufficient days to fraud detection using IT tools as well as addressing fraud risks as an integral part of other audit reviews.

Decisions, decisions

I am currently reading The Decision Book. It sets out fifty models for decision-making alongside some historic context to each model. I’m reading one a day – a bit like Thought for the Day.

The Decision Book even has something of interest to say about old and familiar favourites like the SWOT model of Strengths Weaknesses Opportunities Threats. The SWOT section includes a quote from Margaret J. Wheatley relevant to our uncertain times:

The things we fear most in organisations – fluctuations, disturbances, imbalances – are he primary sources of creativity.