Tag Archives: fun with statistics

Divide and Conquer

Exhibit A

LABOUR-run Durham County Council is poised to axe 1,600 jobs, its leader revealed this week. Faced with £100m of savings over four years, it is to ask its entire 10,041-strong directly-employed workforce for expressions of interest in early retirement or voluntary redundancy.

Over £11m of Durham County Council’s grant has been withheld to protect services in other local authority areas mostly in the South. The Government’s financial damping system which sets a minimum and maximum grant level for every council unduly penalises authorities in hard-hit areas.

In addition, grants for job creation and help to poverty-stricken areas have also been slashed by £25m Coun Henig said that when all grants were taken into account, the council faced a year-on-year funding cut of 15 per cent; and there was “clear unfairness” across the country, with Surrey County Council losing just 0.3 per cent.

Exhibit B

COUNCILS across Surrey are digesting the results of this week’s local government finance settlement, with reduced grants set to have an impact on services.

Communities Secretary Eric Pickles said there would be cuts of between 0.31% and 6.96% in the ‘revenue spending power’ of Surrey’s 11 borough and district authorities, plus the county council. But the real figures for reductions in funding which comes direct from central government are much higher, as the revenue spending power totals included council tax money – which is collected locally – plus other smaller grants separate from the core ‘formula grant’.

… local authorities in the county, where cuts to jobs and services have been part of the landscape in recent years, warned of challenging times ahead. Surrey County Council said its main central government grant was being cut by 25% over the two years, meaning a £41m funding reduction.

Advertisements

How the Sunday Express turned £150 into £10

Or vice versa…

The Taxpayers’ (which ones?) Alliance  quote the Sunday Express, as follows:

The Local Government Association risked the coalition’s fury this month by recommending a 2.3 per cent rise in expenses while local services are slashed and employees’ pay is frozen. The association, which is exempt from the Freedom Of Information Act, has refused to publish details of councillors’ perks in “the current climate”…. A 2.3 per cent rise would bring the average daily allowance for councillors from £149.34 to £152.77.

A great story, with just two crucial flaws. The first is that it isn’t a recommendation, and the second that that isn’t the average daily allowance. Anyone in local government would immediately recognise that, since extrapolating to an annual sum would give a number which is earned by few Council leaders, let alone ordinary Councillors.

What the Sunday Express appear to have latched onto is the “day rate”.  In fairness to them, they seem to have cribbed it from a spectacularly disingenuous Government press release which fails to make clear that that “day rate” is simply a statistical measure of average pay in the country, from the Annual Survey of Hours and Earnings. It most certainly does not translate into “the average daily allowance”. 

Take for example this report (pdf) from Wellingborough Council.  Councillors’ allowances there are reached by taking the day rate referred to above, and applying it to a presumed 47 days a year (any Councillor who manages their job in so little time is almost certainly doing it wrong) and then dividing it in two again to account for local government being seen as “partly voluntary”. The result being that rather than the £150 a day quoted, being a Wellingborough Councillor in fact earns one, over the course of the year, the princely sum of £9.20 a day. A large unitary or county council would pay more, but not 16 times more.

Almost as impressive as the time here when the local newspaper reported that Councillors had voted to quadruple their allowances. It was gently pointed out to them that they had in fact compared two columns in a spreadsheet, one of which was a quarterly outturn, and one of which was an annual projection. Oh well, I guess they’ll have more time to check their facts when they don’t have a Council freesheet to outcompete. Not sure what will cure The Express, though. National politicians who aren’t pulling cheap stunts to distract attention from themselves, maybe. Some hope!

Ongoing churlishness about money

I know, I’ve said it before. I’m perfectly adequately paid – I may be ten years in the pay stakes behind my friends from University who went into the law (one of them in the year below me recently retired) or the city (I’ll never catch up), but I have a work-life balance and a level of job satisfaction that, in principle, makes up for it. That’s much less true for a lot of other local government employees, to whom a 5% real-terms pay cut has the potential to cause real damage.

Similarly, ‘all the money’s gone’, and faced with a choice between a pay freeze and no pay at all, obviously a pay freeze sounds more appealing. It could be worse, in Ireland and some other places things are so bad the public sector are seeing pay cuts (on the other hand, some of those economies are in deflation, so in real terms there’s not much difference). That said, with every extra year, I find myself wondering what else I could do with my life, and quite how bad it would be if redundancy struck while the terms are (relatively) generous, rather than later.

Inflation vs Pay

Still, though, it feels over recent years as though we’ve been told that in the good times, we need low pay rises ‘to anchor inflation expectations’, and in the bad times, we need low pay rises ‘because the deficit’s too bit’. So we get low pay rises; meanwhile, inflation goes up regardless, and the deficit is either hopelessly enormous anyway (stage right) or a good thing anyway because it’s what’s keeping the economy from going back into recession (stage left). When inflation is low (because of the VAT cut) we don’t need a pay rise because inflation’s low, but when VAT is put back up again, we don’t need a pay rise because the increase in inflation is temporary (so, er, wasn’t the decrease also temporary then?)

So in that vein, here’s my graph again, updated for today’s figures. The red line is cumulative inflation. The blue line is cumulative inflation in a hypothetical world where the Bank of England had precisely met their target, and the purple line is the cumulative local government pay settlement, assuming the Employers stand by their offer of ‘nothing’ for this financial year. The Labour delegation are now proposing to recognise persistent high inflation with an offer of 1%, but as things stand the Conservative and Liberal Democrat groups are standing firm at 0%.

Anyway, Nick Clegg said yesterday that “when there has already been pay restraint in the private sector, when the public pay bill now costs the country £160bn every year, and when the alternative is greater job losses we cannot refuse to now look at public sector pay too“. I’m not sure what restraint is, if it isn’t consistently rising less quickly than prices over a full five-year period, but I guess we’ll see soon enough.

Nice place you’ve got here

The more a debate concerns Local Government, the further logic flies out of the window. Or at least so it seems this week. It’s a shame, because often there are some important conversations to be had, and the amount of heat generated obscured the possibility of getting some light into the bargain. I thought last week’s conversation about fairness and unfairness in a geographically-based electoral system was interesting, important, and involved useful contributions on all sides. This week, however, we have a “Council Tax bombshell” in the Sunday Express. This is a retread of classic old “revaluation” scare.

I will largely gloss over the question of whether we should revalue at all, and whether we should have property taxes in the first place (my personal view, by the way, is yes and yes, which is not to say that council tax is flawless). It would in theory be possible to assume property prices remain constant forever and slot in a notional historic price to any new property. This is what we have been doing since 1993, indeed it’s the situation in my current property, and we just about get away with it. It obviously isn’t sustainable forever – consider the relative value change of two houses in the last century, one in the Canary Wharf area and one in thriving industrial Newcastle. If you think that’s balanced out by them being in different areas, consider the impact of a train station moving from one part of a town to another.

All that aside, there are two separate issues which seem to attract interest.The first is what is included in the valuation of a property being taxed. The Sunday Express luridly suggests that “the number of bedrooms and bathrooms they have to whether they have outbuildings or a conservatory. Good parking, transport links and even “pretty views” are factored in“.

I’m not sure why the pretty views are in scare quotes. Pretty views are a major factor for a lot of people when buying a house! They certainly were for my parents, and I expect it will have a major impact on the resale value of their home, which would be a modest 4-bed suburban detached house, were it not for the rolling views of some of the finest scenery in England from the living room and two of the bedrooms (thanks to being built atop a disused quarry and former landfill, but let’s gloss over that). We could simply tax square footage, but we don’t. Obviously a balance has to be struck between simplicity and accuracy, but in principle if people are being taxed on how much their house is worth, surely they have the right to expect that to be determined as accurately as possible?

The second is whether a revaluation would simply lead to an increase in bills. Here the baton is picked up by Dizzy, who fears that revaluing today would push most houses into the top band and therefore lead to people paying more. Fair play to him, on paper this is understandable – the bands are very low, since they were designed for houses in 1991, and the value of homes has increased massively (unsustainably, as people began to recognise in 2007, but that’s an argument for another day) since then. Wales revalued and there was at the same time a slightly larger increase in the tax take than in the rest of the country.

However, firstly it would stretch credulity to anticipate that revaluation would happen without the creation of a new set of bands, and these would account for the fact that, whereas the current top band begins at £320,000 in 1991 prices, that is simply the price of a modest 2-bedroom flat in much of London and the South East at 2009 prices. Secondly, even if the valuation were not done on that basis, and most properties were crammed into the top band, it would not lead to an increase in everyone’s taxes, and it would certainly not lead to a hammering of the middle class. Bear with me, this is a little bit technical, but has to do with how Council tax is set. Obviously the politicians will have a view about roughly what they’re aiming for in terms of percentage increase or decrease, but finding the final number happens like this:

A Council, in determining the Council Tax rate, adds up everything they are agreed they will spend over the year. They then add up every source of income other than Council Tax which they anticipate receiving. This, sadly, leaves a gap. Suppose the numbers are £200m and £180m respectively. It is necessary to raise £20m from Council Tax. Next, this sum is divided by the number of “Band D equivalent” homes. This may be more or less than the number of homes actually in the area, since in much of the country the average is actually around Band B, though in some of London it is closer to E. Anyhow, let’s imagine that counting each house proportionately to the share of Band D tax it will pay, there are 100,000 band D equivalent homes. For simplicity, let’s assume this is because there are in fact 100,000 Band D homes in the area. This leaves us with an annual Council Tax of £200. Lucky people. If the houses aren’t all Band D, this is parcelled up as appropriate. Since they aren’t, it isn’t.

Now imagine a revaluation takes place on the old bands, and every house is pushed up to Band G, meaning they have to pay 15/9ths of the Band D Council Tax. At first sight, you might expect everyone’s Council Tax to leap to £333.33, but in fact this doesn’t happen. The Council still has £20m to raise, and the number of “Band D equivalent” homes rises from 100,000 to 166,667. So the new formula for Band D council tax works out at £120, and the Band G rate… £200. Everyone pays exactly the same. Of course in theory the Council could maintain the Band D rate and just spend more money, but no Council in the current climate would risk a 65% increase in Council Tax, nor would any national government allow it.

In reality, there’s a particular irony here. If you did do a revaluation on the old bands, the outcome would be that people in what are currently lower banded houses would rise further up the scale, and their council tax would increase, whereas people in higher banded houses have much less far left to rise, and would therefore end up paying less tax. Far from hammering the middle class, the theoretical situation would in fact hammer the working class, and amount in practice to the reintroduction of a type of poll tax, though a habitation based one rather than capitation (advantaging people who live quite densely – one of the groups who suffered most from the poll tax, families with grown up children still at home, professional sharers, etc).

Sorry, I have gone on rather, but I thought it was interesting.

Fair Votes?

The weekend’s action around the blogs contained a lot of chatter about the fairness or otherwise of our electoral system – so far, nothing unusual. What was unusual (perhaps Iain Dale talking about whether size matters should go in here) is that the complaints were coming primarily from Conservative blogs rather than Lib Dems, or a particular branch of Labour.

Instinctively, it’s easy to see why they are upset – the Conservatives get fewer seats in Parliament for a given share of the vote (around the 40% mark) than do the Labour Party. Ironically, despite being prime campaigners against the ‘unfairness’ of the system, if they somehow reached 40% of the vote the Lib Dems would do better than either under First Past the Post.

Anyway, the core case being made by the Conservatives was set out with the most clarity and detail by Paul Goodman, writing for ConservativeHome. Of course, in any system which is not directly proportional (most systems, then), it will be the case that one party may gain an advantage. However, the root cause appears to have been missed in the article, and by most commenters.

It is not solely, or even mainly, the drawing of the boundaries which leads to the advantage for Labour, it is turnout. Simply put, despite all the dealignment of recent decades, Labour voters are still far more likely than Conservative voters to be working class, and vice versa. Working class people are far more likely to stay at home on election day. Minor parties are also, generally, stronger in more Labour areas, meaning the vote share required to win is lower.

Given turnout and electorate numbers, then, it is fairly easy to work out how many people stayed at home in each constituency. While it is not entirely fair to ascribe assumed votes to people who chose not to vote, it does seem intuitively likely that they would vote in an approximately similar way to their friends, family, and neighbours. The largest constituency by a long way is the Isle of Wight, because they historically prefer to be united than to have more representation, and there 42,201 people stayed at home on election day. In Vauxhall, 30,000 fewer voters have the opportunity to be non-voters, yet slightly more actually managed it!

Thus, to pick two big seats with almost exactly the same electorate,  marginal Northampton South (89,722 eligible voters) produced a Conservative MP on a turnout of 60.7%. Next door, leafier Daventry (88,758 eligible voters) produced a Conservative MP on a turnout of 68.1%. That is to say, although 1000 fewer people were eligible to vote in Daventry, 6000 more actually chose to do so. Similarly, of the 69,764 voters eligible to back Oliver Letwin in his Dorset marginal, 24,763 chose to do so. This is in stark contrast to, say, Manchester Central, where a very similar 69,656 voters were eligible to return Tony Lloyd for a third term as the local Labour MP, but only 16,993 did so – and yet this was a landslide victory. If Manchester Central and Dorset West were the only constituencies in the country then the national share of the vote would have been 37% for the Lib Dems, 30% for the Conservatives, and 27% for Labour, but Parliament would have had 1 Labour MP, 1 Conservative, and no Lib Dems.

It’s not clear what can be done about this – making constituencies with low turnout larger seems intuitively unfair, judging people in advance for decisions they have not yet taken. Weighting MPs’ votes in Parliament to the number of votes they actually received would solve this ex post facto, but create tiers of MP and sounds a bit unwieldy. National-level PR has its own set of disadvantages, and while it has many supporters I doubt that it is what the Conservatives currently getting exercised about this problem are proposing as a solution. 

To illustrate that this isn’t some specific gerrymander, exactly the same thing happens in local council elections. In a number of elections over the last decade – particularly in large mixed urban/rural areas such as shire counties, Labour have retained control of a council in an election at which the Conservatives had a higher proportion of the authoritywide vote.

One solution in the case of a local authority, of course, is the direct election of a powerful leader – this appeals to both major parties, the Conservatives since they believe differential turnout helps them a great deal, and Labour because they have become used to sweeping up the majority of Liberal Democrat second preferences in an Alternative Vote electoral system. So far the experiment has been limited to cities, but it seems to me that something either works, or it doesn’t, and a directly elected leader model could be transposed to rural and county authorities.

To coin a phrase, getting mad is easy. Getting even is much more complicated.