Wednesday, April 19, 2006

Gravy Trains (And Limos)

Yesterday's post on government procurement unaccountably omitted legal services and the BBC.

The legal aid bill alone is currently running at £2.5bn pa (see this post). And today we get news of lawyers who are doing extraordinarily well out of miners compensation cases:

"Beresfords, based in Doncaster, has been paid £73 million by the Government for handling industrial disease claims by tens of thousands of colliery workers. This has helped Jim Beresford, the senior partner, and Doug Smith to become multimillionaires. Mr Beresford, 55, and his wife, Linda, 54, invested £1.8 million last year on a private jet and have spent heavily on improvements to their home in Linton, near Wetherby.

Fortune has also smiled on their two daughters. Esta, 27, a solicitor, is one of the three partners at Beresfords. She and her husband, Aaron Rae, 29, are among the directors and shareholders of two family-owned companies. In 2002 they bought a house at Ingmanthorpe Hall, near Wetherby, for £470,000. Mr Rae owns a racehorse, and a few weeks ago he joined the board of Doncaster Rovers FC at the same time as his father-in-law became its vice-chairman.

The other daughter, Chloe, 24, also has shares in the family companies, Quaypoint Ltd and Keypoint Investment Mis-Selling Services Ltd. She lives in a £1.1 million home in Sutton Coldfield with her husband, Matt Murray, the Wolverhampton Wanderers goalkeeper. Her father and Mr Smith, 49, who lives at the £840,000, Grade II listed Noblethorpe Hall, love expensive cars. In recent years their garages have housed three Aston Martins, a Bentley and a Ferrari."

Nice work if you can get it. And if you supply services to government, you can.

Another current example: BBC Radio 2's "DJs". As we know, the state broadcaster is tax funded to the tune of £3bn pa, and ladles out huge helpings of public cash to its own charmed circle of "stars". Today we learn:

"Terry Wogan was shown to be the highest paid radio presenter, earning £800,000 a year. However, at an hourly rate, he was eclipsed by Jonathan Ross who is paid £530,000 a year for a weekly three-hour show — a fee of almost £57 per minute. Other high earners, according to the leak, include Chris Moyles on £630,000, Chris Evans on £540,000, Steve Wright on £440,000 and Jo Whiley on £250,000."

And it's not like they're simply paying the market rate: the BBC so dominates UK broadcasting, they are the market. As David McConnell, of the Commercial Radios and Companies Association, says: “The BBC is able to offer packages which make it difficult for commercial radio to compete.”

Now I don't know the right rate for Tel etc, but the point is that the BBC doesn't either. When public sector contracts dominate a market, be it for radio jocks or prescription drugs, prices get distorted and can easily be driven far beyond their right level. So while the vastly witty Major Frobisher would be delighted to take over from Tel for £20 a day plus travelling expenses- and has penned numerous letters to suggest it- he's never even been given the chance to audition.

No proper market, ill-informed and naive government purchasers, final users forced to accept what they're given...no wonder gravy trains are such a common feature of public procurement.

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