Building sound financial foundations for our union

Mike Clancy, October 2019
(2019/01567)

This page aims to enable branches to discuss how our union should build a sound financial foundation for the future, ahead of decisions that will be taken at the national conference in 2020.

I have described the National Executive Committee (NEC) recommendations for reform of our subscription systems, following decisions taken at our national conference in 2018 and our review of the Prospect and Bectu subscriptions. I have explained the background to our recommendations, the details of the subscription system, and how it should be changed.

The recommendations are based on conference and other feedback, as well as our duty to secure a sound financial base for the union which allows us to protect our members, campaign on their behalf, and continue to retain and recruit members in future. They also allow us to maintain the staffing needed to support our current service levels.

By setting out the facts, we hope branches can engage in an open and informed discussion about the best way forward, balancing our desire to conduct ever more activity without placing more financial burdens on members in tough economic times.

The proposals for Prospect members’ subscriptions

We propose to:

  • Increase the banded rates of Prospect membership by 2% from 1 October 2020. Based on our current membership, this would generate an extra £275,000 each year.
  • Introduce a new band of membership (‘Band 0’) where members who declare as working or self-employed with an income of £13,620 or less, would pay a new rate of £5.00 per month. This will only apply to members recruited after 1 October 2020.
  • Increase existing ‘special rate’ members, who are working and continue to pay £1.28 per month, by the 2% which applies to all rates.
  • Support members who are unemployed, students, on a career break, or on paternity or maternity leave by continuing the special rate for these workers.
  • Index increases in membership subscriptions in line with the annual April Consumer Price Index (CPI) which takes into account the cost of food, transport, utilities and other goods and services that our members face. We will set a minimum of 1% and a maximum of 3% at the point of increase.

From 1 October 2020, these proposals would mean a new banded structure of monthly subscriptions for members on the banded rates:

 

Subscription category Monthly subscription
Special rate £1.31
Band 0      £13, 620 and below £5.00
Band 1      £13,621 – £19,449 £7.26
Band 2      £19,450 – £23,986 £9.99
Band 3      £23,987 – £29,821 £12.71
Band 4      £29,822 – £40,191 £16.10
Band 5       £40,192 and above £18.63
Retired members £3.63

 

Energy sector members paying 0.55% of salary will see no change and will continue to pay this rate capped at £18.63, which mirrors the maximum subscription in the banded rate.

We believe this structure best represents the union’s need for income with a fair, progressive scale of what our members can reasonably afford.

The proposals for Bectu members’ subscriptions

For historic reasons, our Bectu sector has a different system of subscriptions, reflecting the types of worker represented. We do not propose a one-size-fits-all approach across Prospect and Bectu, because this would damage our financial base. We calculate that applying Prospect rates to Bectu members would mean a loss of income of at least £2.75 million every year. This would inevitably mean a significant diminution in our activities and have to impact staffing.

At the time of merger, we committed to reviewing the subscriptions for Bectu sector, which is what we have done. Bectu sector members on the Sector Executive and the Divisional chairs have argued strongly to especially review the costs of membership for those on the lowest incomes, which we are defining as anything under £20,000 a year.

Therefore for Bectu sector members, we are proposing that from 1 October 2020:

  • Bectu members paying 1% of their income, who fit into the income ranges of the first three Bectu banded rates, will be placed on those bands in line with their incomes. This covers around 1200 members, and we will conduct detailed work to find out exactly how people are affected.
  • There will be three bands for workers below £20,000, each with a reduction in subs:

As follows:

Current banded rate Banded rate reduced by £1.25 each month
£11.25 £10.00
£12.50 £11.25
£14.58 £13.33

 

This is designed to reduce the burden on those members on the lowest incomes who are under the most financial pressure, and introduce a stronger element of fairness into the system.

This results in reduced subscriptions for approximately 8,700 banded rate members paying by direct debit and up to 1,200 more who pay via the 1% of income scheme. This reduces our income by around £150,000 each year.

It produces new Bectu sector banded rates as follows:

Banded rate Monthly subscription
£12,501 – £15,000 £10.00
£15,001 – £17,500 £11.25
£17,501 – £20,000 £13.33
£20,001 – £22,500 £16.66
£22,501 – £25,000 £18.75
£25,001 – £27,500 £20.83
£27,501 – £30,000 £22.92
£30,001 – £32,500 £25.00
£32,501 – £35,000 £27.08
£35,001 – £37,500 £29.17
£37,501 – £40,000 £31.25
£40,001 and above £33.33

 

We will apply the new £5.00 a month minimum subscription to all new Bectu sector members recruited after 1 October 2020, as already allowed for in Bectu sector rules. After 1 October 2020, where the member’s income is less than £12,501, the subscription will be £5.00 a month and no introductory offer.  The subscriptions will be based on the member’s income, reviewed every two years in line with existing practice. After 1 October 2020, if the member is currently paying 1% of their income as their union subscription, and this works out as less than £10.00 each month, the member will pay 1% of salary for the first year. If after a year 1% of their income is still less than £10.00 a month, they will pay 1% of salary or the £5.00 subscription rate whichever is higher.

We intend to conduct more detailed work about how check-off (deducted at source) payment works in relation to our proposals, especially relating to freelancers, and members in our Arts and Entertainment (A&E) division.

Keeping things under review

We will continue to monitor the real-life impacts of these new rates, both on the revenue of the union, and the pockets of our members. We are aware, for example, that while we focus on the impact of those earning below £20,000, there is also an impact on those earning over £37,501, who will be paying over £375 each year, which is a lot of money, and may not compare well with other trade unions. We do not want to see the overall impact of these changes to be a loss of members and therefore a loss of revenue.

Why are we proposing this?

It is the instinct of every trade unionist to want to do more campaigning and recruitment, but how do we do that without placing extra financial burdens on members, some of whom are hard pressed? So we must strike a balance, and ensure that our system of subscriptions is fair, progressive, reasonable, and straightforward.

After the 2018 National Conference, the National Executive Committee (NEC) was asked to conduct a review of our subscriptions for Prospect and Bectu. The National Conference also voted to not increase Prospect subs in 2019 and the NEC has considered the impact of Bectu subscriptions on workers on lower incomes.

We are of course directed by the democratic decisions of our conferences. However the fine detail is down to the NEC and senior staff, as well as complex legal compliance issues. Having stated the proposals up front, the rest of this paper describes some of the detail to allow fully-informed branch decision-making.

The financial background

The Prospect financial picture is sound overall, and our members should be reassured that we are using their subscriptions wisely and well. As our accounts show, the union’s assets at the end of June 2019 were worth £49.9 million, which broadly breaks down to £14.4 million in ‘fixed assets’ such as buildings, and £33 million in investments.

This allows us to secure our three staff pension schemes. These pension schemes cost around £27 million in 2019, leaving us a balance of £22 million. This gives us a sound base, but in most years we spend more than we receive from subscriptions and other income, by around £1 million. The spending is mainly on staff, conferences, campaigns and professional fees (for example lawyers).

We invest 72% of our expenditure on our brilliant union staff, working on behalf of our members. We bridge the gap between what we receive and what we spend by income from our investments, which means we either strike a balance, or a small deficit, or occasionally a small surplus each year. This is a legitimate way of running things, but in our view it is not sustainable in the long-term. We want to bring our expenditure and income into balance by making savings – but this is not simple while maintaining our activities and services to members.

The Member Contact Centre (MCC) manages our membership transactions, including record-keeping, our compliance with General Data Protection Regulation (GDPR), and members’ subscription payments. This is a complicated process because although a majority of our members pay by direct debit, we also have a large number of members paying through ‘check-off’/deducted at source systems (where we have agreements with employers), and some pay by credit card, standing order or even cheque. To implement accurately any changes to this complex system of subscriptions requires dedicated staff time and effort.

More people are joining Prospect, but the rate of people leaving membership has also increased. Our net growth is a great credit to our staff and workplace reps, but more members does not translate into immediate extra income. Often new members are on introductory rates and discounts to encourage membership. Our existing members have a right to a high level of support and advice in an increasingly complex environment, and this all costs money. So our finances, while sound, are under pressure, and we have a duty to cut costs, modernise our subscriptions, and steward the union into the decades ahead.

The current system

For reference, this is how the system currently works. Prospect operates two subscription systems, with introductory rates (for example Bectu members enjoy a £10 per month introductory fee for the first year, and Prospect members can get three months free when they join).

We operate a series of ‘bands’ of different rates, based on members’ incomes. The current Prospect rates are as follows:

Banded rate       Monthly subscription                          
Special rate – up to £13,353 annual income       £1.28
Band 1     £13,354 – £19.068       £7.12
Band 2     £19.069 – £23,516       £9.79
Band 3     £23,517 – £29,236       £12.46
Band 4     £29,237 – £39,403       £15.78
Band 5     £39,404 and over       £18.26

 

The Prospect banded rates have not been increased since 1 January 2018, when we last applied a 2% increase. By not increasing rates in 2019, in line with National Conference decisions in 2018, we surrendered around £250,000 in income.  

Bectu – the current situation

Bectu subscriptions are different. These apply to the five divisions that composed Bectu on its merger with Prospect in 2017. For purposes of definition we describe this system as that applying in ‘B5D’.  B5D subscriptions have two methods of calculation. They are calculated by either mapping declared salary/income onto banded rates (see below), or by calculating 1% of salary/income (which is the main method for check-off payers) to the same cap as the banded rates. The current Bectu banded rates are as follows:

Banded rate Monthly subscription
£12,501 – £15,000 £11.25
 £15,001 – £17,500 £12.50
 £17,501 – £20,000 £14.58
 £20001 – £22,500 £16.66
 £22,501 – £25,000 £18.75
 £25,001 – £27,500 £20.83
 £27,501 – £30,000 £22.92
 £30,001 – £32,500 £25.00
 £32,501 – £35,000 £27.08
 £35,001 – £37,500 £29.17
 £37,501 – £40,000 £31.25
£40,001 and over £33.33

 

We do not propose to merge the two systems of Prospect and Bectu because they reflect different realities (for example the high number of Bectu freelancers). Our assessment of the costs of harmonising the two systems suggests that it would be simply unaffordable – forcing two systems into one, costing more than it saves.

Next steps…

These proposals are sensible measures, taken from a position of strength. We are ‘mending the roof while the sun is shining’ rather than reacting to a crisis. Instead, the NEC is taking a measured, long-term approach to subscriptions and finance, and we are anticipating a mature and evidence-based discussion with branches ahead of our debate and votes at our national conference in 2020.

We want members to engage with these recommendations at branch meetings and AGMs, and we encourage members to give us feedback or ask for more detailed information by emailing us on subsreview@prospect.org.uk . In addition we will be setting up calls for branches to dial in and ask questions.

We are also happy to offer NEC members or senior staff to attend branch meetings to facilitate discussions and answer any questions you may have. We want to stay ahead of the game by listening closely to what members think about our approach, so we can plan our finances and services with confidence.