The TaxPayers' Alliance - Burning our Money

Correcting The Brown Version

The real tax grab

This morning Gordon Brown was interviewed by John Humphrys on BBC R4 Today. Unfortunately John Humphrys allowed him to get away with a number of infelicities that should have been properly challenged:

• "Tax is only 37% of GDP" - when Humphrys put it to him that taxes are now 40% plus, Brown whacked him: "you must get your facts right John." But the truth is that while declared tax is officially put at 37% this year (Budget report), that excludes a further 2.3% of GDP accounted for by "other receipts". Among other things, they comprise all those service charges now imposed for things that used to be delivered free, or nearly free (eg see this blog). Including them, the government's take goes up to 39%. And on top of that, we have government borrowing of 3% of GDP, implying that the government is actually grabbing 42% of our income, as shown in the chart (government borrowing being no more than deferred tax - an inescapable fact first highlighted by David Ricardo 200 years ago).
• "The 10p tax rate mainly lined the pockets of the rich"- jaw-droppingly, Brown explained he'd abolished the 10p rate because 85% of the benefit was going to the undeserving rich. Humphrys failed to point out it had been Brown himself who had introduced it in the first place. And he also failed to point out that the money from its abolition had been used to fund a cut in the basic rate, which itself "lines the pockets of the rich".
• "The banks were wrong to conduct so much business off-balance sheet"- coming from the Great Enron accountant Brown, who currently has well over £1 trillion of off-balance sheet debt (see this blog), that is outrageous cheek. But once again Humphrys failed to pick it up, preferring instead to concentrate on what he called "moral issues" and whether Mr Brown was enjoying the job? To which his reply was...

..."it is a privilege to serve."

A privilege to serve.

Taxpayers would feel much better served if Mr Brown took less of their money, and was a deal more open and straightforward about his fiscal sums.

Non-job of the week

For all of those who criticised our Council Spending Uncovered paper on publicity spending, take a look at our non-job of the week:

“Publications Editor
£26,067 - £27,584 (pay award pending)

This is your chance to get involved in producing our Council publications.

In our county, effectively communicating and engaging with our residents is crucial. The quarterly Your County publication plays a huge part in this - providing important news updates, advice and features. As the Editor, you can expect real freedom to develop your ideas and take the magazine forward. This will involve liaising with the full range of council departments, sourcing, writing and editing stories and overseeing the full production process. We’ll also look to you to produce other council publications and your expertise will enable you to offer advise [Tim edit: oh dear, oh dear, oh dear] to colleagues. Inspirational and highly motivated, you’ll bring a proven editorial background, exceptional relationship building skills and an ambitious approach. Ref: QO1094.”

Clearly they didn’t edit this ad.  Someone better advise East Sussex Council to check over their work in future. 

Councils are under an obligation to inform taxpayers of its essential services, letting us know when the pharmacies are open for example.  They're not obliged, however, to produce expensive, glossy magazines propagandizing at our expense - they can save that for their party-funded leaflets. 

On Monday we challenged councils to reduce their publicity, middle management and pensions by 10% to produce real tax cuts next year.  East Sussex Council could start by axing this job and work that bit harder to give us some of our money back.

Feel free to recommend this saving to the leader of East Sussex County Council, Peter Jones, by sending an email cllr.peter.jones@eastsussex.gov.uk or drop him a line at the council 01797 226243. 

Council Spending Uncovered No. 5: The Ten Percent Challenge

• TAXPAYERS' ALLIANCE THROWS DOWN GAUNTLET TO COUNCILS
• WITH SIMPLE AND MODEST SAVINGS COUNCIL TAX CAN BE CUT BY 3.5%, WHICH IS £40 OFF THE AVERAGE BAND D BILL
• INDIVIDUAL DETAILS FOR HUNDREDS OF COUNCILS SHOWS SIMPLE SAVINGS IN PUBLICITY, MANAGEMENT AND PENSION COSTS

Ahead of the local elections on May 1st, this fifth Council Spending Uncovered paper brings together the previous papers which revealed large amounts of spending poured into publicity, middle and senior management and gold-plated pensions, and issues councils of all parties across England and Scotland with a simple challenge:

If councils cut publicity, management and pension costs by just 10 per cent, they can cut council tax by an average of 3.5 per cent, or around £40 off an average Band D bill.

This is the TaxPayers' Alliance "Ten Per Cent Challenge".

KEY FINDINGS:

• In 2006-07, councils in England and Scotland spent over £400 million on publicity, £1.9 billion employing managers earning over £50,000 and over £4.3 billion on employer pension contributions. The total of the three expenditures is therefore £6.6 billion.
• Saving just 10% on those three areas alone would therefore reduce expenditure by £660 million.
  In the same year, council tax collected in England and Scotland totalled £18.7 billion (excluding Fire and Police precepts). Saving £660 million from that total would allow councils to reduce council tax by 3.5%.
• The average Band D council tax bill in 2006-07 (including both the district and county council where relevant but excluding the GLA and Fire and Police precepts) was just over £1,100. A 3.5% reduction would equal around £40.

The full report, which can be found here, provides detailed breakdowns for the savings that can be made by each local authority in England and Wales.

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

“Council tax has doubled in the last decade and is now so high that it tips many families and pensioners over the edge.  But it doesn’t have to be that way.  Local authorities of all parties could make meaningful council tax reductions if they saved a modest 10 per cent in these three non-priority areas.”

Andrew Allum, Chairman of the TaxPayers’ Alliance, said:

“These 10 per cent savings could easily be achieved if local authorities focused resources on the real priorities.  We hear repeatedly that councils are cash-strapped, but there is a lot they can do to reduce costs, cut council tax and better serve their local residents.”

Vote Red Mist

You'll need plenty of £2 coins

As you may have heard, ex-Sun editor Kelvin MacKenzie is so incensed by the unaccountable money burning antics of his local council that he's standing for election as a councillor. His Red Mist Party pledge card reads:

1. Cut car parking charges, which have just been increased by up to 43% in one year alone
2. Cut the pay of the council leader, which has just been increased by 40%
3. Scrap the final salary pension scheme for council employees (see many papers from the TaxPayers' Alliance)

He should poll well. Apart from his eye-catching policies, someone of MacKenzie's intelligence and energy is sure put a rocket up the council. We're just sorry he's not standing for our council.

MacKenzie's red mist descended because Elmbridge Council decided to increase the cost of his station's daily car parking charge by 43%. Just like that.

Interesting. Because all of us are suddenly realising how much these local authority charges have escalated. From car parks, to library fines (see this blog), to policing fees (see this blog), to pest control charges, these days local authorities routinely rack up their charges far faster than prices generally.

We've been taking a closer look at this. In 1997-98, charges and fees levied by English local authorities raised £5.5bn (excluding most council house rents). By 2005-06, the most recent year available, the total had shot up to £10.7bn, an average increase of 9% pa. Which compares to the government's official inflation rate (the Consumer Price Index) over that same period of just 1.3% pa.

Assuming this rate of charging increase has continued - and if MacKenzie's experience is anything to go by, that's a conservative assumption - by 2007-08 the total would have reached £12.6bn, more than £500 pa for every single household. Council charges now raise well over half the sum raised by Council Tax itself.

It's high time we started monitoring this properly. Because Council Tax is by far Britain's most unpopular tax, councils have become circumpect about increasing it, and anyway it's capped by Whitehall. But there are no such restraints on charges.

In principle, usage charges have a useful role to play as an alternative to taxation. But in practice, they are an addition to taxation: they are effectively yet another stealth tax.

Ever higher charges need to be opposed, just as Kelvin is doing.

Non-job of the week

As councils up and down the country do their best to expand their middle management, bloat their own salaries and scale back frontline services, they never fail to come up with yet another non-job for us to expose.

This week Liverpool City Council burns taxpayers’ money by offering this job, yet again, from the Guardian Society pages:

“Public Art Officer

£30,598 - £33,291

Liverpool is looking for people with the passion, commitment and skills to make their mark and deliver an exciting and challenging agenda. If you have ambition for yourself and for Liverpool; if you can improve yourself and support the development of your colleagues; if you share our values and strive to make others feel valued then we want to hear from you.

The post holder will be based in the Urban Design Team and will be dealing with all matters related to public art, including guidance and strategy.

Successful applicants will have a degree/diploma in a visual arts related subject and/or substantial experience of public art matters.

Candidates should preferably have experience of working within Local Government and should be self-motivated, well organised and be able to communicate effectively and work well as part of a team.

You must be able to work well under pressure and have the ability to meet deadlines.”

What?  No taxpayer-funded chalk?  No subsidised paint sets?  Liverpool City Council lets us down.  But give them credit, at least the ad wasn’t blank like last week’s non-job.

Seriously, though, Liverpool Council claim to be cash strapped, yet they have a sixty million black hole in their finances.  Why are they employing artists when there is something very wrong with their finances?  They spend £9.4million of taxpayers’ money (a 700% increase on 10 years ago) on its own publicity, with well over £1million of that on its staff advertising (a 1,000% increase on 1997 figures).  Add more on top of that after Liverpool City Council’s 4.9% Council Tax grab this year and you find even greater scope for this council to waste more of your money.

This is where you come in.  Kindly ask the leader of Liverpool City Council, Warren Bradley (warren.bradley@liverpool.gov.uk) whether this public art officer is value for money.  How much longer are you going to let these council get away with wasting your money?

Thank Goodness For The Old Lady

Haircuts from the Old Lady

Mervyn King has taken heavy flak over his handling of the banking crisis, especially from government politicians. For months he stood virtually alone in the corridors of power arguing that the bankers had made the profits, so they should reap the losses. Thank goodness he was there, because left to themselves our spineless politicos would long ago have given the bankers whatever they asked for.

This morning we finally got details of the Bank of England's new Special Liquidity Scheme to "unbung" the financial markets. And we have to say, it's less bad than we'd feared - King seems to have insisted on a degree of sanity being maintained.

As already leaked, the SLS scheme involves the authorities swapping our high quality Treasury securities for the banks' dodgy securities and loans - in particular those Residential Mortgage Backed Securities (RMBS) that nobody now wants. Stripped of technical jargon, we taxpayers are lending them £50bn (or more) secured against the collateral of a bunch of mortgage and other assets they will pledge to us. The arrangement will be for a 12 month period, extendable for up to three years.

From the taxpayer's perspective, the key questions are whether the collateral is secure, and what we are being paid.

On security, the Bank has published the haircuts (ie discounts) that will be applied to the collateral (see table above). And as we can see, for mortgage and credit card based collateral, they will only accept the very highest quality (AAA as rated by two recognised credit rating agencies). And values will be discounted by up to 22% for quoted sterling denominated securities, with further discounts for unquoted or foreign currency denominated securities. What's more, the securities will be marked to market (ie repriced) daily, and collateral will need to be topped up if its value sags.

For choice, standing as we are on a property cliff-edge, we'd have preferred even harsher haircuts, but for AAA securities this is probably tough enough for taxpayers to at least snooze at night.

On charges, the banks will have to pay a fee. It will be equal to the difference between what they can already borrow at in the unsecured interbank market (3 month LIBOR), and what they can borrow at in the so called repo market, secured against government bonds. At present that difference is c 0.9% pa, which is therefore the fee they will be charged.

Again, for choice, we'd have preferred a higher fee: after all, we taxpayers are digging the banks out of a huge hole so we should get fully rewarded. But at least we're not giving them free money.

Overall, this deal seems a bit tougher on banks than some of last week's rumours suggested. And the equity markets seem to agree, with all the major banks' share prices down this morning. Which is reassuring.

And what will happen in the mortgage market? Darling and Brown will doubtless claim this move will "unbung" that as well, bringing "fresh hope to hardworking families and first time buyers". Don't believe a word of it. This is about giving the banks a breathing space to rebuild their capital and free up their balance sheets. Mortgage borrowers will not be high on their priority list.

Indeed, the Bank of England statement makes absolutely no mention of any deal with the banks to help mortgage borrowers. In fact, it makes quite clear that these new loans will not be provided against the collateral of any mortgage loans made since December 2007- so there is specifically no linkage with future mortgage lending.

Bankers On A Promise

It's not just home loans that can go critical

We've been trying to uncover exactly what the government has promised to the banks. But so far taxpayers have been told very little.

Still, the bankers definitely know they're on a promise, as we can see from their share prices. For example, since Brown's crisis breakfast meeting on Tuesday, Barclays and HBOS are both up around 10%. That's a significant rise, and it underlines just how valuable they reckon Browns' promise is. On our reckoning, we taxpayers have given a £2bn present to HBOS shareholders (10% of their c£20bn market capitalisation) and a £3bn gift to Barclays. And that's just two of them.

These gifts are taking the form of credit risk on the mortgage portfolios we will be swapping for gilts. But what will taxpayers get in return?

There's talk of a "penal" fee for doing the swap, but as we learned from the Crock fiasco, such macho talk is most unlikely to translate into anything bankable.

Government spin says it will "free things up", ensuring cheaper and more available loans all round. But don't hold your breath: in practical terms the government won't have a prayer of ensuring benefits are passed on to customers, rather than being used to boost bank profits... not to mention those bonuses.

Moreover, given our wobbling crazed property bubble, many question whether yet more credit is what we want anyway. Sooner or later asset prices have to adjust, and postponing the hour may simply mean an even bigger bust in the future.

Of course, by then Brown's government may have gone. Leaving behind an even larger fiscal crater than we already have.

In the light of the £100bn Crock rescue, the omens for this latest deal are worrying. We have little confidence that the government will protect taxpayers interests, and we will need to scrutinise the details very carefully.

PS Driving through London this morning, I tried to do a quick crane count. Alarmingly, there are still so many I gave up - even though commercial property values are down 15% since last summer. The banks are naturally up to their gunwales in commercial property loans and the associated Commercial Mortgage Backed Securities (CMBS). So are we heading back to a 1990s style nuclear scenario? According to Fitch Credit Ratings, 10% of UK CMBS would go bust in such a world, and it could be a lot more (for even more anxiety, see this excellent FT Alphaville post).

Non-job of the week

Braintree borough council has disgraced itself today.  Their advert in this morning’s Guardian Society jobs page for a ‘Climate Change Manager’ is blank save for two sentences and the council logo.  It measures 13cms x 19cms and has barely anything in it.  The ad boasts that it’s ‘saved ink’ but it’s wasted taxpayers’ money on a blank advert.

My guess is that some over-promoted advertising halfwit thought it would be a good idea to advertise this job using empty space.  How very post-modern... 

This is what Braintree’s taxpayers’ money is going to.  Your Council Tax went up and all you got was an empty page.  They may as well have thrown the money down the drain for what this entire ad is worth, let alone that it’s an advert for another climate change non-job.

“Climate Change Manager

£34,542 - £38,556

A very exciting opportunity has arisen for a Climate Change Manager at Braintree Council.

Delivering the kind of changes we're aiming for will take a special kind of person. The odd trip to the bottle bank won't be enough. We're looking for someone who has real passion for all things environmental and the ability to get other people involved in taking positive action.

Your first challenge will be enthusing those around you about the benefits of thinking green. Because whilst we're already doing a great deal to improve our environmental responsibility, as an organisation, we could be doing more. So it'll be your job to educate and motivate your colleagues, giving them all the understanding they need to start making changes to the way they live and work.

You'll also lead a range of climate change initiatives that'll see you engage local communities in a variety of ways and encourage them to take responsibility for reducing the impact they have on the environment. And by working closely with everyone from community representatives to senior level Council members, you'll help ensure both local and national climate change performance indicators are met, if not exceeded. With your help, we'll set the kind of example that other boroughs will want to follow.

This role clearly requires a great deal of knowledge and understanding when it comes to environmental science, legislation, guidance and practice. It also requires experience in environmental management, promotion and climate change issues. But most crucially, this role needs someone who can turn innovative ideas into effective action, and plan, develop, manage and deliver projects that'll benefit the environment both close to home and further afield.”

Aside from the blank advert, costing thousands of pounds, the job itself is more of the same from local government.  Where they could cut taxes and attract business (saving on commuting) whilst creating incentives for green behaviour, they find it better to employ another drain on borough finances – which this job is.

For those interested, also check out our green jobs report we published back in 2007.  Furthermore, it's also worth contacting Braintree Borough Council's leader - Graham Butland, the Cabinet member for the Environment - Roger Walters and the cabinet member for resources - Michael Lager.  Please ask them what value a blank advert and a redundant non-job brings to the over-taxed residents of Braintree.

Gobsmacker Of The Month

I blame the employers

We are still reeling from the latest story of DWP incompetence:

"A WOMAN who claimed a bad back made it impossible for her work was employed at the SAME Government department that paid out her benefits.

Twenty-four-year-old Joanne Kirman fraudulently obtained over £9,000 whilst employed at the Department of Work and Pensions (DWP).

Magistrates at Blackpool, Lancashire heard the DWP handed over £9,474 to Kirman between April 2005 and January last year in incapacity benefit and income support. She got the money after stating she was incapable of work but all the time she was sitting behind one of their desks taking calls.

The court heard it was a £15,000 a year job which Kirman obtained through a disability advisor at the Department of Work and Pensions.

Steven Townley , defending, said: “She got the job at the DWP through an advisor at the DWP but maintains she had no idea how the benefits system worked.”

What can you possibly say?

Not only has DWP allowed itself to be conned. Again.

Not only was it their right hand not talking to their left hand. Again.

But the absolute smackeur du gob, it was they themselves employing her. And not just at some forgotten out-station either: Blackpool is DWP's national helpline centre.

As for her excuse that she had "no idea" how the benefits system works, we're inclined to believe her. Such is the quagmire of Brown's benefits system, most of her ex-colleagues are probably in exactly the same position.

(HTP John P)

Head Bangers

Downing St head banging

According to those overworked "sources", Darling has summoned the banks to the Treasury so he can "bang heads together" over the withdrawal of competitive mortgage offers and the failure to pass on the full quarter-point Bank of England rate cut".

Does anyone believe that?

The banks have provided a decade of cheap mortgage finance, much of it based on dodgy wholesale funding practices that sooner or later were going to go phut. Now they have. Cheap mortgages are over. The banks have to recoup losses and rebuild capital. Borrowers will pay the price in higher rates. Simple as.

Darling and Brown (who's arranged his own separate bangin' bankers breakfast meeting) are as usual playing to the gallery. They don't actually expect to change anything.

Much more worrying for taxpayers is the real possibility that the bankers will headbang the politicos into stumping up large wads of taxpayer assistance. Because these bankers know how to tell really scary stories, and spines are in somewhat short supply down Downing St way.

Consider the following Bank of England chart. It shows housing equity withdrawal - the amount of cash we have been withdrawing from our homes to spend (largely through remortgaging on the back of spiralling property prices).

Now, those figures are Big. With GDP running at £1400bn pa, housing equity withdrawal at £10bn per quarter amounts to 3% of GDP (it was even higher, at c5% in 2003-04). Or to put it another way, collapsing equity withdrawal - like we're now experiencing - is seriously undermining growth. The fall over the last 12 months has already cut GDP growth by 1% or so, and you'd have to guess the trend is continuing.

And we can add to that the fact that pricier mortgages means fewer buyers and less new housebuilding. The trend in new home starts has already turned down decisively and is bound to accelerate:

So the economic stakes are high. Combined with plummeting poll ratings, those bankers have more than enough material to scare our wobbly politicos.

And the bankers are hot on the case. On Friday, the Chairman of the Council of Mortgage Lenders (CML) warned that "tens of thousands of current borrowers and new buyers will be refused mortgages this year unless the Bank of England provides greater financial help to banks and building societies".

What does he mean by "financial help"? He says they want:

"...deeper and longer term repo facilities – extending beyond the 3-month facility to 12 months or perhaps even 24 months – would definitely begin to help to address lenders’ concerns."

In other words, more lending by the Bank of England against collateral. We agree with that, so long as the collateral is "aggressively" valued (ie heavily marked down) to give taxpayers a healthy safety margin if the borrower defaults (see this blog). He goes on:

"And kick-starting the market for new issuance of mortgage-backed securities – perhaps by incentivising the kind of stable, domestic investors such as pension funds that would fit this market well – is something that the CML believes the Bank should seriously consider."

Hmm... "incentivising investors". We don't like the sound of that. What kind of incentivising? We smell guarantees and special tax breaks.

And complaints about "the inadequate state support scheme for mortgage borrowers" make us very nervous. The state should not be in the business of shoring up borrowers who've been lent too much by go-go bankers (the Chairman of the CML just happens to be chief executive of Bradford & Bingley, Britain's biggest buy-to-let lender).

As we've said many times, by all means let's lend more to the banks against good collateral and at a suitably high rate. But bailing out bankers who've over-reached themselves is not something taxpayers should ever be made to do.

Amid all the head banging, let's hope our leaders don't do anything stupid.

Anything else stupid.

Nice work if you can get it in West Sussex

A TPA supporter has sent us this non-job he found, as well as his response below:

"Considering the state of the finances and services in West Sussex and the ever increasing demand on council tax payers, I was slightly bemused to see the above advertisement in the Sunday Times yesterday.

The advertisement is for a "Director Operations Customer Services", a dynamic new position with a salary of up to £121,000 p.a. plus benefits (Presumably a final salary pension amongst other benefits).

I was also extremely irritated to be referred to as one of 750,000 "Resident customers". I have no choice where to source the few services that we actually use locally and I wish my own company's customer base was as easily sourced!

Whilst I do not want to seem to be whinger, I fail to see how my lot and that of many other local council tax payers, will improve by further unnecessary expenditure by the County Council to "Drive council-wide customer services aimed at raising customer satisfaction with local residents and enhancing the Council's reputation".

I would be pleased to hear the Council's response to the above.

Yours sincerely
John Williams"

John raises some excellent points.  Why are we referred to as ‘customers’?  Customers, I’ve always believed, have their custom, which they can take elsewhere if they dislike a service provided.  We can’t with local government.  It forcibly takes our money and squanders it on non-jobbers using government-gobbledegook to scratch out a reason for their job’s existence.

If you spot any non-job in your local paper – just like John did – email it to us so we can publicise the waste.  We’ve had local papers, which routinely look at our website, pick up the stories we find and print them in their papers before.  So let's drum it home to Britain's taxpayers just how much of our money is being wasted.  In the meantime, give John some support and write to the Chichester Observer telling residents about this shocking waste of taxpayers' money.

IMF On Tax-funded Bank Bailouts

The IMF has caused quite a stir this week. Its latest economic and financial outlook papers ( here and here) have predicted that the credit crisis will cost $1 trillion, GDP growth will slow dramatically, and UK house prices may fall sharply. As its chart shows, UK house prices are the third most overvalued in the world (the "gap" being the difference between prices and what the IMF reckons is the value implied by underlying fundamental factors such as affordability).

But for taxpayers one of the most worrying headlines is that the IMF now favours publically funded bailouts of failing banks. That would be a seriously disappointing turnaround for an institution that has always been a bastion of monetary and fiscal rectitude. So we've taken a closer look to discover exactly what they do say.

Now, the trouble with IMF papers is that the really interesting bits tend to be written in IMFspeak. But stripped of technicalities, here's how the IMF spells it out, along with our verdict on each point:

1. Public policy should seek to safeguard financial stability and market functioning. Agreed

2. However, care should be taken to avoid creating adverse incentives or moral hazard that undermines discipline imposed on private players by such events. Agreed.

3. The public resources should be kept as small as possible. Agreed.

4. In a case of depleted capital, the preferred approach would be to take remedial measures and resolve [ie place in special publically managed liquidation] the institution if it is no longer viable. Shareholders should bear the brunt of the adjustment. Agreed.

5. When the failure of the institution poses a systemic threat, the case for public assistance may need to be considered, but only after shareholders have borne the full brunt, with clear mechanisms in place to ensure that operations continue on a commercial basis, and with an unambiguous plan for exit by the public sector. Agreed.

So the short version is busted banks should be liquidated (ie shareholders lose everything) and reconstructed/sold/run-off over a period of time by the authorities. Taxpayers should be last in the queue for contributions. With which we agree 100%.

The obvious next question is to ask how that all stacks up against how Mr Brown handled the Northern Rock crisis? Let's run through the IMF's guidelines.

Did he safeguard financial stability and market functioning? 6 months of nervous faffing around and the first High Street bank run in 150 years- hardly.

Has he created adverse incentives and moral hazard? Well, eventually, he did pull the plug, which is good. But against that, he spinelessly distanced himself from the tough stance taken by his own Bank Governor, undermining Mervyn King's authority in the process, which is very bad. The bigger banks will certainly guess they could win any future game of chicken with such a wuss.

Has he kept the public resources small? Hardly- we taxpayers are on the hook for £100bn secured only against the increasingly uncertain Crock loan book.

Have Crock shareholders born the full brunt? Yes, most of them have taken a loss, but Brown left the door open to compensation by undertaking to appoint an independent valuer (see this blog). And taxpayers are also at risk from that EU human rights shareholder compensation suit.

Does he have an unambigous exit plan? Don't make us laugh- as we blogged here, it's highly unlikely the Crock will ever be able to survive without its taxpayer guarantee. There is no exit plan, just a vague hope that something will turn up.

So that's... let me see... nought out of five.

Not very good.

Non-job of the week

Croydon’s residents have just been handed a 4% Council Tax increase.  Where’s it going…on the bonfire of non-jobs, of course:

“Senior Internal Communications Officers x2, LONDON BOROUGH OF CROYDON

£28,524 to £30,603

If so, the London Borough of Croydon could be the place for you. With seven Beacon Council awards demonstrating excellence in local Government, a three-star CPA rating with realistic ambitions of achieving a four-star rating, and a new and challenging top team, it’s a great place to work. As a Senior Internal Communications Officer, you’ll be working in the thick of the action.

Based in Human Resources and Organisational Development, you’ll work within a small but dynamic team, responsible for communicating to 12,000 staff in nearly 300 locations. The groundwork is in place: we have an ambitious people strategy and we now need innovative, forward-thinking professionals to deliver creative communications via a range of channels.

To succeed in this role, you’ll need to demonstrate that you can work with everybody from the Chief Executive to refuse collectors and parking attendants who are out delivering services to the community day in, day out. You’ll be excited at the prospect of leading on a range of projects from running events, to editing publications, to communicating large-scale corporate change programmes.

If you’re a proactive communicator who can deliver fast, effective solutions under pressure, we’d love to hear from you.

For an informal chat about the role, please call Hayley Blake, HR & OD Communications Manager, on 020 8604 7679 or email hayley.blake2@croydon.gov.uk

Closing Date: Friday 18 April 2008

For a job pack please visit http://jobs.croydon.gov.uk where you can register and apply online.”

The horrifying statistic in the above job description is the announcement that Croydon Council employs 12,000 people across 300 offices.  Rumours abound that graduate jobs in the private sector will be fewer owing to the uncertain economic climate.  Nevertheless, week after week there is never a shortage of local government non-jobs filling up the middle management roster in local government.  Clearly if this trend of taking more from the profit making sector and handing it to the bloated, unproductive sector continues, it will lead to higher taxes for us all. 

Enron Debt Ticker

Looks like more bad news...

...public sector pensions now costing £21bn pa...

As we know, most public sector pensions are unfunded- ie unlike private sector pensions, they have no backing assets and must be be paid as they come due out of current taxation. According to the latest estimate from the IEA, the capitalised liability (ie the debt) amounts to £1,025 bn.

But lest we imagine that's a far off burden destined to be carried by future generations, we've just discovered the annual pay-outs are already running at £21bn pa. That's equivalent to a staggering 6 pence on the standard rate of income tax. Or getting on for £1,000 pa taken from every single British household.

Put another way, we're now paying more in tax to pay public pensions than we're contributing to our own pension funds (such contributions amounted to £15.6 billion in 2005).

...nuclear decommissioning costs still spiralling...

According to a new report from the Commons Business and Enterprise Committee, government is seriously understimating the costs of the Nuclear Decommissioning Authority (NDA).

As BOM readers will know, the NDA is the body charged with cleaning up all those dodgy old government nuke facilities, and while it's been given some assets to fund itself, we have long been sceptical about the government's sums (eg see this blog).

Now the BERR Committee says:

"We remain to be convinced that the assets transferred to the NDA will in practice make a significant contribution to paying for nuclear decommissioning. Even if the revenue from these assets were to prove sufficient for the original estimates of the NDA’s liabilities, these have steadily increased. In June 2003 the estimated remaining lifetime costs of the NDA’s sites were £56 billion; by March 2007 this had risen to £73 billion. Moreover the NDA’s commercial income is not only volatile but will decline over time as its work is completed.

Public funding for the NDA will almost certainly have to increase significantly in the coming years over and above current plans."

Public sector pensions and nuclear decommissioning are both big liabilities for taxpayers. Both are growing. Yet neither appear as debt on the government's Enron balance sheet.

Open and honest, it isn't.

Chemists To Replace GPs

Pharmacists have never had it so good

Listening to the commissars' latest wheeze for dumbing down the NHS - getting pharmacists to replace GPs - you have to guess they don't visit many chemists. Judging from the queues and the waits, many chemists have problems simply dealing with their existing workload.

So how much is this "plan" meant to save? We have no idea because they haven't said. But with increase in GPs salaries, pharmacists on £35-60,000 pa have to be cheaper. Right?

Almost certainly wrong. For one thing, NHS Redirect shows us precisely what would happen if chemists were asked to deal with anything beyond simple coughs and sore throats: patients would waste time speaking to a pharmacist who would then refer them onto a GP anyway. As the National Audit Office discovered, far from reducing NHS costs, NHS Direct actually increased them by around £100m pa (see this blog).

Plus of course, if the pharmacist did diagnose but got it wrong - highly likely with anything other than coughs and sore throats - we would see a further splurge of emergency hospital admissions (just as happened with the Gershon "efficiency" cuts in hospital stays, and the loss of GPs out of hours service).

Judging from today's White Paper, the underlying point is that the commissars have convinced themselves they can force pharmacists to deliver more for the huge amounts of money they get from NHS prescriptions. The WP says:

"Public investment should not provide a permanent reward system for service providers who are prepared simply to deliver the bare minimum levels of service or whose focus is on patient throughput rather than patient satisfaction and not on the benefits of improved health outcomes within a service delivered to high quality standards. This is unacceptable when the taxpayer invests nearly £10 billion a year in pharmaceutical services overall." (para 8.45)

They've already tried to force chemists to do more. For example, they introduced Medicine Use Reviews (see here), whereby chemists get paid to summon their regular customers in for a meeting, during which they tell them to stop using so much medicine. Just one problem- although the number of MUR meetings has exploded (see chart below), there is zero evidence it's cut costs; in fact the pharmacists seem to use them as a way of earning even more. A classic unintended consequence that was actually all too predictable.

Another nice little earner

And what do we think would happen if pharmacists - the very people who benefit financially from selling more medicine- were given authority to prescribe drugs? And how do we think the big pharmaceutical companies would stop themselves providing huge additional incentives for chemists to maximise sales?

Finally, ask yourself this question: next time Alan Johnson gets sick, do you reckon he'll be popping down to join the queue at his local chemist in Hull?

Precisely.

Non-job of the week

Although we regularly highlight non-jobs in local government, and we will this week, this week’s non-job of the week is going to be a little bit different.  We maintain through our campaigns that we want taxpayers’ money to go to the frontline.  Our reports have exposed the growth in middle management and other non-essential areas of government where our money is being wasted, through being directed away from the frontline and by the government simply taking far too much from the taxpayer.

After year on year of NHS reorganisations, we give to you our non-job of the week:

“Senior leaders, radical change programme, NHS, Healthcare for London
£96,000

Now is your chance to spearhead Healthcare for London, a new organisation set up specifically to transform healthcare across the capital. Borne out of Lord Darzi's vision, HfL aims to radically reconfigure services by 2017, strictly in line with clinical excellence and through widespread public consultation and active partnerships with all 31 London PCTs and with NHS London. Don't miss this important opportunity to re-shape health outcomes for Londoners as a Head of Programme Office, Programme Development Lead, Finance Project Manager, Programme Manager, Project Manager or Project Officer. Find out more and apply at http://www.tribalresourcing.com/HfL”

Six re-organisational staff at £96,000 a pop over 9 years.  Over the next 9 years your money, that you want to go to medicine, nurses and care, will bypass the frontline, all in the name of reorganisation.  Yet we’ve seen so many ‘reorganisations’ in the last ten years and there has been scant improvement.  Yes we want a frontline service.  No we do not want more managers, more bureaucrats, more public sector ‘visionaries’ planning everything from the top down soaking up money as they do it. 

Also for your interest this week, some highlights from the Guardian Jobs pages:

Merely days after we published a report into Town Hall fat cats, two councils this week advertise for jobs paying over £100,000.  The first is a Director of Adult Services at Hampshire County Council, costing taxpayers £140,000 a year (without running costs and benefits included).  Croydon Council seeks a. Executive Director of Children, Young People and Learners at £150,000 a year.  Finally, Kensington and Chelsea Council advertise for a Development Manager for the Gypsy, Roma and Traveller Community at £39,400 a year…go figure that one out.

Slim-Fast Crock

So does the newly published Crock Restructuring Plan finally bring some comfort for taxpayers?

The basic idea is that NR will go on a crash diet, slimming from total assets of £107bn at end-2007, to £49bn by end-2011. That will be achieved by encouraging existing mortgagees to switch away (targeting 60% redemptions), cutting market shares to "well below historic levels", and withdrawing from various business lines altogether. Costs, including staff, will also be slashed.

Meanwhile, reliance on that troublesome wholesale funding will be drastically reduced, and much greater emphasis placed on deposits from retail savers. Retail funding is planned to increase from a mere 10% at end-2007 to 50% by 2012.

In other words, the Crock will go back to being much more what it used to be - a small to medium size mortgage and savings bank.

And taxpayers? Well, all of the current £24bn of loans from the Bank of England will be repaid by 2010. So that's good.

And the Treasury guarantee will be released by 2011. That's also good.

And then the "smaller, more focused and financially viable mortgage and savings bank... will be returned in due course to the private sector". Which is excellent.

So it's all good news then?

Ah...

First, the Crock expects to lose a shedload of money between now and 2011:

"In 2008 the business is expected to be significantly loss-making, as a consequence of both the anticipated one-off restructuring costs, which are likely to be substantial, and higher funding costs."

And it doesn't expect to make annual break-even again until 2011.

Second, those redeeming mortgagees will inevitably be the better quality ones- the people who can find alternative providers. Crock will be left with all the junk.

Which will seriously compound the mounting problems with its deteriorating loan book. Because despite all those high level assurances about high quality, it now turns out it took a £240m charge in 2007 for loan-loss impairment, three times the previous year's figure. And its plan envisages significant further deterioration this year.

Third, what if it can't live without the Treasury guarantee? Or what if the EU competition authorities don't allow it to continue?

The plan envisages NR achieving an A- credit rating on a standalone basis sometime around 2011. But even if it succeeds - itself highly unlikely given previous comments - A- is a pretty low rating by High Street bank standards (eg HSBC and Barclays are both AA, four notches higher). And given the history, many retail depositors would simply walk away.

It's a problem the plan tries to skate lightly around:

"Given the limited practical experience of the consequences of releasing state guarantees of Bank deposits and wholesale liabilities, the viability of the Plan’s proposals for release of the guarantee arrangements will be kept under review in the light of customer feedback, market circumstances and the requirements of the FSA, as regulator, for adequate capitalisation, liquidity and free assets."

Translation: NR cannot survive without the guarantee, but we have no idea what to do about it: maybe something will turn up. And while it is supposedly now paying a fee for it to HMT, as a nationalised company such payments are a complete charade.

A crash diet is undoubtedly the least bad course available for taxpayers. But this plan does nothing to change our view that we are on the hook for a very large bill in due course (ie the other side of the Election).