Select Committee on Treasury Written Evidence

Memorandum submitted by the Public and Commercial Services Union (PCS)


  1.  PCS welcomes the opportunity to submit its views on how globalisation is impacting on the UK economy. While relevant to many aspects of our lives, it is in relation to work and employment that globalisation has become a matter of considerable public interest and concern. The causes and consequences of globalisation are therefore matters of considerable importance to trade unions and the millions of workers they represent.

  2.  PCS is a trade union with 315,000 members. Most are employed as civil servants in departments such as Her Majesty's Revenue & Customs (HMRC) and the Department of Work & Pensions (DWP). As a consequence of privatisation a growing number are employed in the private sector. At present approximately 30,000 of our members are employed by a number of companies such as Siemens, EDS and Capgemini. For some of our members in these companies increasing globalisation has come to be associated with the threat of "offshoring". There is considerable concern that some employers will attempt to move an increasing quantity of work overseas to lower wage nations.

  3.  There is a view held by some in politics, the media and academia that globalisation, involving processes such as offshoring, is welcome and inevitable. We disagree. This submission begins by outlining what we understand globalisation to be and why we regard many aspects of it as neither welcome nor inevitable. The submission then briefly outlines the impact globalisation is having on our public services. There follows a discussion of the issues raised by offshoring in the context of our membership and how we believe policy makers should respond. The submission concludes by calling on government to implement a series of measures in relation to matters such as privatisation, job design and the Services Directive that we believe will protect the quantity and quality of our public services and the jobs our members do.


  4.  A common view is that contemporary globalisation represents a fundamental and inevitable break with past trends in the organisation of the world economy. It is argued that post-war national Keynesianism has been rendered impractical by a combination of new competitive pressures from Asia and Eastern Europe, and the development of new production and communication technologies. In this context much industrial and financial capital has become "footloose", able to roam the globe in a ceaseless search for the lowest wages and the highest rates of return.

  5.  It is argued that national governments have become almost powerless in the face of pressures from multi-national corporations and the financial markets to deregulate product and labour markets, and to reduce public spending and welfare provision to levels consistent with securing low inflationary growth. If trade unions have any role in these processes at all, it is to prepare their members for ceaseless change by working with government and employers to deliver more and better education and training in new skills.

  6.  For some, these trends are to be welcomed because they bring the real world closer to behaving like the hyper-efficient equilibrium models of neoclassical economic theory. The more that "free markets" and "free trade" are uninhibited by "red tape" and "producer interests", the more the world economy will grow and deliver benefits for all. Globalisation consists of what are an essentially politically neutral set of processes that can benefit everyone if they adapt accordingly. While workers cannot challenge globalisation, they can adjust to it by increasing their employability and helping their employers to become more competitive.

  7.  Our view is different. There are positive aspects to globalisation. In recent decades there have been welcome developments in technology and policy that have enhanced the ability of many to travel, communicate, and access information and knowledge on an unprecedented scale. This has contributed to increasing our awareness of economic, political and environmental issues around the world, and encouraged a greater understanding of the interdependence of peoples, nations and the problems they face.

  8.  However, at the heart of globalisation have been important structural changes to the world economy that have been intended to increase the vulnerability of many workers to market pressures and instabilities. In particular, we have seen the desegmentation, marketisation and transnationalisation of financial markets. This has been combined with an increased integration of industrial production into financial market disciplines, and the uneven development of global markets for certain products and types of labour. These trends have contributed to increasing competitive pressures on companies, some of whom have responded by developing new computer processing and telecommunication technologies which can facilitate the relocation of some forms of work overseas.

  9.  These changes have not been the inevitable result of politically neutral market forces. They are in large part the product of political choices made by governments of the main economic powers over the past 30 years. It is national governments, not "new technology" or "markets", that decided to relax or abolish most controls on the organisation and movement of private capital. It is governments, frequently in alliance with each other, who have constructed a global economic environment in which they have surrendered some of their national policy discretion in order to be able to claim to their electorates that international treaty obligations, such as those associated with the General Agreement on Trade in Services, make deflationary disciplines and the deregulation of markets inevitable and irreversible. In short, some nation states have been the authors, not the victims, of globalisation.

  10.  In the UK, as a result of these choices and the competitive pressures they have unleashed we have seen massive job losses from manufacturing industry, increased job insecurity, the deskilling and intensification of many forms of work, and the potential to lose 0.75 million jobs because of offshoring.

  11.  Many of the roots of contemporary globalisation, and the pressures it has placed on companies to shed and relocate jobs, can be found in decisions and choices made by governments. Therefore, in our view, if sufficient political will and support can be mobilised the negative results of globalisation can be halted and reversed. We believe trade unions in the UK and abroad have a key role to play in that process.

  12.  Some in government and the labour movement argue that unions should respond to globalisation by focusing on equipping their members with new skills. We agree that many workers in the UK need and want to improve their skills. PCS has been involved in the Skills for Life project since 2002, and we have established a Computer Learning Centre at which members can receive training in the latest IT skills. However, we share the concerns of many other trade unions that the government's voluntarist approach to skill formation across the UK economy, with a narrow focus on supply-side policies, is an inadequate response to a problem rooted in the short-term pursuit of profit and deregulated labour markets.

  13.  In the context of attempting to halt job loss and the steady erosion of labour's bargaining power across much of Western Europe and North America, we do not believe acquiring new skills is enough. The primary focus of trade unions must be on informing and organising their members, building real grassroots solidarity among trade unionists around the globe, and placing pressure on national and supra-national state institutions to implement measures that increase the democratic accountability of those who make policy and investment decisions.


  14.  Globalisation has had negative implications for many of those who work within and use our public services. Following decisions by policy makers in the UK, USA and elsewhere to deregulate global finance, there are now powerful pressures on many national governments to enhance the value of financial assets within their borders by pursuing monetary and fiscal policies regarded as credible by international investors, and as being consistent with attaining and securing low-inflationary growth. In part, this involves ensuring levels of public spending and debt are kept within limits considered by investors as sustainable and conducive with internationally competitive rates of taxation. To this end the present government has introduced a range of measures and rules intended to promote the credibility, transparency and external validation of its macroeconomic policies.

  15.  This approach, while admired by institutions such as the IMF and World Bank, has presented domestic policy makers with a significant dilemma. On the one hand, there is considerable public pressure to increase the quantity and quality of public services. On the other hand, policy makers have chosen to adopt policy rules, such as the Code for Fiscal Stability, which make it difficult to satisfy public expectations.

  16.  In the context of the civil service the government has sought to resolve this dilemma by hoping that new technology, combined with the deskilling and intensification of work, will sustain service levels while costs are cut by means of privatisation and massive reductions in staff numbers. In many parts of the civil service, such as DWP and HMRC, the impact of this strategy on staff morale and service quality has been disastrous. It is no coincidence that levels of industrial action and instances of service failure have increased markedly since the Chancellor announced his intention to implement Sir Peter Gershon's "efficiency" programme.


  17.  In the context of privatisation and competition for government contracts there is a clear incentive for companies to attempt to cut costs and increase their profitability by offshoring some forms of work to low wage nations. Having established a policy framework within which the work of some civil servants is now performed by profit-maximising firms, we do not accept the argument advanced by some in politics and business that decisions to offshore work should not be a matter for government to regulate.

  18.  Some work is vulnerable to offshoring. However, much work is not. In general, the extent to which work requires high levels of skill, local knowledge, quality control and confidentiality will tend to determine how vulnerable to offshoring it may be. In addition, the extent to which labour costs comprise a significant proportion of total production costs varies across sectors and product markets. While employers will always tend to want to minimise how much they need to pay to obtain the quantity and quality of labour they need, their overall cost structure may make offshoring unnecessary. Furthermore, some firms need to remain close to key suppliers, distributors and markets, in the context of which offshoring becomes commercially impractical.

  19.  It is therefore important that trade unions and policy makers avoid taking a simplistic view of globalisation that acts to spread fear and uncertainty by overstating the potential for movement overseas, while remaining alert to the fact that some jobs are at risk.

  20.  Our members have cause to be concerned about offshoring for a number of reasons. Firstly, job designs rarely remain static. The continuous search for cost savings and competitive advantage means employers often try to simplify work so that it can be performed by less skilled workers in other places at a lower cost. In some civil service departments senior managers are currently attempting to deskill work. In HMRC such attempts, involving the imposition of LEAN principles of work organisation, have recently provoked industrial action by hundreds of our members. We oppose deskilling, not only because it typically results in less interesting and more stressful work, but because it makes that work more vulnerable to privatisation and relocation.

  21.  Secondly, in the context of current moves to centralise and rationalise "shared services" across and within departments and agencies, we have been advised that in some areas attempts may be made in the future to outsource and offshore work. This could impact on thousands of our members working in areas such as human resources, finance, estates and procurement. These changes, in common with much of the Gershon "efficiency" agenda, appear to be driven by a crude desire to cut costs, with little or no regard for how service quality may suffer.

  22.  Thirdly, we are concerned that the Services Directive, if implemented, may lead to more offshoring of work performed by our members. We are opposed to the Directive. Marketisation and competition are incompatible with providing high quality and democratically accountable public services that prioritise meeting social need over increasing private profit. Therefore, we are calling for all Services of General Interest and Services of General Economic Interest to be excluded from the scope of the Directive. In relation to how it may impact on many of our members, there are significant ambiguities and inconsistencies in the Directive as it is presently drafted which make it difficult to estimate the full extent to which our members' jobs and the services they deliver may be under threat. However, the pro-privatisation and pro-market agenda of which the Directive is part appears likely to make offshoring of our members' jobs more, rather than less, likely.

  23.  Finally, in some areas where our members are employed offshoring is taking place. In 1999, 4,000 civil servants were transferred to Siemens Business Services (SBS) when it won a government contract to perform work for National Savings. In 2004, SBS announced its intention to move 240 government contract jobs to India. PCS campaigned hard against the proposed offshoring. We argued the offshoring would generate no tangible benefit for the government, the taxpayer or those who used National Savings. It was driven solely by the desire of SBS to maximise the profit it could obtain from an existing government contract.

  24.  More generally, we made clear our total opposition to all offshoring of government work. It is not acceptable for the UK government to seek to directly or indirectly benefit from the inferior pay, conditions and legal protection of many workers in countries such as India. Offshoring tends to make controlling the quality and security of work more difficult. Therefore there is a risk it will compromise the quality of services available to the public. Furthermore, offshoring by private contractors, and the significant cost savings then generated, will make winning in-house bids for contracts involving established staff almost impossible.

  25.  PCS was unable to prevent the offshoring on this occasion, but our campaigning and bargaining managed to secure significant concessions from the company. It was agreed there would be no job losses in the UK as a result of the proposed offshoring, and no jobs would be transferred offshore unless replacements of at least the same quality were identified and agreed with PCS. Furthermore, the company agreed that staff in India will be paid above local market rates. Staff in India will have the right to organise in unions and bargain collectively, and SBS will arrange for PCS reps to visit India to discuss with staff and their representatives.

  26.  Despite securing important concessions in this instance, offshoring remains an important concern. Recently, SBS has announced its intention to offshore a further 240 jobs to India. On this occasion the company has made clear they will not be able to offer alternative employment in the UK, and therefore redundancies are anticipated. In addition, there are plans by the Office of National Statistics to outsource the digitisation of over 250 million records of UK births, deaths and marriages to companies overseas. PCS will campaign and bargain hard to prevent offshoring and any involuntary job losses that may be planned.


  27.  In our view, globalisation in the UK has contributed to substantial job losses, work intensification and deskilling, increased job insecurity, and the under-funding of many public services. This is not welcome, but nor has it been inevitable. The environment in which these processes have unfolded is one that has in large part been created by the most powerful states, policy makers and supra-national institutions. It is within the remit of these organisations and political actors to halt and reverse the damage that is being done.

  28.  As this submission has made clear, a key concern for our members is the threat presented by offshoring. Offshoring has the potential to significantly increase unemployment, poverty and social exclusion in the UK, and exploit low paid and poorly protected workers overseas. It should be no part of government policy to attempt to benefit from such conditions, or pursue policies that contribute to increasing job loss and job insecurity in the UK. To date, offshoring has taken place in the absence of a full public debate about the extent to which we wish to see parts of the work performed in our public services moved overseas. We would welcome the government initiating such a debate.

  29.  In our view, action must now be taken to any prevent any further offshoring of government work. We call on the government to:

    —  Halt all further privatisation in the civil service and non-departmental public bodies (NDPBs), and agree to award or renew contracts with private companies on condition that no contracted work will be offshored.

    —  Agree to ensure that any internal restructuring of civil service departments and NDPBs is consistent with preserving and promoting high-skill and high-quality work for all staff.

    —  Engage in immediate consultation with PCS about the "shared services" initiatives and agree to a joint evaluation of each initiative. Give firm assurances that any centralisation and movement of such services will not involve compulsory redundancies, relocations or the future privatisation and offshoring of work.

    —  Enter into immediate discussions with PCS and the other public sector unions about how the government interprets and intends to apply the provisions of the Services Directive to civil and public services.

May 2006

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