Britain - cost-cutting in local services to feed capital's parasitism

Jul/Sep 2010

Among the first cuts announced by Osborne, even before his "emergency budget" was a "£1.166 billion" reduction in local expenditure. That local government should be first in the firing line of government attempts to make the population foot the bill for the capitalists' parasitism on the state, is no coincidence. Local authorities are, collectively the country's largest employer. They are responsible for as much as a quarter of public expenditure, being by far the largest provider of services to the working class majority of the population, either directly or, these days, through their funding of private sector "partners".

This is why "efficiency savings" - i.e. cuts - in local government go back a long way, before the present Con-Dem administration or even the current crisis. They were already a fact of life under Labour and under the previous Tory governments, from the 1980s onwards. However, contrary to politicians' claims, their objective was never to "achieve better value for money for the taxpayer", but rather to shift a larger proportion of state funding into the coffers of the capitalist class.

In this respect, the present austerity drive against local expenditure is in no way different from the on-going cuts of the previous decades. If there is a difference, it is only one of magnitude, which merely reflects the extent of the crisis itself.

Blair's worst value

When Labour came into office back in 1997, they took over from Tory governments which had made a concerted attack on the public sector in general, and local government in particular. After all these years in which Labour politicians had denounced the Tories' on-going cost-cutting and the resulting "rolling back" of local services, there was widespread hope that the new government would reverse the cuts and, at the very least, halt the attacks. But Blair's government did nothing of the kind.

In fact, this was all too predictable. Labour had been in a dominant position in local government ever since the beginning of the 1990s. And far from organising the fight against the Tories' attacks on local services, Labour councils went along with them.

Not only was the Tories' sub-contracting of local services to private operators retained by Labour, but it was turned into a systematic policy affecting all services. In a typical PR exercise, Labour rebranded this policy under the consumer-friendly sounding name of "Best Value". The implication was that this policy would take quality of services into account as well as cost and a whole bureaucracy was put in place to enforce this. But this didn't make much difference in practice and it certainly did not stop the deterioration of local services. While local authorities could deliver services themselves - in theory, at least, provided they could prove that they were able to meet the "Best Value" criteria - they remained under the same competitive pressure to cut costs as any private contractor.

Even more than with the Tories' compulsory tendering, the idea behind "Best Value" was that every aspect of local services should be run as a commercial operation. It was assumed that the market being "intrinsically efficient", its pressure would always produce a cheaper way of delivering services. But it did this, of course, by squeezing workers' conditions and the quality of services. The hidden costs of this - low-paid untrained workers, staff shortages and, in the case of private contractors, the need to generate profits out of the services provided - generated a real mess in many of the contracted out services.

One such example was the case the ITNet contract at Islington council. Private company ITNet had won the contract to administer housing benefits. It began by getting rid of large numbers of experienced workers and quickly ended up with thousands of unprocessed claims. Meanwhile the council, with its other hand, was pursuing the claimants caught up in ITNet's mess for rent arrears!

Education: contractors in the driving seat

Education saw the same continuity between Tories and Labour. Prior to 1997, the Tories had allowed schools to opt out from local authorities' control by applying for "grant-maintained" status. In 2000, Labour introduced their Academies programme, which went one step further, by handing schools over to private sponsors. Whether these sponsors were businesses or wealthy "do-gooders", changed nothing to the fact that they took over control of the way children were educated - which, in and of itself, was turning the clock back to the days when education was run by (mainly religious) charities.

In addition, Local Education Authorities (LEAs) were encouraged to contract out other functions, like maintenance of schools and even their school management functions. For example, in Islington, under the pressure of a damning Ofsted report, the council chose to privatise the functions of the LEA, which was handed over to a company called Cambridge Education Associates. It did not, however, prove to be a miracle cure for raising standards in Islington's schools - in fact, this company was later penalised for failing to meet its targets.

Labour also made extensive use of long-term "partnerships" with private operators for infrastructure projects - either in the form the old Tory "Private Finance Initiative" (PFI) or its Labour version, the "Public Private Partnership" (PPP). These schemes were used to build new schools or Children's Centres as well as to maintain or manage school buildings. They tied councils into leasing back buildings and buying services from contractors for years to come. And since these contracts were often awarded for decades, a change in the council's political make-up had no impact on them.

In some cases, these schemes may "save" taxpayer money on the back of services and workers' conditions. But overall, real costs are increased by the parasitism of the private "partners" and for the sub-contractors they choose to employ. However, having layer upon layer of profit-making was and is bound to affect quality. For instance, catering contractors fed school children on low quality, ready-made food and put vending machines in schools, selling more junk food, to make a bit more money. This particular kind of cost-cutting was promoted by the government's own regulators. In Carmarthenshire, where schools prepared food freshly on the premises, the LEA was criticised by the Best Value Audit Commission for having higher costs, and ordered to cut down on fresh food and staff pay, or contract out. The whole thing caused such a scandal that new government guidelines on school dinners were introduced in 2005. But it turned out that PFI schools were exempt, because long-term contracts had been awarded to school meal providers and if they were no longer able to make their contracted profit because of the guidelines, they would demand compensation!

Several hundred new schools had already been built across the country under PFI deals when, in 2004, Labour ramped up the process with the "Building Schools for the Future" programme (BSF). This £45bn (now gone up to £55bn) programme was supposed to rebuild or refurbish every secondary school in the country over 15 years. The body which was responsible for it, "Partnership for Schools", was in fact jointly run by the government and "Partnership UK" - which was itself 50% privately-owned. Some of the private shareholders were themselves potential contractors for BSF projects. In other words, the sharks were invited to share the loot between themselves!

Predictably, the preferred bodies for delivering these projects were so-called "Local Education Partnerships" (LEPs), in which private contractors had an 80% share, and the preferred funding method was PFI. In fact, half the government money for BSF has been provided as PFI credits - i.e. a government promise to contribute to the councils' future payments towards PFI deals. Not only did the BSF projects involve PFI deals for the building work itself, but they also tied councils into long-term contracts for all aspects of facilities management and computer technology. Moreover, during the 10 year of the LEP contracts, the contractors involved were also to be given priority for any other contract from the council, whether it was BSF-related or not.

Whether this was a more "cost effective" way of revamping school infrastructure or not, this was certainly a way of giving private companies an unprecedented role in deciding how public funds were to be used in education and an unprecedented share of these funds.

Working class homes hijacked

The continuum between Tory and Labour housing policy is also obvious. Under the Tories, the biggest privatisation of all had been that of council housing, with total stock dropping by one-third. This was an enormous bounty for mortgage lenders and was one of the factors behind the subsequent explosion in housing prices. In the process, part of the public debt was transferred to working class families.

Councils were not only forced to sell off social housing, to cut expenditure they were also prevented from using the proceeds of the sales to build new council houses or to carry out repairs on existing ones. From 1989 onwards, they even had to return 75% of their income from council house rents and sales to the Treasury.

Labour did not only fail to stop the sell-offs, it also kept blocking councils from directly building social housing - at least, until 2009. As a result, housing built directly by English councils dwindled to almost nothing. In 1997, only 1,500 council houses were built, but in subsequent years, the number dropped even lower - to only 200 in 2001/2! Even taking into account what was built by Housing Associations, the annual average social rented housing built was halved under Labour compared to the previous Tory governments.

Not all council housing was saleable, however and remained social housing for rent. However, the Tories had begun to transfer this housing en blocto supposedly "not-for-profit" Housing Associations. But as these transfers were subject to tenants' approval, many had been stopped by fierce opposition. Labour continued these transfers by resorting to blackmail: funding for maintenance and refurbishment was to be withheld until tenants agreed either to a transfer to a Housing Association or at least to some sort of private "partner" to be brought in via a PFI deal.

As tenants kept resisting this kind of blackmail, Labour came up with a new idea - councils were to transform their housing departments into so-called "Arms Length Management Organisations" (ALMOs), which were separated off from the council. Like Housing Associations, the ALMOs were allowed to borrow money in order to build new homes as well as to bid for central government funding (available to Housing Associations and private developers, but not to councils). This was obviously a preparation for making the "ALMOs" completely independent entities, which would be privatised at some point - but this time, the tenants would not be given a say.

The end result of this has, of course, been a massive shortage of social housing, as Housing Associations failed to cover the gap left by the virtual halt in council house building. Most government funding went to middle-of-the-range housing for rent and for sale (or part rent, part buy). Brown' so-called "affordable housing" programme produced homes which were mostly beyond the means of the majority of working class families and the £8.4bn which was made available for this programme went exclusively to projects involving ALMOs and PFI deals. As to the funds which the government finally released to "bail-out" the construction industry, after the crisis broke out, supposedly to restimulate house-building, this was so small - £460m in all - compared to real needs (not to mention, compared to the bailout of the banks!) that it did nothing to change the situation.

As a result of all of this, waiting lists for social housing have got longer. The withholding of funding for repairs means that many estates have become dilapidated. As councils were legally obliged to provide housing for certain categories of homeless people, even if they did not have available housing themselves, the numbers housed in private "temporary accommodation" has increased by 75% under Labour, to 72,000 households at the last count.

While waiting lists are predicted to increase to 5 million individuals by the end of 2012 - that is, assuming further turmoil in the crisis does not create mass homelessness - these three decades of starving social housing of public funding will not have been a total waste for everyone: the finance industry, PFI contractors and private landlords will have made a fortune out of this policy.

Unsocial carelessness

Most adult social care has always been done by unpaid family members. But state provision of care used to be delivered by local councils. Today this remains part of their responsibilities and accounts for a large chunk of their budgets.

Residential homes, which were part of local councils' remit, were mostly privatised under the Tories. This created a whole layer of small or big-time capitalists, who made a (fat) living out of the isolation of the elderly and out of their savings. The cost for the elderly was (and still is) exorbitant. Initially, funding for residential care came directly from central government. But it was means-tested, so that the elderly had to use up nearly all of their own assets before becoming eligible for the state allowance. The main asset for most was the family home, which they were forced to sell, no matter whether there was a son or daughter still living there, who had been caring for their parent before they got to the point of needing residential care. The private home bosses couldn't lose - after these sharks had ripped off their elderly residents to the point where they had next to nothing left, the state the paid the sharks for their care.

The spiralling cost to the state, though, eventually meant that the emphasis shifted from residential care to home care. It was considered cheaper to keep the elderly out of residential care whenever possible and to help them to stay in their own homes. Despite this shift, though, the number of adults receiving home care organised by their council has fallen by a third since the mid-90s (it currently stands at half-a-million), thanks to increasing rationing by councils.

Unlike with residential care, it took some time for a private home care industry to develop. For a whole period, even if councils had wanted to contract out their home care services, there were not many companies around who could have bid for them. But after 1993, they were forced to do so - since they were legally bound to spend 80% of the social care budget in the private or voluntary sector.

The whole process of privatisation of social care was not altered in the least by Labour's return to power in 1997. Not only was nothing done to reverse the privatisation of residential homes, which had been already virtually completed, but the privatisation of home care was stepped up. So much so that by 2008, the proportion of home care directly provided by councils had dropped to 25%, whereas it had been 90% at the beginning of the 1990s.

Under Labour new dirty tricks were invented to cut the cost of social care. For instance workers in 57% of councils surveyed by Unison in 2008/9 reported that the work which would have normally been done by district nurses was now allocated to home care workers. Why? Quite simply because the councils had decided that some health care work (which was not means-tested) would be treated as home care (which is means-tested). Just another means to cut corners on the backs of the sick and the elderly!

The effect of this process on the service has been devastating. Home carers no longer have time to carry out their most basic tasks. Overall, the quality of services has deteriorated, not surprisingly. For instance, one of the largest companies in social care, Care UK, got a zero-star rating from Harrow council last year, where it has a £2m contract. It also lost a couple of contracts with other councils. But never mind - Care UK still managed to increase its income by 20% last year!

Cost-cutting on the backs of council workers

When services are contracted out, the existing workers are usually transferred to the contractor under the so-called TUPE protocol, but it does not protect much in the way of conditions. Even if pay rates, at least, are initially protected, they can be eroded over time as pay rises fail to keep up with those of directly employed local authority workers. New workers taken on by the contractor have different contracts, with worse pay and conditions and the contractor never fails to put pressure on transferred workers to either leave or sign up to the new contracts. Or their hours and overtime are cut because the contractor would rather use new, cut-price workers.

In the case of home carers, for instance, in addition to the increased workload, the most drastic change in the conditions came as a result of savage cost-cutting under Labour. Ministers boasted of having made £513m of "efficiency savings" in social care since 2004. Since 80% of the costs of the home care are down to the workforce, it is not hard to imagine what effect these "efficiencies" have had on wages and conditions, which were never great. Many home carers found themselves on the minimum wage after being contracted out. But in fact, they often do not even earn the minimum wage. For instance, the travelling time between clients' homes is not paid and travel cost is at their own expense. Or they are sometimes obliged to be on call, but paid only for the time they are called to work. Also, they can effectively be on piece work. Only the minutes actually spent in the homes count as working time (they have to clock in and out by phone) and the amount of time for each job is allocated in advance - 17 minutes, 21 minutes, or whatever - and if it takes them longer, the extra time is unpaid. Sometimes home carers have to pay for their own uniforms and one company actually charged its workers for having the company logo added to the uniform!

Another consequence of the governments' systematic cost-cutting was illustrated, over the past period, by the issue of "Single Status". Introduced during Major's last Tory government, this was supposed to harmonise pay and conditions between manual and white collar workers. Initially, it was supposed to guarantee a 37-hour working week for everyone. Many low-paid workers were supposed to gain and no-one was supposed to lose out. In any case this was how it was sold to workers.

The whole thing was complicated by the fact that at the same time, councils were being taken to court under sex discrimination legislation over the disparity in pay between jobs done predominantly by women and jobs done predominantly by men - and sometimes had to pay claims which amounted to millions of pounds in back pay. So when councils came to implement the Single Status changes, they tweaked the changes so as to protect themselves from more costly equal pay claims. But instead of upgrading the wages of the women workers who had brought these cases - generally low-paid women, like school diner ladies - they down-graded the wages of low-paid male manual workers doing comparable jobs, who ended up being the main losers in this whole exercise.

The result was that, more generally, many workers saw their pay drastically reduced: as central government was not providing funding to cover the cost of any adjustments in wages, the councils were simply jumping on the opportunity to drive down their total wage bill - which meant, inevitably, that they levelled downwards instead of upwards.

So, for instance, Bournemouth council announced that 40% of workers would gain, 40% would have a pay freeze and 20% would have their pay cut by up to 20% (the chief executive and directors were not in the latter group, needless to say). In Lancashire, there were large cuts across the board - day centre workers, for instance, lost an average of £2,211 and for 12 workers, the cuts represented one quarter of their pay. The chief executive of Lancashire County Council, on the other hand, was paid £171,701 last year.

In many councils, where basic pay was increased for some workers, it was clawed back by cuts in allowances, etc., so that even the "winners" in the process end up worse off. For example, in Nottingham, workers were presented with "strings" including cuts to allowances, changes to overtime, mandatory Saturday working, etc. and told that they would have to sign up to these strings to have their pay upgraded or protected (for those who were losing out).

This caused many disputes across the country and a series of strikes. For example, in Leeds (controlled by a Tory/Lib Dem coalition at the time), bin men went on strike for 11 weeks after being threatened with a £4,500 cut out of their £17,500 annual pay. In the end the council backed down and scrapped the pay cuts. But in return, productivity strings (changes to rounds and shift patterns and introduction of targets for the number of households covered) were attached to the deal. The deal was finally accepted, but without one of the strings - that workers should collect from 220 households an hour!

The overall result of these many years of cost-cutting is that, today, 200,000 local government workers (mostly part-time women) earn less than £12,500 (full-time equivalent salary) - meaning that they cannot possibly make a living on their part-time wages. Given the degradation of pay and conditions, some areas have a high vacancy rate. For instance, vacancy rates were as high as 20% on average in social work in London last year and an average of 14% of posts were filled by agency workers. But apparently Labour thought local government workers were still too well paid, since their wages have been frozen for this year, a pay cut in real terms.

Another consequence of cost-cutting is job cuts. There were 23,000 redundancies across English councils in 2009, contributing to a drop in the councils' overall annual wage bill of 2%. In March of this year, even before the new wave of austerity measures, the BBC carried out a survey of councils in England, asking them what they were planning in terms of future job cuts. Those that responded were planning to cut 10% of jobs on average over the next few years, implying 180,000 job cuts if this was replicated across the whole of England.

Beyond the Con-Dem's rhetoric

Well before the election, the Tories had already set out their plan for local government. In a speech to the Local Government Association (the employers' group) last year, Cameron told council bosses that he would offer them less money but more power - to allow councils to do what they like. He champions a local government reduced to the bare bones, commissioning services from private "partners" and devolving power to local "communities". What the latter really means is revealed by the fact that he expects a "surge of local entrepreneurialism" to accompany this - i.e. even more opportunities for businesses to get their fingers in the public sector pie.

This "model" has been developed by Tory-led Barnet council, who was described by the media as aiming at becoming the "Ryanair of local government", with residents paying for all but the most basic of services, and out-sourcing taken to the maximum, with a consequent reduction in the directly-employed council workforce. Another example is Hammersmith and Fulham, which has cut council tax and boasts of having saved £42m by "cutting waste and bureaucracy". But residents who pay for home help are now charged £10.50 per hour; meals on wheels has gone up from £2.40 per meal to £3.80; there has been a rise of 121% in fees for after school child care and a 50% increase in parking charges.

Essex County Council, under the leadership of Tory peer, Lord Hanningfield (who has subsequently stepped down, after being charged over his expenses claims), has gone one step further. Last December, it signed an 8-year deal, worth £5.4bn, with IBM, to manage all of its services. IBM's brief is to cut 20% of the council's £1.2bn annual budget over the next 3 years by "streamlining" services. Unison calculates that this will mean up to 6,500 job cuts, along with the inevitable degradation of services.

So, beyond the rhetoric are the same old cost-cutting policies, designed to "save" on jobs and services, while handing over more funds to private businesses. The greater "flexibility" that Cameron intends to give to councils, is only designed to give them more leeway in implementing these policies without having to worry about the impact on services.

After the government announced its first cuts in local government funding, it was claimed that no local authority will bear cuts of more than 2% and that, frontline services, and education specifically, would not be affected. However, £311m is going to be cut from the Dedicated Schools Grant, which, since 2006, is the grant received by councils specifically to cover education spending - meaning a cut of about 1%. So, far from being unaffected, education was, in fact, the area which was threatened with the biggest cut at that stage.

But of course, since then, Osborne's emergency budget and the much bigger departmental cuts it implies, can only mean that many more attacks and cost-cutting are to be expected in local councils. The only area that will be really "ring-fenced" as ministers put it, are areas they won't even mention - in particular the huge sums already contracted to be paid for years to come to private companies as part of PFI deals. Just as much as we can be sure that these politicians are prepared to cut everything they can in services, whether frontline or otherwise, we can be sure that they will do their utmost to protect the dividends of the big PFI companies' shareholders.

The necessary response

Unison leader Dave Prentis responded to the budget with what sounded like fighting talk. Said Prentis: "This budget signals that the battle for Britain's public services has begun with the Government declaring war. But if war has been declared, what are Unison's battle plans?

Shortly before, at his union's conference, Prentis had formulated his plans as follows: "We begin that fight, here, today. We will organise. We will organise public meetings and street demonstrations, in towns and cities, up and down the country. We will build lasting community alliances, to defend our public services ... This is the time to lift our hearts and raise our flag. And he added that it is vital to "build alliances with community groups, service users and other unions in a major campaign in support of public service provision"

But what has Unison to propose to those who would like to do something to defend public services and public sector jobs and pensions? The "A Million Voices For Public Services campaign on their website invites you to "add your voice" by posting a message of support on the site and to "spread the word" via Facebook and Twitter... These gimmicks aside, there was a "day of dissent", with stunts and lunchtime rallies, to mark the emergency budget but no attempt was made by the union leadership to mobilise significant numbers of members for this. And, at this point, despite being by far the largest union in local government, Unison has no plan to prepare for a protest on any scale, where it can be heard - that is, in the streets and the workplaces!

For years, local councils workers and all working people who have been at the receiving end of the cost-cutting policies of governments, implemented by willing local bosses, have been led down the garden path by union leaders. The issue of "Single Status" is a case in point. While tens of thousands of workers were confronted with the same kind of attacks on their wages and conditions across the country, union leaders were hiding behind the artificial divisions between categories, grades and council boundaries, to isolate each group of workers from the others. As a result the many sections of workers who took industrial action, remained on their own without being able to use the collective strength that they would have had by acting together.

And the same tactics have been used again and again, whenever an effective fight back was called for, against the successive drives to cut workers' conditions and downgrade services. But this kind of salami tactic is a recipe for disaster, one that local council workers cannot afford, any more than the users of local services.

Today, this government, following in Labour's footsteps, is indeed declaring war against the working class, on behalf of its capitalist masters. But in this war, workers will have to organise their own battalions. Local council workers and service users will need to be united behind the objective of stopping the cost-cutters in their tracks - and they will need to see their fight as an integral part of a general fight back of the entire working class against the capitalists' offensive.