Friday, March 31, 2006

Olympics Watch: Scary Portents From Wembley


It looks like the new Wembley stadium will not now host major sports events until next year- an entire year behind schedule. There are some chilling portents here for the 2012 Olympics, and the size of its likely cost over-runs (see previous blogs starting here).

What we know about Wembley is that the FA did a fixed price deal with Aussie lead contractor Multiplex. The overall price was fixed at £757m. But of course, in the real world the project soon began over-running- collapsing roof beams, collapsing sewers, wildcat strikes, "high winds"...stuff just happens.

As a result, Multiplex has been forced to pick up additional costs: in February it set aside over £100m, and its final over-run is expected to be over £200m. On the face of it that's a 25-30% over-run, but it takes no account of the initial contingency reserve already priced into the contract, and it ignores likely additional losses among sub-contractors. So the true figure is certainly higher. And Multiplex's overall losses won't stop there because the company has been weakened as a credit- it's already been forced to renegotiate terms with its bankers and bond investors. Their board must be rueing the day they ever heard of Wembley.

As for the FA, they will receive penalty payments from Multiplex for late delivery, but they're reportedly capped at £14m. Meanwhile, its Wembley subsidiary has borrowed £450m from the banks to finance the whole thing, with a capital and interest repayment of £40m due in September. Looks like another round of crisis debt rescheduling ahead.

The conclusions for 2012 costs?
  • As the organisers try to negotiate fixed price contracts, they're going to find the price has gone through the roof: who'd want to risk following Multiplex, particularly given the massive scale of the 2012 project compared to little old Wembley? With all works taking place in the same small area at the same time.
  • As a result, the organisers may well settle for traditional variable price contracts so as not to scare taxpayers too much too early (it's called salami slicing- see here).
  • The "easy option" of Wembley's 12 month slippage will not be available in 2012. Organisers will have to pay whatever it takes to get the thing done on time. Whatever the nominally "fixed" pricing contract says, if it takes bucket-loads of extra taxpayers' cash, that's exactly what it will get. Slippage is not an option.

The Wembley debacle reinforces our view that the eventual cost of the London Olympics will be in the range £10-20bn. And it seems Gordon Brown is already coming round:

19 July 2005: Brown at the Treasury Select Committee: "The Government and the Mayor have agreed a package of £2.375 billion. Assumptions are well-supported and they are achievable. That is the basis on which we are funding the Olympics".

22 March 2006: Brown in the Budget speech: "Together the government, the London authority and the national lottery have already agreed funding of £3.4 billions."

So in just 8 months he's already increased his estimate by £1bn. With another 75 months to go, that clearly implies we're in for a further increase of 9.4x£1bn= £9.4bn. Which will take the total to £13bn.

Dig deep my friends. Dig deep.

Thursday, March 30, 2006

Consultants: Christmas Comes Early

Father Christmas

As the NHS financial crisis deepens, we find ourselves strangely in agreement with Father Christmas. Amid all those job cuts, and new reports that the Department of Health's £12bn central budget is already £2bn "over-committed" for next year, Christmas has discovered that the Department itself has spent £52.5m on management consultants. He reckons the overall NHS total is £200m, and says "If the Health Department pays out hundreds of millions of pounds of taxpayers' money to management consultants then it's not available for the NHS."

Spot on, and highly reminiscent of Doc Crippen's bracing views on the same subject.

Management consultancy is a strange business. It employs some immensely bright people, but those who've been on the receiving end of their services rarely have a good word to say for them. The general view is that they're only hired to provide some backside covering rationalisation for action already decided upon by lily-livered top management.

And yet there's no denying it's one of Britain's most successful industries. According to the Management Consultancies Association it's now worth over £10bn pa, and it employs around 60,000. And they're not alone: there are consultancies covering virtually any activity you can think of, including of course IT and PR.

The public sector's appetite for external consultants has grown hugely under Labour. In 2005 alone, it grew by 42% to £2.5bn. Individual consultants cost up to £2,000 per day, and firms such as PriceWaterhouseCoopers and Serco Consulting have seen their public sector business double or treble over 2-3 years.

Is the taxpayer getting value for money? Various National Audit Office reports have certainly raised concerns. For example, their recent report on the British Energy bale-out (see previous blog) criticised the DTI for spending £28m on external advisors- including Credit Suisse First Boston, Deloitte, and Slaughter and May- without a competitive tendering process: "the Department decided that to have run a competition to appoint new advisers would have taken too long." And the Public Accounts Committee recently questioned the fees paid to PWC for their work at MG-Rover (80% of Finance Directors seem to agree: see here).

Even more concerning is the appointment of firms with close ties to the Labour Party. For example, the Times reported: "For £3m...Weber Shandwick has been hired by the Department for Education and Skills to “build and develop relations between the department and business”. Weber Shandwick’s chief executive, Colin Byrne, is a former chief press officer for the Labour Party and worked for Peter Mandelson during the 1997 election campaign. And two senior press officers have left the Education Department to join the company in the past year." Plus of course, the recent problems with Capita (see here).

At the root of the public sector consultancy boom is the plain fact that ministers don't trust their departments to do the job themselves. They've discovered that large public sector bureaucracies are just not much good at getting things done.

But wait...if that's the case...now let me see...isn't there a more general conclusion we should drawing here?

Wednesday, March 29, 2006

Public Pensions: Show Me The Money!


Following yesterday's local authority pensions strike, there's been more discussion of what all these public sector pensions are actually costing us. Remembering of course that the bulk of them are unfunded (ie there's absolutely no money set aside to pay for them- remember that).

For all the obvious reasons, the government specifically excluded this particular ticking package from the remit of the Turner Commission- most unhelpful. Still, the Commission's Report did slip in the official cost projection, which goes from 1.5% of GDP in 2003/04, up to 2.3% in 2033/34 (Figure 1.20). That's getting on for £30bn pa in currrent prices, which is what we taxpayers will be paying those public pensioners year to year. About 8p extra on the standard rate of income tax.

That's bad enough, but clearly we also need to know the capital value of our liability, when we compound all those future cash payments together. On that, the government recently estimated the present value of the unfunded liability at £530bn, substantially higher than our official National Debt. But leading consulting actuaries Watson Wyatt point out even that's a huge understatement.

Watsons reckon the real total is £960bn, getting on for twice as big, and a cool £40 grand per British household. They say:

"The official estimate...of £530 billion ...is a significant underestimate because it doesn’t take account of falls in long-term interest rates that have pushed up the cost of pensions. Once account is taken of current interest rates, a year’s extra pension and improving longevity, this figure increases by over 80 per cent to £960 billion. The Government is taking a rosy view of the cost of public sector pensions. If the private sector were allowed to use public sector methods to value their own pension liabilities, the £78 billion deficit for the companies in the FTSE 350 index would be completely wiped out."

Once again, the government is using accounting methods that would be totally unacceptable in the post-Enron private sector.

Now if you happen to be one of those prospective public pensioners, you might well be looking at this a little differently. You might be saying, hang on a minute...I'm contributing to my pension, so why the bleepin' bleep shouldn't I get it? And indeed you are contributing. Here are some of the current employee contribution rates:
  • Civil servants: 1.5-3% of salary
  • NHS staff: 6%
  • Local authority staff: 6%
  • Teachers: 6%
  • Firefighters and police: 11%

The problem is, these contribution rates are not enough to buy the kind of benefits your schemes offer (note that while firefighters and police contribute more, they can generally retire at 50 on up to two-thirds salary). As private sector companies have discovered the hard way, the true cost of providing final salary pensions with retirement at 65 (let alone 60) is at least 25% of payroll (see Turner Report).

Which of course is why your employers (ie we taxpayers) are having to stump up some extraordinarily hefty contributions of their own:

  • Civil Service: 12-20%
  • NHS: 14%
  • Local government: 20%
  • Education authorities: 13.5%
  • Police/Fire employers: 26%

OK you say, sorry about the cost and everything, but at least the money has gone in to pay for the pensions. So everything should be fine.

You'd think so wouldn't you.

Ah, well, unfortunately it isn't quite like that. Because with the single exception of the funded Local Government scheme, all our contributions- yours and ours- exist solely in the realm of funny money: money that has been sucked out of our wallets simply to disappear in the great maw of government finance. The sad twisted bitter truth is that these contributions are no more than a few extra strokes of the government's Enron pen.

What's that you say?

I'm sorry...there's just no point standing there screaming "Show me the money!"

As I'm trying to tell you: there is no money.

PS For a good illustration of the BBC's cluelessness with money matters see their coverage of the Watson Wyatt analysis here: "The Watson Wyatt analysis is really a comparison of apples with pears. The first point is that the government has absolutely no plans to create a national pension fund to pay for the retirement income of civil servants, nurses, teachers etc. And even if it did, there wouldn't be nearly enough inflation-proofed bonds in circulation left to buy up. Any such fund would be forced to put much of its money in a much wider spread of investments such as shares, bonds issued by companies and foreign governments, and property. In other words, it would have to act rather like a real investment fund, such as the ones that underlie most private sector pension schemes. Almost by default then, it would probably earn a higher real rate of return...You won't have reach for your cheque book and write out a cheque for £40,000." So that's OK then. Obviously those ill-informed Fellows of the Institute of Actuaries have got themselves into a lather over nothing.

Skates Debacle: What Did It Cost?


So the Old Bill is no longer skating. The Pythonesque Superintendent Pollock says:

"If the criminal went on to grass, the officer giving chase had to stop, take off his skates then follow him without proper footwear while carrying his skates. The moment people realised they were being chased they would switch to a soft surface. Not an awful lot of officers were interested because it hurts when you fall over."

Point taken.

But what we taxpayers want to know is what did this barmy project cost? Start with the skates. Hot pursuit crimebusters would need something top grade- certainly nothing less than the Deshi Randy Spizer Aggressive Skate, which retails at £229.99. Then there's the training- got to be a couple of weeks each. And then there's time off for injuries sustained- given the huge number of sickies already thrown by the boys and girls in blue, that would be a big ticket item. And we mustn't forget the cost of all those grassy escapes, with the bad guys free to carry on robbing.

It would be surprising if we got away for much under a mill or two.

Maybe the Met should now consider the new Iranian policing methods.

Tuesday, March 28, 2006

Workers In The Vineyard


Thrusting young investment bankers of my acquaintance like to amuse themselves by calculating what they're being paid. Not how much, you understand, but how little.

It goes like this. Straight out of college your novice banker can expect a base salary of £35-40 grand. Plus a bonus after 12 months of maybe another £30 grand. Not bad you say. But what they say is that, to get the job, they've literally had to kill and eat a thousand other applicants. What's more, once signed they discover they're expected to work 100 hour weeks, chained in semi darkness to the oars of everlasting number-crunching and pitch-books. And they only get the bonus in the unlikely event they're still alive after 12 months (see the hilarious Monkey Business for full details).

So £35,000 pa is £673 pw. On an hourly basis that works out at just £6.73, only just above the minimum wage. Is you heart bleeding?

I thought of this today as I listened to a public sector union chief explaining why today's strike over pension rights was justified. He recognised that most private sector pension schemes don't give nearly such good benefits as those public sector schemes providing index-linked final salary pensions at 60. But he said that was recompense for much lower public sector pay.

Hmm.

The facts are different. According to the Office for National Statistics (see here) full-time median gross annual earnings in 2005 were £24,344 in the public sector and only £22,247 in the private- a gap of almost 10%. And in terms of hourly rates, the gap is even bigger, at 25%. That's because full-time public sector workers put in about 3 hours a week less than private sector- 37 rather than 40. And the median public sector rate per hour is £12.48- way more than those knackered investment bankers.

We've blogged about the public sector pension crisis before. We taxpayers simply cannot afford the current arrangements, whatever the unions say. It is wildly unfair for private sector workers- whose own deficit laden final salary pension schemes are busy slashing entitlements- to be forced to work til they drop in order to pay for continued public sector largesse.

Of course, the government has already flunked the challenge with centrally employed civil servants, so we'd better not hold our breaths.

The Doc Does Grand Rounds


Over at the unmissable NHS Blog Doctor, Doc Crippen is hosting Grand Rounds. That's the premier global round-up of medical and health blogs, assembled each week by a different global medico.

The Doc only started blogging three months ago, but within days he'd established himself as Britain's foremost authority on medical matters. More particularly, his wit and wisdom have exposed the full horror of life in the make-believe dysfunctional life-threatening world of Commissar Hewitt's NHS.

Being a squeamish hypochondriacal wimp, I must admit to occasional episodes of vomiting and black-outs whilst perusing previous editions of Grand Rounds. But the Doc's done an excellent job in turning up a raft of items that are riveting rather than revolting. I even found out from the father of behavioural finance why my colonoscopy was extended by a minute. Fascinating. If a little eye-watering.

I urge you all to take a look.

Monday, March 27, 2006

Nuke Liability


Here's a good one.

You're a director of a company that's fast heading for the rocks. You've tried raising a few hundred mill from the bond market, but failed. You've considered borrowing from the banks, but decided you might end up in clink because you know there isn't a cat's chance of ever repaying. Who ya gonna call?

Well, you could call the administrators. But then the company would get sold or wound up, with all the attendant unpleasantness. So first...why not try 020 7215 5000? That's what the directors of British Energy did, and they immediately got a loan of £410m.

The National Audit Office report on what happened next makes interesting reading. The DTI not only baled out the company- which nobody else would have done- but it then led a financial restructuring that left taxpayers holding a £5.3bn liability, but with a sizeable de-risked ownership stake still in the hands of the original shareholders and creditors.

As you will know, British Energy is the nuclear power producer that hit the rocks in September 2002 and was baled out by the taxpayer. But unlike the notorious Railtrack confiscation, here a significant slice of the assets was left with the existing owners. The creditors received "new bonds and 97.5 per cent of the share capital in the restructured company", while the remaining 2.5 per cent was left with the original shareholders. Even better, neither group was any longer lumbered with the £5.3bn liabilities- ie the estimated cost of dealing with all that nuclear waste and eventual plant decommissioning. That was all parcelled up and pushed over to the taxpayer.

Both shareholders and creditors have done rather well. On the face of it, an administration in 2002 would have been unlikely to realise much- if any- value for them: as the NAO reports, "given the prevailing low wholesale electricity prices and the scale of British Energy’s nuclear liabilities no credible and qualified purchaser existed". But since then, energy prices have soared, taking the BE share price with them.

As at today's prices, the original shareholders' residual stake is worth £100m-plus, while the creditors' stake has surged through £4bn- not bad when you consider their pre-restructuring stake (all debt) had a nominal value of only £834m (and as at September 2002, it probably wasn't actually worth anything like that).

And the taxpayer? Well, we did get a 65% slice of BE's future net revenues, which is convertible into shares. And fair play- as those revenues have ballooned with higher energy prices, so the value of our stake has shot up to £2.5bn. But let's be clear- that's still less than all the other investors combined, and we're the only ones holding the nuke risk.

Once again, whether through political pressure, incompetence, or commercial naivety, a government department has failed to secure the financial interests of taxpayers.


PS The NAO report also reminds us of DTI's incompetence in the run-up to BE's 2002 problems. Specifically, that they "had failed to put in place any proper arrangements to manage the risk to the taxpayer arising from British Energy’s nuclear liabilities, and had failed to establish a credible overview of British Energy’s deteriorating financial position and did little more than gather information." Which is virtually identical to NAO's recent critique of DTI conduct during the MG-Rover fiasco: they've clearly learned nothing.

PPS The report also once again questions the process by which DTI appointed and remunerated its advisors. Overall they paid out £28m. We will be taking a closer look at this issue.

PPPS For those that don't know, the £5.3bn nuke liability for BE is only one small slice of the total taxpayer liability for clearing up Britain's various nuclear waste piles. The last official estimate was £48bn, so goodness knows what the real total is. £100bn? £200bn? And none of it is included in Gordo's official total for National Debt.

Sunday, March 26, 2006

Recent Bonfires- 9


In the news this week:

£10m to fund unions- 'Millions of pounds of taxpayers' money is being used to fund the trade unions. The Union Modernisation Fund is giving up to £10 million to pay for computer projects and other initiatives. Cash was awarded to the train drivers' union Aslef to create a website, to Amicus to "improve the communication efficiency of branch secretaries", to the RMT transport union to create "a web-based membership system" and to the TUC for development and testing of "an online support system". The Transport and General Workers' Union was given money to establish a migrant workers' support unit. Alan Duncan, the shadow trade and industry secretary, claimed that it was a "payback" for the unions' funding of the Labour Party. During 2005, £11 million, more than half of Labour's £21 million funding, came from the unions. "With deals like this, no wonder so many suspect money buys influence over policy." (Sunday Telegraph 26.3.06)

Brown's £56bn wasteful spending spree- 'SURGING public-sector inflation and tumbling productivity in the government sector are costing the UK economy at least £56bn a year in wasted resources, a devastating analysis reveals...The same volume of government services could have been provided for some 21.5% or £56.2bn less in 2005, if public ­sector productivity and price discipline had matched that in the private sector. This is over and above any waste that already existed in 1997 and therefore means the total squandered in the public sector is likely to be tens of billions a year higher. David Smith, chief economist of Williams de Broë, said: “Any private-sector finance director who had increased his expenditure budget by almost 66% between 1996-97 and 2005-06, or from £313.2bn to £519.6bn, at a time when the price level rose by 15%, and then had the temerity to ask for more, would be dismissed out of hand, not promoted to chairman of the board.” (The Business 26.3.06)

£4m on BBC art- 'From pavement poetry to cones of light, BBC chiefs are spending more than ever on...public art ...which will set licence fee payers back more than £4m. The most expensive work...costing more than £1.6m...is a paved floor inscribed with lines of latitude and longitude and names of places and regions across the world. Barcelona-based Spanish artist Jaume Plensa....at a cost of £897,000... has built a 33ft inverted cone that will sit on the roof of Broadcasting House through which a light will be beamed 3,000 ft into the night sky. Ellis Woodman, of the magazine Building Design, described it as the 'most misconceived public artwork in London since the Queen Mother's gates'. (Observer 26.3.06)

This week's total: £56,014 millions

PS Another £23,000 blown on posh BBC party- 'Marco-Pierre White's Criterion restaurant was the scene for a £23,000 Christmas party held by the BBC for some of its highest-paid radio stars. While the corporation undergoes swingeing budget cuts, it still found £238 a head to wine and dine Radio 2 DJs including Terry Wogan, Clive Anderson and Jeremy Vine, which has angered BBC staff and listeners alike. News of the party leaked out when the Radio 2 disc jockey Sarah Kennedy boasted on air about the evening, which did not cost her a penny." (Telegraph 27.2.06)

Sex, Violence, And Healthcare


What's the biggest industry in the world?

Sex? Funny chap, sex: always tricky to get a firm grip. Some official estimates put annual turnover at $50bn, but for all the obvious reasons that's almost certainly low-ball. Let's multiply by ten: say $500bn pa- about the size of Red Hot Dutch GDP.

But no, it's not sex.

Violence then. According to GlobalSecurity, world defence spending is running at about $1,000bn pa.

Closer. But it's not violence either.

Food? No. Energy? No. Accountancy? Nope, none of the above.

No, the answer is healthcare. The global healthcare industry is worth over $3 trillion. That's an humongous $3,000,000,000,000 pa, or 7-8% of world GDP. And growing all the time.

Here in Britain we know all about that. Ever since Tony Blair announced he would increase our laggardly healthcare spending up to the European average, our taxes have been racking up to provide billions more for the NHS. He said we needed to move from under 7%, up to around 8%...but of course he forgot it's a moving target, so it's now over 9%.

And the real question is, why? Why, all around the world, are we shovelling all this extra cash into a new arms race in healthcare?

Yes sure, as we get richer we gradually satisfy those first order Maslow hierarchy needs, so we start to go after higher order stuff. But Maslow himself only put healthcare on level two- way behind all that self-actualizing opera writing.

And does spending billions more on it actually deliver? Life expectancy is the commonsense man-on-the-Clapham-omnibus measure of overall healthcare delivery. Yet when we look round the world at developed nations with comparable income levels, there's virtually no correlation between healthcare spending and life expectancy.

Take the US: they now spend an eye-watering 15% of GDP on healthcare, by far the highest in the world. Yet life expectancy at birth is only 77.2 years, the lowest among G7 nations. Contrast that with Japan, which has the lowest healthcare spending but the highest life expectancy, at 81.8 years.

The same is true of other measures, such as infant mortality, where cheap-health Japan has the best record, and expensive-health America the worst.

Ah but, you say, that's because the Japanese eat all that raw fish, whereas Americans live entirely on flame-grilled Whoppers. And maybe there's truth in that: just 3% of Japanese are obese (BMI>30- see p10 here), whereas in America it's nearly one-third.

But if the real problem is bad "lifestyle" choices, why do we need to spend all those billions on healthcare? Why not just provide cheap and cheerful stomach stapling ops- maybe conducted en masse by Nurse Quacktitioners in trailers parked outside fast food outlets, and funded from a ring-fenced fat tax? Why on earth should the rest of us have to pay zillions failing to sort out someone else's three-a-day Whopper habit?

The really scary thing about healthcare is that, even though it's already the world's largest industry, it's now growing at about twice the rate of world GDP. What that means is that in less than a century it will account for the whole shebang. Which means there will be no cash for anything else. Think about it: sex, violence, flame-grills...everything we've come to stand for will be entirely squeezed out.

I ask you: is that really what we want?

Pic: The Physician Services Company

Saturday, March 25, 2006

World Champ Slams Athlete Welfare Dependency


We've blogged many times about the appalling cost of the 2012 London Olympics (eg see here). And as Gordo confirmed in the Budget, part of the cost will be to put our 2012 "super-heroes" onto the public payroll.

So it's interesting to hear what a real Olympic hero thinks of that. Michael Johnson, the US 200m and 400m sprint legend, was commenting on the attitude of British sprint "stars", and their dire performances at the Commonwealth Games. As you will know, that including crashing out of the 4x100m relay heats by actually dropping the baton. Johnson says the UK development system "rewards mediocrity":

"They (British sprinters) have lost the hunger and it is the system which causes them to lose the hunger. The system rewards mediocrity. It rewards Great Britain's best, not the world's best. These athletes have it before they have done anything at all. They have celebrity and sponsorship and things we work hard for in the US."

"As American athletes we were often envious of the support you get in Britain but at the same time it can hurt you because these athletes have the celebrity status and the sponsorship and all the things we have to work so hard for in America."

In other words, Britain's system of public funding for athletes has already killed that all-important "hunger". Like any other form of welfare dependency it has sapped the will to succeed. And how much worse is it going to be when all of Gordo's extra zillions have plumped up the cushions to hitherto undreamed of plumptiousness?

Of course, that's not what the Department of Culture Media and Sport says. But really. Who are we going to believe? Five times Olympic gold medallist and nine times world champion Michael Johnson? Or a bunch of couch-potato athletics "experts" from the darkest bureaucratic recesses of the DCMS?

Hmm. Tricky one.

PS The success of our swimmers at the Games is testimony to the focused direct training methods of national performance director Bill Sweetenham. Sweetenham is the Aussie who controversially brought Aussie Rules training methods to the genteel world of British swimming. So controversially in fact that some of his charges complained of bullying, and there was a steward's inquiry. He didn't realise that a country where politicians have pretty well banned competitive sports in state schools was not entirely ready for him. Post-inquiry he says he'll have to tone down his methods: "I have been burned by the investigation. I won't be able to fast-track, I'll have to be genteel. It's not the ideal approach if you want success." Indeed it isn't, but as results in Melbourne show, if you truly madly deeply want success in the ultra-competitive world of international sport, there's no alternative to gritting a few teeth. £500m more public money on cushions ain't going to do it.

Risky NHS Gets More Risk Managers

Risk Assessment Managers


As the extraordinary financial crisis in the NHS spirals ever further out of control, healthcare is getting riskier (see previous blog). Now we have news that 20,000 jobs are to be axed as hospitals desperately struggle to balance the books.

One of the worst affected hospitals is the Royal Free in North London. It is already £19m in debt and the local paper reports it's "in freefall": it is "sacking more than 10 per cent of its staff and axing nearly 200 beds to slash costs...and save £25million next year". A senior nurse on one of the doomed wards, with 30 years experience at the hospital said:

"This is the worst I have ever known staff morale to be at the Royal Free. It is an absolute shambles. They didn't even come to the wards to tell us what was going on. I could have walked out on Tuesday and not turned back. It will be front line nurses losing their jobs, rather than top heavy management."

So what about the increased risk to patients? Well, it seems senior management are well aware of the issue because despite savage cuts on the wards, they are finding the money to hire four "Risk Assessment Managers":

"Well, Mrs Smith, I'm afraid I have to tell you that we assess your risk as extremely high."

"So I need to come into hospital?"

"Yes, you most certainly do...which is precisely why your risk is so high- we no longer have any beds you see."

This whole fiasco is yet another example of how our top-down Stalinist NHS is run to please the politicians, not us. Hospitals need to tick boxes like "risk assessment" if they are to qualify for more of those gold stars the bureaucrats hand out. Moreover, as we've blogged before, most of the cost over-runs actually reflect cost pressures emanating from Whitehall, not the individual hospitals.

Friday, March 24, 2006

Brown's Maxxed Your Credit Card


If yours is the average UK household, then you have £50,000 of personal debt (including mortgages). Personal debt has more than doubled under Gordon Brown, and we are now the most indebted households in Europe. Think about that next time you want to stay awake at night (see Credit Action for good overview).

Well, that's hardly Gordo's fault you say, which in some respects at least, is quite true. But what is squarely his fault is the additional debt he's run up on our behalf while we were somehow distracted into looking the other way.

The Budget gave updated estimates of his official borrowing binge. By 2010-11 public sector net debt will have climbed to £619bn. Every household in Britain will then owe £25,000 on behalf of the government.

But as we've blogged before, that declared £619bn is just the tip of the government's debt iceberg. To start with, there are all those unfunded public pension liabilities- government guaranteed index-linked pensions the rest of us can only dream about...and pay for. Quite indefensibly, they're not included in the official debt calculation. The best independent estimate says they now amount to a debt of £690bn, or another £29,000 per household.

Then there are all the payments we're now obligated to make under the Private Finance Initiative for those PFI schools and hospitals. The Budget projects payments out to 2030-31, and they go on even beyond that. The last proper estimate of their capitalised value came to £60bn: another £2,500 per household.

Then there's Network Rail's debt. Following the confiscatory renationalisation of RailTrack by Stephen Byers, that debt rightly belongs on the government's balance sheet. The scandalous fact that ministers have so-far strongarmed the official statisticians into keeping it off, doesn't alter the reality that taxpayers are liable. So that's another £20bn, or £1,000 per household.

And so it goes on. When you tot up the whole lot- on balance sheet and off balance sheet- the real total for government debt comes to £1.3 trillion. Which is about £55,000 per household.

In other words, Gordo has borrowed on your behalf even more than you've managed to borrow for yourself. You thought you owed £50,000, and it turns out you actually owe more than twice as much.

You're going to need some much stronger sleeping pills.

Thursday, March 23, 2006

Budget Incineration Guide

Gordo's assistant lends a hand

As feared, Brown's tenth budget will burn even more cash. According to his speech* the worst of the news is:

  • 2012 Olympics- another £500m public money to payroll athletes. This is an initial salami slice of the likely £15-50 bn Olympics bill (see previous blogs here and here)
  • £30bn asset sales- including the Tote and Westinghouse. Highly likely to be underpriced just like Qinetiq (see previous blog); also increases the £1.3 trillion public sector net indebtedness already hung round the necks of taxpayers (previous blog here)
  • £7.5bn on failing Skills Industry- he says "each college will make a step change in employer involvement so that we can better match the demand for skills to the courses on offer"; we say it will never work- the public sector skills industry is an unwanted and costly dud (see this blog)
  • "Additional £1.5 billion pa invested in scientific discovery"- Gordo has chucked billions at measures to stimulate R&D, yet all he has achieved is a collapse in private sector R&D- ie the stuff that's actually likely to yield a return
  • Gershon "Efficiency" programme- Brown claimed a further £2bn of savings, but there was no solid supporting evidence, and as we all now know, such "savings" are actually no more than a PR stunt/sad delusion (see here). Even worse, he's now promising yet further "savings" beyond 2008

And as was widely observed, the new soft focus smiley Chancellor made absolutely no mention of the NHS and all its squandered billions.

* All our figures are lifted straight from the Chancellor's speech. In an honest world we would of course be able to link back straightforwardly to the detail in the accompanying Budget Report. But Brown's budgets have always been dizzying constructs of smoke and mirrors, and this one's no different. After several hours fumbling through the usual dense cloud of "budgeting regime changes" and other definitional obfuscations, we gave up for health and safety reasons. I think we all get the message: tax and waste will go on getting worse.

Smokin'


So the Executive Chairman of Capita has resigned over the Labour loans scandal. It seems the stock market is suspicious of the smoke billowing around, and has marked Capita down. So the Chairman has to go, once again demonstrating the superiority of markets over political "judgement". None of the politicians involved has resigned, and unless Plod's investigation throws up charges, there's no way of making them do so. No matter how much smoke we can see.


PS We all know that Capita has been a major beneficiary of Labour's half-baked outsourcing programmes. Just for the record, since Labour came to power the company's value has increased 24-fold: "Capita, whose business is linked to its standing in Whitehall, made its fortune bidding for, and taking, contracts from the public sector. Since the election it secured the payroll provision for the Independent Police Complaints Commission — no value given; but Capita says that it is the third Home Office agency it is now working for. In February it was awarded the £120 million contract to represent the Department for Trade and Industry over miners’ personal injury liability claims. In December it won the contract to administer the British Waterways pension scheme — no value given. In September it was given the contract to provide IT services to the Department of Work and Pensions. It also collects the BBC’s licence fee and administers the London congestion charge.

Capita has been embroiled in controversy. It was involved in the disastrous launch of the Criminal Records Bureau in 2002. The company was fined almost £2 million for its failings in providing criminal checks on people working with the vulnerable. In 2000 Capita was appointed as the customer service provider for the Individual Learning Accounts Scheme, which ran £70 million over budget. After the scheme was wound up, in 2001, the National Audit Office said that it had been introduced too quickly without proper security measures."

Top-down outsourcing is not the way to improve public services. Real reform demands breaking up the monolith and- crucially- putting the spending power back into the hands of customers.

Wednesday, March 22, 2006

Gershon Update

As already blogged, Gordo's latest Gershon tractor production statistics announced in the Budget were greeted with derision (for background see here, here and here).

He now reckons he's saved £6.4bn and cut 33,237 jobs (both to end-Dec). So supposedly he's about halfway to his 70,000 cut to staff numbers, but less than one-third the way to his £21.5bn cash savings target (both to 2007/08).

As usual, he's released very little detail on the calculations behind these figures. The recent NAO report told us the £2bn saving quoted in last year's Budget was simply made up, and it's quite likely the same applies this time. But just on the offchance the numbers might be real, we can note the following:

  • Job cuts at the Department for Work and Pensions are slowing right down. Their target is the biggest at 30,000, yet between September and December they only managed a further 483 to reach 14,698. John Hutton's face was a picture of grim resignation during Gordo's speech- he's wrestling with a massive dysfunctional department that now not only has to deliver a 25% staff cut under Gershon, but also is one of the four departments slated for a further 5% real cut after 2008. Completely undeliverable of course, and Hutton must be praying for Gordo to move next-door so he can be moved himself.
  • Job cuts at HM Revenue and Customs are also slowing drastically. In the final quarter of 2005, they managed only 425 extra to reach 3,671- way short of their 13,350 target. They too are doomed to deliver that additional 5% real cut post-2008. And they too are gently disintegrating, with loads of taxes already going uncollected. It's quite possible that the Gershon "savings" will be more than offset by a breakdown of tax collection.
  • 8,560 jobs have reportedly been cut at MOD. But as we know from the NAO report, at least 2,300 of these were not Civil Service jobs at all- they were just included to boost the numbers.

Overall, the Gershon "savings" remain on track to be the best Marx Brothers film never made.

The Laughter Of Doom


Anger they can deal with. A gale of derisive laughter is much trickier.

The best bit of today's tedious self-congratulatory Budget speech was when Gordo said:

"Published today are the figures for the first £6.4 billion of Gershon savings, including a reduction in civil service posts of 40,000. And I can today announce further savings in the years of the next spending round from 2008 to 2011 that will also release new resources for future priorities."

Cue for the entire opposition to laugh out loud. Because as everyone outside government now realises, the "Gershon savings" are pretty well non-existent; indeed the whole delusional charade may actually be costing us even more money (see previous blogs starting here).

But Gordo seemed taken aback. As did his grim faced colleagues.

It wasn't exactly that special Ceausescu moment. But it was getting there.

In Place Of Annual Budgets


Budget Day. The annual theatre set-piece where the Chancellor gets to be centre-stage, and MPs get to wear their top-hats. Well, Denis Skinner does anyway.

But as Danny Finkelstein reminds us, these days annual budgets are little more than an exercise in political spin. Even worse, in the absence of substance, they're an open invitation to Chancellors to tinker- and the current one hardly needs encouragement on that score.

Of course, really high spending Chancellors do have to raise tax rates, and Gordo has done that on numerous occasions. But wouldn't it be better if, instead of being able to bury such measures in para 48, section c, subsection iii of HMRC's routine 400 page Budget pack, he had to convene an emergency session of the House to request them? After all, he's got the stealthy power of fiscal drag constantly increasing taxes anyway without him lifting a finger.

In place of an annual budget we should have a third fiscal rule. It would limit taxes as a percentage of GDP. There would be a medium term target- say 5 years- suitably adjusted for cyclical effects, and monitored not by the Chancellor but by an independent Fiscal Audit Office appointed by and reporting to Parliament.

In overall charge of that and the National Audit Office would be the Wastefinder General, with powers similar to those being planned for his Chinese counterpart. Obviously he would need to be provided with an armoured bulldozer to smash down the walls of official spin and outright deceit. But it could be done.

I humbly volunteer to serve.

Tuesday, March 21, 2006

Alan Johnson: Business Leader

"Three letters: wastes a load of money"

Following our earlier post on why we should get rid of DTI, I took a look at Alan Johnson's credentials for leading British business into the Third Millennium. Could they possibly match the Commissar's (from whom he took over at DTI)?

Turns out they're even better:

Born: 1950

Education: left school at 15 with no qualifications

1965-68: Tesco shelf-stacker (nothing wrong with that- see Sir Terry Leahy) and rock band wannabe (another one)

1968-76(?): Postman in Slough (nothing wrong with that- Tyler grew up in Slough...but can't help wondering if Johnson knows which of the bruvvers swiped my 18th birthday card with the £2 postal order from Auntie Dora)

1976(?)-1992: Union of Communication Workers official

1992-1997: General Secretary of CWU, General Council of TUC, Labour National Executive

1997- MP for Hull West (when he was imposed on the safe constituency by Tony Blair 'he knew nothing about Hull, and still does not know the old tyke joke that "the Humber is the arsehole of Britain, and Hull is eight miles up it". Some suggest that Johnson is even further up a certain other arsehole.)

Oh and he's widely rumoured to have been a member of the Communist Party, although he himself says: "I wasn't a Trot. I was more CPGB [Communist Party of Great Britain]. I did consider myself to be a Marxist--I read more chapters of Das Kapital than Harold Wilson." Well, that's OK then.

And now he's spending £5bn of our money every year "facilitating partnerships and promoting fresh thinking between government, businesses, employees, unions, consumers and the scientific community."

And he's third favourite to take over from the Blessed Leader.

Gawd help us.


PS One of his very first acts as Trade and Industry Secretary was to reverse the Commissar's whacky rebranding of the DTI as the the Department for Productivity, Energy and Industry- DPEI. He reckoned 'there was concern about the loss of the word "trade" in the title. "A man with a screwdriver" will replace the sign outside the department's HQ, Mr Johnson told the Financial Times. When pressed he admitted DPEI had prompted "various descriptions...penis and dippy." Another fine testament to the Commissar.

So...What's DTI Actually For?


In case it passed you by, both the Lib Dems and the Tories fought the last election on a platform of abolishing the Department of Trade and Industry (see James Review). Under Labour it's continuing to burn £5bn of our money annually.

According to the DTI (or dti as it prefers to be known):

"In this world of rapid change and intense competition, DTI plays a vital role, working towards a vision of prosperity for all. We do this by facilitating partnerships and promoting fresh thinking between government, businesses, employees, unions, consumers and the scientific community."

Yesterday, in Commons Committee Room 15 (the Lloyd George Room*), the Public Accounts Committee tried to decipher whether such waffle might somehow mean something. Anything.

On the table was the National Audit Office report on the collapse of MG Rover (see previous blog). On the rack were the top officials from the DTI: the current Permanent Secretary, the unfortunately named Sir Bryan Bender KCB, and the temporary acting Perm Sec at the time of the collapse, Catherine Bell.

Ms Bell's appearance was a story in itself, since she is no longer a civil servant. She was the one who reportedly stopped then Trade and Industry Secretary Commissar Hewitt bending the rules to use even more of our money to prop up MGR right through the 2005 election. The Black Spot was handed to Ms Bell shortly afterwards, and she now works in the duty-free at Heathrow.

As you may recall, the NAO found that the collapse of MGR is likely to cost taxpayers around £250m in terms of support for those made redundant and the West Midlands economy. That's quite a wedge and there were any number of aspects of DTI action that raised questions, including for example their intercession with Customs on behalf of the company to swing a tax deferral (resulting in £18m of tax losses). But the NAO particularly criticised an extraordinary £6.5m government "loan" made to keep the company going for a further week last April after it had already gone into administration. We will never be repaid.

The departmental defence is that they reckoned the loan would buy a little more time for MGR's prospective Chinese suitor to ride to the rescue- a fantasy prospect that was described even at the time as "remote". Everybody in the room knew the real reason was the proximity of the May election, and the pressure from Labour ministers to somehow keep the jobs going until after the poll.

PAC members homed in on DTI's plan to provide a £100m "Bridging Loan"- the one Hewitt wanted and Bell reportedly stymied. Ms Bell played a very straight bat when invited to confirm the story, and despite a number of underarm deliveries from members, she declined to hit Hewitt for six. The plan had only ever been one of a range of "contingency" possibilities. What? Even though an offer was given in writing to the Chinese? Ah, but that was only a draft. Plus, they turned it down anyway.

All we taxpayers can do is thank God the Chinese showed some sense. MG Rover has been a public money pit for as long as any of us can remember, and throwing in yet more was never likely to change that.

So coming back to the question, in the case of MGR what did we get for that £5bn pa? Well, back in 2000, the department (then under Bad-News Byers) was heavily involved in persuading BMW to sell MGR to the dubious Phoenix Consortium rather than Alchemy Partners (NAO Report p 21). Why did they do that? Was it that thing about "facilitating partnerships" and "fresh thinking"? Or was it perhaps because they didn't like Alchemy's plans to downsize the company, and Byers/Blair didn't like the loss of marginal votes?

Sadly, when DTI then tried to do some follow-up "facilitation" with John Towers and his dubious Phoenix colleagues, they were given the bum's rush. All they could do over the next four years was to follow events in the press, and put together internal reports that "had not been subject to due diligence" (ie they'd just been cut and pasted out of the FT). Yet when eventually the company started to disintegrate they were only too willing to take MGR management at its word in terms of the life-saving Chinese deal being just around the corner. So they leant on other bits of government to help (including HMRC and FCO) and looked at relaxing their own operating rules so they could pump in yet more public funds.

And of course, as the PAC chairman pointed out, the £250m straight taxpayers loss identified by the NAO is really only the start. The MGR pension fund has a deficit of about £0.5bn, which will now fall on the new Pension Protection Fund (which conveniently became liable just TWO DAYS before the company went into administration). And it has been reported elsewhere that MGR creditors were owed a total of £1.3bn, most of which they will never see. None of these people will be thanking the DTI.

The overall conclusion is clear. If it hadn't been for political interference and DTI's hamfisted meddling, BMW would have sold to Alchemy in 2000. The company would then have been downsized pretty drastically to become a specialist sportscar maker. The downsizing would have been done in a properly planned, orderly manner, paid for by the company itself, not taxpayers. And the creditors would have been paid off. Even the pension fund deficit would have been less problematic because its equity investments were worth so much more in 2000.

And as the specialist producer of MG sportscars, the company would surely have had a much better chance of survival than the clueless fag-end of a defunct volume manufacturer. So a good chunk of the jobs would still be with us today.

We really don't need the DTI. Taxpayers could save £5bn pa, and Britain's economy would function a whole lot better.


* Sitting in the Lloyd George Room listening to tales of grubby goings on in the corridors feels entirely appropriate. A man who had so much difficulty observing the proprieties relating to power, money, and trouser fastenings is the ideal host for sessions of the PAC.

Latest On NHS Computer Disaster


We've blogged before about the disastrous National Programme for Information Technology (see here). NPfIT is the NHS plan to centralise all patient record keeping on yet another Big Brother style supercomputer. Originally budgeted at £2.3bn, it's now reckoned likely to cost up to £50bn, and it's the largest civilian IT programme in the entire history of the world.

Quite rightly, it's being investigated by spending watchdog the National Audit Office, who will deliver their report in the summer. But NAO head Sir John Bourn has already given us a taster of what it's likely to say:

"The report is developing and essentially there are two main points in it. One is in relation to technical expertise, the design of the system and the contracting for it.

The other one is the failure to take the people in the National Health Service with the system. I have been very keen to make it absolutely clear that, in the report that I produce, it will make clear the failure to take the people in the National Health Service with them."

NPfIT is failing on both counts, as we've said before. Technically, even the few bits that have already been delivered don't work properly. And managerially, the top-down NHS sledgehammer has failed to realise that this system is not actually wanted or needed by frontline staff.

We await Sir John's report with interest.

PS One of the junior Tylers happens to know a few of the geeks working for the various IT companies contracted by NPfIT. The contracts are notoriously juicy and virtually open-ended- obviously a welcome gravy train for them, and as they say, you can't blame them for the Department of Health's stupidity. In the words of Tyler Jnr, "for real man...for real."

Monday, March 20, 2006

Scary NHS Gets Worse


Item: 500,000 children to lose NHS dental care. The new NHS dentist contract comes into force on April Fool's Day, and like so many NHS reforms, it's a total shambles. Hundreds more dentists will stop NHS work. John Renshaw- chairman of the British Dental Association until last month- will be among them:

“I have been committed to the NHS for the last 37 years but the new contract has forced me to make this decision. It was not an easy decision but it had got to the point where the NHS was not supporting the kind of service we wanted to offer our patients. There will be some patients who will not pay. I expect the number of children who are not getting dental care will increase.”

Item: "Thousands of elderly and disabled patients would lose their right to free long-term NHS care under draft proposals circulated by the Department of Health...the proposals would sharply reduce the number of patients eligible for free NHS continuing care. Officials say a harsher assessment regime outlined in the document would force many more families to rely on local authority supplied "social care", which is subject to means testing. That would push more vulnerable people into a parallel system that is itself under unprecedented pressure from debts of £1.7bn. Last week the organisation representing social services directors instructed its members to re-examine thousands of cases amid fears that many councils may be vulnerable to legal action from patients who are being charged for social care when in fact they ought to be treated free on the NHS".

Item: NHS to cut hospital care- People with asthma, heart disease and other chronic conditions who are frequently admitted to hospital as emergency cases are to be treated at home in a drive to save £400m pa and ease the cash crisis in the NHS. CPO Commissar Hewitt says “While it’s important to know the hospital is always there, it’s a much better, more stable, life for people if they can be treated in the community. Having so many unplanned admissions can also make it harder to develop day-to-day services in the hospital and increase costs. More efficient community treatment can avoid the need for hospitalisation.” And as we know, the Commissar is a big expert on all this.

Conclusion: Despite all evidence to the contrary, the Commissar and her top bureaucrats persist is thinking they can sort things from the top. One size fits all. With the NHS now in crisis, let's hope they've already sorted the specs for the one-size peoples coffin.

Sunday, March 19, 2006

Recent Bonfires- 8


In the news this week:

£10m on foreign wind- "THE government is raiding £10m of lottery money intended for good causes to subsidise the construction of a wind farm by a foreign energy company, Elsam, a Danish energy giant. It will help to pay for a wind farm four miles offshore in Liverpool Bay. The manager of the project admitted it would have gone ahead with or without the lottery cash. A former vice-president of the Royal Academy of Engineering, said: "I’m not sure lottery money was ever intended to subsidise electrical supply. It sounds like a bit of a cheat." The £10m is part of £50m awarded by the lottery to renewable energy schemes. It has granted £18m to the British subsidiary of the German firm E.ON to construct a biomass-fuelled power station in Lockerbie." (Sunday Times 19.3.06)

£4bn BSE bill unwarranted- "Wednesday will mark the 10th anniversary of our costliest-ever food scare, unleashed by Stephen Dorrell's claim that there might be a link between eating beef and the brain disease CJD. The Observer predicted a million dead by 2016. The Government's top BSE scientist thought that deaths could reach half a million and that it would be a catastrophe "worse than Aids". A decade on, having wasted £4 billion on slaughtering millions of healthy cattle, we still do not know the causes of BSE or CJD. But the total of vCJD cases is still only 150. The incidence curve has declined virtually to zero. It was the epidemic that never was." (Sunday Telegraph 19.3.06)

£5m Diana fountain still useless- "AFTER being plagued by accidents, floods and mud, the Princess Diana memorial fountain has developed a new problem — it is starting to crack. The £5m structure will need further repairs to help it withstand the effects of weathering and subsidence. So far it has cost over £2m more than originally estimated. About 16ft of grouting will need to be replaced every year because of the “natural movement” in the earth." (Sunday Times 19.3.06)

£425m on failing City Academies- "A THIRD of Tony Blair’s flagship city academies have failed to produce better results than the poorly performing comprehensives they replaced. The results, released in a Commons answer, show that, overall, the academies are trailing behind national improvements. At Unity City in Middlesbrough only 12 of the school’s 200 16-year-olds last year got at least a grade C in maths and English GCSE, compared with 17 at its two predecessor schools. When Unity opened in 2002 the new head promised a revolution in learning that would “discard the Victorian-style chalk and talk” and put in place “learning sessions” taken by “learning facilitators”. Old-style history and science were to be replaced by “concepts”, and teachers were told to adjust their styles to cater for whether children were “kinesthetic, visual or auditory” learners. Since then, Unity has been identified as a “failing school” by the Ofsted; the government has had to bail out its £1.5m debts and the education department has had to appoint and pay for a “trouble-shooter” to deal with the academy’s problems. The 27 academies that have already opened have cost £425m to build, ranging from £18m to £37m each." (Sunday Times 19.3.06)

Total for the week- £4.44 billion.

Saturday, March 18, 2006

A Little Bit Woah, A Little Bit Wayyy


Just like that dodgy cockney geezer from the Fast Show, Blair and chums are now arguing that it's the law's fault for putting temptation in their way. Surely we must have known none of them could be trusted to raise funds honestly. As Matthew Parris puts it, "if a burglar, caught red-handed, should by effrontery and oratory make from the dock so stirring a call for the fundamental reform of the Theft Acts that the whole court were distracted from the charge and persuaded to “move on”. . . then the tour de force would hardly be more impressive".

So here we are back to the solution preferred by nine out of ten lying conniving rapscallion politicos throughout the ages - putting them all on the public payroll, even before they've gone through the tiresome business of actually getting elected.

Just how dumb do they think we are? In case they hadn't noticed, we taxpayers want fewer politicos, not to pay for even more.

Remember that the cost of our so-called democracy has already rocketed under the stewardship of these dirty rotten sleazebags. At the last count in 2004, costs had increased by 80 per cent since 1997, taking them to £1.3 billion a year:

"Just under half the extra outlay can be put down to the running costs of the elected institutions set up by Labour since 1997 — the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly, the Greater London Authority and the London Mayor. Labour also created the Electoral Commission to oversee elections.

There has also been a 75 per cent rise in MPs’ salaries and allowances, a 40 per cent rise in the cost of House of Commons facilities and administration, and a 71 per cent rise in local government representation and management costs, with big increases in the allowances of councillors a key factor."

We could write a couple of thousand words on all this, but it might be mainly expletives (see previous blog). So instead, let's just go along with the Committee on Standards in Public Life. They looked at public funding for parties last time around and came down against. They said:

  • Taxpayers should not be compelled to contribute to the support of political parties with whose outlook and policies they strongly disagree
  • Public funding could cause an existing party system – any existing party system – to ossify, with the existing parties handsomely supported out of the public purse
  • The parties might abandon efforts to raise money at the grassroots...the power of party headquarters vis-à-vis the grassroots might be considerably increased
  • Instead of representing the citizens vis-à-vis the state, the parties would be tempted to represent the state vis-à-vis the citizens; they would, in effect, have been ‘captured’ by the state. On the continent, there is talk of ‘cartel parties’, which use state funding and the state apparatus increasingly to further their own ends rather than those of the citizens they claim to represent.
They also pointed out that the parties already get free postage for their election literature- estimated to be worth well over £20m at a general election- and all that free TV and radio advertising- worth gzillions, and not available at any price to honest campaigning groups like the TaxPayers' Alliance.

All very politely put.

So short of abolishing politicos, what should we do?

A cap on individual donations/"loans" (we might start with ConservativeHome's £100,000pa), a tax break for small donations up to say £500 pa (as recommended by the Committee), and an immediate move to a PR elected second chamber of no more than 100. And while we're at it, cut the number of Westminster MPs to 400.


Oh, and anyone taking the Michael to be locked up.

Thursday, March 16, 2006

High Rent Bureaucrats


The Department of Culture Media and Sport costs us £3bn pa in hand-outs and admin costs. It is of course a disgrace that we taxpayers are forced to pay for any of it (see previous blogs, eg here). But it's even worse to find out they're wasting at least £4m pa on overpriced office accomodation for their bureaucrats.

That's the conclusion of today's National Audit Office report, which says DCMS and its offshoots spend £43m pa on accomodation, at a cost of £8,573 per employee. But there's wide variation around the average, and some offices are clearly palatial.

One of the most outrageously expensive billets is the DCMS HQ:

"This accommodated 335 staff at a total cost of £7 million in 2004-05; an average cost of £20,929 per person. The analysis shows that this is due to both high costs per square metre (£1,067) and high space per person (19.6 square metres)".

We know Tess has problems with figures, but this is pretty rich even for her.

PS The most expensive accomodation per head is that enjoyed by the jobsworths at the Football Licensing Authority in London W1: "This office accommodated six staff at a cost of £180,600 in 2004-05; an average cost of £30,100 per person". That's particularly interesting since the FLA is one of Dan Lewis' 10 Most Useless Quangos. As he says: "If a football team can afford to pay £27 million for Wayne Rooney, why should the taxpayer – not all of whom like football – be forced to fund the Football Licensing Authority to the tune of £1.1 million a year?" And now we know that nearly 20% of their budget goes on plush offices. Herrumph.

Thank God We're In Safe Hands


According to the Taxpayers Alliance, Gordon Brown will use next week's Budget to present himself as the experienced statesman whose steady hand will be needed to meet the competitiveness "Threat From The East" (see previous blog). Let's just remind ourselves of his form. Remember this?

"Over the next few years we must seize this opportunity to lift our productivity in each and every industry towards the levels of the world's best. Breaking free from old ideas of state control and crude laissez-faire, our new ambition for Britain must be to encourage enterprise and entrepreneurship, to boost education and skills... in other words to implement for our country a medium term strategy for growth".

That was what he told us nearly a decade ago when he originally became Chancellor: our productivity was way short of the best, undermining our international competitiveness; he would fix it through "investment" in education and training, industrial subsidies, "prudent" regulation, and all manner of hitherto undreamed of tinkering. As he put it, productivity was 'the fundamental yardstick of economic performance'

And the result? Crushed beneath an avalanche of tax and regulation, Britain's productivity growth has collapsed. In the eight years before he took over it was running at 2.1% pa; in the eight years since, it's averaged 1.6% pa, most of which took place in his early years. In the last five years it's slumped to a miserable 1.2% pa.

Internationally, our productivity shortfall is getting bigger: latest figures show us 11% behind the G7 average. And against the world productivity champs- the US- we are now 27% behind.

Of course, when it comes to productivity and competing with the new industrial powers of China and India, the US has one very big advantage over Britain. There the government takes just over 30% of national income in taxes, whereas under Mr Brown our government now takes around 40%.


PS One of the central planks in Gordo's National Plan was the huge funding for his pet education schemes. We've already blogged the hopeless £9bn pa Skills Industry. Now- irony of ironies- just at the time when all the "investment" should be starting to pay off in that titanic struggle against the new Eastern super-powers, we're having to import even more graduates from those very same super-powers. According to the Guardian, 'UK companies are starting to recruit science graduates from overseas rather than rely on the home market because they have a larger pool of high calibre students to choose from, the Confederation of British industry (CBI) warned today. The deputy director of the CBI, John Cridland, told EducationGuardian.co.uk: "We are beginning to see UK companies saying it makes economic sense to source science graduates internationally, particularly from China and India." So much for the National Plan.

Wednesday, March 15, 2006

Pensions: They Would Say That


As we are only too well aware, this government has pretty well destroyed Britain's once mighty occupational pensions system. Millions of us can now look forward to much poorer retirements- a particularly long-lasting feature of New Labour's horrific legacy.

Part of the destruction of course was Gordo's outrageous £6bn pa tax grab from company dividends. But that at least was to be expected from any high tax and spend Labour government. The voters voted them in and somebody was always going to have to pay.

What is much less forgivable is the crass incompetence that has turned crisis into disaster. We've blogged before about how, in piling more and more regulation and funding risk onto employers, successive governments simply hastened the employers' withdrawal from the whole shebang: well over three-quarters of final salary pension schemes are now closed to new members.

And we've now had confirmation that the advice leaflets the government handed out to pension fund members while all this was going on were so misleading as to be actionable...that is, if they'd been produced by an Independent Financial Advisor rather than the government.

The Parliamentary Ombudsman has investigated the government's advice, and found yet another catalogue of incompetence:
  • "Official information - about the security that members of final salary occupational pension schemes- was sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading, which was contrary to the Department for Work and Pensions’ own standards and also to principles of good administration
  • The DWP appeared to have relied on professional advice which could not be sufficient in itself to enable the Department to come to a decision
  • Maladministration caused injustice in the forms of a sense of outrage, lost opportunities to make informed choices or to take remedial action, and distress, anxiety and uncertainty...and was a significant contributory factor in the creation of the financial losses suffered by individuals."

What's the government doing to make amends? DWP Secretary John Hutton immediately rubbished the report: "I don't think there is any evidence that the leaflets were inaccurate or incomplete in the way that the parliamentary ombudsman has indicated." Well, as we've just been reminded, he would say that wouldn't he.

And Tony himself says about possible compensation: "we simply can't do it" as it would set "enormous precedents".

He's probably right. We might all start asking for our money back.

Once again, the big conclusion is that government advice is never to be trusted.

Should you get your baby vaccinated? Don't trust the government- Google it.

Should you eat beef? Don't trust the government- Google it.

Should you invest in a stakeholder pension? Possibly yes...but who'd trust the government?

PS Mandy's 61 now, so she'll be drawing her state pension. I wonder what her occupational pension arrangements are.

Brown's Budget Going East


In all likelihood, next week's Budget will be "steady as she goes". Brown's borrowing binge has been sorted by the simple expedient of nobbling his Golden Rules, he's postponed his Comprehensive Spending Review, and he already admitted last year's growth forecasts were wildly optimistic.

In these circs, he'll be free to wibble on about big picture stuff. What better than that "Threat from the East", and how it means we've got to spend yet more squillions on those useless training programmes and R&D Tax Credits etc.

Which is precisely why the TaxPayers' Alliance has produced a useful briefing on why that will miss the point. If we want to compete with the East we need to improve our competitiveness by cutting taxes.

Yes we know the figures aren't strictly comparable, but whereas Brown has pushed up government's tax'n'spend share of GDP here to 42%, in India it's only 29%, and in China a mere 22% (eg see here).

Not that Brown will mention that in his Budget speech. As the TPA puts it:

"Brown and Balls are likely to want to continue to keep tax out of the entire competitiveness debate. But the fact is that tax remains at the very heart of international competitiveness and Brown’s tax rises have made the British economy significantly less attractive as a place to do business".

Tuesday, March 14, 2006

Leadership Spot The Difference


BP is Britain's most valuable company, employing 103,000 staff. It is led by Lord Browne who joined the company in 1966, while still at university; he started as an apprentice and worked his way to the top.

HSBC is Britain's second most valuable company, employing 284,000 staff. It is led by Sir John Bond who joined the company in 1961, at the age of 21; he started as a clerk and worked his way to the top.

Tesco is Britain's most successful retailer, employing 335,000 staff. It is led by Sir Terry Leahy who joined the company in 1979, at the age of 23; he started as a marketing executive and worked his way to the top.

The NHS is Britain's dysfunctional health service, employing "approximately 1.3 million staff" when last officially sighted (in 2004). It is "led" by CPO Commissar Hewitt, who joined ten months ago; she started as...er, the boss. Although she did have all this highly relevant experience:

1971-73: Press and PR with Age Concern
1973-83: Womens Rights officer and then General Secretary for National Council for Civil Liberties
1983-1992: Press Secretary to Neil Kinnock; also helped set up Institute for Public Policy Research, Tony Blair's favourite thinktank
1993-97: Anderson Consulting (yeah-but-no-but-yeah-but-definitely-not-the-bit-of-Arthur-Anderson-that-had-to-be-shut-down-because-it-cooked-the-books-at-Enron-honestly-anyone-would-think-the-whole-barrel-was-rotten-anyway-they-probably-only-gave-her-a-job-because-of-her-Labour-contacts-so-she-wouldn't-have-had-nuffink-to-do-wiv-any-of-that-anyway-so-shuttup)

Leadership.

At least we now know why she spends so much time trying to spin the press against all those nincompoops she reckons she has to deal with in the NHS (as always, see the unmissable Doc Crippen for a GP's view of her latest outburst blaming the doctors for the entire NHS fiasco).


PS The NHS safe in their hands. Hah. First, they gave us Dobbo Dobson. Nuff said. Then the appalling Brylcreem Bounce Milburn, so bad he attracted his own dedicated website, "Don't Vote For Milburn" (sadly now defunct, but see here for flavour). Then Doctor "I'll see you Jeremy" Reid (only when we went to him with severe necrotising bureaucratis gravis did we discover his doctorate is actually just in economic history). And now the Commissar. Who is not only hopeless, but also Australian (born and educated in Canberra, where her Dad was a top Aussie bureaucrat). Why couldn't she have stayed there to destroy their health system? We'll have Kylie instead.

Three Star Nightmare

For those of you who haven't seen it, I urge you to read Doc Crippen's shocking post on the treatment meted out by a three star hospital to one of his patients.

It is an appalling indictment of the dangerous morass this government has created in the NHS. not only was the patient left in an appalling condition by the poor treatment he got, but the Doc then had to spend much of his own day trying to bludgeon the hospital into accepting the patient back for desperately needed remedial treatment.

Somebody should be fired, and a good place to start would be in Hewitt's office.

Sunday, March 12, 2006

Peerages Going Far Too Cheap


Further to this morning's post, I've done some more digging into the price of peerages. And I've come up with some very disturbing findings.

Of course, facts are a tad scarce because invoices are not generally issued. But we have it on good authority that Lord Vestey's peerage cost him £20,000 in 1922. Since at that time GDP per head was about £100, the Baron paid 200 times that.

Now, 200 times today's GDP per head would be nearly £4m. But today's going rate is actually only £1m. Something has clearly gone very wrong, particularly when you consider today's supply is supposed to be more restricted.

Neither does it help if you go back further. Right back at the time of James I, Lord Teynham paid £10,000 for his peerage. Which would translate into about £30 gzillion today.

I suggest that as a matter of extreme urgency, Charlie and Tony should review their charging tariff. It's bad enough to know these things are still being sold. It's even worse to know that it's being done so ineptly.

Duke And Duchess Of Tyler


Mrs T has always had ideas above her station, and she's now instructed me to buy a peerage. Everyone else seems to be getting them, so why haven't we? Of course, I've explained we don't have a spare mill to give Charlie Falconer, but she's convinced I must have a few offshore accounts kicking around that I haven't bothered to mention. Don't all husbands do that these days?

Obviously I'm looking for a deal, so I began on ebay. They're complete rubbish- all they offer under "peerage" are various old copies of Burkes Peerage and a number of bizarre brass items.

The International Commission on Nobility and Royalty is much better. True, they start off with a load of guff about protecting "the field of nobility and royalty from modern day pirates who impersonate, and by their fraudulent declarations defame, those who hold authentic titles and valid claims". But cutting to the chase, the say:

"Members who contribute large sums of money will be given the designation of diplomates and fellows of the Commission--our highest non-royal, non-noble status if they contribute $2,500 or more. All contributing $5,000 or more will be given the status of high diplomates and fellows. To remain...only requires the yearly payment of continued membership fees."

Well, five grand a year is certainly more do-able than the Falconer route. But "high diplomate"...does Mrs T actually get to wear the robes and that? Sounds unlikely, and on closer inspection it seems we'd have somehow to prove we're descended from ancient nobility. Clearly there's no chance of that for us peasants, so we need to look elsewhere.

The outright winner is the service offered by Prince Douglas at the Principality of St. Michel de Clermont: "Have you ever dreamed of becoming a Knight or a Dame - perhaps even a Lord or Lady? Do you have a friend, relative or a colleague whom you would like to nominate for such an Honour?"

Yes, this is it. Forget peerages- this guy will make me a Duke: "from the Latin ‘dux’ or ‘dux bellorum’...Dukes are the highest Rank of Nobility below a Prince". A Duke! That beats a poxy bog standard peerage any day. And what's more, the Prince will do it for a grand, all in:

"The Fee of Investiture, including the individually inscribed Certificate plus enrollment and badge with neck riband in the Order of St. Victor is $1500 (US), or Pounds Sterling or Equivalent. There are no annual or additional Fees, ever.. Recipients will receive the badge of the Order with handsome neck riband".

I'm feeling very excited about this. As soon as Mrs T gets back from Tescos I'm going to give her the good news.

Recent Bonfires- 7


In the news this week:

£130m loss from pensions errors- "MINISTERS are to write off almost all the £130 million paid in error... there will be no effort to reclaim the cash, either because it would cause hardship, or because it was a result of clerical error. In such circumstances the Government is obliged by law to forgo the cash... overpayment on means-tested pension credit and income support has trebled in the past three years to £130 million last year. Ministers feared a repeat of the scandal over tax credits were they to attempt to recover the money...there has been criticism of the aggressive “automatic clawback” from low-paid households. David Ruffley, the Conservative welfare spokesman, said that ministers had put out confusing messages on the overpayment of pensions and were “all over the shop — how can pensioners have any faith in what they say after this fiasco?” (Times 11.3.06)

£35m lost to government dithering- "Patricia Hewitt, the health secretary, approved the redevelopment of St Bartholomew's hospital and the Royal London after delays which patient groups and the hospital trust claimed had added £35m to the £1.1bn cost. Duncan Dymond, a consultant cardiologist at Barts, said: "We came very, very close to losing the whole PFI scheme, so thank goodness we have got there in the end." But he criticised the changes which would leave three floors empty, saying they would still cost money in heating, cleaning and maintaining. "It will mean the hospital has fewer beds to earn money." (Guardian 9.3.06)

£56,000 for Hewitt speechwriter- "PATRICIA HEWITT is to hire a personal speechwriter to overhaul the flagging reputation of government health policy as deficits in the NHS continue to soar. Days after revelations that health service debts have passed £800 million this year, it has emerged that the Department of Health is inviting applications for the new role of speechwriter to help to sell its controversial reforms. Advertisements for the part-time post suggest that the successful applicant can expect up to £56,000 a year for only 18 hours’ work a week — the equivalent of almost £70 an hour. The rate, which would amount to a £120,000 annual salary, is 30 per cent higher than that paid to President Bush’s leading speechwriter." (Times 11.3.06)

£930m on unwanted training- "The Learndirect scheme is run by Ufi Ltd and provides training courses at 2,400 centres across the country or via the internet. It has received £930m of funding since it was set up in 1998. But a PAC report revealed that just 37% of small and medium-sized businesses were aware of the service - and just 4% enrol their staff on its courses. The report also raised concerns about Learndirect's finances - and said Ufi's management and marketing costs, which take up nearly 30% of its budget, were "far too high". (BBC News 7.3.06)

This week's total- £1,o95,056,000