News

Graduate unemployment levels on a par with school leavers

Latest data shows 25% of 21-year-olds who left university with a degree in 2011 were unemployed compared with 26% of 16-year-olds with GCSEs

Graduates leaving university found it harder to get jobs in 2011 than students finishing A-level courses, as youth unemployment hit its highest level since the 1980s, official data shows.

In 2011, 20% of 18-year-olds who left school with A-levels were unemployed compared with 25% of 21-year-olds who left university with a degree, according to figures from the Office for National Statistics. Graduate unemployment rates were almost on a par with those for people leaving school with just GCSEs, with 26% of 16-year-olds with these qualifications out of work.

But the ONS figures show it was easier for older graduates to find work: at age 24 only 5% of degree holders were unemployed compared with 7% of those who finished their education after A-levels and 13% of those with only GCSEs.

Charlie Ball, deputy director of research at the Higher Education Careers Services Unit, said the figures were “absolutely correct, but give a misleading impression”, as the cohort of people leaving with A-levels was smaller than the number graduating.

He said the graduate jobs market had “hardly returned to its state pre-recession”, but most of those leaving university were likely to get jobs within six months.

“Although the number of young people out of work is historically high, the graduate unemployment rate in this recession has not reached the levels it did in the 1980s or 1990s,” he said.

Research by investment firm Skandia suggests graduates still earn a high premium over the course of their career once they do find work. It says a graduate leaving university today should earn an average of £1.6m over a working career of 45 years compared to £1m for an 18-year-old entering the workforce and retiring 48 years later. A 16-year-old working 49.5 years will typically earn £783,964 over their career.

Although the prospects for graduates may not be as gloomy as they first appear, the ONS figures make grim reading for young job seekers.

The ONS said unemployment for those aged 16 to 24 stood at just over 1m in the last quarter of 2011, the highest number since 1986/87. This represented one in seven (or 14.2%) of this age group and is the highest rate of youth unemployment since 1984/85. Of these, 307,000 were full-time students actively looking for work alongside their studies.

London was the region with the highest youth unemployment rate, with 24% of economically active 16- to 24-year-olds unemployed from July 2010 to June 2011. However, the ONS said this was a result of the number of students in the capital, some of who were looking to work. When students are discounted, the highest proportion of youth unemployment was in the north-east at 15%.

The TUC’s general secretary, Brendan Barber, said the figures showed the importance of higher qualifications in helping young people into work. But he added: “With ministers putting up fresh barriers to higher education by hiking tuition fees and scrapping the EMA, the scar of mass joblessness that is hitting today’s youngsters could follow some of them into their late 20s or even 30s.

“The government’s cut-price work experience scheme is woefully ill-equipped to deal with the scale of our jobs crisis. Young people need tailored support and experience of proper paid jobs to give them the best possible chance of moving into work.”

Recently, some large firms have stepped up their recruitment of school leavers to attract bright students put off by the cost of going to university.

All of the UK’s “big four” accountancy firms, which between them recruit several thousand graduates each year, have established degree-equivalent school-leaver training programmes, including Ernst & Young which launches its programme in the autumn.

Stephen Isherwood, head of graduate recruitment at Ernst & Young, said the company had already recruited 30 of the 60 school leavers it planned to take on from hundreds of applications.

“There is a sense that the mantra of the last few years that everything is about university is not necessarily right, and that A-level students should really be thinking about what they want to do and whether that means going to university, and making sure they get the best deal for themselves.”

SSE reduces number of tariffs

Utilities supplier SSE launches simplified tariffs system and website price-comparison tool

Energy company SSE has slashed the number of tariffs it offers and launched a price-comparison tool to help customers choose the cheapest deal for their needs.

The energy supplier, which is the second largest in the UK and provides gas and electricity to consumers through Southern Electric, Hydro and Swalec brands, and an online arm called Atlantic, said this was “the most significant change” it had ever made to its range.

SSE customers can now choose from four core products: two fixed-price deals and two variable-rate deals, one offering a discount on the standard tariff to customers who are prepared to tie in for two years. Once price differentials for paperless billing and other options, such as free energy-usage meters, are added, SSE is effectively offering 15 different tariffs, instead of the 68 that were previously available.

The company said that by offering four core tariffs, and then allowing customers to refine their options, it was making it easier for them to find the best product for their circumstances. To help customers shop around quickly, it has introduced a price-comparison tool to its website. Customers who input just their postcode can see how much each of the four tariffs will cost for the average energy customer. They can then refine this by answering five questions about their usage, meter, payment and billing options, and choosing any additional features such as Argos points, or green-energy options.

The change follows the launch of a 10-point plan to rebuild consumers’ trust in energy suppliers, announced by SSE in October 2011. This saw the firm commit to offering all of its tariffs to both new and existing customers and change the way it buys energy on the wholesale markets.

Alistair Phillips-Davies, generation and supply director at SSE, said buying energy had become too complex: “Energy customers want choice, but most customers have a straightforward set of requirements and when they look at the products offered by an energy supplier it should be easy for them to find out which is the best deal for them.

“In October, SSE committed to end the complexity that surrounds tariffs and significantly reduce the number of tariffs it offers. That is exactly what we are doing and I believe this is the most significant change SSE has ever made to its product range.”

Phillips-Davies said existing customers could stay on their current deals but the company hoped to migrate them onto new deals by the end of the year. He said that while most would be able to get a similar tariff to their current one, “a small rump” of customers may prefer to stay put. These could include those who currently have deals without standing charges, which SSE has scrapped in anticipation of them being stopped by the energy regulator Ofgem.

The move comes as Ofgem reaches the end of a consultation on how to improve the energy market for consumers, which includes proposals to simplify tariffs. British Gas and EDF have already reduced their product ranges, but the regulator could eventually force the companies to offer a single standard tariff, alongside other deals that would run on fixed terms.

SSE said this approach would be detrimental for consumers, who would only be able to sign up to money-saving deals such as Economy 7 for limited periods and would have to remember to re-sign up afterwards.

Audrey Gallacher, director of energy at Consumer Focus, said customers were “often bewildered” by the complexity and number of energy tariffs on offer and this could form a major barrier to people switching to a better deal. She said: “SSE’s moves to address this problem are welcome. A simplified range of products should hopefully make it easier for people to understand and compare rates. It is also good to see the firm end the unfair practice of customers buying face-to-face and over the phone being denied the cheapest deals.”

However, Gallacher said customers would only be able to make informed choices if they were able to make comparisons across the whole of the industry. “Ofgem is currently consulting on proposals to simplify tariffs and it is essential that these reforms deliver if customers are to engage more with this market,” she said.

Ann Robinson, director of consumer policy at price switching website uSwitch.com, said: “This is the direction that Ofgem wants the market to move in so it will be really interesting to see how SSE’s customers react and whether it does give the market the boost that Ofgem is hoping for.”

Banks should ‘speed up PPI compensation’

Only a quarter of the amount set aside by lenders for mis-sold payment protection insurance was paid out last year

Around £50m of the compensation for mis-sold payment protection insurance (PPI) paid out this year will go to claims management companies needlessly, the financial ombudsman has warned. It expects to resolve more than 100,000 PPI complaints this year, but eight out of 10 are being brought by claims management firms, which charge hefty fees.

The average payout is £2,750. Natalie Ceeney, the chief ombudsman, said: “We’ve always emphasised that there is no need to pay a third party to make a complaint. Why pay someone else to do it for you when you’re just as likely to win by doing it for yourself for free?” Banks have been urged to pay compensation more quickly after figures showed that £1.9bn was paid last year – only a quarter of the amount set aside, as consumer group Which? noted. It called on banks to streamline and speed up the claim process. Some £441m was made over to PPI customers in December alone, the highest monthly total so far.

Richard Lloyd, its executive director, said: “It’s good to see the PPI payout is finally starting to speed up but … Too many people are finding the claims process too lengthy. This leaves an open goal for claims management companies that charge people a hefty fee for putting in a claim which is easily done yourself for free.”. Which? has found dubious practice by claims managers, including bombarding people with misleading information about getting PPI compensation.

Banks are expected to settle mis-sold PPI complaints within eight weeks, but this does not include the time taken to send out cheques.

Earlier this week it emerged that Lloyds Banking Group would claw back at least £1.5m in bonuses from five former and current executives and eight other senior managers, to penalise them for £3.2bn of PPI losses

The female unemployment crisis

The number of women out of work is the highest it has been in 25 years. What is the story behind the statistics?

“It’s so depressing, so frustrating, I don’t know what to do,” says Helen, outside a jobcentre in north London on Monday morning, her voice breaking before she wipes a tear from her cheek. Helen (she doesn’t want to give her second name) has been looking for work since 2009, after being made redundant from her job as a community care worker – a job she had 10 years’ experience in. “I’ve been for interviews, I send my CV off all the time, but there is nothing. It is so difficult.”

Last week, the official UK unemployment figures showed that women were losing their jobs at a disproportionately greater rate than men. Of the 2.67 million people who are unemployed, 1.12 million are women – the highest number for 25 years. One factor is that the number of women in the labour market has increased over recent decades. “In previous recessions like the early 80s, female unemployment figures weren’t nearly as high because there were fewer women in work to lose their jobs,” says Graeme Cooke, associate director of the Institute for Public Policy Research. “It reflects the fact that women’s levels of participation have gone up. But more recently it is to do with job losses in the public sector where women disproportionately work.”

Women make up around 65% of the public sector, and are represented even more highly in some areas, such as local government, where 75% of workers are female. “When you look ahead to the 710,000 jobs that will be going from the public sector by 2015, that is going to disproportionately impact on women,” says a spokesperson for union Unison.

Older women have been particularly affected. “There has been a big jump in unemployment among older women, age 50 to 64,” says Cooke, with an extra 20,000 in the last quarter. In contrast, unemployment among younger women went down in the last quarter.

“It is especially worrying because those years of their career are really crucial in building up their pension contribution. It’s not just a short-term problem of being jobless, it’s the risk that they will be unable to make up their lost pension contributions and then face a much lower standard of living in retirement and potentially greater reliance on state benefits.”

Helen thinks her age – 52 – is an issue. “There are a lot of young girls out there doing care work. Experience doesn’t count for anything.” She goes on courses, she says, and attended a training day encouraging women to set themselves up as entrepreneurs. “It was a bit pointless – you have to find your own funding to set up a business, and there is no money. I’ve been working all my life until I lost my job and I just want to work now.”

But the cuts can also hurt those dependent on child care. Claire O’Connor, her baby wrapped up in a pushchair, has just signed on at the jobcentre for the last time. A former director of estates for a university, she had been looking for work since October, but she has decided to help her husband with his business “until things start getting better … I was being offered very poorly paid jobs that wouldn’t have covered childcare.” She says the jobcentre staff were “really helpful … but there is nothing out there. I haven’t been able to find anything that matched my previous salary, and I’ve had to lower my expectations. It has been really difficult.”

“Women are being asked to take on the role of shock absorbers for the cuts,” says Anna Bird, acting chief executive of the Fawcett Society. “As well as the job losses, they’re also facing cuts to their income as a result of cuts to benefits and services they rely on to support their lives. We’re really concerned that cuts to childcare support combined with the rising cost of living make it difficult for women to put in place support that allows them to go out to work. We’re also concerned that working tax credits that allow parents to go back to work are being cut and that makes it hard for single parents to balance their work and family life.”

Bird says she is concerned that large numbers of women are taking lower status, lower paid work out of necessity, and an increasing number of women are taking part-time jobs: 5.86 million, nearly three times the number of men in part-time employment. “We need to investigate whether those are women who positively want to work part-time or whether it’s a response to the jobs situation,” she says.

The government is banking on a private sector-led recovery, although little has materialised so far. Even when firms start hiring again, it could prove to be a step back for many women. The gender pay gap – with women earning around 18% less – is double that of the public sector, which is 9.2%. “The public sector has also been quicker to respond to the needs of women, for example implementing more flexible working policies to suit family life and that’s had a marked impact on the number of women who are able to work. That’s why more women work in the public sector,” says Bird. “The private sector has been less likely to offer the kind of flexible working arrangements that many women want.”

It is still too early to predict what the long-term outcome for many working women will be, but with the effect of the cuts and more job losses still to come, Bird is not optimistic. “The evidence is that women’s equality is turning back a generation.”

Trading up, trading down

From a former school in Bath to a weavers’ cottage in Gloucestershire

Andrew Lansley wins battle to keep NHS risk assessment under wraps

Labour motion demanding publication of document defeated despite growing disquiet among Tory and Lib Dem MPs

Health secretary Andrew Lansley looks more determined than ever not to reveal the findings of a risk assessment done on the government’s NHS shakeup.

Lansley won the support of MPs, who voted on Wednesday by a majority of 53 against a Labour motion that the Department of Health should make its document public. However, growing disquiet among some Conservative MPs and Liberal Democrats was voiced by Lib Dem MP John Pugh, who told the often bad-tempered debate that the bill was “toxifying the Tories” and “sadly detrimental” to his party.

Lansley suggested to MPs that he might refuse to release the risk register even if instructed to do so by a tribunal due to meet in a fortnight to judge on his dispute with the information commissioner, who has instructed him to publish.

Lansley twice refused the opportunity to tell MPs he would accept the tribunal’s judgment. Answering deputy Lib Dem leader Simon Hughes, the health secretary instead quoted from an article in the Observer by the information commissioner, in which Christopher Graham said he was “not infallible”.

“The government has the right to appeal to the tribunal [following the information commissioner's ruling] and the tribunal is the proper place for that public interest test to be tested,” he said.

Defending his decision, Lansley said the prospect of publishing such assessments reduced the quality of advice to ministers, meaning documents would become “bland and anodyne” and “cease to be of practical value”.

“To be effective, a risk register requires all those involved to be frank and open about potential risk,” Lansley told MPs. “It is their job to think the unthinkable and look at worst-case scenarios. It is vital nothing is done to inhibit that process.”

Asked whether Lansley’s comments suggested local and regional NHS risk registers, which have been published, were not as strong as they could be, a department spokesman said they could be “potentially watered-down”.

As the Guardian reported last week, the risk assessments of the four English regional strategic authorities suggest there are wide-ranging concerns, including that patient care and safety could be damaged and costs could rise.

Lansley cleared up some confusion about the hotly debated risk register, saying the document in question was the “transition risk register”, relating specifically to the reorganisation set out in the health bill, an assessment which was first drawn up in 2010 but is continually “reviewed and updated”. This was different to the department’s “strategic” risk register of all its operations.

The department said that, unlike the strategic authorities’ and other NHS risk assessments, its risk register concentrated on policy development. However, a spokesman said refusal to publish the register extended also to explaining what questions it might cover, eg, if it dealt with how the bill might pass through parliament, or gave technical details about how its parts might impact on each other.

Labour’s opposition day debate was fronted by

shadow health secretary Andy Burnham who insisted MPs and peers had a right to know the implications of health reforms before they voted on the bill, which is currently in the report stage in the House of Lords.

“He [Lansley] is running unacceptable risks,” said Burhnam. “What he’s doing is wrong and needs to be stopped.”

Burnham had to fend off repeated charges by Conservative MPs that he had refused similar requests for risk registers when he was health secretary in the previous Labour government. Burnham said he had refused to publish a different document – the strategic register – and that he had not been overruled by the Information Commissioner. Labour did release a similar policy-specific risk assessment, into Heathrow’s third runway, when it was in government, said Burnham.

Defending Lansley, Tory MP Mike Freer said: “The release of the risk register is seen as an opportunity by the opposition to cherry-pick doomsday scenarios the register may contain. It is simply a charter for shroud-waving.”

Former shadow health secretary John Healey said: “These current plans are unprecedented in their nature, scale, pace and timing, and that means there is exceptional attention and exceptional concern about the risks associated with their implementation – and that’s why there is an exceptional case for releasing this transitional risk register.”

Former Labour health secretary Frank Dobson said: “I think the government will finally conclude it’s foolish of them not to publish this register because everybody assumes they must have something to hide.”

A4e compelled jobseekers to work unpaid in its own offices

DWP reveals that A4e sent the unemployed to work in at least two of its own offices in an apparent conflict of interest

The company at the centre of a police investigation into an alleged abuse of government back-to-work contracts compelled jobseekers to work unpaid in its own offices for at least a month at a time, the Guardian can reveal.

In response to a freedom of information request about the company last year, the Department of Work and Pensions (DWP) revealed that A4e sent jobseekers it was meant to be helping into employment to work in at least two of its own offices in an apparent conflict of interest.

The placements, part of Labour’s Flexible New Deal scheme, were mandatory and are understood to have lasted for four weeks. Those on benefits were, in effect, forced to work for free for the company or have their benefits stripped.

The DWP’s list of placements from just one of A4e’s offices in Holloway, north London, shows that it sent the unemployed to work at two of its other London offices in Camden and Woolwich. The document also contains a third reference to work in an A4e office.

The list also reveals that from the 12 months to late June 2011 the company sent people to work unpaid in Asda, Sainsbury’s, Oxfam bookstores and a host of other charities and small businesses.

Oxfam and Sainsbury’s have since pulled out of unpaid work experience programmes linked to the receipt of benefits. A dozen other major charities and high street chains have also left the programme following protests.

Speaking in the Commons on Wednesday, David Cameron praised work experience for young people. “I think we should encourage companies and encourage young people to expand work experience because it gives people a chance of seeing work and all that involves and gives them a better chance to get a job,” he said during prime minister’s question time.

The prime minister will go further in defence of the government’s work experience schemes on Thursday. “We see this in the debate on education, put a young person into college for a month’s learning, unpaid – and it’s hailed as a good thing,” he will say.

“Put a young person into a supermarket for a month’s learning, unpaid – and it’s slammed as slave labour.

“Put a child into a great school run by a local authority – cause for celebration.

“Put them into a great school backed by a bank – and that is a cause for suspicion.”

He urged a “thorough” inquiry on Wednesday into A4e after four of the company’s former staff were arrested as part of an ongoing police inquiry at its offices in Slough.

A former government official who helped devise Labour’s unemployment programmes said he was “very surprised” that A4e had placed the unemployed to work for free in its own company.

There is no suggestion that A4e would have received any direct financial reward for placing people in unpaid work experience but the official explained that mandatory placements were partly devised to stop those private companies running back-to-work schemes from “parking” difficult or problematic jobseekers.

Apart from being able to gain from unpaid labour, the senior former official, who did not want to be named, said sending jobseekers to work in its offices would help A4e cut down on its overheads as it would not have to spend time on organising placements in outside businesses.

The company – owned by families tsar, the millionaire Emma Harrison – has refused to comment on the allegations or explain what work they were made to do and whether it included tasks such as data entry, cleaning or was job shadowing.

Harrison has come under pressure to step down from her post since she was appointed by Cameron in December 2010 but on Wednesday a spokesperson for her said she was “staying put”.

A4e corroborated the veracity of the document and has previously confirmed that companies listed in the freedom of information release have been used by A4e to place jobseekers.

The revelation raises the question of where private companies running back-to-work schemes such as Mandatory Work Activity (MWA) and the Work Programme are allowed to place unemployed people.

In recent days, ministers and the DWP have insisted that while the “voluntary” work experience scheme operates in high street chains, mandatory placements are always for community benefit.

Writing in the Sunday Telegraph, employment minister Chris Grayling said: “Where we use mandation in our welfare policies, it will be to do useful work on community projects. We will never mandate anyone to work for a big company. They wouldn’t take them if we did.”

An official tweet from the DWP also backed the claim saying: “The DWP only mandates people for community work #workfare”.

However, the private company Seetec, which won two contracts to run the MWA scheme in London and the East of England told the Guardian that “community benefit” also includes private companies.

In a statement Seetec said: “There are occasions where people taking part in MWA would carry out a work placement with a local employer who may be a private company, but this would be a placement that does deliver community benefit.”

The DWP has now clarified that private companies can also be included in the definition of “community benefit”. Official figures show that 24,000 mostly young jobseekers have been made to do MWA but since this entire scheme is administered by private companies, information on where worked has not been made public. In response to questions about mandatory placements from the Guardian, a spokesperson for Ingeus Deloitte, which administers MWA in the east Midlands and the north-east, said: “We have not sought the permission of MWA placement providers to publish their names so will not be able to issue you with a list at this time. However, I can confirm that our clients are placed with wide range of community-based organisations and charities which benefit the local community, in accordance with the provider guidance issued by DWP.”

Both Seetec and Ingeus said that they did not place jobseekers on MWA placements within their own company.

Official provider guidance for the MWA says “community” benefit can be defined as profit for the person using the unpaid jobseeker in their organisation.

Under section 48 of the 2011 official guidance, the third definition of community benefit is described as “working towards the profit of the host organisation, providing that the majority of the role is dedicated towards delivery of benefit to the community”.

A Labour MP has contacted the Guardian to say they were concerned that the MWA programme had not been scrutinised by the Commons and had passed into law with the “tick of a minister’s pen” last year.

A spokesperson for the DWP said: “As well as offering jobseekers the chance to develop work-related disciplines and behaviours, DWP specifies that all placements under the Mandatory Work Activity scheme must be of benefit to the local community. This could be in a wide range of roles, including renovating and recycling old furniture, working in a local sports club or supporting charitable organisations. The department also specifies that placements must be additional to any existing or expected vacancies.”

Alex Salmond challenged to hold Scottish independence vote in 2013

Scottish secretary releases legislative timetable showing referendum could be held a year earlier than planned

Alex Salmond has been challenged to hold his referendum on Scottish independence a year earlier than planned after UK ministers insisted it could be staged within 18 months.

Michael Moore, the Scottish secretary, accused the first minister of deliberately delaying the poll and released a legislative timetable showing that the referendum could be held in September 2013, a year earlier than Salmond has proposed.

In the most detailed challenge yet to the Scottish government’s preferred timetable, Moore said: “No one has yet explained to me why the people of Scotland should have to wait nearly three years to make the most important decision we will ever make. It is not in the interests of the Scottish people to build up uncertainty and make them wait.

The UK government’s challenge is intended to intensify the pressure on Salmond after his inconclusive talks on the referendum’s timing and rules with David Cameron and Moore earlier this month.

During prime minister’s questions on Wednesday, Cameron accused Salmond’s government of running away from the referendum, saying: “As soon as you’re offered a referendum that gives you the chance to put that in front of the Scottish people, you start running away.”

Cameron has offered to make the referendum legally watertight by giving Holyrood the powers to hold it, in exchange for concessions such as asking only a single question on remaining in the UK and on timing.

Although Salmond is prepared to concede the UK Electoral Commission should oversee the referendum, he is refusing to budge on his 2014 timetable and is defending plans to put in two questions, including one on increasing Holyrood’s powers within the UK, and to allow 16- and 17-year-olds to vote.

Bruce Crawford, the cabinet secretary for strategy in the Scottish government, said it had received an “unanswerable mandate” to stage the referendum at a time of its choosing, “while the Lib Dems lost every … seat in mainland Scotland”.

He said the timetable issued by Moore, a Liberal Democrat, was “flawed and full of holes” since it failed to give enough time to analyse consultation responses and the 10 weeks’ minimum needed to test the ballot.

“In any event, it is simply not for the secretary of state to dictate the legislative timetable of the Scottish parliament. And given the abysmal farce of the AV referendum, the very last people to listen to on the timing and terms of a referendum would be the Lib Dems.”

Moore, however, said recent opinion polls contradicted the SNP’s assertions that it had won a mandate for its preferred date of autumn 2014 by its landslide Holyrood election victory in May last year.

The official Scottish National party position during the election campaign, as set out in its manifesto and election material, was to stage a referendum at an unspecified date in its five-year term in office.

As it became clear the SNP would comfortably win the election, Salmond refined that verbally during a television debate to say in the later half of the term. His critics insist this date was never formally put to voters.

Moore said a recent Ipsos Mori poll showed that 62% of voters in Scotland wanted to hold the poll before autumn 2014, against 22% who supported the later timetable.

Under the UK government plan, the referendum bill could be brought to Holyrood in autumn 2012, and not 2013 as planned by Salmond; it would receive royal assent in March 2013, rather than November 2013; and the referendum campaign could start in June 2013, not the summer of 2014.

“The timetable the Scottish government has set out has heel-dragging built into it,” Moore said. “There are months and months set aside for straightforward tasks [which] could be done properly in a much shorter timeframe.”

Salmond has repeatedly insisted that 30 months is needed to allow the independence proposals to be properly developed legally and politically and then fully debated by voters. He also believes that campaigners who would support a second question on greater devolution need more time to develop their case.

He said in January that autumn 2014 “was the date that allows everything to be put in a proper manner on the most important decision in Scotland for 300 years. That date will allow the Scottish people to hear all the arguments.”

His opponents believe he is playing for time because Scotland will play host to several high-profile sporting and cultural events in 2014, including the Commonwealth games. Scottish ministers also say privately that by then the Tory and Lib Dem coalition in London could be deeply unpopular and at war as it prepares for the 2015 general election, strengthening support for independence.

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Ex-Greggs chief attacks executive pay

Sir Mike Darrington has become the first senior executive to break ranks with his peers and attack levels of boardroom pay

The former boss of Greggs, who built the bakery business into one of the UK’s most successful high street chains, has become the first senior executive to break ranks with his peers and attack the level of boardroom pay in corporate Britain.

Sir Mike Darrington, who led Greggs for 25 years before his retirement in 2008, said: “The quantum of executive pay is excessive and must be reduced … if the current packages were halved, senior executives and bankers would still be overpaid.”

Darrington, who was knighted in 2004 for services to business, has pledged to use his retirement to campaign against excessive boardroom pay deals. He hopes to encourage other like-minded business leaders to offer a critical perspective from inside the executive world.

In particular Darrington, 69, is keen to scotch the myth that attacks on executive rewards are attacks on business. “It is a smokescreen and a lot of bollocks – it is the greed of the people [at the top] that is anti-business.” He has labelled his campaign “pro-business and anti-greed”. He admits he had been sceptical about trends in corporate governance but claims remuneration has become such a toxic issue it must now be dealt with radically.

His condemnation of existing arrangements is the most searing criticism from the business establishment since Richard Lambert, then director-general of the Confederation of British Industry, two years ago warned bosses risked being viewed as “aliens [living in] a different galaxy from the rest of the community” because of the ever widening gulf between shopfloor and boardroom wages.

Darrington, who was born in Sussex but has lived much of his life in Jesmond, Newcastle, is seeking to build a broad base of support for a campaign to reign in executive pay. He is already supported by the High Pay Centre and corporate governance advisory group Pirc, but is keen to get public backing from fund managers and, ultimately, executives themselves.

In 2007, as Greggs chief executive, Darrington received pay, benefits and bonus of £901,000 and, a year later, retired having built up a pension pot of more than £2m. His pay was modest compared with peers. Since the group joined the stock market in 1984 it has grown steadily, becoming a FTSE 250 stock, and proving one of the few high street success stories during the recession. It continues to open stores, creating jobs, while many of its peers rapidly contract or go to the wall.

Unlike many politicians who have joined the debate on executive pay recently, Darrington is also happy to cite specific examples of what he sees as unacceptable excess. He attacked the decision this month by Barclays chief executive Bob Diamond to trim back investment banker pay by a third. “If profits are down [nearly] 40%, bonuses should be nil,” he said yesterday at a governance conference organised by Pirc.

Also criticised were past pay arrangements for former Marks & Spencer boss Sir Stuart Rose and former Tesco chief executive Sir Terry Leahy. Darrington suggested that during Leahy’s final years Tesco’s share performance had been “good but not brilliant — and look what happened since”. Some £5bn was wiped off the value of the group last month after Leahy’s successor Philip Clarke delivered a heavy profits warning and attacked the company’s “long-standing business issues”.

Darrington also dismissed fears that companies taking a hard line on executive pay risked losing vital business leaders to rivals. It would be healthy to cut back pay to such a level that executives left, he said, as most companies had a rich pool of talent which could step up to fill any roles left vacant. “If you don’t start to lose people, we have not gone far enough,” he claimed, though he accepted a mass exodus might indicate inappropriately low levels of pay.

The increasing complexity of pay arrangements is another bugbear for Darrington. He said multiple bonus arrangements, purporting to be linked to performance, were “guilty of obfuscation”.

Reflecting on the many cases of executives received big payouts despite manifestly poor performance, he said the complexity of remuneration arrangements meant shareholders “do not know what is going on until it is too late”.

Letters: A4e and the dangers of outsourcing

Congratulations to John Harris on his excellent article about A4e and the perils of outsourcing (Nice work if you can get it, G2, 22 February). As he points out, A4e and others act like an arm of the state but with little transparency or democratic scrutiny. It is good to see a politician of the status of Margaret Hodge admitting policy mistakes and recognising that “private providers often don’t provide well”. Should a contract end and the work need to be taken back in-house, there are further complications. The expertise has often been lost by the local authority or government department. They then have to reinvent the wheel at great cost to discharge their responsibilities.
Tony Clewes
Walsall, West Midlands

• I work for a locally recognised, small, specialist welfare-to-work provider – typical of the sort that Iain Duncan Smith insists the prime providers of the now infamous Work Programme should be engaging with. We know from previous articles that, contrary to their assurances during the tendering process, prime providers are not engaging with organisations such as us. A great many of us had and still have concerns about how prime providers have been operating, especially with the “harder to reach” claimants who would need longer-term and more expert support usually provided by specialists.

While it is unfortunate that four members of staff from one of these providers have been arrested on suspicion of skewing the figures to generate more income, I wonder whether this is the tip of the iceberg. Perhaps deeper investigations should be undertaken.
Jane Cattermole
Senior employment manager, Employment Support and Retraining Agency Ltd

• As somebody who was unemployed for 18 months, I’m glad that MPs and the public are beginning to see A4e’s shortcomings. I had a short experience with them and it was awful, with no help in finding work and the only work offered unpaid in a charity shop already over-staffed with other jobseekers from A4e.

I had to borrow money to fund a training course. When I got a new job, A4e got paid by the government for helping me into work even though A4e were no help and continued to get payments for me in work. In your article it says the total payments A4e gets from each person such as me is up to £13,000. Why doesn’t the government give jobseekers control of this money, and let them decide how to best use it so they can learn a new skill or fund a university course?

I only needed £1,500, so the government would have saved £11,500. The government must let jobcentres do more and stop people like Emma Harrison making millions from unemployed people.
Mark Judge
Sheffield

• On Tuesday I listened to an original recording of Asquith talking about his people’s budget. He made it clear that it was only fair that those who had most should pay more tax to help those who had nothing. Buried deep down in David Laws’s article (Our ambition for fairer tax, 22 February), one politician has the guts to make the same plea.

As a retired person on a reasonable occupation pension, I have, so far, been virtually unaffected by the austerity measures. I would gladly pay some extra tax if it meant that more young people could get into work, but no political party is prepared to offer me that option. Increasing VAT was a regressive measure affecting all, but income tax does, or should, reflect ability to pay and, in David Cameron’s “big society”, fairness has to be one of his aims or it stands even less chance of capturing the public imagination.
Maureen Panton
Malvern, Worcestershire

• David Laws, while supporting a policy which will condemn thousands more, particularly young people, to unemployment, claims the only tax change possible is to reduce tax avoidance and scale back certain reliefs. But there is a much simpler “tax change” which could yield up to £10bn: add three extra divisions to council tax rates. Income and affluence levels are closely related to the value of houses owned and any tax is unavoidable. The small number with high-value properties and limited income would simply have to move – the fate which will apply to the large working-class families in London because of the new rules.
John Pert
Tonbridge, Kent

• Margaret Levy is no doubt convinced by her own claims about the Youth Training Scheme (YTS), and the purported features that, “by design”, it was “intended” to have (Letters, 20 February). She omits to state that in 1982, prior to the development of YTS, the Conservative government had abolished the majority of the very agencies that would have been able to develop relevant youth training programmes in negotiation with and agreement by employers, trade unions and educationalists.

Those agencies, the statutory industrial training boards (ITBs), had close links with employers and the occupational fields they covered, undertaking detailed research into changes in skill requirements and developing qualifications directly linked to job requirements. They were run by boards that had employer, trade union and educationalist members. Some 55% of the UK workforce was efficiently covered by the ITBs prior to 1982, with a total staff of only about 20% of that of the bloated Manpower Services Commission, which was effectively an arm of government.

The reason for abolition of most ITBs, and disabling of the remainder, was clear: they would not have supported YTS as it was introduced, because it did not meet the skills needs of industry. If the ITBs had not been abolished, we might by now have the highly skilled, globally competitive workforce we so desperately need. Clearly, the abolition of the ITBs, espousedly to improve training and skills levels, has been an utter failure. Their reintroduction is urgently needed but, sadly, unlikely under the ideologically driven policies of the current government.
Dr Leonard Holmes
Reader in management, University of Roehampton

• Employment minister Chris Grayling is stalling for time by suggesting that the unpaid work schemes he has promoted to businesses are to be reviewed (Unpaid work scheme may be reviewed, says minister, 21 February). He is attempting to justify the unjustifiable: tens of thousands of people being forced into working for companies, including Tesco, the biggest private-sector employer in the country, which made profits of £3.8bn.

He talks of protecting small employers, but the reality is that “workfare” schemes are a multimillion pound industry. On an eight-week placement, Tesco saves £1,500 by not paying the minimum wage of just £6.08 an hour to people on placements. Many have reported that they do the same work as any other Tesco employee without pay. 

Multiply this by the 1,400 workers Tesco says it took on placements in the last four months (Tesco under pressure to withdraw from unpaid work experience schemes, 17 February) and you arrive at £2m pounds in four months – £6m over a year. These savings on Tesco’s wage bill are being subsidised by public money used to pay the subsistence benefits that keep those in forced labour fed.

The employment minister also states: “The idea of people being press-ganged to work for nothing to provide cheap labour for big firms is totally untrue.” But as documents released by the Guardian show, the minister is disgracefully pushing not just the young, who face mandatory work activity for four weeks,into unpaid work, but also the disabled. In the case of those on disability benefits, there is no time limit on the period of servitude.

Referring to the plans, The Royal College of Psychiatrists has stated it would prefer the placements to be optional, suggesting that as it stands the vulnerable people they are aimed at have no choice in whether to participate.

Grayling should stop playing for time and move immediately to end the disgraceful schemes that are exploiting the most vulnerable to boost the profits of big business.
Mark Dunk, Rhia Lawrence, Alexandra Sayer, Richard Donnell
Right to Work