Connected Research

Union policy research in the 21st century

Archive for September 2009

Bradshaw confirms legislation to tackle illegal downloading

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Ben Bradshaw, Culture Secretary, has confirmed in a fringe meeting at the Labour Party conference that legislation to tackle illegal downloading would be included in the next Queen’s Speech.

Bradshaw, sharing a platform with Feargal Sharkey, former Undertone and current chief executive of UK Music, directly referred to another possible way of tackling the problem in addition to that of cutting off access – that of restricting the access speeds of file sharers. ‘Squeezing’ the bandwidths of those involved is also the agreed view of UK musicians who last week, in a meeting convened by UK Music, reached a compromise position on the issue after a rather public debate between two camps of them. Capping, or shaping, broadband speeds or data volumes is one possible measure included in the Department of Culture Media and Sport consultation on illegal peer-to-peer file sharing, which closes today, and has the advantage of ensuring that the net access of illegal file sharers continues while addressing the problem of illegal downloading. Back in August, BIS specifically inserted into the consultation the possibility of cutting off access completely, in an intervention regarded as the contribution of man-of-the-moment Lord Mandelson, while France has also recently approved a new law cutting off access on a ‘three strikes’ basis (see further below).

Capping speeds or volumes is clearly not a perfect remedy since legal downloads – e.g. via iPlayer – will also involve high traffic volumes as well as requiring high speeds and allowing continued access to legal downloads might well be a legitimate part of the ‘rehabilitation’ of those found to be sharing files illegally. More prosaically, just how effective speed squeezing might be, given the contention-based problems which affect the network currently, is a fair question and we might well wonder whether anyone thus affected would actually notice that their speeds had been throttled back. Nevertheless, since this is the agreed position of UK Music (although illegal file sharing clearly does not only affect musicians), and given the shared platform between Sharkey and Bradshaw in Brighton this week, this is likely to be the preferred solution which eventually makes its way into the Queen’s Speech.

Its likely effectiveness in dealing with illegal file sharing, which is a problem area given technological advances, is unclear – but potential difficulties in this are evidently not a reason for inaction and it remains right to consider how policy can be shaped to tackle the problem. Copyright exists for a valid reason – well defended by Sharkey recently – and getting people to understand why, in the file sharing age, is an essential activity in ensuring it retains its relevancy.

Written by Calvin

29/09/2009 at 12:53 pm

RSA report illustrates impact of pensions management costs

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Pensions for the people: addressing the savings and investment crisis in Britain, a report by David Pitt-Watson, founder of Hermes Equity Ownership Services, for the Royal Society of Arts highlights (among other things) the effect on pensions pots of annual management charges.

The report starts from the perspective that the investment chain is currently failing as a result of high investment management costs and inadequate corporate governance and makes proposals for how these can be addressed within the framework of the government’s pensions reforms. As Pitt-Watson points out, the imminency of the reforms – starting in 2012 – as well as signs that the opposition is currently reviewing its policy on them adds to the urgency with which the problems he highlights must be addressed.

Certainly, the running costs of private pensions are little understood. Pitt-Watson points out that the annual fees charged to a private pension is somewhere in the region of 1.5% of the total balance of the fund in each year (the Pensions Commission calculated slightly lower, at 1.3%). This means that, over the course of the average lifetime of a pension, some 40% of the total pot goes into costs and charges, meaning a hefty reduction in the size of the annual pension that such a pot will secure: Pitt-Watson’s calculations suggests a reduction from an annual pension of £16,080 (in the unrealistic scenario of there being no charges at all) to one of £9,901. In contrast, a pension of £13,657 could be achieved at a cost structure of 0.5% and one of £14,756 at 0.3% – a significant increase in return for no more investment by the individual pensions beneficiary concerned and with a knock-on effect on the extent to which future generations of retired people are going to be reliant on the state.

So, it is clear that personal accounts must have low charges – and also that employees with DC schemes more generally ought to pay much more attention to the cost structures charged to their schemes.

Through auto-enrolment, much of the on-costs of marketing and product set-up are taken out, meaning that personal accounts can be established on the basis of a much cheaper cost structure. The Pensions Commission suggested that an annual management charge of 0.3% was achievable; the government’s response agreed that it may be possible to achieve an AMC at a rate of 0.5% of funds invested in the short-term and below 0.3% in the long-term.

Pitt-Watson’s suggestion for citizen investor funds – to tackle the corporate governance inadequacies – have similar cost structures underpinning them but he does suggest increasing the £3,600 maximum amount that can be saved in personal accounts – a proposal which the TUC has also previously supported. This he suggests would facilitate the creation of collective investment vehicles of sufficient scale that would essentially entail the creation of major new market players committed to good long-term corporate governance.

With the government having previously suggested that the attainment of a replacement rate of two-thirds of income could be achieved within the £3,600 annual limit on contributions, the personal accounts system may not see the establishment of pensions institutions of the sorts of scale that Pitt-Watson is seeking as regards the corporate governance aspects of his report, but continued industry support for lower cost structures is the one that will deliver the most practical benefits to ordinary pensions savers.

Written by Calvin

28/09/2009 at 2:26 pm

TUC’s 11th Recession Report

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This was published today and can also be accessed over the usual route via the TUC’s excellent Touchstone blog.

The headline figures from the brief are that ILO unemployment now stands at 2.47m (7.9%) and has risen for 14 successive months. It now stands 743,000 people higher than at the same quarter one year ago. Some 560,000 people have now been out of work for over one year. Meanwhile, the population in work stands at 28.9m – representing an employment rate of 72.5%, a decrease of 2.1 points on the figure one year ago.

The Report also includes some very interesting data on out of work benefits with which to respond to right wing commentators, as well as on lower-paid workers which is the group hit hardest by the recession.

The special commentary this month is on the adequacy of benefit rates for unemployed people. Starting from the perspective that Jobseeker’s Allowance is lower today relative to average earnings (it’s just 10%) than was the case for unemployment benefits in the 1980s (c. 17%) and 1990s (c. 15%) recessions, the TUC is renewing its call for an increase in JSA to at least £75 per week (a £10 increase). This is where JSA would now be if the incoming Labour government in 1997 had re-introduced the informal link between unemployment benefit and movements in average earnings abandoned by – yes, you guessed it – in 1980. The link existed for a very valid reason – it ensures that people out of work over a period of time do not lose relative ground on those remaining in work, thus holding back the growth of inequality given the obvious links between existence on benefits and families in poverty.

Written by Calvin

25/09/2009 at 6:03 pm

Posted in Economic trends

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DWP announces transitional regime for 2012 pension reforms

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The DWP has launched a consultation exercise, Workplace Pension Reforms – Completing The Picture, surrounding the introduction of a set of regulations due for 2010 and concerning the 2012 pensions reforms.

The 2012 pensions reforms refer to the introduction of the system of personal accounts for those who don’t otherwise have access to an occupational pension scheme, mandatory for employers unless individuals choose to opt out, and based on a minimum employer contribution of 3% (and a total of 8%, with an additional 4% coming from employee contributions and the other 1% in the form of tax relief).

Key amongst the suggestions the DWP is making in the consultation is for a staged implementation of the introduction of personal accounts. Starting in 2012, employers will be introduced on to the system over a period of three years, ranging from large employers in the first place to the smallest ones by the end; and will, during that period, make contributions of no more than 1%. Once all employers have been introduced to the system, the employer rate will increase firstly to 2% and then, one year later, to 3%.

To put a timeline on this, employers will be introduced to the system between 2012 and October 2015, at which point the rate will rise to 2% and it will not be until October 2016 that the system will be in its ‘steady state’ with all employers paying 3%.

The consultation is a large one and needs to be digested properly, but my initial reaction is one of disappointment. The reason for the staged process is the load at key points on the key delivery agents – largely, The Pensions Regulator and the Personal Accounts Delivery Authority – together with employers being likely to leave participation until the last possible moment, becoming unmanageable. This is perhaps an understandable perspective but, at the same time, the system of personal accounts was suggested in May 2006 and subject to a further consultation in December 2006. The Personal Accounts Delivery Authority was legislated for in the Pensions Act 2007, and had its remit broadened in the 2008 Pensions Act which also introduced the notion of auto enrolment on the basis of minimum employer contributions. This implies – provided there is no further slippage – a period of introduction lasting 10 years from gestation to completion (actually, 10 and a half, given the 1 October anniversary dates introduced in the guise of ‘better regulation’). Two whole parliaments.

This is clearly an important and complex reform and the time is perhaps not the most propitious. I’m sympathetic to the notion of easing workloads that could be tough to manage. But 10 years? 8 years from the last piece of major legislation? 6 years from the date of the Regulations? Just how long can it take for systems to be established and for employers to get used to the idea?

The reform has all-party support so, unless that consensus is broken, the reforms will survive any change of government in the next election (and in the one after that…). However, I would like to have seen a quicker (much quicker) period of implementation given this major piece of reform aimed at extending the principle of occupational saving for retirement. In the meantime, it looks a complete victory for any strategy of kicking the notion into the long grass until it really has to be dealt with – and this level of capitulation to is perhaps the most disappointing thing of all.

Written by Calvin

25/09/2009 at 12:06 pm

Posted in Pensions

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TUC joins lobby for a jobs G20

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TUC General Secretary Brendan Barber is joining a fifty-strong lobby by union general secretaries from around the world of world leaders in Pittsburgh. The aim of the lobby, which will involve several meetings with heads of government and global institutions, will be to argue the point that Friday’s G20 summit should be a summit for jobs, aimed at helping people survive the recession and overcome poverty by facilitating a return to decent work offering good wages.

The ITUC argues as part of the research for its Pittsburgh Declaration that the global crisis will have cost 59m jobs by the end of the year – equivalent to the whole population of the UK – and that unemployment across OECD countries could reach 10% in 2010, and rise still further into 2011. Furthermore, it could lead to 200m more people falling into poverty. In this context, it is unarguable that the G20 must address the need to create work if economic recovery is not to stall as a result of a lack of demand.

The union lobby is a useful reminder of two things:

– that, whatever the technical, economic definitions of recession related to GDP, a recession continues while people are losing jobs – and that this is likely to be for some time after the recession has technically ended

– that an ending to the crisis does not mean an end to discussions about what caused it, from the perspective of preventing it from happening again. In contrary to any quick return to ‘business as usual’, economic policy remains very much a contestable area of public policy. As Barber argues:

Governments need to be talking to employers and to unions – not just when there’s a crisis, but to stop the next crisis from happening. We need millions more green jobs, tougher rules on top bankers’ bonuses, and a fairer global economy – and millions of people around the globe will be looking to Pittsburgh this week for just that.

Written by Calvin

24/09/2009 at 1:03 pm

DPI and net neutrality

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An interesting aspect to the net neutrality debate in the US, about which I blogged a couple of days ago, is how internet service providers know which traffic to prioritise so as to manage the load on the internet at peak times.

The naive assumption might be that they monitor particular servers, or use of particular sites, and then throttle that traffic back – and some might well do it this way. At least Comcast amongst US ISPs, however, uses Deep Packet Inspection [registration required; limited viewing time], which brings a whole new aspect to net neutrality: that of online privacy. Deep Packet Inspection, in the definition of online privacy campaigners, is akin to post officers opening your Royal Mail envelopes and examining the contents before handing you your post. To extend that analogy, DPI allied to traffic management measures is akin to your first delivery post being opened, the postal delivery officer saying to you ‘Oh, I see you’ve got some pretty big files in there – you can’t have it now but I’ll bring it back when I come back with second delivery’ [or tomorrow, for those who don’t get second post].

So, Comcast knows whose traffic to throttle back not because it has a general approach to the management of traffic to and from particular sites but because it knows you, as an individual, are downloading a file from the computer of someone on the other side of the world who you’ve never met – and it knows that because it has examined your communications in detail (and then sidelined it in terms of priority).

The above link talks in general about companies offering DPI services not having actively marketed their offerings in the US since Comcast was cited for its traffic management last August – but having concentrated on Europe and the Middle East. Should the net neutrality debate cross to Europe – as some have suggested it might – this is an aspect that campaigners will have to be aware of – and not only then, if DPI companies are already actively marketing in Europe.

This tying up of DPI and online privacy with net neutrality casts a dangerous aspect to the debate. Traffic management measures (to paraphrase what I argued earlier) are probably a necessary evil, currently – but not at the price of online privacy. If ISPs must manage traffic to ensure that too-thin pipes don’t fall over under the weight of our net usage, how they do that must not compromise the privacy of your online communications.

Written by Calvin

24/09/2009 at 12:14 pm

Broadband levy back on track

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The BBC website today is reporting that Stephen Timms, the Minister for Digital Britain, has told a meeting organised by the British Computer Society that the 50p month broadband levy, designed to raise funds to assist with the roll-out of broadband to areas which, left to its own devices, the market would not supply, would be law ‘before the next election’.

This is in contrast to previous rumours circulating during August that the levy was to be dropped (see earlier post).

Despite likely Conservative opposition, the levy would be part of a forthcoming Finance Bill on the basis that:

We want to make high speed networks nationally available. The next-generation fund will help that and we will legislate for it this side of a general election.

Connect supports the concept of the levy on the basis of the need to extend high speed broadband services throughout the country on a socially cohesive basis, although we do have some comments to make about its coverage  and dimensions.

A copy of Timms’s remarks is not yet available on the BIS website, nor is there any reference to his remarks, or to the meeting concerned, on the BCS website.

Written by Calvin

23/09/2009 at 3:40 pm