Tag Archives: local government

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.

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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.

Strengthening Local Democracy – Government Consultation

I could, and might yet, say all sorts about this document. One particular little bullet point hidden away on page 44 caught my eye, though.

163. This raises the question of whether sub-regional structures are sufficiently visible and accountable to citizens. If they are to be granted significant powers and responsibilities, it is vital that local people are able to understand and be involved in the arrangements that are in place to manage activity and make decisions at this level.

164. Any new proposals will need to fit with the ideas set out in the first chapter of this consultation of local residents understanding of where they can hold local services in an area to account. We also wish to raise the question of whether citizens should be more directly involved in electing representatives to structures at this level, if significant additional powers, as was the case with London, are to be granted. Any reforms in this area would of course require public support. Whilst the government’s policy on mayoral governance at local authority level remains as outlined early in chapter 2, we are interested to hear views on other possible options including:

• establishing ‘city-region leaders’ – existing sub-regional partnerships could elect, from among their members, a single leader who would be a figurehead for the partnership. This would not lead to more powers but would provide greater visibility for the work of the partnership to citizens
• creating new sub-regional local authorities – rather than current and planned sub-regional bodies, which are limited to specific issues such as economic development and transport, new sub-regional local authorities could be established with a much wider range of powers. Any direct elections to these authorities would lead to greater engagement with the sub-regional level but there would need to be a clear division of responsibilities between the new and existing tiers, and scrutiny could be complex
• mayors for city- and sub-regions – executive mayors with powers over strategic issues could be created for city- or other sub-regional areas and be directly elected by the population. This would provide strong accountability but there would again need to be a clear division of responsibilities. The role of existing local authorities would be reduced, although they could scrutinise the activity of the mayor
• a combination of a directly elected executive mayor and directly elected subregional scrutiny body – this is similar to the model of the mayor and assembly established in London. The mayor would have executive power, potentially over a wide range of issues, and would be held to account by a body of people directly elected by citizens for that purpose.

Ahem.

Quote Unquote

The MJ diary / endpage / gossip column last week had a little bit of fun, presumably at David Cameron’s expense, and noted the apparent similarity between the following two quotes.

  • Through a new general power of competence Councils will be able to do whatever they like as long as it’s legal
  • We shall give a power of general competence to all local authorities to carry out whatever activities are not expressly forbidden by statute

The first was recently said by David Cameron in an article in the Guardian. The second is from the Labour Party’s roaringly successful and widely praised 1983 Manifesto.  I’m being silly really, obviously I think it’s a good idea. I thought (hoped) it was what the Government had almost done with the power of wellbeing and associated rules, but recent events suggest the battle is at best half-won.

For completeness, I thought it worthwhile remembering what the Government of the day thought about those plans – that John Denham has not yet said anything like this could be counted as progress I suppose, although I anticipate there are many in the Conservative Party who still feel this way, and will surface if the national and local swing operates in the traditional British way.

In other words, a blank cheque. A socialist council could spend your money on anything it liked unless there was a law forbidding it. I leave to your imagination the crackpot schemes, the waste of money and the gigantic leap in expenditure” – Margaret Thatcher, 3rd June 1983

Of course in the same speech she talked about the importance of central government driving local government structural reorganisation. What price Eric Pickles’ pearl handled revolver then? Who knows, perhaps as a humble committee member on Bradford Council he was quite favourable to the abolition of the West Riding, perhaps not!

Win one for the kippers

I hope those UKIP Councillors elected earlier this month (Nelson ward in Norfolk seems as appropriate a place as any for them to top the poll) are settling in well to their new positions in elected local government, and finding good ways to make the link between the problems and challenges faced by their local authority in delivering for the people they represent, and the UK’s membership of the European Union. I worry that they are going to find a lot of Council business quite tedious if they aren’t especially interested in the rest of it, but they have their experience as residents to draw on, and Greens around the country have managed to engage with issues which aren’t really ‘environmental’ in any real sense, so who knows.

I thought this might be a good time to help them make one of those links – indeed I’m a little puzzled that it hasn’t already been made more widely – it might just be a really tedious story. Last week there was a rather unfortunate decision in a case before the Court of Appeal (Brent London Borough Council v Risk Management Partners Ltd) which in essence said that local authorities were not allowed to form partnerships with one another without going through the tendering process which they would employ if they were considering outsourcing a function to the private sector.

In brief, a group of London councils believed they could get better value for money from their insurance by clubbing together to self-insure than by buying insurance from the private sector. This is often likely to be true, since insurance is in pure mathematical terms irrational – the “expected value” for each individual is less than you get out, much like betting on horses. The advantage is being protected against large risks for a small guaranteed loss.

Understandably however, a private sector provider was unhappy that the tendering process had been halted and went to court seeking compensation. This recent ruling upheld one which awarded them such compensation, on the basis that halting the tendering process was a breach of the Public Contracts Regulations 2006. Now, I am open to the argument that if a Council is not going to deliver a service directly it should consider all possible providers. However I think there are a number of reasons this is not ‘the whole story’.

Firstly, the public sector (more broadly than local government) is hugely outgunned on procurement. While great strides have been made, big contracts still often see a local authority negotiator on a ‘politically acceptable’ salary of say £60k facing up against a far more experienced private sector ‘client relationship manager’ who is perhaps on the same wage but with the potential to more than double it through commission. The only time I’ve ever been confident in my own work that our lead negotiator on a large contract was really the top player on the field was when we had a very wealthy retired accountant who came in for a far lower wage than he could have commanded elsewhere, because he “thought it might be a fun experience”. Secondly, some private sector organisations overpromise and underdeliver to the public sector, knowing that it is politically and administratively difficult to break certain contracts.

Thirdly, and most importantly, partnership between public sector organisations is, in my view, a qualitatively different thing from outsourcing, for all sorts of reasons of staff morale, democratic accountability, and political acceptability. Whether we are talking about the Sustainable Communities Act, or the Total Place initiative, or David Cameron’s suggestions about pooling local funding for public services, there is progress to be made beyond simply an old model of ‘putting it out to tender’.

Consequently I am not terribly happy about this judgement – I think it puts at risk a number of important initiatives, and so do other people in the field. For example Michael Burton, Editor of the MJ (which used to stand for Municipal Journal but I think it now stand-alone, like BP or YMCA) says the following on his blog – quoted at length because I think it’s important;

Among the pile of correspondence in new communities and local government secretary John Denham’s red boxes this week, the Appeal Court ruling over London Authorities’ Mutual Limited should be stamped ‘urgent: action this day.’

This otherwise obscure ruling over the legality of a new insurance consortium of London boroughs threatens to undermine the entire direction of public sector partnership working by blocking the use of long-established wellbeing powers.

However, the Appeal Court maintains that councils do not have the powers to set up such an entity as LAML, even though it has the support of the CLG, and says that neither the 1972 nor the 2000 Local Government Acts give such legality.

Critics in turn argue that this is a narrow interpretation of this legislation and is a return to the 1980s when councils needed express powers to act and if they did not were ruled ultra vires. The whole point of wellbeing is to allow councils to do anything which is not expressly forbidden, precisely to allow them to be more pro-active and innovative.

John Healey, before he was moved to housing, made a point of telling councils they have these powers, and should just get on and use them, especially when grappling with the recession. Some lawyers said it was not quite as simple as that and the Appeal Court agrees with them. It has turned the clock back and done councils, and residents, no favours. Its ruling must be overturned.

Which is all well and good, and I entirely agree. However (and I’m sorry if this doesn’t quite live up to my billing), it’s not open to the Minister to reverse that ruling. Indeed it’s almost certainly not up to Parliament to reverse that ruling either, because the Public Contracts Regulations 2006 which are getting the blame here are not domestically inspired legislation. They exist to give effect to EC Directive 2004/18 and its predecessors, “on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts [in the EU]”.

Now, there may be UK gold-plating of that directive (though it looks pretty clear to me), or there may be a public policy decision that the benefit to UK private sector companies in being able to compete for public tenders elsewhere in the EU outweighs the inconvenience to the UK public sector in being unable to form public-sector-only partnerships. I don’t know. Nonetheless, I think it is important when we look at what impact legislation is having, to understand at what level that legislation is made, and who does and does not have the power to change it.