… and three days to recover: an open email to faculty colleagues about the UCU strike action

The text of an ‘open’ email I sent to the University of Cambridge, Faculty of Education, University and College Union members, but also addressing all members of the Faculty Community

Thursday 9th March 2018

Dear Faculty of Education UCU members and non-members,

It is hard work withdrawing your labour.

I would like to begin by pointing you to this evocative Twitter thread by Tyler Denmead – words, ideas, feelings and images from the Faculty of Education picket line, it is a wonderful documentary of that experience.

This action has been tough: tough on those striking but also tough on those who have chosen not too. As we approach a day of truce, indulge me in giving this some thought.

I grew up around the North Nottinghamshire coal fields. Although my family did not work in coal mining, the three nationwide miners’ strikes of 1972, 1974 and 1984-85 had a lasting effect on the community in which I grew up. The 1974 strike was a bitter dispute which led to the fall of the Conservative government. The 1984-85 strike was brutal, bitter, divisive and tinged with revenge. Prime Minister Margaret Thatcher, who was Education Secretary during the Heath government, that was deposed by the miners in 1974, was out to settle the score and to destroy the most powerful trade union, the National Union of Mineworkers. She did this in part, it was revealed later, by funding the Union of Democratic Mineworkers which supported miners in going back to work in order to break the strike. While the Yorkshire miners remained loyal to the NUM, the Nottinghamshire miners split and the UDM attracted increasing numbers. I witnessed the bitterness and brutality as the rift cut through families and communities. I am sure those scars remain in the former mining communities of Nottinghamshire to this day.

In those working-class communities, the divisions were clear, there was no grey-in-the-middle, there were no complexities of Ofsted, complex student needs or management responsibilities. As a miner you were either on strike or – forgive me for using the pejorative term – you were a scab. In our situation, it is far from binary, and from speaking with Faculty colleagues involved in the strike action, I believe everyone is well aware of this. The Faculty community – UCU members and non-members – are divided in that some have chosen to strike and some not. The reasons on each side are undoubtedly both complex and profound; so far I have witnessed nothing but respectful behaviour for each other’s position. They are, however, deeply conflicting positions.

I believe that as this action continues, and if those with the power to permit a speedy resolution fail to engender such, we will all become increasingly tired and there is danger that tempers become frayed and frustrations surface. Respectful disagreement in a divided community can degenerate into misunderstanding and mistrust. This could do lasting damage to our professional community. I don’t want that and neither do, I believe, my colleagues on the picket line.

I just want to say, on the eve of the one day’s break in strike action, that I have nothing but respect for colleagues who have chosen not to strike and that will remain whatever happens. Notwithstanding, it is my strongly-held view that if we all collectively make a stand against the decision to cut defined benefits from our pensions – a decision that is merely the visible part of fundamental and damaging transformation of the UK HE sector – we can stop it. These changes are not inevitable, but they will be if we do not draw the line and make a stand at some point.

While the strike action will have a lasting effect on the culture of the Faculty, the questions that are put in this dispute – that have divided us – are necessary to ask. The democratic governance of this institution at all levels has been increasingly marginalised and fundamental strategic questions have not been deliberated upon by all the members of the University. I will take the liberty of assuming that for those for and against strike action, these observations are not contested. What is contested is, how and when we do something about it.

In what is a deeply difficult time for our professional community, I believe that we can and will come back from this stronger and we will restore the warm and neighbourly professional community that existed before this dispute. In the meantime though, I will, as I expect others who are taking part in the strike action will do, put my full effort into the action that the UCU has democratically agreed to take. I will argue my position robustly and attempt to persuade others to participate in the action, but I will do my utmost to respect different views and with respect for my colleagues who have chosen not to strike and I expect you to tell me if I don’t.

At least we do not have Margaret Thatcher, Robert Maxwell and MI5 conspiring to drive a wedge between us.

In solidarity with all,

Steve Watson

Faculty of Education UCU co-rep

The Higher Education pensions dispute: a perfect storm of neo-liberalism, marketisation and austerity

The current dispute between the University and College Union (UCU) and the representative body of the employers, Universities UK (UUK), is over imposed cuts to pension benefits. According to the UCU, the annual retirement income of academics will be reduced by 10 to 40 percent. This is on top of real-terms pay cuts of 19.5 percent since 2009/101http://www.ucu.org.uk/circ/pdf/UCUBANHE14.pdf, while surpluses in UK Universities have gone up from £1.85 billion in 2014/15 to £2.34 billion in 2015/162Ibid. The accounting model changed in 2016/17 but the sector continued to secure considerable surpluses..

The dispute is more than about pensions though: on the surface, it appears to be a debate about the justification for changes to pension benefits, but beneath is a fundamental argument about political economy and the further push toward a privatised and marketized higher-education sector. Within the sector, within universities, decisions are being made without sufficient democratic scrutiny from members of staff and the wider community. Moreover, many academics may be unaware of the economic underpinnings of what appears to be conflict over pension affordability and university staffs’ pay and conditions. I set out here the underlying political and economic issues that are driving policy in government and that have led to the decision to cut pension benefits. I hope you will see that the pension cuts are the symptom of a deeper malady. I wish to show that the inherent threats to higher education are way beyond being about the comfort of academics in their retirement. And that anyone who believes strongly in the value of scholarship, research and learning should show solidarity with the striking members of the UCU.

I begin with some background to the dispute over pensions and the role of my institution, the University of Cambridge, which along with Oxford has taken a particular stance. I follow this with a quick summary of the economic context. Finally, I bring these elements together and demonstrate that we are in the conditions of a perfect storm for higher education. The underlying debates about the projection and level of risk in the pension fund are connected to government economic choices.

Finally, I argue that universities have a moral duty and should not simply accept the political and economic orthodoxy, rather than acquiescing to the parochial rationality of neo-liberalism and marketization.

Background to the dispute

The Universities Superannuation Scheme (USS) was valued at £41.6 billion in 2014 and £60 billion in 2017. The most pessimistic valuation leaves the pension fund with a shortfall of £5.1 billion in 2017. On the other hand, a best estimate valuation suggests a surplus of £8.1 billion. The question of whether there is, in fact, a shortfall depends very much on the model used to calculate future liabilities, growth and risk. An important factor in this is what is deemed to be an acceptable level of risk. Universities have been particularly keen to reduce the level of risk and a strategy of “de-risking” has been adopted. Equities, are higher risk investments than government bonds or gilts but offer higher returns. However — and I shall explain why in the next section — gilts offer a much lower rate of return than equities. Between 2011 and 2017 the percentage of the USS fund that has been in equities has reduced from 55 percent to 37 percent. While the amount invested in gilts has gone up from 13 percent in 2011 to 31 percent in 2017. Reducing the level of risk leads to a reduction in the rate of returns and is a factor in the pessimistic valuation of the USS fund.

It is the issue of risk that is central to the current dispute. According to Michael Otsuka, who analysed the results of the employers’ consultation over USS3https://medium.com/@mikeotsuka/oxfords-and-cambridge-s-role-in-the-demise-of-uss-a3034b62c033, only a minority (32 percent) of employers were looking for changes to the way in which contributions are set and assets and liabilities calculated. In other words, most employers were happy with the scheme as it stood. However, 73 percent of Oxbridge institutions (which presumably includes constituent colleges as well as universities) were opposed to the current arrangements.

The USS is based on last-man-standing mutuality which means that should all the universities go bust the liabilities would be passed to the last remaining universities. This means that Oxford and Cambridge, as the richest institutions, would bear the liabilities in the unlikely event that the other universities went to the wall. This also assumes that government would not intervene should the whole of the higher education sector go in to complete meltdown.

Otsuka points out that in their submissions to the September consultation on USS both Oxford and Cambridge expressed concern about the level of risk in the last-man-standing scheme. Cambridge objected that:

The University (and the other financially stronger institutions) continues to lend its balance sheet to the sector, which contains the cost of pension provision for all employers. In a competitive market for research and student places the University would be concerned if this appeared to be having an adverse effect on the University’s competitiveness (by allowing competitor universities access to investment financing or reducing their PPF costs in a way that would not be possible on a stand-alone basis).

Within this, Cambridge acknowledges that higher education is and will remain a competitive ‘market’, there is no sense in which Cambridge characterises itself as a public institution there to provide a universally available service in collaboration with the rest of the sector.

This also became evident to me when the government were trying to hurry through the Higher Education and Research Bill at the time the General Election was announced in April 2017. I approached the Conservative Member of Parliament, in whose constituency my Faculty sits, with objections to the Bill. Heidi Allen MP explained to me in her response, that the University of Cambridge had already been in touch with her to explain that they were happy with the Bill as it stood. I am aware how Cambridge, and most likely Oxford too, are seemingly sanguine about the marketisation of higher education and are preparing themselves to exist in this environment.

USS have reacted to a minority (42 percent), of whom, according to Otsuka, Oxford and Cambridge are the most prominent and hawkish members. The majority, however, were happy with the current levels of risk. The UCU describe how on the 23 January 2018, Chair of the USS Board, Sir Andrew Cubie, used a casting vote at a meeting of UUK-UCU Joint Negotiating Committee to remove Defined Benefits from all members of USS. The USS now transfers to a Defined Contribution scheme, where all contributions are placed in an individual investment portfolio. The risk is entirely transferred to contributing members of the USS. It also means a reduction in pensions of between 10 and 40 percent, particularly affecting younger entrants to the scheme.

The national economy does not work like a big family home

It is a common belief that a national economy works much the same as a household; that income must at least equal outgoings and preferably income must exceed expenditure – for that rainy day. Yet, there is a major difference between household economics and a national economy. In a household economy, expenditure is independent of income, one or both can change without really affecting the other. In a national economy, government income or taxation is dependent on its spending. The reason for this is that government spending is the only means by which currency can be introduced into that economy. Government spending creates currency, taxation effectively destroys it.

Within a national economy, all deficits and all surpluses must sum to zero. To understand this, imagine if there were just two people in a national economy. If one person has a surplus, i.e. they have more income the outgoings, the other person must be running a deficit, they must have more outgoings than income. The sum of deficits and surpluses is zero because there is a fixed supply of currency. Now imagine adding more people until there are 60 or 70 million, the sum of deficits and surpluses must still be zero for a fixed supply of currency.

By convention, nations divide economies into three sectors: the public sector (government spending and taxation) the private sector  (households and businesses) and ‘overseas’ (imports and exports). The sum of public-, private- and overseas-sector surpluses or deficits must sum to zero. The UK has an overseas deficit, we are a net importer, so currency is leaving the UK4It is not really leaving the UK, more accurately it means there is domestic accumulation of Sterling as a consequence of overseas trade.. We have a public-sector deficit, government spends more than it receives and the private sector is in surplus, households and businesses have more income than expenditure. It is important to realise that this is an aggregate surplus across the whole private sector, it is just the wealthy individuals and businesses that run a surplus, while poorer households are running a deficit and accumulating debt.

The austerity measures of the last eight years were intended to reduce public-sector deficits. Reducing public-sector deficits while maintaining an overseas trade deficit reduces private-sector surpluses and puts more of the poorer households and businesses into debt. The wealthy are then able to lend their accumulated wealth to the poor profitably.

Austerity uses a household analogy to justify reducing public-sector deficits, where in reality it increases the debts of the less well-off and the wealthy can the profit by lending. Indeed, it is preferable for the wealthy to profit through lending rather than investing in productive business and enterprise. If the poorer are in debt, they will be reluctant to spend, so aggregate demand is reduced making business investment riskier and less attractive.

Austerity is an exercise in trickle-up economics and the poorer are paying rents (that can be rents on property or money) to the rich. This leads to an accumulation of currency and creates a demand for government bonds or gilts as a low-risk means of saving. This is also referred to as the national debt, which is not really debt, but savings. The high demand for gilts (and so-called high national debt) reduces the returns on them. In an investment-led economy, money invested in gilts would more likely be invested in businesses, because government spending and investment increase aggregate demand and the risk of business investment is reduced.

Neo-liberalism: choice and competition

Neo-liberalism is closely aligned to austerity, it is based on the belief that the free market is the most efficient means of exchanging goods and services and that competition results in lower prices, efficiency and improved productivity. A further characteristic of neo-liberalism is the transfer of public services, utilities, nationalised industry and public transport to the private sector. The first moves toward neo-liberalism in the UK were in the 1970s. In 1976, Denis Healey, the Labour Chancellor of the Exchequer, accepted a loan from the IMF, attached to it were conditions that forced austerity, i.e. reducing public-sector deficits. When Margaret Thatcher came to power in 1979 public assets were sold off to individuals and investors, including public housing, utilities and public transport for example. At the same time, there was increased financial liberalisation which facilitated more lending. Outsourcing and private finance expanded through John Major’s premiership and was further extended by Tony Blair during the New Labour government. While it might seem that privatisation reduces the size of the state, the state is still required to fund public services such as health, education, prisons and transport infrastructure Privatisation presents an opportunity for businesses to profit from the provision of public services. Importantly, losses and risk are largely underwritten by the state. The provision of public services by the private sector is an attractive investment: in a period of austerity, with low aggregate demand in the private sector, investing in public service provision with socialised risk, is very attractive.

A further lucrative low-risk investment is the financing of capital projects in the public sector, so-called Private Finance Initiatives (PFI), Public Private Partnerships (PPP) or Private Placements where an institution issues a bond to raise finance.

Privatisation, marketisation, neo-liberalism and austerity are beams of the same sun. They don’t happen without political will and citizen consent; the neo-liberal project has to be lobbied for and promoted. The project has many outriders, think tanks such as the Adam Smith Institute, the Institute of Economic Affairs, and Policy Exchange, all funded by business and wealthy free marketeeers (sometimes transparently but quite often opaquely), to assemble evidence, create arguments, lobby and advocate, through the media, the benefits to the public of choice, competition and private-sector efficiency and innovation. Of course, this is driven more by a fundamental need for capital accumulation, than it is out of a concern for the provision of quality public services. Though the neo-liberal project attracts its enthusiasts and disciples who espouse the benefits of autonomy, individualism, efficiency and innovation.

Neo-liberalism and austerity have been central to growing economic inequality , in addition, the privatisation of public services has contributed to a growing democratic deficit, a powerlessness over the conditions of the community, where service provision is provided by an unaccountable public service . There is a growing inequality in the access to public services, where the principle of universal provision is replaced by an increasing amount of part or wholly private-paying services.

A perfect neo-liberal storm in higher education

The pension issue in the UK’s higher education sector is a perfect storm in the progress of privatisation and marketisation. There are two aspects. Firstly, poor returns from government bonds (gilts) mean that a low-risk investment of the USS pension fund in bonds give returns lower than the consumer price index. Other types of investment, such as equities, are higher risk because of the low aggregate demand in the economy. This is a consequence of austerity and the attempts by successive governments to manage the economy by balancing the books i.e. by reducing the public-sector deficit. Austerity leads to deflationary conditions with low aggregate demand in the economy and high demand for low-return low-risk government bonds. This makes the USS fund vulnerable to pessimistic valuations and to anxious evaluations of risk.

Secondly, the government continues to pursue an outsourced, privatised and marketized model for public services. This is driven by a capitalist lobby that seeks to maintain and expand a rentier economy. The introduction of student loans, tuition fees and subsequent increases are all part of the commodification and privatisation of higher education. The Higher Education and Research Bill that was hurried through before the general election in 2017 further embeds the consumerization of higher education, with the creation of the Office for Students and providing opportunities to establish challenger institution to increase competition in the sector.

The government claims that the reforms introduced since 2010 have resulted in more disadvantaged young people entering higher education, but the evidence suggests that there is an uneven distribution, with disadvantaged students more likely to take up places in less prestigious institutions5https://www.tes.com/news/school-news/breaking-news/new-figures-reveal-dearth-poor-students-russell-group-universities. Further competition and marketisation in higher education will lead to greater inequality, as institutions are forced to compete for the most university-oriented students, generally those from backgrounds with high social, economic or cultural capital.

Higher Education institutions have increasingly adapted to the neo-liberal reforms . This has seen the emergence of ‘New Public Management’ of ‘new managerialism’ as a hierarchical system of control and performativity. The cultural shift is away from democratic governance and collegiate professionalism to executive decision making principally drawing on management accounting and metrics. The disciplining and performative and managerial cultures lead to conformity and undermine academic freedoms except for, say, a few at the pinnacle of elite institutions.

Conclusion

I hope I have demonstrated the connection between the pension dispute, the introduction of student loans, the privatisation and marketisation of higher education and our current national economic policy. For me, as I take part in UCU’s action over the pensions, it is not just about being comfortable in my dotage. I love my job, I love the environment in which I work and I love working with students. There are so many achievements that my institution and the UK higher education sector, as a whole, can be proud of and with which it has led the world. So my motivation is to prevent public education from sleepwalking into becoming a further fragmented and inequitable system. A system that treats students as consumers and undermines scholarly inquisitiveness and the pursuit of ideas, ideas whose inspiration might arise from unusual and unconventional lines of inquiry. The performativity of neo-liberalism fosters a conformity, a narrowness and too often the safe and mundane.

I say we are sleepwalking, because it feels like this here in Cambridge, decision making has become concentrated with a few, no doubt highly-skilled and rational managers. That same rationality appears to have usurped the University’s democratic governance. Of course, it makes sense to reduce the University’s liabilities and exposure to risk to attract private finance, it makes sense to make the University competitive internationally and of course, there is logic in reducing staff pay and conditions to maximise surpluses. But these are rational judgements based on an acceptance that austerity and neo-liberalism are a) necessary and b) the only choice of political economy. It is not the only choice and, as I have argued, austerity is a political choice and not an economic necessity and in accepting it as though it is, we, as a University, make a moral choice. Or worse, we dispense with moral deliberation and accept that growing inequality and a deepening social crisis in society is simply a cost, a risk that can be put into and evaluated in our management analysis. If a university fails to accept its moral mission and fails to engage in genuine democratic moral deliberation over what society should look like, then it has failed as an institution. It may have secured private investment and have good metrics, but, nonetheless, it has failed.

The reason I take action as a member of the UCU is to encourage the higher education sector — and especially the elite institutions — to take responsibility and offer moral leadership. And not to acquiesce to those who look to perpetuate a rentier economy. Universities must offer a robust independent voice based on independent scholarship and promote the same moral purpose and critical thinking in their students.

Finally, I ask: colleagues, students, parents and communities please stand in solidarity with the striking members of the UCU.

References

Radice, H. (2013). How we got here: UK Higher Education under neoliberalism. ACME: An International Journal for Critical Geographies, 12(2), 407–418. https://acme-journal.org/index.php/acme/article/view/969/823
Stiglitz, J. (2012). The price of inequality. Penguin Books.
Piketty, T. (2014). Capital in the twenty-first century (A. Goldhammer, Trans.). The Belknap Press of Harvard University Press.
Harvey, D. (2011). A brief history of neoliberalism (Reprinted). Oxford Univ. Press.