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Hammersmith & Fulham Cuts Tax

Dec 13th, 2011
by Paul Harwood.
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Hammersmith & Fulham council (H&F) has announced that they are proposing to cut council tax next year by 3.75 per cent. This will be the fifth year in six where the council has managed to cut council tax. This saving is due to several cost cutting measures including combining services with Westminster and Kensington & Chelsea councils in order to cut management and overhead costs by half.

This tax cut will be realised without resorting to the kind of ‘bleeding stump’ approach of shutting libraries and cutting services that some councils have taken, say H&F:

“While planning to cut [council] tax, H&F is intending to freeze parking charges, keep all its libraries open, maintain weekly or even twice-weekly refuse collection and plough £1.3 million into extra town centre police.  It is also one of just two councils in London offering homecare to people in the ‘greater moderate’ as well as ‘substantial’ or ‘critical’ banding.”

Further savings are to be made by selling off underused property, co-locating services among other measures in order to pay off about half the council’s debt and reduce annual interest payments.

We are pleased to see that some councils are giving taxpayers a break. The dramatic savings that H&F are proposing show that other councils can follow suit with tax cuts by cutting out waste. Sharing services can be a sensible way forward, too. It’s a shame that other councils are choosing to increase council tax, like Brighton & Hove who are looking to impose a 3.5 per cent hike.

The welcome move by the Department of Communities and Local Government to use money generated through other taxes to help councils freeze council tax bills cannot compete with genuine tax cuts. Funding from central government grants may be falling but since council tax has doubled over the last ten years, there is plenty of space for efficiency savings and for more creative solutions.

Cllr Stephen Greenhalgh, Leader of Hammersmith and Fulham council, spoke at a TaxPayers’ Alliance fringe event at the 2011 Conservative Party Conference. He explained the position they were in when they took over and how things have changed since then. Council tax has fallen from one of the highest levels in the country to one of the lowest, while debt levels have been reduced at the same time.

Other councils should look at how tax cuts across the country have been achieved and copy good ideas.

Wasteful spending during Council efficiency drive

Dec 7th, 2011
by Paul Harwood.
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Like many councils, Sheffield City Council recently embarked upon a £57 million cost-cutting exercise in response to a fall in the central government grant. After council tax bills have nearly doubled across the country in the last decade there is no way taxpayers should pick up the bill.

Apparently unaware of the irony, the council has spent £21,000 sending 230,000 leaflets to residents asking them for ideas how to save money, living up to Sir Humphey’s mantra that it’s more expensive to do them cheaply.

While it is obviously good for a council to talk to voters about a necessary reduction in funding and how to save money, it should be done when it can have a meaningful impact on all aspects of spending rather than at the tail end of the discussions.

The consultation is open until January 6th leaving the Council just three months to prepare and adopt a budget to take effect in April 2012. The opposition Lib Dem leader, Shaffaq Mohammed, claims that decisions must have already been made about next year’s budget, “We are now almost at the door of the final closure of the budget process as far as I’m concerned.”

If this is just a smokescreen for councillors to use to defend their own plans when the outcome is already decided, it is a very cynical waste of money.

Julie Dore, the Labour-run council’s leader, claimed that it cost just 9p to produce each leaflet and this represented “value for money.” But the question isn’t whether they have bought the leaflets at a reasonable price but whether or not the project was worthwhile in the first place, whether it was a genuine attempt to engage with the public or just a presentational gimmick.  Taxpayers will suspect it was the latter.

(Not quite) the whole story

Dec 6th, 2011
by Paul Harwood.
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The Treasury has recently published the Whole of Government accounts for 2010, which provide consolidated financial information for over 1,500 public sector organisations. This is the first time that such a detailed document has been put together and is a positive step towards greater transparency in how taxpayers’ money is spent.

Perhaps the most worrying figure in the report is the UK has a liability of £2.4 trillion – the amount of money that taxpayers are currently committed to paying out if there was no change in government policy. This is a staggering sum – equal to 170 per cent of GDP. Even if the government sold off every asset it had, from the Royal Navy’s ships to the road network, we would only be able to pay off less than half this liability.

It’s a stark reminder of the challenge facing the government. The deficit is equal to 92 per cent of the public sector wage bill. The net public service pension liability (not including state pensions) is over one trillion pounds.

There are still many organisations not included in the report, perhaps most notable the banks in ‘temporary’ public ownership and various transport organisations, so the total size of the state is yet bigger than the report suggests. However, they may be included in future releases to give a more representative picture.

There is a huge amount of information presented in this report so it is well worth a look, whether you’re interested in pensions, the cost of services or simply curious to see where your money goes.

MoD fields army of consultants

Nov 18th, 2011
by Paul Harwood.
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Today the Guardian reports that, while the MoD cuts the number of front-line troops, £564m has been spent on consultants in just two years. Spending has increased from £6m in 2006 to £267m in 2011 – a 4,350 per cent rise.

The huge increase has been blamed on the Framework Agreement for Technical Support (FATS), bought in by the Labour government in 2009, which allowed defence officials to hire specialist, short-term help without requiring a minister’s consent.

An MoD internal audit report claims there were “significant weaknesses” in the submission of business cases; that there were “weaknesses in the robustness of scrutiny” by budget controllers; and that three quarters of contracts were awarded without any notion of competition. Despite the laxity of the guidelines the report concludes that there was “no assurance” they were even being followed.

All options must be considered to ensure that services can be delivered at the lowest cost to taxpayers. There may be occasional situations where it is more cost-effective to hire consultants on specific projects than to have them employed full-time. In these circumstances we would expect robust guidelines to be in place; that they be rigorously followed and compliance monitored; and that appropriate sanctions would be deployed against individuals who broke them.

In the context of budget reductions of around eight per cent over the next four years, and the loss of 42,000 posts, we would expect the MoD to be doing everything possible to maximise the value taxpayers’ get for their money, rather than relying on union reps to highlight gaping holes in their financial procedures.

 It is disingenuous for the MoD to be claiming to be cutting costs by reducing staff if external consultants are then bought in to do their job instead at a higher cost. They should be taking a more holistic approach to the costs of their projects which are already, in many cases, heavily over-budget.

Our Chief Executive, Matthew Elliot, had this to say:

“It’s appalling that the MoD has been managing its budget so catastrophically badly. This level of spending on consultants is disgraceful and worse still is the face that correct procedures were allowed to be so consistently ignored. Some larger or more technical projects may require consultants to be brought in for their specialist expertise, but this should be in moderation and should certainly be within the department’s own guidelines. Transparency and value for taxpayers’ money should to be at the heart of all Whitehall spending decisions, rather than the poorly planned, wasteful overspend that is plaguing huge swathes of the public sector. “

When questioned by the BBC the Defence Secretary, Philip Hammond, claimed claimed that tighter controls and a new framework now in place will ensure these costs are properly scrutinised in future. He compared reforming the MoD to manoeuvring an oil tanker and suggests that the “legacy of mismanagement is deep and will take some time to turn around.”

Without fixing problems like this that ship will soon be heading into a storm.

European Regional Development Fund loses millions

Oct 19th, 2011
by Paul Harwood.
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Alastair Jamieson at the Telegraph recently reported that huge amounts of public money were lost by the EU after being used to prop up schemes to “reduce economic disparity” between countries and regions as part of the European Regional Development Fund (ERDF).

The total ERDF budget for England was £3.7 billion between 2000 and 2006 during which time the Department for Communities & Local Government (DCLG) confirmed that £38.1 million (about 1%) had been misspent or unaccounted for. Losses could have totalled £236 million, but officials had managed to “claw back” £63 million and a further £133.9 million remains outstanding.

In 2010 the UK made a net ‘contribution’ to the EU of £9.2 billion (about the cost of the police and courts combined) and a total transfer to the EU of £19.7 billion (roughly a quarter of the education budget). Amongst the indispensable projects on which this money was misspent were:

  • an enterprise scheme in Tees Valley where £1.8 million is unaccounted for due to “audit trail and document retention issues”;
  • a rooftop plant nursery to provide seeds for biodiversity projects, which lost more than £300,000 after its promoter, Tower Hamlets Environment Trust, went into liquidation;
  • regional film agency Screen East was responsible for £368,000 of “ineligible expenditure”.

The situation was so bad by March that even the EU had had enough and cut funding for the projects. Funding resumed in July after the DCLG, which allocates funding for projects, introduced tighter controls to prevent further losses.

The EU itself doesn’t seem too concerned. Out of a total budget of €140 billion (£122bn) the EU claims that “a 2% to 5% error rate is not big” which works out at £2.4bn-£6.1bn . This is fine, we are told,  since “this represents a considerable reduction from past levels”. Luckily, suspected fraud only accounted for about £244 million of the EU budget by their own estimates.

DCLG may be reintroducing weekly bin collections but there is still a large waste management problem to tackle with these EU budgets.

Eurozone to resume digging its way out of debt hole

Oct 18th, 2011
by Paul Harwood.
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Slovakia’s parliament refused to ratify the expansion of the European Financial Security Facility (EFSF) on Wednesday. As usual with ‘No’ votes, a second vote was called and the decision was reversed on Thursday leaving the bailout fund ratified, the ruling coalition in tatters and Slovakia facing its second general election in less than two years.

The original vote failed to pass after Freedom and Solidarity (SaS), a junior partner in the ruling coalition, refused to endorse the proposal. It was later passed with the support of the opposition Direction – Social Democracy (Smer) in return for early elections.

In an interview with Germany’s Spiegel, SaS leader Richard Sulik explained why his party didn’t support the proposals.

“Slovakia has the lowest average salaries in the euro zone. How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?”

He’s got a point. Slovakia will now contribute €7.7 billion (about eleven per cent of GDP) to the bailout fund. With a population of 5.4 million and a GDP less than one per cent of the eurozone total, Slovakia will now be forced to prop up a country with living standards at 89 per cent of the EU average while their own is just 74 per cent.

It’s hard to see how prolonging the agony of a Greek default serves the purpose of Slovakian taxpayers. This will simply transfer more of the liability from the private sector to taxpayers when it does eventually happen. It’s hard to find someone arguing that Greece will pay its debts and the debate is now about how to manage an ‘orderly default’. This is not a guarantee as any ‘haircut’ taken on the bonds purchased will mean a loss for the taxpayer.

When asked if he had any advice for Greece after Slovakia escaped its own economic crisis a few years ago:

“They have to make cuts in the state apparatus. The Slovaks could also give them a few good ideas about the tax system. We have a flat tax when it comes to income taxes. Our tax system is simple and clear.”

Slovakia may be a small country but they have some big ideas and it’s not just Greece that can learn from them.

MoD to pay £14,000 to a contractor for every new soldier

Oct 13th, 2011
by Paul Harwood.
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Thomas Harding at the Daily Telegraph reports that the Ministry of Defence (MoD) is proposing to outsource Army recruitment to a civilian company in a deal worth £1 billion over 10 years. At a cost of nearly £14,000 for each soldier recruited, the contract will offer generous returns for the company that wins the bid, especially while there are over 2.5 million people unemployed in the UK. The RAF and Royal Navy are also believed to be developing similar plans.

Over the next three years the MoD intends to make 12,000 soldiers redundant while recruiting 7,500 a year through the external agency. That means that in three years we will have recruited nearly twice as many people as are being made redundant.

The MoD needs to be careful to avoid the double cost of paying redundancy costs and paying to recruit new soldiers at the same time. Is there no way those being made redundant couldn’t be retrained for the new roles? They need to explain why it isn’t possible to save money in both redundancy and recruitment whilst keeping the experience of older soldiers and the supply of new soldiers for the future. There are limits, and we certainly wouldn’t want to see the absurdities of the “surplus” scheme they have in the Royal Mail, but all we have at the moment is the simple claim from an Army source that they “still have to recruit”.

The MoD argues this deal will save £250 million over a ten year period but Air Commodore Andrew Lambert, of the UK National Defence Association, has questioned the savings, and the Telegraph reports that serving officers have described the decision as “perverse”.

With just under half of the 17,000 new entrants each year who go through training for the Army failing to finish the course, there is plenty of room for more efficiency in the recruitment and training system. It seems like common sense that having people on hand who have experienced Army life will lead to better recruitment outcomes. But civilian involvement might be a good thing if they can take some of the administrative burden off the shoulders of soldiers.  And recruiting firms in the private sector might have new ideas about how best to reach good candidates.

Just like with PFI, the problem here isn’t the principle of involving the private sector. But the price and the objective needs to be right, otherwise soldiers and taxpayers will wonder whether they are getting a very bad deal.

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