The TaxPayers' Alliance - Burning our Money

NHS Blog Doctor's misleading attack on the Town Hall Rich List

NHS Blog Doctor's attack on the Town Hall Rich List 2008 and the TaxPayers' Alliance is a mix of ignorance and irrelevance.  Little more than a dishonest and misleading smear.

First, he makes the startling discovery that the TaxPayers' Alliance thinks tax is a bad thing.  That with the high rates of tax that we have now no tax rise can be justified.  Why he needed to look at our mission statement to discover this will remain a mystery.  While we only discuss the reasons why we think levels of tax are too high briefly in our mission statement we have produced a wide range of research on the subject.

He then moves on to discuss the Town Hall Rich List 2008.  He accuses us of fraud and "sailing close to the law of defamation", serious charges, without a shred of evidence.  There isn't a single quote from the TPA in this section.  Instead, he makes up a load of over the top arguments that we supposedly "[want] you to infer."

The quote he makes up is "anyone not working in the private sector who earns £100,000 or more is ipso facto an undeserving, lazy, overpaid fat cat". Our actual quotes are very different:

Matthew Elliott, Chief Executive of the TaxPayers’ Alliance, said:

“Taxpayers have a right to know how much senior town hall officials are being paid because only then can we judge whether they deserve their remuneration. Too often, council executives are rewarded handsomely even when they fail. Families and pensioners are struggling with the demands of yet another council tax rise, and councils owe it to them to cut back on executive pay hikes.”

Ben Farrugia, Policy Analyst at the TaxPayers’ Alliance, said:

“Some local government executives still feel that what they’re paid is not the taxpayer’s business. But with council tax bills now tipping many families over the edge, it is more important than ever that councils are open and transparent about their costs. Council employees must be accountable to the local residents who pay them.”

Coming from someone who, so frequently, accuses us of distortion making up "an inflammatory out-of-context quote" is dismal hypocrisy.  With council tax having doubled in the last decade we do need to ask serious questions about the performance of councils and whether they are justifying high remuneration for senior officials.  Trying to paint this as some kind of undifferentiated smear is an ugly response to our study.

After that we get a long and largely irrelevant discussion of the qualities of those working in the City.  This is a pre-amble to the charge that if we think the public are entitled to know how much senior council staff are paid we should also be exposing how much those employed in the private sector earn.  This is the basis of his challenge to us:

"Will the founders of and writers for the TPA make a public declaration of their earnings?"

No.  No one is forced to financially support the TaxPayers' Alliance.  As our organisation is not funded from their taxes there is no legitimate public interest in our earnings.

NHS Blog Doctor almost completely ignores the basic point that we have made repeatedly, including in the quotes above: the public have a right to know what senior officials earn because they are the ones paying the bill.  In order to prevent public sector organisations being run for the benefit of staff rather than the taxpaying public there needs to be accountability.  Not just to decide whether or not staff are being paid "too much" or "too little" but so that they can decide if they are getting the performance that would justify the amounts seen in the Town Hall Rich List.  If that kind of information is not made publicly available then in elections to local councils voters will have less to go on.

NHS Blog Doctor's only nod to the difference between private and public spheres is "in most cases, these [private sector] salaries were paid out of the pension funds to which people on more modest incomes contribute".  That isn't true for those who work for non-profits funded by private donors - like the TaxPayers' Alliance.  That is only accurate to the extent that the remuneration of directors at public limited companies is the business of shareholders who pick up the bill.  Now, there are two ways in which senior staff at those public limited companies are held accountable.

1. Through corporate institutions designed to deliver effective accountability.  These operate both through the potential for shareholders to rebel (as they, on occasion do) and the more mundane business of selling your share in companies that are being run in the interests of staff, rather than shareholders, and in doing so, exposing a company to takeover by other firms with better behaved directors.
2. By the legal requirement to report directors' earnings in their annual accounts.  It is a statutory requirement that the numbers we established for local authorities are published in the annual accounts of companies and public bodies.

In short, the TaxPayers' Alliance absolutely stands by the public's right to know how much senior council staff are paid because they pay the bill.  When the public don't have that, legitimate, interest the earnings can, and often should, remain private.  NHS Blog Doctor's attack on our study is nothing more than a meaningless slur.

Council Spending Uncovered 4: The Town Hall Rich List 2008

• FULL LIST OF THE 818 COUNCIL EMPLOYEES EARNING OVER £100,000 PUBLISHED
• INDIVIDUAL DETAILS OF NAMES, JOBS AND FULL REMUNERATION PACKAGES FOR SENIOR OFFICIALS AT HUNDREDS OF COUNCILS

Download the full report (PDF, 1.3MB)

The TaxPayers' Alliance presents the second annual Town Hall Rich List, which reveals details of the 818 local authority employees who earn over £100,000 a year from the taxpayer. As well as providing individual data for officials in hundreds of councils across the country, the report reveals:

• 6 people in town halls earn more than £200,000 a year, while 88 earn more than £150,000. 14 earn more than the Prime Minister (£188,849) whilst a staggering 132 earn more than a Cabinet Minister (£137,579).
• The average remuneration received by those on the list is £120,938 - over £2,300 a week.
• Those who appear in both this year's Rich List and last year's enjoyed an average pay rise of 4.6% - more than double the Government's target for public sector wage inflation. The number of people featured on the list has risen from 645 last year to 818 this year - a rise of 27%, showing a boom in high salary executives.
• The top ten earners in local Government and a comprehensive list of 818 other high-earning executives listed by local authority.

Unlike companies in the private sector, and even many other public sector bodies, local authorities do not make executive remuneration details publicly available so TPA researchers compiled the Rich List using Freedom of Information requests to every local authority in the country. A small minority of councils used a series of highly questionable excuses not to release the information - the report also features a "Top Five Ludicrous Excuses" table to name and shame those withholding important information.

Matthew Elliott, Chief Executive of the TaxPayers’ Alliance, said:

“Taxpayers have a right to know how much senior town hall officials are being paid because only then can we judge whether they deserve their remuneration. Too often, council executives are rewarded handsomely even when they fail. Families and pensioners are struggling with the demands of yet another council tax rise, and councils owe it to them to cut back on executive pay hikes.”

Ben Farrugia, Policy Analyst at the TaxPayers’ Alliance, said:

“Some local government executives still feel that what they’re paid is not the taxpayer’s business. But with council tax bills now tipping many families over the edge, it is more important than ever that councils are open and transparent about their costs. Council employees must be accountable to the local residents who pay them.”

Non-job of the week

Today the Department of Communities and Local Government will announce Council Tax increases set to land on doormats all over the UK.  It’s doubled in ten years and will soar beyond the official inflation figure of 2.5% this year.  People are being sent to prison for being unable or refusing to pay.  It’s clearly unsustainable.  What makes this system of financing unsustainable is that your money is going to useless non-jobs burning our money.

How apt it is this week that we find this job from the Guardian jobs page:

“Sustainability Manager

£40,964 - £42,686 pa - Full-time, 37 hours per week- flexi-scheme

We are seeking a knowledgeable, experienced and enthusiastic sustainability manager to maintain the profile of work in this area. Joining an authority with a history of innovative approaches to sustainability and successful cross-service working, this post offers an excellent opportunity for you to lead our dedicated sustainability team to deliver significant carbon reductions and other environmental improvements across the organisation and beyond, responding to high profile issues such as climate change and linking to corporate priorities as stated in our Local Area Agreement.

Using your practical knowledge of sustainability and proven ability to manage people, projects and budgets, you will be expected to champion the strategic "green city" vision for the council in its local and regional contexts, as well as embedding a corporate approach to sustainability across the council.

You will need to be articulate and persuasive, involving councillors and colleagues to develop and deliver the policies and outcomes we need.

You and your team will work with services in all council directorates, helping them reduce their environmental impact, especially through energy and water management.

You and your team will also have important inputs to key services such as planning and building control, transport and highways and environmental services to ensure that sustainability approaches are reflected in policy development and application across the borough.

For more information about this post, please telephone Zoe Hanim on 0118 939 0173.

To apply... application forms can be downloaded or completed on-line at http://www.reading.gov.uk

Alternatively email: recruitment@reading.gov.uk or call 0118 939 0039 (24 hour answerphone) quoting ref: CEX0166 and stating which position you are interested in.

Please do not send a CV. For the purposes of equal opportunities, we can only accept Reading Borough Council application forms.

This post is politically restricted under Part 1 of the Local Government and Housing Act 1989.

Closing date: Wednesday 9 April 2008

Interview date: Friday 25 April 2008

What's on offer?

generous relocation allowance

flexible working

24 days holiday rising to 32 days

final salary pension scheme

excellent training & career opportunities

Equal opportunities for all Positive about disability

Reading BOROUGH COUNCIL

POSITIVE ABOUT DISABLED PEOPLE”

Remarkable.  These jobs never cease to amaze.  Another green job, with astonishing benefits and a ‘relocation allowance’ – surely they don’t expect the successful applicant to relocate by car?  Add in the 5-weeks off they get as holiday (a caravan at the bottom of the garden as opposed to a long haul flight to Bermuda, they can't be hypocrites now, can they) and the gold plated pension and you can see that funding non-jobs like Reading's Sustainability Manager isn't sustainable.

But there is a way out.  How about government cut its emissions by sacking these non-jobbers, saving on running costs their offices, computers, lights etc all use up and handing you back some of the cash you’ve lost in Council Tax over the past ten years…it’s just a thought.

Dark Days For Taxpayers

Finance is fantastically profitable... so why are taxpayers bailing it out?

Taxpayers on both sides of the Atlantic should be depressed by yesterday's decision by the US authorities to revise their Bear Stearns bail-out terms. Instead of lending JP Morgan $30bn against the collateral of Bear assets, US taxpayers are now effectively taking ownership of those (v dodgy) assets, with Morgan simply chipping in the first $1bn of any losses... and there will be losses.

When the Fed announced the original deal, we applauded. Comparing it to the botched handling of the Crock, we liked the speedy resolution, the fact that US taxpayers' exposure was limited, and the fact that Bear shareholders had paid by losing virtually everything. But under the revised deal, US taxpayers have taken $29bn of the most toxic debt, and Bear shareholders have been handed back 5 times more than the original offer. Bear's management and board remain in place, and the taxpayer won't even get a share of Morgan's likely upside.

The message from the Fed to risk-chasing banks is all too clear - do what you like; no need to worry about the Armageddon scenario because we'll always bail you out. No wonder bank shares have bounced.

Commenting on this, the fact that the Fed will be holding its toxic debt portfolio via one of those now notorious special purpose vehicles, and the fact that the collateral for its future loans to investment banks will be valued by the banks themselves, ex-Bank of England Monetary Policy Committee member Prof Willem Buiter asks "time for a tax payer class action suit?"

Where do we sign?

But for those of us who believe in free markets, the gloom is even deeper. As Martin Wolf points out, the inevitable consequence of this banking crisis is more regulation. Legislators will demand it and the cap-in-hand banks will hardly be in a position to resist. Indeed, they are actively inviting it: Joseph Ackermann, chief executive of Deutsche Bank, says that “I no longer believe in the market’s self-healing power”.

But we have no faith in the ability of regulators to do much better. The history of financial regulation is the history of unintended consequences (most recently the US Sarbanes-Oxley legislation driving many US financial firms across to London).

What's more, the actual people who work for regulators are rarely up to the job envisaged by legislators. As we have seen only too clearly with the FSA and the Crock, they are simply not confident enough to challenge aggressive bank management (and the ex-building society types who ran NR were hardly the raw meat eating brain-boxes who run investment banks).

We'd much prefer the approach advocated by the excellent John Kay:

"The state cannot ensure the stability of the financial system and a serious attempt to do so would involve intervention on an unacceptable scale. But to acknowledge responsibility for financial stability is to assume a costly liability for failure to achieve it. That is what has happened.

"Since financial stability is unattainable, the more important objective is to insulate the real economy from the consequences of financial instability. Government should protect small depositors and ensure that the payment system for households and businesses continues to function...

We cannot prevent booms and busts in credit markets, but today’s regulation of risk and capital – which is more reflective of what has occurred than of what may occur – does more to aggravate these cycles than to prevent them. Regulation in a market economy is targeted at specific market failures and should not be a charter for the general scrutiny of business strategies of private business. Banking should be no exception."

Hear, hear.

PS We'll be posting on the FSA drains-up report when we've read it.

More non-job madness...

Hiding away in today’s Metro is an advert for an, all to frequent, non-job - one that’ll leave you with little reason to doubt why the 2012 Olympics is going to be over-budget.

Instead of just getting the job done, building the Olympic park and ensuring there’s track to run on and such, the Olympic Delivery Authority sidestep all that in the name of ‘gender equality’.

On your buck, they’re attempting to ‘promote gender equality’ in the construction industry.  It’s as if they can take time out from building the Olympic park and competition venues to even out the male to female ratio in the building industry.

It shouldn’t matter what sex makes up the majority of the workforce in any industry, as long as the job is done.  London’s taxpayers (and soon to be taxpayers in Hertfordshire and Essex if Ken gets his way) want the Olympics ready to go on time and, preferably, under budget.  If the ODA continues on this politically correct path of wasting your money, then they clearly won’t.

From the ODA website:

“The ODA and its Delivery Partner wish to recruit two Employment & Skills Managers – Women’s Project to:

• Proactively promote construction related employment opportunities for women
• Assist in removing the barriers facing women wishing to enter the construction industry
• Broker on-site construction related work placements and direct employment for women
• Offer additional support to women on-site to ensure retention and career development

Understanding gender specific schemes will be new to many contractors and to the construction industry as a whole. The successful candidate will have a proven track record of supporting women/under-represented groups in gaining employment within the industry and also facilitating relevant training and development opportunities. In addition, they will have experience in educating and assisting companies to place women/under-represented groups into construction jobs.”

It gets worse north of the Border when you see what Glasgow University use government funds for…

Anyone fancy becoming a research project assistant in Scottish Pantomime?

Taxpayers Say No To The Bankers

Stress test for bankers 

Taxpayers are teetering on the brink of picking up some huge bills to bail out the banks. Somehow we have to make sure it doesn't happen.

Following Thursday's emergency meeting between Mervyn King and the City's top bankers, we'd steeled ourselves for a multi-billion bail-out announced over the long Easter weekend. Despite mounting hysteria, that didn't happen. Phew.

But we're certainly not out of danger yet.

The bankers reportedly demanded the Bank start buying mortgage backed securities: the toxic ones nobody else - including the bankers themselves - now wants. The Bank has given a categorical no, but that's likely to cause even more screaming. One FTSE chief executive squawked over the weekend:

"Does the Bank of England think the Fed is stupid or that the actions of the ECB are stupid? They need to wake up to the fact that this is serious and they need to help - that's what we have a f**king central bank for."

To which there's only one possible response: f**king central banks are not for doling out taxpayers' money.

As we blogged here, there's a huge difference between the Bank lending against heavily discounted collateral - which it's certainly going to do more of - and outright purchases of dodgy loans (let alone toxic loans). The banks got themselves into this mess, and they should get themselves out of it.

Here are a couple of interesting charts from Bank of England's Financial Stability Report. The first shows the return on equity capital for major UK banks over the last decade:

As we can see, it's been rolling along quite nicely in the range 20-30%pa, hardly dented even during the dotcom crash. These are highly profitable businesses.

The second chart shows how the pattern of banks' earning has been changing (specifically, the chart plots the earnings of Large and Complex Financial Institutions, but it highlights the point)

The key point here is that the real growth areas have not been in traditional bank business of taking deposits and lending (generating net interest income), but in fee earning and trading. The latter clearly involves dimensions of risk way beyond anything traditional banks did*, but even fee earning has brought whole new kinds of risk, many of the fees having been earned on the very financial innovations now causing so much concern.

It's the banks and their shareholders who have profited from getting into these new businesses. And taxpayers should not be made to bail them out when the going gets rough.

We reckon King is up for toughing it out. But Mssrs Brown and Darling?

Exactly.

*Footnote- Do you know how these bank trading operations have made so much money? I expect you imagine it's because they employ genius rocket scientists and/or barrow boys who can just "do it". But that isn't the essence of it at all. Many of those profits have come from banks borrowing money cheap, and then placing highly risky bets that pay off most of the time. A simple example is the so called "yen carry trade": there, you borrow yen, which carries a very low interest rate, you invest in some currency (typically dollars) that has a much higher interest rate, and you sit there quietly earning the difference. If you're lucky, the yen also goes down against the dollar because it has such low interest rates, so you make an extra profit on top. Brilliant. Well, brilliant until the yen goes up against the dollar that is. Then, everybody dives for the exit at the same time, and you make a thumping great foreign currency loss. Most of the time, it's a regular money machine, but every now and again, in some entirely unpredictable way, it incinerates your face: don't try it at home. (Actually, it's a bit more complex than that, but the essence- investing in risky assets that are OK most of the time- is correct; and we're now in one of the periods when it's gone horribly horribly wrong: see also this outstanding blog by Martin Wolf on hedge funds and its link to this).

Non-job of the week

When criticising big government, we often use the term “nanny state” to mean the government ordering us around like a nineteenth century nanny.  Like all other aspects of government modernisation, even the term “nanny state” has to take new meaning as Islington Council demonstrates this week with our non-job of the week, straight from the Guardian:

“Senior Play Ranger
£28,778 - £31,068 PRO RATA

Children's Services

Young People's Services

Islington is coming out to play!

It's exciting times for play in Islington, following our successful bid to the Big Lottery Fund.

We are now embarking on setting up our Play Ranger Teams. Play Rangers will work across the borough in parks, open spaces, estates and schools in developing play opportunities for children.

Play Rangers will respond to children's play needs and will primarily focus on delivering services during weekends and holiday periods and will carry out estate based work after school.

With initial two-year funding received from the Big Lottery Fund Islington, Children's Services and partners are seeking to recruit motivated play workers with a strong play ethos, who are able, willing and enthusiastic to work with children.

£28,778 - £31,068 PRO RATA REF: CS/0571/SG

2 YEARS FIXED TERM CONTRACT, 21 HOURS PER WEEK TERM TIME, 30 HOURS PER WEEK SCHOOL HOLIDAY PERIODS (SATURDAY / SUNDAY WORK ESSENTIAL)

As an experienced play worker who is level 3 qualified in play work, you will manage and lead a team of play rangers to deliver services across a range of play settings predominately at weekends.”

Seriously, is our society in such a state that local authorities have to pay people to play with children?  Do councils really need to pay someone to organise a kick around on the green?

I particularly like the part where the job specifies someone who is ‘level 3 qualified’ in play work.  Does that mean they can put together the more complicated lego sets or is it a qualification in meccano construction?

Either way, if you ever need to explain to someone how big our government has become, enlighten them to the sad fact that councils are now trying invade the family space, interfere and regulate children’s play time.

Gershon Speaks

Buying cheap is the easy bit

We've blogged the fantasy Gershon "efficiency" programme many times (see all previous blogs gathered here). As you will recall, this was Brown's 2004 Budget headline to save £20bn pa by improving public sector efficiency by 2007-08.

Most of the subsequent "savings" have of course been pure fiction. The NAO concluded only one-quarter of the announced savings are "reliable", with the rest comprising deckchair rearrangement or service cuts (many of which- such as kicking patients out of hospital early- have expenditure increasing knock-ons). Worse, the programme has spawned its own Whitehall "Gershon" industry, inflating costs even more.

This morning BBC R4 Today interviewed Sir Peter Gershon himself about the whole nonsense.

Asked about that damning NAO report, Gershon pleaded the old "leading edge/frontiers of knowledge" defence - measures of success have had to be developed from scratch, so of course there are a few rough edges. He also threw in the "long-term" defence - the first three years are just a downpayment on a thousand years of efficiency (OK , ten years).

And could he name one tangible real world saving? Yes, he could- NHS procurement of pharmaceuticals, where £1.3bn had been saved over three years.

Procurement. An interesting answer, reflecting the latest scorecard presented by the Treasury alongside the Budget (see chart above).

As BOM readers will know, the Simple Shopper spends getting on for £200bn pa on procurement, and routinely pays way over the odds for everything from spy planes to post-it notes. So there's definitely scope for improvement.

Do we believe the Treasury numbers? Even if we do, buying more cheaply from external suppliers is not really what we'd call an efficiency gain. It's simply exercising the Big Buyer Power that Tesco and Sainsbury have been wielding for years. The real business of efficiency is reorganising working practices to produce the same (or better) stuff more cheaply. There is no evidence Gershon has cracked that.

Dismantling Northern Rock

Sandler's the one on the right

Given the dire circumstances, Ron Sandler's plan to dismantle Northern Rock is the best taxpayers can expect.

He plans to shrink the operation drastically, halving the asset base in three years, repaying the Bank of England loans, and cutting staff by one-third. It's certainly the right direction, but before popping any champagne corks taxpayers should remember the following.

First, selling mortgage books in current market conditions will not be easy. Sandler should make sure he holds out for full value.

Second, the easiest assets to sell will the best. Which also applies to the NR mortgagees who will be persuaded to remortgage elsewhere. In three years time, taxpayers could find themselves left with the problematic rump.

Third, it's not at all clear how he proposes to unravel the offshore Granite funding vehicle (see previous blogs eg here).

Fourth, the NR statement talks of rebuilding its retail deposit base so it can reduce its reliance on fickle wholesale funding. Right now, with the Rock's market leading rates, that's probably going quite well. But that's because the HMG guarantee remains in place, which, as we've blogged many times, makes NR savings products highly attractive.

What happens when the government guarantee goes? Yes, most of the deposits are likely go too. Or to put it another way, taxpayers will have to go on guaranteeing NR's deposits into the forseeable future.

We are a very long way from being home and dry.

PS We've reminded ourselves of some details from the US S&L crisis. There are some spooky similarities, including how, during the Go-Go 80s, the S&Ls diversified their funding sources from boring old retail savings accounts to wholesale funding via an array of intermediating sharks. Small town S&L managements were way out of their depth. Oh, and the subsequent bail out cost $160.1 billion, of which $124.6 billion was directly paid for the U.S. taxpayer.

Lessons From The Bear

Not a bear to follow

What can British taxpayers learn from the Bear's collapse into the arms of JP Morgan?

First, let's note the similarity with our own Crock. Here was a bank that was no longer able to borrow from other banks and wholesale lenders, and which has an unknown amount of dodgy loans on its balance sheet. It could not survive without taxpayer support.

Now let's note the big BIG difference- the US authorities gripped the problem and got it sorted over a weekend. They simply opened their old smoke-filled room and bashed through a solution.

Yes, to get swift action they had to leave the Bear shareholders with a small amount of equity, but it's only 1% of its value 12 months ago. And yes, they've had to make a $30bn loan against some pretty dodgy collateral, but it's only for a month. And yes, JP Morgan shareholders will get all the upside, but they've also taken on the bulk of the risk.

Contrast that swift action with the Crock case. Our authorities faffed and blundered around for six months, having rejected a JP Morgan style rescue from Lloyds TSB last summer. They hoped somehow something would turn up, even though everyone else could see their prospective buyers were mainly after taxpayers' money. And all the while the situation deteriorated further.

The key reason for the difference of course is the half-baked Brown/Balls regulatory reform of 1997. As we've blogged many times (see previous blogs gathered here), because of the ill-defined way they split responsibilities between the Bank of England, the FSA, and the Treasury, nobody was at the controls when the Crock hit the wall.

Despite a decade of crowing about Bank independence, when it came to dealing with bank failure, Brown had emasculated the Bank of England.

In contrast, the US Fed retained its traditional clout: yes, they only ever take such extraordinary action in concert with the US Treasury, but they still have the credibility to get the politicos on board (for a good account see Alan Greenspan's book The Age of Turbulence).

Which approach is best for taxpayers?

Clearly, taxpayers on neither side of the Atlantic would start from here. We're all now on the line for guaranteeing rafts of questionable assets built up in the global debt bubble.

But whereas we British taxpayers are exposed to the full £100bn plus of Crock debt, US taxpayers are "only" holding $30bn of dodgy Bear assets. The risk on everything else is being born by the shareholders of JP Morgan (OK, OK, that $30bn is likely the most toxic stuff, but the plan is for JPM to examine it over the next 30 days and take it onto their own balance sheet at a suitably marked down price- ie resolution).

With the debt crisis worsening by the day, our government must crack on with its new banking legislation. But as taxpayers we should rue the day Brown decided to stymie the Bank of England's power to run its own smoke-filled room. The room that had been used for decades to twist arms and engineer cut-price take-overs of ailing banks. The room that had prevented High Street bank runs for 150 years.

Financial market confidence is a fragile thing. And it is often beyond the kind of abstract academic analysis so beloved of commissars like Brown and Balls (again, see Greenspan for his reflections on his own irrational exuberance remark). Smoke-filled rooms might be dark and stinky, but in the real world we abolish them at our peril (also see here for good John Gapper blog).

And remember: the lender and guarantor of the last resort is always the taxpayer. It's most unlikely the Crock and the Bear will be the last casualties of the deflating debt balloon, so taxpayers could end up holding A Lot of dodgy assets. The total liabilities of UK banks currently stand at over £6 trillion, or four times annual GDP. While nobody's suggesting all their assets are dodgy, in a market crisis the numbers can get very big very quickly.

The pain for taxpayers is only just beginning.

Axing The Beast

Two-thirds of us think government taxes and spends too much

At last a senior centre right politician has spoken up for lower taxes and smaller government:

"Tax policy should help create more wealth not penalise, particularly when it comes to those on low or middle incomes... The government should give parents - starting with the poorest who are usually stuck with the worst schools - their own budgets to make school choice real not rhetorical... In old age, health, childcare or training individuals should be able to control budgets to make the choices that are right for them... Local police and health services would be directly elected. Local communities would have a bigger say in local courts... "

Sounds great- how do we get there?

"No-one ever willingly gave away power, so Whitehall should be capped. Civil servant numbers have been reduced but still total almost 500,000. My ministerial experience taught me that the bigger the machine is the more it will do. So the civil service should be reduced by one quarter."

That's the voice of bitter experience talking. Alan Milburn hasn't just read about this stuff in books - he's been there in the dark bureaucratic corridors of the Department of Health.

He knows the truth- marginal tinkering, even when designed by the best management consultants (taxpayers') money can buy, simply doesn't work. The only hope is swift and bloody field surgery.

Thatcher had her cuts, and Reagan came up with "Starving the Beast". But whereas the gentle Ronnie simply tried to restrict the Beast's food supply, Milburn's plan is to smash the thing's skull with an axe.

Compare and contrast that with the latest subdued murmurings from David Cameron:

"There is not going to be some magic pot of money waiting for us when the next Conservative government is elected. We need to get used to saying 'no' more often than 'yes'. Money is tight and we've got to make choices."

We all agree that choices must be made. But what choices? 4,200 extra health visitors doesn't sound like beasts going hungry. And yet another £28bn for the NHS sure ain't no axe.

Ruling out tax cuts not just for the next election, but for the four years after that as well, is too dismally defeatist for words.

And while Philip Hammond rightly says Thatcher was unable to make tax cuts until she'd brought the public finances under control, part of that control was her being very tough on public spending. Far from lashing herself to Labour's spending plans, her first budget made cuts. And throughout her first term- despite the deepest recession since the thirties- she held discretionary public spending growth to well under 1% pa (see this blog for details)

What's that? Spending cuts are electoral suicide? That's sooooh 1990s. According to yesterday's Sunday Times/YouGov poll, 67% of us now reckon government taxes and spends too much. And fully 78% of us now think the government wastes huge amounts of our cash. Which is a complete turnaround from that rose tinted 1997 dawn.

If you can't think the unthinkable in opposition, then frankly you haven't got a prayer of doing so once in power. Once inside those dark "can't do" corridors, the very act of thinking becomes exhausting. And that vague hankering for lower taxes some time... in the promised golden future... when the time is right... you can forget all about that.

Ask Mr Milburn.

And while you're at it, ask if you can borrow his axe.

In The Long-Term We're All Broke

Politicians of all hues seem to assume we can go on increasing public spending by give-or-take 2% pa for ever. After all, the economy will deliver 2.5% pa growth, whatever, so what's the problem?

The problem is highlighted in one of the annexes to Wednesday's Budget, punchily entitled the Long-term public finance report: an analysis of fiscal sustainability. The age time bomb is ticking away quite nicely, with ballooning pensions, healthcare and long-term care set to wreck the public finances.

The table above summarises the Treasury's latest projections. As we can see, in the next half-century, age-related spending increases by 6.5% of GDP. That is a staggering amount, equivalent in today's terms to around £100bn pa, or £4 grand for every single household. It is principally driven by state pensions (an additional 2.3% of GDP), healthcare (an additional 3.3%), and long-term care (0.8%).

But here's the bad news: it's likely to be even worse than that. To start with, the Treasury assumes that we will all have the decency to die in a timely manner. By 2031, average life expectancy is assumed to be 82.7 for men and 86.2 for women. But judging by the experience so far, that might well turn out to be an underestimate (see this blog).

Second, the Treasury assumes unchanged policies. But just to take healthcare as one example, the experience of the last 50 years is that policy doesn't stay unchanged. Advances in expensive medicine are constantly putting upward pressure on spending. Similar pressures apply right across the public sector.

Third, it's well known that the relative cost of public services increases over time. That's because whereas public sector pay has to be kept broadly aligned with private sector pay, public sector productivity always trails far behind (eg slumping NHS productivity). Yet as far as we can see, the Treasury assumes the "unit cost" of public services relative to GDP remains unchanged.

Fourth, it is highly likely the Treasury's projections incorporate other hidden assumptions which damp down the increases. See that line "Other spending"? That goes down by 1.6% of GDP, with no very serious explanation why. And what precisely is being assumed on RPI vs earnings uplift for, say, pensions? Since earnings tend to outstrip prices over time, uplifting by RPI may understate the realistic prospective costs (we will investigate further).

The Big Message here is that demographic forces are propelling us towards a fiscal crisis. Even on the Treasury's figures, on current policies, public spending increases to 44.5% of GDP by mid century. Strip out that mysterious fall in "other spending", add on a bit for longer life expectancy, expensive new health technology, and low public sector productivity, and our back-of-envelope says that should actually read more like 50% (we'll be taking a closer look).

Now in theory, your reponsible politician considers this and says "hmm, looks like we'd better rein back on public spending asap, or we're going to be seriously up the fiscal creek".

But somehow in practice that never happens. The HMT Report concludes: "The UK will therefore be well placed to deal with the potential fiscal impacts arising from other long-term trends." So not exactly a call to action.

This government has talked a lot about fiscal reponsibility and something grandly called "intergenerational equity". We wonder whether a future working generation paying 50% tax with no pension before 80 will think equity has been achieved.

Pie In The Sky Budget Forecasts

Somewhere out in the future everything's going to be fine

For taxpayers the Budget's fiscal projections are worrisome.

The basic proposition from Alistair Darling and Yvette Cooper is that while the current economic turbulence will hit tax revenue and push up borrowing in the short-term, it's nothing that can't be contained within the existing fiscal rules. And by the time we get to 2011-12, a "mere" £4bn of tax increases (compared to Budget 2007) will be enough to rebalance the books.

That seems highly unlikely.

First, borrowing this year and next is substantially higher than forecast in last year's Budget- an extra £23bn, taking total borrowing to £81bn over the two years.

Second, the Treasury's GDP forecast is more optimistic than the consensus. According to the Budget papers, the average independent growth forecast is now on 1.6% for 2008, and 1.8% for 2009. Against that, the Treasury is on 2% for 2008 and 2.5% for 2009. That may not sound much of a gap, but depending on whose ready reckoner you believe, it could mean an additional £10-15bn borrowing over the two years, taking total borrowing up towards £100bn.

Third, the outlook is getting darker by the day. Here's how the average of independent GDP forecasts has been moving for 2008:

Given the innate caution of mainstream forecasters, and the unfolding US recession, who'd want to bet there's not more downward revision to come.

Fourth, what happens if we don't revert back to 2.5% pa "trend" growth assumed by HMT for 2009-10 onwards? The way the banks have been zapped by the credit blow-out, that seems an extraordinarily optimistic assumption. If for example, we only got a jobless joyless 1.5% pa that would mean another c£10bn additional borrowing every year.

In summary, the Treasury forecasts look far too optimistic. And as the TPA has pointed out many times, when it comes to optimistic forecasts of the public finances, this government has got serious form.

The following table from Reform spells out the record from successive Budget forecasts, showing the initial estimate against the eventual outturn (or latest estimate):

As we can see, in each of the last five years we've seen a borrowing outturn substantially higher than the initial government estimate- in one case, 9 times higher.

One possible explanation is incompetent forecasting, but blind incompetence would surely have produced a random pattern of errors. Moreover this has been a period where growth has turned out stronger than most expected, so if anything, future borrowing should have been overestimated.

No, these borrowing forecasts look to have been systematically massaged downwards throughout the entire period, and the massaging looks even worse in this Budget.

This is both depressing and dangerous. How can taxpayers ever hope to engage in a proper discussion of the public finances without open and honest forecasts?

Responsibility for public finance forecasts should be taken away from the Treasury. We need an independent Office of the Budget, modelled on the National Audit Office, and charged with producing non-partisan forecasts and analyses of public sector revenues, expenditure, borrowing, and debt. Other countries have that, and it's long overdue here.

Non-job of the week

I thought the North East said “No” to the North East Regional Assembly?

Aye, they said ‘no’ to an elected regional assembly, but it still exists, illegitimate, unwanted and unaccountable.  If there’s any doubt that it exists, just take a look in the Guardian Society jobs pages today and you’ll find an ad for the North East Assembly which conveniently doubles up as our non-job of the week.

The more I research and experience local government, the more I find the governmental structure to be all over the place.  District and County councils have strategies.  The government’s regional assemblies and development corporations have ‘strategies’.  Lines of authority overlap to the extent where you have to have an incredibly sharp eye to keep track with who has competence over what and which authority is responsible for any one policy area.

This, perhaps, is just one of the reasons why taxpayers in the North East said no to an elected regional assembly.  Unsurprisingly, the government still carried on with a regional assembly nonetheless.

So, for your displeasure, our non-jobs of the week come from a non-body still burning your money:

“Policy Officers

(2 temporary posts, open to secondments), SCP 26 - 36: £21,411 - £28,920

The North East Assembly shapes the future development of the region by setting the strategic framework for planning, housing, transport and sustainable development, and for ensuring the regional development agency, is accountable to the region.

The North East Assembly has vacancies for two policy officers that we would like to fill as soon as possible. As part of the team responsible for taking forward the regional spatial strategy, or for the team responsible for scrutiny and policy development around the regional economic strategy, the two temporary posts offer the opportunity to work across a number of policy areas and with a range of stakeholders. The posts are open to secondments and provide an opportunity to gain invaluable experience of governance at a regional level during a time of change.

With experience of policy work, and with planning skills and/or social research skills, you will be able to demonstrate achievement in analysis and interpretation coupled with an excellent understanding of regional and national policies and strategies.

You can download an application package from our web site at http://www.northeastassembly.gov.uk/vacancies. For an informal discussion, please contact Phil Jones, planning manager, or Nicola Boyne, scrutiny manager, on 0845 673 3343.

Closing date: 26 March 2008.

We are an equal opportunities employer, and all applications will be considered solely on merit.”

Post Office Closures

Sickening hypocrisy

Essex County Council's £1.5m plan to make its Council Tax payers prop up 15 local post offices is merely the latest twist in a long and dismal saga of public sector buck-passing.

The Essex post offices are among 2,500 unprofitable branches (from over 14,000) earmarked for the chop to stem £200m pa losses.

Thoughout the land there's been a predictable outcry. And throughout the land there's been a predictable rush by our grandstanding politicos to distance themselves from closure decisions and join photo-op protests. So what, if those self-same politicos were themselves party to decisions that led to the closures in the first place (pass the sick bag Straw, Jowell, Smith, etc etc)?

Who's responsible for this mess?

Specific closure decisions are taken by Post Offices Ltd, a state owned company. But in truth, they have little choice, having been ordered to cut losses by their departmental sponsor the Department for Business, Enterprise & Regulatory Reform (never heard of it? it's just the latest name for the same hopeless old DTI). And BERR had little choice, acting on the direct orders of HM Treasury (prop. G Brown esq).

But why were the POs making £200m of losses in the first place? Largely because the government has salami sliced away from them vast swathes of their traditional business, like for example on pensions and allowances.

Someone who's naturally taken a very close interest in this whole nasty business is the Village Postmaster. His sub-Post Office is thriving and has survived the axe, but he knows plenty about those that haven't. In this post (a letter to his local paper) he explains the backgound, and the prospect of a much larger shrinkage to come:

"The reason for the change was the ‘unsustainable and growing losses’ that Post Office Ltd was making, and the reason for the losses was the loss of Government work like Pensions and Allowances. It was Government who decided to ‘modernise’ the payment method, not the Post Office.

We now face a much more serious threat to the remaining branch network, and that is the end of the Post Office Card Account contract in 2010. Its replacement is currently out to tender and if Post Office Ltd fails to win the ongoing business, the consequence is likely to be the end of the Post Office network on a large scale, with it shrinking to the 3000 or 4000 commercial profitable branches" (against 14,000 branches now).

Now, it's we taxpayers who have been carrying the £200m pa loss, but that's not all we've been carrying. In addition, the government has been putting £150m pa into subsidising rural Post Offices because it thinks they are socially worthwhile. Add them together, and the Village Postmaster reckons that on average each rural PO is currently getting about £30,000 pa in taxpayer support. So some must be getting considerably more than that.

Do we think that's value for taxpayers' money? £350m pa is a lot of money: surely there must be cheaper ways of delivering cash and stamps to isolated old folk in outlying areas.

And as the VP points out, this whole problem could soon be a lot worse. If the PO card account contract is terminated in 2010 (nicely the other side of the next election), many more offices will become unviable. Economic logic says thousands more should close, but our spineless politicos are unlikely to allow that. So the subsidy will balloon still further- £0.5bn or even £1bn pa would be well on the cards.

And what of the Essex plan? They are proposing to spend £1.5m over three years propping up 15-16 offices. So that's about £30 grand pa each, roughly in line with the current subsidy. But will they be able to do any better than the existing managers?

True, if local Council Tax payers want to spend their money on supporting local services, that should be up to them. But in this case local taxpayers have not been consulted, and as the TPA was pointing out over the weekend, local authorities are hardly known for their entrpreneurial skills.

PS There's another thing. One of the organisations opining extensively on this issue is Post Watch. And the way they talk, you imagine they are an independent consumer champion, particularly since that's the way they're introduced on the media. But in reality they're not independent in the slightest degree. They are yet another government quango, fully funded by taxpayers and reporting to, yes, the Department for Business, Enterprise & Regulatory Reform. The self-same department that is responsible for the Post Office. What a farce. And what a complete waste of £10m pa.

A Disaster Waiting To Happen

Dippy diplomas- neither vocational fish nor academic fowl

Schools Secretary Ed Balls has been out and about today trying to defend the government's new school Diploma scheme. And it certainly needs defending.

As BOM readers will be well aware, the government has taken the worrisome decision to raise the school leaving age to 18 (see previous blogs eg here). But only now, with the decision already taken, are they trying to find something for those thousands of disaffected 17 year olds to do, other than disrupting school for everyone else. Diplomas are the straw they're desperately clutching at. 

On Wednesday the Public Accounts Committee quizzed the mandarins from the Department for Children Schools and Families for some details of how they are going to work. But as they discovered, there are no details - at least none that connect up to the real world. As the ever impressive Richard Bacon MP put it, "this is a disaster waiting to happen".

On the table was the NAO Report optimistically entitled Partnering for success: preparing to deliver the 14-19 education reforms in England, but the title is the only upbeat thing about it.

According to the NAO, these Diplomas (subject list above) "aim to merge applied and general learning, providing alternative pathways for 14 to 19 year olds into further education, higher education and employment." But what that means in practice is an unholy mishmash of academic and vocational bits and pieces from a huge raft of disparate bodies, all stapled together and labeled "A Diploma".

So far, so bad. But there's worse: "Unlike most existing qualifications for young people, it will not be possible for a single institution to provide a high-quality education in all the Diplomas, because the content of each Diploma is broad and ranges across both applied and general provision."

In other words, these disaffected teenagers won't be sitting in a classroom in a specific school but roaming around- often for miles - to a wide range of schools, colleges, hairdressing salons, KFCs, and anywhere else that provides some input to the ragbag. I think we can all see how that will go.

Worse still, no one institution has been given overall responsibility. The whole shaky edifice is being contructed on the basis of hundreds of local partnerships ("consortia"). And they involve virtually everyone you've ever heard of, including the terminally useless Learning and Skills Council which is already enmeshed in its own "partnerships" quagmire (eg see here and here).

The commissars are literally making this up as they go along. Here are some lowlights from the NAO report:

• Mad timetable dictated from above- This entire project has been ordered by headline chasing politicos who haven't a clue how it could work; they've dropped it onto their Whitehall commissars who similarly haven't a clue how it could work; they've dropped it onto the local authorities who hardly know whether they're coming or going: "Consortia are concerned that aspects of the reforms which they have to implement, to a demanding timetable, will not be adequately thought through and trialled" (para 85); they can say that again
• Employers not involved- vocational qualifications are only any use if employers are involved in the training (it used to be called an apprenticeship); but 45% of these local consortia haven't yet involved employers at all;
• Vapourware- most of these diplomas haven't even been specced yet: unsurpisingly, consortia are "finding it especially difficult to get employers involved while the content of the Diplomas was not known, as partnerships were themselves unclear about employers’ potential contribution; employers understandably want to know precisely what is being asked of them and when" (p 79)
• No logistical plan- "We found no evidence that the scale of the need to buy in provision is known or being assessed, or that potential risks, such as poor access or very long travel times for some young people, are being evaluated"(p74)
• Wishful thinking- "the Diplomas are perceived to be designed for less able students, despite the fact that they are being developed as equivalents to existing qualifications" (p71)
• Not enough staff- there are nowhere near enough qualified staff to teach these courses and no workable plan to get them
• No funding plan- "Lack of clarity over future funding makes collaboration and planning difficult"- this is yet another set of demands dropped onto local authorities with no indication of how they will be funded

As Bacon suggested, the real risk with this whole half-baked enterprise is not the wasted millions it will undoubtedly cost us all. It's the fact that many of our less academic teenagers will be sucked into doing courses that are markedly inferior to the existing range of vocational qualifications (NVQs).

Our headline chasing rulers should hang their heads in shame.

PS All of this upheaval is ostensively being driven by the observation that the UK has a smaller proportion of 16-18 year olds in full-time education than our competitors:

The idea being that if we don't correct this shortfall, we will surely all perish in the inferno of global competition. But is that right? First, quantity is never the same as quality, and forcing those teenagers to stay on for the kind of half-baked nonsense envisaged here isn't going to help anyone. Second, do we actually need everyone to be given more and more formal schooling? From the perspective of the national economy - which is how this is always sold - we need a mix of workers with different levels of skill and employment expectations. Indeed, recent migration experience surely tells us the problem with our NEETS is not that they're insufficiently educated to find work, but that for whatever reason they won't take the jobs on offer.

Non-job of the week

Lancashire’s taxpayers, after footing Council Tax bills that have doubled in the last ten years, better brace themselves to hear where their money’s going.  We found this job at Lancashire County Council from the Guardian Society jobs page, which is our non-job of the week:

“Woodlands from waste development officer

£28,172 to £30,598 a year.

Are you wasted...

...where you are? We're transforming Lancashire's waste management scene. Do you want to be a key player in one of the most innovative integrated projects in the UK? As our...

Ref: X00169MT

You will be involved in establishing woodland planting on derelict and neglected land using organic growth medium produced by the county's innovative, new waste treatment facilities.

We are conducting a job evaluation exercise and as a result the salary of these posts may increase or decrease, or stay the same.

Interested in any of these new and exciting positions?

Apply online at: http://www.lancashire.gov.uk/vacancies or tel: 0845 053 0008.

Closing date: 28 March 2008.

We are an equal opportunities employer welcoming applications from all sections of the community. Applications from ethnic minorities are welcome. You must be committed to equality and diversity in the workplace.

Apply online at: http://www.lancashire.gov.uk/vacancies

- POSITIVE ABOUT DISABLED PEOPLE”

INVESTOR IN PEOPLE”

Essentially this job is £30k of hard-earned taxpayers’ money to spread muck and plant trees.  Add into this the operating costs and such, double the salary and you have the rough cost to the taxpayer.  Yet in spectacular bureautalk, this role seeks an ‘officer’.  So, this could be £30k+ on a job nowhere near the frontline.  Perhaps it’s another case of the expansion in bureaucratic middle management?

You can find out and ask Lancashire County Council’s cabinet why they’re spending your money on a muck-spreading supervisor.  This is your money, you can get involved by holding wasteful politicians to account.

Paths To Nowhere

Opening up the countryside

The government's £250m pa eco-quango Natural England has just shredded another £4.5m.

Discovering Lost Ways, a £15 million project, was set up by the Government six years ago to restore forgotten countryside rights of way. But:

"Staff searched hundreds of land deeds, maps and agreements, many dating back to the 1800s, for the lost rights of way. All they have to show for almost six years of effort are five pending applications with Cheshire County Council and twenty case files sent to Shropshire County Council.

Amanda Earnshaw, a project manager for the scheme, said: “What should have been a sensible process has got itself mired in bureaucracy. As yet we haven’t got any more rights of way on the map.”

So after six years, £4.5m, and countless miles of red tape, the whole nonsense has finally been canned.

Your correspondent strongly supports preserving the best of Britain's past, and pays his annual subs to the National Trust accordingly. But why should his taxes be spent on half-baked government plans to reinstitute paths that are so disused nobody even knows where they are? And why should landowners be forced to open their lives to yet more quad-bikers?

We've met Natural England before of course. They're the quangocrats ripping up our woodlands to construct their preferred landscape of blasted heath (see here).

Did anyone vote for this?

Rebutting the local government spin merchants

Since the launch of our third Council Spending Uncovered paper last week, which looked into the cost of the Local Government Pension Scheme, there has been a lot of media discussion of the issue - which is, of course, exactly what we hoped for. This is a crucial issue and the cost of the unreformed scheme is placing a severe burden on council budgets and taxpayers, so it is good that the true cost of the Scheme is being discussed.

Predictably there has also been some mud slinging from some usual suspects. Given that back in December we identified a £450 million local government publicity machine, it is no surprise that some people have been spinning earnestly. At least some of the taxpayers' money spent on PR men is being put to use...

So we thought this would be a good opportunity to answer the issues, questions and dubious claims that have been raised in the last few days.

It will come as no surprise to you that the main sources of these comments are the Local Government Association and the trade unions UNISON and the GMB. No vested interests in squeezing as much money out of the taxpayer as possible there, then.

First up is the GMB's statement. A somewhat old-school practice in spin doctoring is the smear, and the GMB's press office are obviously not people to pass up a good opportunity so they jumped straight in with it, describing us as

"The far-right Taxpayers Alliance..."

A classic example of the unfounded smear - and probably worth a lot of points in the Eye Spy Book of Spin. We can't say we expected the GMB to agree with us about making the pension settlement more equal, but trying to lump us in with the National Front is a bit below the belt even for them. Not content with that, they thought they'd try to undermine the facts of the report, too, claiming

Brian Strutton, GMB National Secretary, said “It’s a shame the Taxpayers Alliance didn’t do their homework. They ask for a reform of local government pensions oblivious to the fact that a new scheme starts in April 2008.

It's somewhat unfortunate that Mr Strutton doesn't seem to have actually read our report, or he would have read on Page 3 that:

On 1 April 2008, employee contributions will decrease to 5.5 per cent on earnings up to £12,000 and increase to 7.5 per cent on earnings above £12,000, while the early retirement age will increase to 55.

The point is that we are well aware that there is a change being made to the pension scheme in April, but it is not enough of a change. It is tinkering round the edges rather than real, fundamental reform of the system. The Unions should be well aware of this, as it is in fact the last tattered vestiges of the reform package they ripped to shreds with threats of strikes bringing the country to a standstill when the Government proposed them.

So let's move on to UNISON's comments. Describing the description of gold-plated pensions as a "myth" is rather deceptive - the kind of pensions enjoyed by Local Government staff are in fact so unsustainable and so generous that they are almost extinct in the private sector. The reason? They are simply too expensive to save for.

The Government Actuary's figures show that between 1995 and 2004, the proportion of public sector workers enrolled in final salary pension schemes has increased from 78 per cent to 88 per cent.  At the same time the proportion of private sector workers has declined from 23 per cent to just 16 per cent.

As the population grows older, the private sector, which has to make the books balance, has woken up to the need for change and has had to move away from these final salary schemes. Not so the local councils, though - why rein in your spending when you can just charge it to the taxpayers' tab? If these pensions aren't gold-plated, how come they are unaffordable to everyone else?

UNISON's Head of Local Government, one Heather Wakefield, goes on to produce a very misleading statistic - that in local government

the average pension is just £3,800 a year

Whilst this is probably broadly factually correct, it is used very misleadingly. Given the high number of employees and staff turnover in local government - as the LGA themselves remind us, councils do provide over 800 services - this does not mean everyone working a full career for a local authority gets an average salary of £3,800. It includes everyone who worked for a council for 6 months, and then went to do something else; people who entered the local government sector for a short period of time, left and may well find with surprise that they are due a pension of 20p a month in 50 years' time. To put it in perspective, even this average of £3,800 would be a relatively sizeable boost to the basic state pension of £4,500. Given that only one in four of the general populace have private pensions, even if we take this average figure it means that local government workers are better provided for than those that struggle to pay council tax.

There was also an odd piece written on the Channel 4 News web site, who run a feature called FactCheck, which analyses data released by campaign groups, think tanks and political parties. Their piece on the report - which they seem to have spoken to the Local Government Association about but not discussed with us (and have not returned our calls) - parroted the line about the surface changes being brought in April that we've already dealt with. It also claimed we'd been disingenuous about the headline figure.

The main figure, that councils spent £4.6 billion in 2006-07 on employer pension contributions, is the fact that Unison, the GMB and the LGA all stepped quietly around. None of them have been able to undermine it because it is true - and shocking in its size. What Channel 4's report, which echoes closely LGA and union press statements, took issue with was our pointing out that £4.6 billion is equal to 21 per cent of the £22.2 billion of council tax raised in 2006-07.

This isn't an unreasonable comparison, given that the Council Spending Uncovered series is about identifying areas of spending where savings can be made that could be passed on in council tax cuts. C4 point out that councils get the majority of their income from central government, so the £4.6 billion does not come solely from council tax payers. It's unfair of them to suggest that we've tried to hide this, given that our press release stated that

Council tax is not the sole source of income for councils, nor is it earmarked for pensions, but all spending comes from the same pot - any savings made could be used to reduce council tax.

and we then repeated it in more detail in the report itself.

The facts are stark and undisputable:

1) Pension contributions by councils = £4.6 billion

2) £4.6 billion equates to more than 20 per cent of the amount raised by council tax.

3) Any savings made by reducing the £4.6 billion could be passed directly on in council tax cuts.

We want to see council tax reduced, and we're making honest, well-calculated suggestions for how to do it. Perhaps we can judge how close to victory we are getting by the way opponents have responded.