Dr Varney’s prescription for the north – privatisation and wage cuts

The British Government’s grim vision for workers in the north took on some more detail this week with the publication of the second part of the Varney report. This report, the first part of which had dealt with taxation, was commissioned by the treasury in response to the pleading of local politicians for some type of economic peace dividend. Of course the expected economic package from Brown wasn’t forthcoming. As compensation Brown’s close advisor David Varney was tasked with drawing up proposals to boost the north’s economy.

Local politicians had all hung their hats on the call for a dramatic cut in corporation tax as the magical formula for economic growth. However, this was never likely to be conceded in the context of broader Treasury policy and was rejected by Varney in his first report. The second report, which sets out a broad economic prescription is therefore probably more significant, reflecting as it does British government thinking on how to reform the north’s economy.

For workers in the north Varney’s report makes grim reading. It is a programme for a complete shift towards neoliberalism. While this process has been ongoing for a number of years, under both devolution and direct rule, Varney’s proposals would mark a dramatic acceleration.

The main elements of Varney Two are privatisation and wage cuts. He calls for the Executive to increase the role of the private in the delivery of key public services while transferring other “non-core services” entirely into private ownership. The public assets he recommends selling off completely include Belfast Port, the NI Vehicle Testing Agency, car parks and the public housing stock. This last proposal is particularly harsh given the chronic housing crisis in the north and the growing waiting list for Housing Executive properties.

Alongside this privatisation programme Varney demands the lowering of wages in the north. His claim is that the marginally better pay and conditions in the public sector are hammering private sector growth. To counter this he proposes the introduction of regionalised pay for public servants, breaking the link with the rest of the UK. He also proposes a regionalised minimum wage and changes to the benefit system. The effect of all this would be to lower wages across the board, and to coerce people off benefits and into low paying jobs.

What Varney proposes would be a nightmare for workers. It would transfer massive wealth from labour to capital, and drive down the living standards of workers both in terms of their pay and conditions and the costs and quality of public services they use. Unsurprisingly Varney Two received a welcome from employers and criticism from trade union. However, the silence from local politicians was notable. While none of the parties endorsed Varney they didn’t reject it either. Their true position was probably summed up most accurately by a spokesperson for the Institute of Chartered Accountants in Ireland (ICAI) who when welcoming the proposals noted that “to a very large extent they already reflect the existing aims of the Executive”.

Let them eat cake - water bosses party as Executive looks to private equity

Given the scandals that have surrounded NI Water, a celebration of the first anniversary of its creation would have hardly seemed appropriate. However, this did not deter the company throwing a £8,000 bash birthday bash at a luxury hotel for its senior managers. This came just days after the utility regulator had lunched an investigation into a blunder that could result in customers paying an extra £20 million a year in water bills.

The shamelessness of NI Water bosses is perhaps matched only by their lack of taste. This was revealed in a leaked draft itinerary for the birthday gathering. It refers to "party bags with sweets" being available on tables, a "birthday tea" at lunchtime with "sandwiches, cakes, jelly and ice cream" and " birthday branding" including banners and balloons. A special birthday cake was scheduled to make an appearance after a morning presentation to managers on NI Water's first year by its chief executive Katharine Bryan. The draft programme said the chief executive would be asked to stay on stage to cut the cake, as the lights dimmed, music played, and birthday imagery appeared on screen. The song snippet earmarked for the start of Bryan's talk was from the U2 hit "Pride". Other songs featured included "Praise You" by Fat Boy Slim, "Little Less Conversation" by Elvis, "Shine" by Take That and the theme tune of The Office. The last is particularly appropriate as the party scene conjures up the discomforting comedy that was the hallmark of that series. Unfortunately this isn’t a satire on reality TV, this is reality. If there is a joke it’s on the public.

The bosses of NI Water can engage in such smug and contemptuous displays because there is absolutely no pressure on them from the parties in the Executive. This is despite the fact that it is nominally a government-controlled company. While there may be huffing and puffing from some MLAs, NI Water has been given a free hand to do whatever it wants. The minister for Regional Development, Sinn Fein’s Conor Murphy, uses its status as an independent company to evade any responsibility. We therefore have a situation in which all the Executive parties claim to be against privatisation of the water service and extra water charges, while the management of NI Water moves this process on a pace.

While there may appear to be a conflict, the reality is that the Executive and the management of NI Water are actually in tune. Despite the rhetoric the whole thrust of the Executive’s programme is towards privatisation and the extension of the role of private finance within public services. The latest example of this is the agreement negotiated with the comptroller of New York City pension funds to invest around $150 million in the Emerald Infrastructure Development Fund. This fund, which will effectively act as a private equity firm, will finance projects in the north in sectors such as energy, waste management, property, healthcare and ports. Significantly, the water industry was also mentioned as a possible area of investment.

Despite the claim from Martin McGuinness that the fund represents “the ordinary people of the United States investing in the ordinary people of the North", this is certainly not charity or an act of solidarity. It is actually a form of financial speculation. New York city comptroller William Thompson was clear about the purpose of this fund when he declared that was "optimistic about the opportunities for potential strong returns" from the north.

Investment of this type is also a driver of privatisation as whole areas of the public sector are opened up to private capital. This is what is behind the massive expansion of PFI schemes in the north. Under these public assets such as schools and hospitals have been transferred into private ownership and taxpayers forced to pay for their maintenance. This racket has run up hundreds of millions of pounds in public liabilities. Despite the rhetoric about additional investment, private finance actually extracts money from the public purse. And it is workers who bear the cost of the “strong returns” for the likes of Emerald Fund, whether directly through jobs losses and deteriorating working conditions if they are employed in the public sector, or through having to pay charges and higher taxes for public services. No wonder the bosses of NI Water are celebrating!