NUJ Recovery Plan
Towards a Sustainable Union
The scale of the crisis
The NUJ is facing a severe financial crisis - with a perfect storm of falling income, rising costs and a hugely industrial environment for our members. At the Finance Committee last month, there was an extensive discussion about our financial position and a number of measures agreed for discussion at NEC.
This followed on from the Budget plan endorsed last year, which clearly set out the challenges facing the union and that fact that significant changes were needed to ensure not only our financial stability and sustainability, but also our political sustainability and future as an independent trade union.
There has been no single overnight event that has brought us to this position. The fact that there has been no positive uplift in the industry's fortunes, and therefore our members'; the continued pressure on our budgets and unresolved deficits in some areas; the drop in subs income in the first half of this budget, 3 per cent more than the 2 per cent decline budgeted; the depletion of our assets and reserves in the wake of successive deficits; and the crisis in our pension scheme - all of these things bring us to the position we are in today, and this combination of factors mean we have to take action. Sitting back and doing nothing is not an option.
As things stand, after provisions in the accounts for forthcoming agreed expenditure, we have around £300,000 in cash. That only amounts to 3 weeks running costs. We are running monthly deficits averaging over £20,000 (this is after the non-recurring one-off costs highlighted in the accounts). The overall deficit to the end of February is £267,000. If immediate action is not taken this money will run out in October and the union would be insolvent.
We also now have accurate data on membership statistics, long overdue. The introduction of a new membership system as well as other organisational changes mean we have access to genuinely meaningful data. This shows an 18 per cent drop in overall membership figures in the past five years. Given the scale of the crisis in our industry we cannot assume that this decline will not continue.
After the audit of this year's accounts takes place [at the] following year-end in September, NEC members have to formally declare their belief that the union will remain a going concern. If comprehensive action is not taken, the stark reality is that members of the NEC would not be able to make that declaration to our auditors.
Our only remaining asset - Headland House - has a negative pledge of £1.4million on it to the pension scheme and what is left over is effectively the nominal Fighting Fund that is listed in our accounts. The building's current valuation, however, has dropped from £3.5million to just £2.7million. This means there is no ability to seek loans or extend our overdraft - even if it was decided that such a step would be an appropriate course of action.
We need to be completely clear that the way out of the crisis will involve cuts across all areas of the union's expenditure. Bernard Roche and I will be meeting with our bank, Unity Trust, next week to discuss the union's financial situation with the intention of presenting them with an endorsed Recovery strategy including a programme of cuts which will demonstrate there is a clear plan of action for tackling this crisis and setting the union on the path to sustainability.
That means planning for surpluses and rebuilding our reserves. As far off as that prospect might seem right now, it's absolutely vital if we're to ensure the NUJ remains sustainable, independent and able to deliver for our members now and in the future. If there truly is to be a recovery, we need to be planning for the future and that means committing to a recovery plan that delivers a real change in our financial situation and enable us not to simply lurch from crisis to crisis year on year.
The background to the crisis
It is important to recognise that significant measures have already been put in place to reduce costs and tackle problems within our budget.
I have been working closely with our national officers and chair of finance throughout this budget round to tackle the problems we face. Their input into this strategy plan has been considerable and it represents the collective position of the Budget Working Group.
In recent years, staff numbers have been reduced. ADM was changed to an 18-month cycle. Contributions to NUJ Extra ceased following an agreement with the charity's trustees (the union's commitment to paying the charity the 3 per cent of subscription under rule still exists, and the agreement with the charity's trustees is due to expire at the end of this year). We reduced the number of issues of The Journalist. Supplier contracts have been reviewed and in some cases changed in order to reduce costs. There have been minimal pay increases for staff since October 2008. We have sublet the 4th floor to the GFTU to bring in rental income and are currently renegotiating that contract. We are in the process of clearing the third floor to do the same. Working practices in membership and finance have been radically altered which has seen a considerable reduction in staff numbers in these areas over the last four years.
However, at the same time the economic crisis and the severe job losses and cuts within the broader industry have had a knock on impact on union membership and subs income.
Over the last three years a 2 per cent year on year decline in subs income has been budgeted. However, halfway through this budget round that figure has reached 5 per cent representing a significant decline. We have to plan for the likelihood that this decline will continue given the ongoing difficulties in our industry.
In 2009 the union took out a £2million loan to plug the £1.7million hole in the pension scheme, and the additional £125,000 charges in interest. A recovery plan was established, which saw employer and staff contributions increase, the splitting of the cross border scheme into two schemes and the pension fund securing a £1.4million negative pledge against Headland House.
The loan has now been repaid, following the decision taken by the NEC last year, to ease the pressure on monthly cash flow but the pensions problems continue. We are awaiting final figures but the possible pensions deficit in the UK scheme, due for a valuation in January, could range from £500,000 to as much as £4million depending on the calculation assumptions. The reality of the current financial situation means that the employer covenant in the pensions fund is weakened. This would consequentially mean the ultimate deficit would be in the higher threshold as that has to be factored in when agreeing the assumptions on any valuation.
I referred to the pension situation as the elephant in the room when I presented my budget plan last year. The pension trustees have been updated on our declining financial situation and I have made clear that there is no new money available to plug any future deficits. The response from the actuaries is to advise that a new financial strategy be adopted that will generate more returns - this necessarily introduces more risk into the scheme and therefore to the union. Following finance committee I wrote to the pension trustees on behalf of the national officers and chair of finance registering real concern about this. The scheme is not sustainable and is an additional major threat to our future financial stability. We now need to embark upon a formal consultation process with staff about fundamental change to the pension scheme going forward.
Cutting costs and Building Reserves
Cutting staff costs is key, as is ensuring that all budgets are kept as low as possible and controlled stringently. This process has commenced, budget submissions have been received and the annual budget-setting is in train. We will plan for a 10 per cent decline in subs income, based on last year's actual figures. This is a sensible and cautious approach - we cannot simply hope things will pick up in the industry and that membership will hold up or see a modest dip.
Back in 2007 we had 23 weeks of running costs in the bank. We now have three weeks - in the coming weeks that will drop to just 2 weeks. We need to rebuild our reserves up to 6 months of money and keep them at that minimum threshold and ensure we are able to deal with inevitable crises that will hit our members. That means a target of £2.5million - that requires £250,000 to be budgeted and put into reserves every year for the next decade.
A number of motions require approval at the Newcastle Delegate Meeting in October. There will need to be an awareness raising exercise amongst branches and delegates to explain the measures the union is taking to address the financial crisis and persuade them that they have a role to play, seeking support for motions the NEC will table.
Whilst taking a subs increase motion to DM is a difficult decision given the real difficulties our members are facing Finance Committee decided there is no option. We will seek a subs increase of 5 per cent - this equates to rises of between 15-26 pence per week. That's 15p per week for Grade 1, 19p per week for Grade 2, and 26p per week for Grade 3. This will require a two thirds majority.
However - to be able to put forward this motion and argue it we need to be able to demonstrate that our approach has been one of shared pain and that the union has made the necessary cuts and is committed to turning this crisis around with a recovery plan.
Finance also passed a motion to introduce biennial delegate meetings from 2014, with a one-day conference to be held at Headland House during the non-DM year. This was to ensure there was a real opportunity to pull activists and reps together and focus on the key industrial issues of the day - for example, like the Jobs Summit some years ago.
Financial necessity led to the shift in duration of delegate meetings. The "up to 18 month" cycle is a fudge we entered into for clear reasons but which is cumbersome democratically and logistically given our NEC cycles.
We have already taken the decision that the delegate meeting in 2014 should be held in London in April, and that a "no-frills" approach should be taken. The recommendation from Finance is that delegations should be capped at six with a minimum of two delegates. We are currently reviewing the costings of DMs with a more detailed report to come to the next Finance Committee.
It is important to note that significant savings have already been negotiated for the forthcoming DM in Newcastle in October.
In addition, the committee agreed that Freelance Loss of Earnings should be reduced from £50 to £35 - the total annual cost of FLE is currently £28,000.
Focusing on our core trade industrial work
Finance also decided that it was vital the union now focuses on our core industrial work with the priority of directing resources resources on the organisation and representation of members - this will involve the ceasing of union-funded professional training activities. I was asked to explore other ways of ensuring members can access what has proved to be a popular and useful service, particularly to our freelance members.
A significant amount of time has been spent since last June by myself and the national officers and chair of finance, in conjunction with the Training Organiser, in an attempt to turn around the long-standing budgeting problems within this department.
Despite this, halfway through this budget round the deficit stands at £29,000. The reality is that the problems reflect the staff costs of resourcing this department. The political decision was taken by the NEC nine years ago to embark upon professional training - on the basis that it was zero-cost to the union. The reality is that this has never happened and that the union has continued year on year to centrally subsidise this work. This is work that largely is carried out in England and Wales, not for our members in Scotland and Ireland (although it is possible for members to travel to England to access the courses). In Scotland there is a significant programme of training work - all carried out through external funding and at no central cost to the NUJ.
Finance Committee asked me to explore alternative ways of providing the service of professional training - given that the courses are well-received by members, and particularly useful to freelances - but to do so at no cost to the NUJ.
I believe it is perfectly possible to achieve this - with the aim of ensuring that a programme of professional training, carried out by NUJ members, is available to the broader membership and conducted across all union centres.
There are different options
- Tender a contract for NUJ Training; open this up to members, whether as an individual, collective, or company. The tender - which would provide income to the NUJ - could be offered on an annual or three year contract; it would give the right to advertise the services to our members; and access to our training rooms; administration would be the responsibility of the person/group who win the contract. The tender process would be handled transparently with an appointed panel established by the NEC.
- Training could be administered and delivered by the General Federation of Trade Unions on behalf of the NUJ: the GFTU under its new leadership (general secretary Doug Nichols was recently elected) has been working to develop the range of services for its members. The NUJ is an affiliate of the GFTU. They provide a range of training services for unions - anything from bespoke courses to running the entire training provision for some unions (eg Musicians' Union, Bakers' Union). They could run and administer the professional training programme - this could be structured in different ways. It could bring in an income for the NUJ; it could be a cooperative structure (the establishment and operation of which the GFTU could advise and facilitate under its educational charitable trust) of members that pay the NUJ for its training rooms. This NUJ programme could then be developed/tailored to other unions and advertised to all GFTU affiliates.
The NUJ has a longstanding commitment to ensuring its lay activists and reps are trained. This has been a commitment even during difficult financial periods in the past and must remain so going forward. Currently we provide what is effectively bespoke training of NUJ members - paying for trainer fees, the travel/accommodation costs of participating members, as well as the accreditation fee of £500 to the GFTU for each course. Although an affiliate of the GFTU, which brings with it the right for our members to attend the GFTU's core trade union training programme, we rarely utilise this service. Compare this to other unions who access training for their members to a tune that totally outstrips the affiliation fee they pay. These courses are free - but in addition the travel/food and accommodation costs of participants are fully paid for by the GFTU. The benefits of these courses are that our members meet other trade unionists from across the movement.
The GFTU can also provide tailored training. This could be done via a Service Level Agreement and at a cost tailored according to our budget (currently £40,000 but consistently underspending). It would therefore be possible to place our members on the free core programme on an ad-hoc basis, as well as providing specific training courses for, say, group chapel reps who want to focus on a specific topic eg redundancy consultations and representation.
The TUC also offers training as part of its Organising Academy programme. Again, this is free. It is bespoke to a union as long as a group of at least eight members sign up to it. It is done in a focused programme of practical training, around a particular campaign - this could work well within some of our group chapels or the BBC, for example, as a targeted recruitment and organising campaign.
A combination of these options could provide a comprehensive and innovative package of training - both trade union and professional - to NUJ members at no cost (in the case of professional training) to a budget not in excess of the current budget of £40,000 (in the case of trade union training).
This would be a practical way of guaranteeing the most important thing - that members are still able to access vital training.
Recruit and Organise
Cutting costs cannot be the whole solution. Growing our subscription income is a key challenge going forward. We have to devote time and resources to doing this. Despite the commitment of activists, at DM and on the NEC, this has not paid off with any increase in income. Subs income has declined year on year and the only responsible thing to do - in the light of the sharp decline in subs in the first half of this year - is to plan for a decline in the next financial year.
However, retaining and recruiting members will be even more important if we are to plan for a sustainable future as an independent union. We need an active strata of membership, we need confident lay reps if we are to meet demands for representation and advice and personal casework. The reality - even now but particularly with a smaller staff - is that full time officials cannot meet this demand. The role of the NEC and lay activists will be critical in this.
Therefore I propose to establish a Recruitment Task Force to spearhead this work, with immediate effect, reporting into the Development Committee and the NEC. I want NEC members and officials to work together with this task force to set out targets for organising work in every sector of the union so that our collective efforts are focused and strategic. Strategic priority should be given to in-fill recruitment and activity aimed at boosting organisation and confidence in our recognized workplaces. A strong core of lay reps need to be at the bedrock of our work. This activity should form a key part of the report-backs at every NEC. Work in this vein has already begun in Ireland and the Irish Executive Council, and now on the Wales Executive Council. This can be a genuine focus for activity we can build on come DM.
The redundancy consultation process with staff will continue. On Monday 28th May a 3 week voluntary redundancy window will close and I will be meeting with all reps to discuss next steps.
The decision by Finance Committee that total staff costs should make up no more than 45 per cent of total subscription income must remain the benchmark for the union's staffing going forward. Whilst it is difficult to be wholly inaccurate about the headcount reduction this necessitates, we estimate this to equate to 9 redundancies out of a total staff of 47 posts - the key aim is to make the necessary £400,000 cuts in total staff costs and incorporate this into the 2012/13 budget.
The process of setting the forthcoming budget will continue and the budget working group has a programme of meetings set out. This will be approached with the view of making savings across the board.
A special lapsing run is currently in process - with an amnesty for those lapsed for more than 6 months, enabling them to rejoin the union for a £25 rejoining fee. We will be able to update the next Finance Committee on what results this has had.
I ask all members of the NEC to take on board and carefully consider the scale of the crisis facing our union. This is clearly a difficult time for NUJ staff. Nobody - not anyone on Finance or the NEC, and certainly not me as GS, wants to be in the position of making redundancies. However the only priority there can be is ensuring the union's future for our members. Standing back and watching the inexorable slide into insolvency is not an option.
Only by acting together now and addressing the urgent financial crisis by making cuts and putting in place changes that will allow us to rebuild our reserves in the future, will we ensure the NUJ can continue as an independent trade union and set us on a path to a genuinely sustainable future - a goal I have no doubt that our membership expects us to meet.
I am therefore asking members to back the collective recommendations from Finance Committee and support the Recovery plan.