Tag Archives: spending

Inconsistency-spotting.

Apparently, we’re wasting vast amounts of money, pretty much on purpose. For example;

Whitehall officials said that the report showed widespread savings could be made  throughout local government without a “slash and burn approach” to  public  services. Mr Pickles’s aides said some councils were making  genuine efforts.  They praised Cornwall Council, which has cut £3million  from waste collection services by contracting out to one firm, not six.

Now, how might it have come to pass that Cornwall started using one waste collection firm, rather than six? Could it have something to do with Cornwall having become a unitary? It can’t possibly be that, though, because

THE formation of Cornwall’s new unitary council has been highlighted as one of the worst examples in the country by a senior Conservative party figure. On a visit to Cornwall, Eric Pickles, the newly-appointed chairman of the Tories, said the process of reorganisation had been a disaster – and a waste of taxpayers’ money.

And as we know, it’s not the sort of behaviour he wants to encourage. I presume a hunt is underway for the officials in question so they can be re-educated with the aid of Eric’s pearl-handled revolver.

Say no to Councillor on Councillor violence

Goodness, the Standards Board has not even been properly abolished yet, and already Councillors from the same party are turning on one another. Councillor Jean-Paul Floru (Westminster) has been driven to the brink of financial ruin by the amount of Council Tax he has been required to pay on his spare houses in Kent.

So upset has this made him, he’s written for the Taxpayers’ Alliance to condemn the garden of England and others for having a controlling group who are “Conservative in name only”, and challenging those around the country to make the same savings as have been achieved in Westminster.

I’m all for lower Council tax (we don’t get a staff discount, you know), but there are moments in political life when one might think, from a comfortable distance, that a pause for reflection and a period of silence might be wise. This is particuarly true when there is a risk of claiming that one has achieved by struggle that which has in fact been gained by luck.

For while it is true (I shall use 2008-9 figures, they were the most conveniently available to me) that Westminster charges an average Council tax of only £203 per head, as against £437 in the Dover area (£382 for Kent County and £55 for Dover District), that is not the whole story. It turns out that net Council spending in that year was £1008 per head in Westminster, and only £760 in Dover (£610 for the County, £150 for the District).

So there we have it, Westminster are in fact splurging fully a third more of other people’s money into the hands of scroung… I’m sorry, I’ve been reading the TPA website too long and turned into the Daily Express. In any event, while I’m sure many wise political and managerial decisions have been made in Westminster, one might look more to the fact that the national redistribution of business rates delivers £653 per resident to Westminster, and only £245 per head to Dover, as at least part of the explanation.

Here’s a graph. I like graphs.Lovely graph

A rather different perspective. Apologies to long-term readers who will have seen a similarly-themed rant from me on a previous occasion. Newer readers who have enjoyed this post may be interested in that one too.

The Real Real Hustle

Sometimes I really worry at what publicly funded bodies appear to be trying to con people into doing.

I know the fashion is for having a go at smoking cessation co-ordinators, or five-a-day school promotion officers. Whatever, really. The criticism there is generally based on believing the job isn’t worthwhile, and that people should be trusted to look after themselves. My experience of the cost to the state, let alone employers, of people with unhealthy diet and habits is enough to persuade me that a substantial proportion of people can’t, and the debate I want about the above rôles is whether they work, not whether in principle the state should be neutral on lifestyle issues – I don’t think it should.

Anyway, setting aside that risky foray into political philosophy (blame Saturday’s BBC Documentary on Robespierre – happy Bastille Day to all readers) I’m far more concerned about the money we are wasting encouraging people to do unwise things they didn’t rationally ought to do, than the money we are spending encouraging people to do sensible things that they merely don’t want to do. 

So I am going to pick on Family Mosaic Housing, and I apologise – I’m doing so simply because they happen to have crossed my desk, rather than being particularly bad offenders. As far as I can tell they’re good at what they do – managing outsourced housing for a few Councils, and building affordable homes for sale, rent, shared ownership and so forth.

One of those shared ownership properties is in North London, a 1-bed flat for sale. There are a number of 1-beds available in that development, and I have, for the purpose of fairness, picked the cheapest. I assume everyone is familiar with shared ownership – handy for people who want to own some property but can’t get a mortgage for anything like what they aspire to. You buy some of the property, and rent the rest. A number of things leap out of this advert, at least to me.

  • Total cost of ownership is still not that low for a 1-bed flat round those parts. £350 a month mortgage, £280 a month rent, and £130 a month service charge takes it to £760 a month. £850 would rent a 1-bed flat privately without the responsibility for repairs, and so on. Bear in mind that these properties are subsidised with Social Housing Grant from the Homes and Communities Agency, formerly the Housing Corporation.
  • The maths used to market the property are “Based on a Full Market Value of £225,000“. The problem is, that simply isn’t the full market value of a small 1-bed flat in that area. Here is a similar, and I suspect slightly larger, flat in a decent condition on the other side of the main road, which is on the market for £40k less and in the current climate with the stamp duty exemption might be expected to fetch at most £175,000. I was watching The Real Hustle On Holiday, last night, when they persuaded someone to buy Yen at 50 to the pound by showing them a fake website listing the exchange rate as 25. Oldest trick in the book.
  • “The minimum single income required to qualify for this apartment is £21,691”. So, to be clear, if we accept their claims about the market value, we have a state-funded agency encouraging people to buy houses which are worth over ten times their annual income, at a cost of almost 60% of their take-home pay, before food and bills. Am I alone in thinking this is crazy? According to that maths I could, with my savings, be expected to buy a house worth almost £500,000. Of course I wouldn’t even dream of it. Well, alright I would dream of it, but I wouldn’t do it! The minimum joint income for the property suggests that a quarter-million pound house is a sensible purchase for a couple each on the minimum wage. Is it?

All of the above seems to me a situation which replicates itself with alarming regularity in the sale of shared ownership homes, rather than being an outlier. I wouldn’t mind that much (I’d still mind, but less) if housebuilding companies were doing it as a mere marketing exercise, or new business model, but that public/third sector bodies are doing it with taxpayer money, well, it rankles.

Now, with that rant over, I return to my lines. 100x “This is not a housing blog”. I will doubtless return to the topic when it becomes clear which faction has come out on top in the current tussle over Conservative housing policy, if not before.

Not just another drop in the ocean

Duncan criticises the economics of the proposed public sector pay freeze. Nigel criticises the equity. I’m inclined to criticise the politics.

MPs got a 2.3% pay rise this year. Local Government workers have been offered 0.5%. Already, that doesn’t look terribly good given the headlines of recent months. I appreciate many private sector workers are suffering badly from the recession and high public sector pay increases would anger them. At the same time, public sector pay is obviously less likely to be cyclical, and indeed so it should be. When inflation was roaring up towards 5% at the end of the boom, we were told to accept 2.8% and shut up about it, to help the economy control inflation. I did wonder at the time whether if deflation materialised we would get a huge pay boost to help crank it back up. I rather assumed not and have been proved right – you have to be a banker for the Government to accept that logic.

Steve Bundred at the Audit Commission, who was the first to float the pay freeze as a ‘pain-free’ way of tackling the deficit, is 67th on the Taxpayers’ Alliance list of public sector fat cats, with a salary of £245,000. If you want to freeze my salary at £245,000, Steve, I’m more than happy for you to do that. You would have to double it and then triple it and then add a bit more first, though. Even so, a pay freeze might annoy me at a time when everything I buy is getting more expensive, but it wouldn’t cause me any real hardship – I’m fairly well paid and very frugal. But it makes you look a bit silly, I think, when you are proposing a real terms cut in the income of people earning about 5% of your wedge. Less, in fact, than it costs to live. That’s why it’s often called a ‘cost of living’ increase, Steve.

Alistair Darling, who says that “Public sector pay has obviously got to reflect prevailing conditions and in particular inflation has come way down“, seems not to have noticed that inflation has been above target for 20 months in a row, and indeed for those of us who don’t have mortgages it is still around 3% (slightly more or less depending whether you think the VAT cut is a real fall – I bet wages aren’t increased to compensate when it goes back up!). Alistair Darling earns around £150,000, plus expenses and a small income from a flat he owns in London and rents out since he has a free house in Downing Street. Claiming inflation is low makes you look like a bit of an idiot, Alistair, like when MPs are asked the price of things like a loaf of bread or a pint of milk and turn out not to have the faintest idea. £250 a week, isn’t it?

Of course none of them really mean any of this. Alistair means “Look at me, I’m independent from Gordon and I can prove it. You should vote for me because I’ll be tough on public spending without cutting services”, and Steve means “I know you want to abolish my organisation Mr Cameron, and I know most of your party thinks I’m a Labour stooge, but look at all these helpful things I’m saying, I’m sure we can come to some arrangement”.

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.

That could save something in the region of…

Media darling and economic blogger Duncan has been looking at the list of possible public spending cuts put forward by David Davis MP in today’s FT. He asked me what I thought of both the effectiveness and the likely saving from the proposal to “Abolish regional government and devolve remaining functions ‘back to the counties’ or back to the centre“. You can read my full answer in the comments, but I thought I’d raise the issue here in case any readers have any specific insights.

My general view is that at the moment the “regions” (RDAs, GORs, SHAs, and assorted other smaller regionalised Quangos) generally do the job they’re given adequately, but there’s no particular logic to them. Certainly there’s no reason it couldn’t mostly be accomplished either at a county level without spending any extra money (and sometimes by spending less) or centrally, since the limited devolution that the regions represent often doesn’t add anything in terms of real accountability.

The problems the proposal needs to address are, firstly, the variable geometry of the UK – not everywhere has Counties any more, so for example Doncaster and Brighton may not be large enough to undertake some tasks, but the Conservatives are generally opposed to structural reforms that might address that, and to the best of my knowledge not exactly enthused by the city-region (aka “metropolitan county”) agenda. London is the other anomaly – would the Mayor be the County and decide what can and cannot be pushed down further to the individual boroughs? Instinctively that seems sensible.

Secondly, where the savings from scrapping the regional tier come from the amount of work the Government Offices of the Regions do on liaison over regulation and inspection with individual Councils, there is a risk of double-counting, since the Conservatives are already proposing to save much of that money by reducing the amount of regulation and inspection. You can’t, sadly, save the same money twice. I suppose you can get rid of some of it, and have the part you keep done more consistently and with fewer layers.

In principle though, it’s much simpler to me. Democracy works better when there’s demos as well as cratos. Villages, towns, cities and counties tend to have a significant number of people who describe themselves as being “from x”. I meet very few people who say “I’m from the East of England”, and when someone says “I’m from the West Midlands”, they tend to mean the conurbation, I don’t think it’s a widely used self-description by people from Herefordshire.

Therefore I would want the argument to be overwhelming for governance at the regional level if it were to continue – which is not to say that some delivery can’t still be done at that level by agreement, but I wouldn’t use the current structures or, to be honest, regional boundaries. I am put in mind of a comment once made by Matthew Taylor, MP for Truro and St Austell – who when asked his views on regional government replied that he was entirely at ease with it but that there wasn’t really room for many regions in a country the size of Cornwall. I think he was joking…

While we’re on the subject, I have some changes I would like to make to the sections of the Local Democracy Economic Development and Construction Bill dealing with drawing up the Integrated Regional Strategy. Will supply own red ink if required.

More guest blogging – spending cuts

Councillor Harry Phibbs approached me recently to write a guest blog for ConservativeHome about “how to cut Council tax”. I said that I couldn’t do quite what he wanted, but was happy to write an article about where I thought spending cuts might be targeted in an environment where local government’s central funding is reduced substantially, and ‘efficiency’ no longer comes anywhere close to filling the gap.

The resulting blog post is here. Two things I should say – firstly, I’m not a Conservative – I say that both because I don’t want this to be seen as a partisan blog, but also because I don’t think ConservativeHome should be subject to mischief if someone decides to use my suggestions and claim they are ‘Conservative proposals’. I have worked with and for Councillors of all three main parties quite happily – they’re all individuals, and they all have their strengths and weaknesses. Secondly, while the article has been titled ‘where the axe must fall’, I am clear that I hope the very worst case scenario doesn’t arise, and in some cases I think the savings I’ve suggested should be on the table, but I would advise against them when it came down to it.

Anyway, my contribution to what I expect will be a lively debate. Fingers crossed that in five or ten years I’ll be writing about great ways to spend our unexpected new wealth. Doubt it, but life’s funny like that.