Wednesday, February 28, 2007

Private Equity And Gordo's Pensions Grab

Always keen to wreck our economy
One of the major charges against those unspeakable private equity firms is that they "pay too little tax".

Of course, as various sleek City moggies have pointed out, private equity firms operate under exactly the same tax rules as everyone else. Plus, they pay nearly £5bn pa in Corporation Tax.

The key issue is that when they acquire companies, they run them with much higher levels of debt than is typical among public companies. And interest on debt is tax deductible, whereas dividend payments are not. Hence for a given level of earnings, tax payments are less.

At the risk of stating the bleedin' obvious (again), let's remind ourselves of a few key facts.

First, companies belong to their shareholders, and at root, interest payments are an operating expense. Just like say the fuel bill. Nobody suggests companies should be taxed on other operating expenses, so why interest payments? No other major economy does that.

Second, interest payments are taxable- but in the hands of the recipients, not the paying company. When a company increases its leverage through taking on more debt, it may reduce its own tax liability, but it increases that of someone else.

Which brings us back to Gordo's Great Pensions Tax Rip-Off.

Readers of BOM will be familiar with the £6-7bn pa he stole from Britain's pension funds. And how he did it by abolishing the right of those funds to receive company dividends gross of tax (via the ACT tax reclaim).

One effect was to destroy our final salary pensions. But the other was to make it much more attractive for companies to issue debt rather than equity.

That's because when a pension fund invests in company debt, it receives the interest income gross of tax. In effect, no tax will be paid until the interest is eventually paid out in the form of a pension.

In sharp contrast, investing in equities means that the income- received in the form of dividends- is taxed before the fund gets it. And thanks to Gordo, there are now no refunds.

So Gordo made debt investment much more attractive relative to equity investment, which is reflected in the relative price of debt and equity issuance for companies.

And that's why there's been a surge in company debt issuance over the last decade (Tesco issued a highly successful 50 year bond just this last Monday), and why company leverage has increased markedly right across UK plc: since 1997, depending on how you measure it, it's up by around one-half.

So when all those appalling moral midgets vying for the Labour Party deputy leadership jump up and down screaming about private equity funds not paying enough tax, we should remember who made it happen.

Forced To Shop At Lidl

The People's Pizza
"Just because you live next door to Waitrose, it's totally unfair that you should automatically be allowed to shop there. That is entirely contrary to the basic tenets of Marxist-Leninism. Henceforth your shop will be allocated by council lottery!"

We hail local soviet boss comrade Pat Hawkes! Why should the pampered bourgeois be allowed to gorge themselves on organic zero-sugar meusli and Fairtrade bananas? It is an outrage! They must be made to eat their fair share of mystery meat deep-pan pizza and Bernard Matthews microwave Wedgies.

In Brighton and Hove's new socialist shopping paradise, counter-revolutionary ideologies such as so-called "consumer choice" will be outlawed. The People's Lottery Commissars will issue shopping allocation orders in the interests of all- the Many Not the Few.

Orders must be obeyed without question. Anyone caught shopping illegally will be shot.

PS According to the excellent Brighton Argus, the school choice fiasco in Brighton reflects a long-standing failure of the local authority to provide schools in the areas they are actually needed. Since they closed one of the local secondaries in 2005, all schools have been operating close to capacity, and an increase in intake has precipitated a crisis. The best bet for the good schools is to opt out of LA control via the foundation route, which several are now actively pursuing.

Meanwhile, across the country roughly 200,000 kids will not get into their first choice of secondary this year- ie they will be forced into schools they don't want. That's about one-quarter of the age cohort.

Tuesday, February 27, 2007

Half Sense On Defence

FRES- Airfix is cheaper
According to the Times, the Treasury wants to cut £35bn from the MOD budget. It's not clear to what period this applies, but the noise is coming from this year's rancorous Comprehensive Spending Review which covers 2008-09 to 2010-11. That would mean a stonking cut of about one-third.

At a time when the army has never been more stretched, cuts like this sound the height of irresponsibility. But to anyone who's read Lewis Pages' excellent Lions, Donkeys and Dinosaurs, the Times list of projects facing the axe has considerable logic:
  • "The next batch of Eurofighter Typhoons, to be built by BAE Systems. The RAF has already bought 144 Typhoons, which cost £65 million each, and has another 88 on order. The Treasury’s view is that the MoD does not need Tranche 3, as the supplemental order is called, as well as Joint Strike Fighter, a next-generation fighter currently under development." Page makes the point that the Typhoon is a grotesquely expensive cold war weapon no longer needed for fighting the sort of enemies we now face. So a tick.

  • "The Royal Navy is expected to lose at least two destroyers, and possibly even four, but will at least get its aircraft carriers. The Treasury is understood to have signed off the £3.6 billion to £3.9 billion cost of the two carriers." Page, a Navy man himself, expounds at length on why destroyers are virtually useless in today's circumstances, but cheap carriers are vital for supporting our boys in distant lands. Another tick.

  • "The Army could be the biggest loser as the Treasury is thought to be unhappy with Future Rapid Effects System (FRES), a £14 billion project for up to 3,000 armoured vehicles. The Treasury is understood to favour buying a replacement off the shelf, possibly from a US company, rather than have the UK develop its own." The financial and performance arguments for buying proven off the shelf kit have been rehearsed in BOM several times, and Page covers them in detail. The ever dependable Christopher Booker also wrote recently about the FRES "boys toys" here. A third tick.

So the cuts sound sensible.

What continues to sound much less sensible to us non-military types is the government's continued belief that the army can fight two bloody ground wars on a relative shoestring.
One of the real shockers in Page's book is his estimate of the paltry numbers of "men with guns" we can call on- ie the ground troops who can actually be sent in to fire rifles and stuff. He reckons that out of the 200,000 odd people in the forces (plus the further 100,000 civvies on the MOD payroll), only about 20,000 are actual "men with guns". Plus maybe 6,000 "tank-and-horse soldiers", such as Prince Hal.

Which sounds a ludicrous state of affairs, and explains why the wholly unconvincing Des Browne has to juggle a few hundred troops out of Iraq only to reassign them to Afghanistan 48 hours later.

Of course, if MOD was a private company, they'd have been forced to grip the problem long ago. They'd have staunched the cash haemorrhage on Typhoon/Nimrod and all that other cold war kit, and switched the funds to recruit, train, and equip our men with guns.
But MOD is not a private company. So they continue to avoid the real issues, spreading the budgetary pain pro rata between the three services. Even though everyone can see it's actually only the army that's any use for fighting the modern "low intensity" land wars our politicos insist on dropping us into.


He's a doctor in his spare time
A new junior doc on the medic blog block over at The Ferret Fancier. He clearly enjoyed the Commissar's grilling by Liam H last evening.

Actually, I'm not at all sure about medics fancying ferrets. I once had occasion to watch a couple of hired gun ferrets hunting rabbits in a back garden. Razor teeth, pink-eyes, and total ruthlessness. You certainly wouldn't want them up your trouser leg.

But this is what's happened to our caring health professionals under the Commissars.

Value Of Life And Other Big Numbers

Being Big doesn't make it right
Last month we blogged the QALY, which is used by the National Institute for Health and Clinical Excellence (NICE) as a tool in healthcare rationing.

We pointed out that while QALYs are supposedly based on the officially assessed value of a human life- which in Britain is £1,311,490- in practice that's only included as a bit of pseudo-scientific window dressing for a crude rationing system (see earlier blog).

In any normal human sense of course, you can't put a value on human life at all. But since we economics types aren't really human, we do. We reckon that in an imperfect world of limited resources, putting a financial value on saving life can help to illuminate the costs and benefits of alternative policy choices.

Originally such value of life calculations included only the lifetime value of economic output lost when a drone died, which would make a pensioner worthless. But today our £1.3m Brit Value includes £860,380 for the "human cost" (pain, grief, intrinsic enjoyment of life etc), as well as the £451,110 for lost output.

That £860,380 is based on a serious methodology that assesses the value people themselves put on avoiding physical risk (eg through job choice). But clearly with such a wibbly wobbly concept as "intrinsic enjoyment of life" you could come up with all kinds of astronomical numbers. Especially if you had an axe to grind.

Like wanting more public money.

Yesterday, we had a report from the Audit Commission on road safety. It reckoned that the total cost of road accidents is running at around £15bn pa (well, that's what the detail of their report says, although the figure they actually chose to headline was only £8bn). Of that £15bn, £7.8bn is the cost of our "willingness to pay to avoid individuals’ pain, grief and suffering."

In fairness, the Commission notes that "this element for pain, grief and suffering has the greatest effect on the calculations, though it is inevitably subjective."

Quite. But that caveat was missing in the headlines.

Today we have a report from the Alzheimer's Society which reckons that dementia already costs us £17bn pa, or nearly 1.5% of GDP. They say that most of that cost currently falls on families struggling to provide care, and they want taxpayers to pay much more. After all, what's a couple of billion extra if it relieves costs of £17bn?

Which is fair enough- they're a campaigning organisation. But the rest of us need to hear a little more detail.

The Report doesn't explain quite how they got their £17bn, but it does give some pointers. 36% of it (ie £6bn) represents the value of unpaid work by family carers. And 41% (£7bn) is free "accomodation". Which together account for most of the cost.

Clearly, coping with dementia is appalling. As the Society points out, as we all live longer, it's getting more and more prevalent, and most of us will know dreadful individual cases. So let's take it as read that we do have a problem here.

But their Big Figure of £17bn is a tad misleading in terms of being "the cost of dementia". Take that £7bn accomodation cost. True, £7bn may be the cost of accomodation for dementia sufferers, but surely they'd have to live somewhere even if they didn't have dementia. It's not a net additional cost of dementia itself.

Big Numbers are certainly a good way of grabbing headlines. They always sound so hard-edged. But when it comes to tapping the public purse, BNs from even the worthiest axemen must be treated with suspicion.

Monday, February 26, 2007

Commissar Slips The Surly Bonds

In case you missed it, here's the Commissar's interview with Liam Halligan on tonight's C4 Dispatches.

The interview takes place in a windowless underground bunker, and it's clear the stress has finally done for her. She's living in a fantasy world where the 35% of NHS trusts now in deficit to the tune of £1.3bn are somehow on the mend, and patients have never been more delighted.

Presumably it's only a matter of time before she commits those twenty fresh panzer divisions to the frontline.

PS Hope C4 don't mind me posting the excerpt- they should make the whole prog available online... although I'm not convinced they'll get many takers at 99p a go.

With A Face Like That...

Remember to set the vid for C4 at 8pm this evening.

Liam Halligan is presenting his Dispatches report on the NHS shambles, and the Commissar reportedly gets so upset with his impertinent interviewing style she gives him the old Groucho feed about how she's "never been so insulted".
Might be worth a few laughs amid the smoking c diffed ruins of our health service.
PS Yes, I know... I always thought the punchline was "with a face like that you must have been". But in reality it was the far less punchy "Well, it's early yet" (listen here). We'll see what Liam comes up with.

Chauffeur Driven

Ready for the Commissar
Because they're worth it...

The number of chauffeur driven cars provided by us to ferry round our rulers has exploded. Last year (2005-06) the Government Car and Despatch Agency drove them 2,834,000 miles, up from 2,394,200 miles in 2004-5. That's 114 times round the earth, or 1,567,241 times from the not-fit-for-purpose Home Office to the nearest Gordon Ramsay.

We taxpayers now employ 210 dedicated chauffeurs at an annual wage bill of £7.3m pa. And the total cost of the Agency is £17.8 million.

Clearly, our politicos can't risk walking the streets or mingling with the rest of us in the foetid confines of the Northern Line. They'd be pushed under trains.
But why do they need to go out at all? I'm sure they'd do much less damage if they just stayed in out of our way. And think of the money we'd save.

Sunday, February 25, 2007

Recent Bonfires 53

Confessions Of A Diary Secretary- ITV1 Wednesday 9pm

In the news this week:
Prescott cost soars to £2.5m- "ANGRY MPs and taxpayers' groups have attacked Deputy Prime Minister John Prescott after his office got a 30 per cent spending boost. It means the taxpayer is having to pay more than £2.5million a year – a rise of almost £600,000 – for what Mr Prescott’s opponents say is a “non-job”... Mr Prescott was demoted from his job running the local government, housing and planning department, after revelations of his extra-marital affair with his diary secretary.... The taxpayer is also paying over £284,000 a year into Mr Prescott’s pocket... made up of his ministerial salary of £133,997, an estimated £35,911 towards his gold-plated pension fund and £115,000 for his MP allowances, including payments towards council tax and mortgage interest on his home in Hull." (Express 20.02.07)

£56bn on Red Tape- "THE burden of red tape on British business has hit a record of nearly £56 billion and shows no sign of slowing, according to the British Chambers of Commerce (BCC), which compiles its “burdens barometer” on a regular basis. It says the cumulative cost of regulation on British business is now £55.6 billion. A year ago that burden was £44.8 billion, revised figures reveal, implying an increase in red tape of more than £10 billion in the past 12 months... The biggest burden comes from the working-time regulations — the 48-hour week — and data protection. Environmental regulations are increasingly burdensome to business. But the problem is often the sheer scale of red tape faced by business, particularly smaller firms." (Sunday Times 25.02.07)
Honours probe Blair aides share in £1.2m- "The Downing Street aides at the centre of the police inquiry into the loans-for-peerages scandal are to get payoffs of up to £75,000. Chief of Staff Jonathan Powell and Ruth Turner, the director of Government Relations, will share in the £1.2million expected to be paid out in 'golden goodbyes' in the next few months. About 40 Blairite spin doctors and fixers - including several of the suspects in the Scotland Yard sleaze investigation - will leave their Government posts when Gordon Brown moves into No10. Mr Brown plans to bring in his own advisers and there is expected to be a cull of those loyal to Mr Blair. But they will be entitled to up to six months' salary. (Mail 24.02.07)

£240m pa for sick cops- "8,000 police officers are claiming full pay while on 'restrictive or recuperative duties' - with some working for as little as one hour a day while they recover from illness or injury. Their wage bill amounts to more than £240 million a year... [In addition], a thousand police officers a day are off work with stress-related sickness - costing the taxpayer more than £1 million each week. Total sickness for all causes was equivalent to 8.5 days per officer. In the private sector the average number of sick days per year is just 6.4 days, compared with 9.1 among civil servants." (This is London 19.02.07)

Total for week- £56,243,700,000

Saturday, February 24, 2007

On Top Of The Briefs

Mrs T reports a very striking experience yesterday. There she was, innocently perusing the ladies' flimsies at Marks and Spencer Marble Arch, when who should hove into view but the Big Boss- Sir (only a matter of time) Stuart Rose.

Unrecognised by most of the customers, Sir Stuart was making his way through the store, beadily inspecting the work of his underlings and dishing out orders for more rigour in the knicker department.

Mrs T has always had a soft spot for Sir S- especially now he's rescued the nation's favourite shop- so despite the fact that he seemed disappointingly shorter than on the telly, she shot him a smile. He was clearly delighted to be recognised, reciprocated the smile, and warmly wished her a very good day. No free samples alas, but a good bit of customer confirmation.

All of which reminds us of a long-running BOM theme. Sir Stu has been a retailer man and boy these 35 years. He knows his frilly displays inside out, is totally comfortable with his pricing points, and understands the whole business backwards.

Contrast that with say the Commissar, who knows nothing about health other than what she's somehow gleaned in the last 18 months. Or zero qualifications Alan Johnson, who knows even less about education. Or Des Browne, who knows no more about military matters than you or I, yet now holds the lives of our servicemen in his hands.

Why do any of them think they're remotely equipped to do the job?

And why do we let them get away with it?

Olympics- 4x Over And Counting

One way of blowing £1.8bn
So let's see...

Sydney was 2x over the original budget.

Athens was 4x over.

London is now officially 4x over, and there's still five years to go.

Needless to say, amidst all the buck passing and general spin, the actual facts are difficult to glean. But according to the BBC report, the main elements of the latest escalation are only too familiar to BOM readers:

  • Land decontamination- not allowed for at all originally, but now assessed at £1.8bn

  • VAT- not allowed for originally, but now assessed at £1bn (it may be a transfer from one government pocket to another, and Tess and Ken may find it a tricky distinction, but one pocket is labelled "spending", and the other "tax")

  • Security- not properly factored in originally, now put at about £1bn

  • Contingency- worldwide, 90% of all public projects over-run their budgets, and the Treasury is now sensibly insisting on a 60% reserve- which will be spent

Of course, there's also much blather about the sharp and unforseeable rise in steel prices, but given the scale of the escalation, that only accounts for about 35p.

And do bear in mind that this latest £9bn figure still excludes much of the hidden £10bn on-costs, like essential transport infrastructure, we blogged here.

Is it really too late for Bliar to phone Chirac and hoof the whole shebang over the Channel? That really would be a legacy to be proud of.

PS Tyler once had some involvement with the wild and whacky world of commercial property. And one thing you learn pretty quick is that a really really good way of losing shedloads of money is to acquire property that suffers from industrial contamination. It's like a game of pass the parcel, and you don't want to be holding it when the law suits come in. So if, say, someone offered you a zillion acres of old gas and chemical works in East London, and suggested you might like to build... oooh, I dunno, an Olympic Park, say, on it... your best bet would be to walk away. Sharpish. What a shame they didn't ask me. Or the junior assistant teaboy at any estate agents.

Friday, February 23, 2007

Britain's Worst Managers

Now why can't he take over the Home Office?
The hopeless Home Office has just lost a sex and race discrimination case at an employment tribunal. It will cost us taxpayers an estimated £2.3m.

The facts are that Marti Khan and Odette King were employed by the HO as interpreters at Heathrow. But "the women had been effectively redundant since 1990, when the Home Office outsourced interpreting to freelances. Officials failed to reassign them to other roles and though they were contracted to work 41 hours a week, they were paid to do nothing or asked to carry out basic clerical duties.

They could have remained in that position until retirement had they not complained to managers. Their complaints about the lack of work and that freelances were paid more were ignored by senior officials. They were signed off sick and placed on paid leave but after writing to Charles Clarke, then the Home Secretary, they were dismissed from their £25,000-a-year jobs."

The judge described the Home Office as "one of Britain’s least impressive managements" with a "consistent attitude of procrastination". But in fairness this is a familar tale right across the public sector: people being employed to do nothing (eg see this blog), people being placed on indefinite leave (eg see this blog), and managers failing to grasp nettles (see many previous blogs).

Personally, I doubt this is really sex and race discrimination. It's just another dollop of monstrously bad management.
Compare government departments with private equity firms. They are currently picking up all kinds of flak for heartless profiteering management. The GMB union is running a concerted campaign, among other things trying to get Gordo to withdraw the tax deductibility of debt.
This morning, for the first time ever, R4 Today interviewed Damon Buffini, head of Permira, one of Britain's most successful private equity operations. Clearly Today wanted to be critical, but the ill-informed Robert Peston didn't know what questions to ask. So the ever impressive Buffini came out well. And he patiently explained how private equity firms make money essentially by gripping management issues that have previously remained ungripped.
Yes, that often involves cost cutting, and yes, that can mean job losses.
But at the end of the process you generally have companies that are a whole lot fitter for purpose than say... well, say the Home Office.
What a shame private equity can't somehow be brought into government departments.

Thursday, February 22, 2007

Wolverhampton Takes On The Shark Tank

Not exactly Wolverhampton
I hope you're not a council tax payer in the West Midlands.

C4 News has just reported the case of Wolverhampton City Council vs Dell Computer (see here for summary). The basic story is that the Council is upset about losses its pension fund made on Dell stock, and is now co-lead in a US class action against Dell for alleged insider trading.

Oh. My. God.

Does anyone really think the councillors and officials of Wolverhampton City Council are going to prevail against the sharp suited sharks of Dell's legal team?

What are they doing?

Yes, yes, we know they've been talked into it by "corporate governance" activists (Wolverhampton's acting CEO is a director of PIRC), and they've shackled up to a supposedly no-win-no-fee LA Law style team of eagles.

But trust me, there will be costs.

And you council tax payers will be paying 'em.


Two Scary Pictures

These are the latest ONS charts for deaths from Clostridium difficile and MRSA.

According to Health Statistics Quarterly, around 90% of the deaths take place in NHS general hospitals. They have an incidence (percentage of all deaths on the premises) 3 to 6 times higher than non-NHS general hospitals.

Moral: if you're going into hospital, make sure it's a private one.

Unless you feel very, very lucky.

Local Authority Performance "Improving"...

...except here
The Audit Commission has just published its updated Comprehensive Performance Assessment (CPA) for English local authorities. According to them, things are looking pretty good, with 79% of councils turning in a 3 or 4 star performance overall, a 9% increase on last year.

Now, there's no doubt that some councils are doing an excellent job in difficult circumstances. For example, long-time star Westminster has single mindedly focused on value for money, and has saved taxpayers millions through renegotiating supplier contracts and reorganising workflows.

Which is especially impressive because in general, value for money (vfm) is a serious problem. Even on this report's rosy assessment, Westminster is one of only seven councils turning in a 4 star performance.

That's disgraceful, because as we blogged on the last CPA report, a council's value for money score is actually self-assessed. And for most authorities, the Commission's Self-Assessment Pro-Forma made it even easier for councils to big themselves up this time round, requiring only an update on changes from 2005.

So the assessments are hardly worth the paper they're written on, and only one council in the entire country is now assessed as not meeting minimum standards- the forever benighted Stoke on Trent*. To fail a self-assessment test really is the pits, and my strong advice to residents is flee to the hills.

Obviously local authority financial accounts should be audited to make sure nobody's got their fingers in the till. Nobody disputes that.

But the Audit Commission now costs us £200m pa, and fundamentally, it's another bureaucratic instrument of central government control over local authorities. Except of course, with these quality ratings- just like with the corresponding star system for rating hospitals- players are clearly learning to game the system. And a government that has been in power for a decade is only too ready to connive in rtaings that apparently show year-on-year improvement.

Does anyone really believe 80% of local authorities are now performing "well" or "strongly"? Talk sense will you?

*Footnote- Tyler knows someone who grew up in Stoke. The story is that despite being a major industrial centre, it escaped bombing by the Lufwaffe during the War because when the pilots looked down, it was such a wreck they thought they must have already bombed it. A shame.

EU Fine Doubles

Britain's last few bars being handed over to EU
We already knew about the fine imposed on us by the EU for all that bungling at the dire Rural Payments Agency (see here and here), but the amount hadn't been fixed. In October we said:

"The late payment fine from the EU is so-far undecided but officially estimated by Defra at £131m - so let's say £250m."

Turns out even we were too optimistic- we've just learned the fine is now expected to be £305m, more than double what we were originally told last year.

So just to be clear- that's a fine imposed by the EU on us British taxpayers for the spectacular incompetence of our rulers. And if the EU says you're incompetent, then you really shouldn't be leaving the house alone.

Wednesday, February 21, 2007

Deadly Embrace Gets Tighter

Trust in me...
When it comes to social policy, everybody's Big Idea is to syndicate as much as possible away from government and pass it over to the so-called third sector, ie charities and voluntary organisations. Theoretically they are more innovative, flexible, and closer to the "client" groups than plodding government bureaucracies can ever be.

But in practice, one of the principle ways it happens is by the public sector contracting with such organisations to deliver specific services. Clearly that's helpful for funding, but as always, he who pays the piper calls the tune. And once a charity becomes dependent on government for its funds, it's unclear quite how it then differs from any other quango. The embrace is warmer than a python's, but just as deadly.

And we've just had a fresh insight into how far this process has gone.

In 2004, according the the National Audit Office, there were 166,000 registered charities with a total income of around £35bn. Overall, some 20% of that came from the public sector.

But now the Charities Commission has published its own survey. They find that 60% of charities with incomes above £500,000 pa are now engaged in delivering public services. And one-third of them get over 80% of their income from government- indeed, for bigger charities, the proportion is two-thirds.

Is this really what anyone wants? Our major charities as arms of government?

Wouldn't it be far preferable to support the finances of charities and voluntary groups through juicier tax breaks? That way, we encourage the growth of our third sector, without stifling its creativity and commitment with the deadly coils of Whitehall.

Still Waiting For Productivity Miracle

GDP per worker

We've blogged many times about Gordo's promised productivity miracle. Strangely, after a decade of tinkering, and billions blown on his half-baked interventions, we're still waiting.

According to the latest ONS update, we stil lag the G7 average, and are way behind Germany, the US, and France.

Just thank God for the City, otherwise we'd be completely sunk.

Talk Is Easy

Unbothered by the ARA

A recurrent theme in BOM is politicos making wild promises which they are totally incapable of delivering. It costs us a fortune.

The National Audit Office has just reported on a classic- the hopeless Assets Recovery Agency. As we blogged last month, this was set up in 2002 amid a typical Blair/Blunkett pie-in-the-sky fanfare about confiscating the proceeds of organised crime. It was meant to be self-financing, but in reality it has been a fiasco, costing us £65m and recovering only £23m.

The NAO report makes some very familiar points:

  • silo mentality- poor integration with the other parts of government which were meant to refer cases- eg four police forces have never referred a single case

  • rubbish information management- "It does not have a single central database of cases and staff refer to different databases that holdcontradictory and incomplete information. We had great difficulty in compiling a comprehensive list of cases and tracking their value and progress"

  • high staff turnover and extensive use of temps

  • pants management- "no effective case management and no consistent use of targets and deadlines to incentivise staff to progress cases"

  • simple shopping- "Receivers’ fees, which are paid by the Agency, are expected to total £16.4 million by the end of 2006-07. In twelve of the seventy nine cases managed by receivers, the value of the fees is expected to exceed the assets managed"

  • wasted training- "at least 30 per cent of Financial Investigators retired or moved on from financial investigation shortly after completing their training"

Every single one of those points comes up over and over again, especially in the context of failing executive agencies/quangos (just to take two recent examples, the Rural Payments Agency and the National Patient Safety Agency).

And as we blogged here, this is precisely why we cannot let our politicos press ahead with their half-baked plans for splitting policy-making from execution. Any fool can come up with "wouldn't it be nice" policy wibble: I can do that for myself. It's making it work that's the hard part.

Which is why government needs to be humble.

And small.

Tuesday, February 20, 2007

NHS Deficits- More Misery For The South East

The appliance of science... not

The Department of Health has just issued its update on those financial deficits.

As we've blogged many times, we know for certain that the system will be in small surplus by year-end because the Commissar has promised to resign if it isn't. And sure enough, the latest forecast is for a surplus of £13m.

But behind this manipulated net result, of course, is a continuing crisis. Deficit trusts have actually moved into even greater deficit than last year, but they've been "covered" by the simple expedient of witholding funds from other trusts- "top-slicing" as the DoH calls it. The underlying figures show a gross deficit of £1,318 million compared with £1,179 million at quarter two and £1,312 million in 2005-06.

So where are the 35% of trusts that are in deficit?

Where do you reckon?

Yes, that's right. They are overwhelmingly concentrated in the Greater South East.

A quick inspection of the detailed DoH tables reveals that of the £1.31bn total gross deficit, £0.84bn- 64%- is in the GSE.

According to the Commissar, the deficits reflect incompetent management. A far more likely explanation is that the capitation formula the DoH uses to divvy up the cash is heavily tilted in favour of the Labour heartlands up North (just like the RSG formula used to fund local authorities).

For example, one of the biggest deficits is Cambridgeshire PCT on over £50m. True, the managers may be incompetent, but it also turns out that for every £1 per head received by say Durham PCT, Cambridgeshire only gets 70p. Despite the fact that it's a much higher cost area.

The difference reflects the detailed weightings used in the distribution formula, including age and "social deprivation" factors, which favour Durham and penalise Cambridgeshire.

Until recently this has all been a classic black box, an arcane number crunching area that attracted little attention even within the DoH. But now the money's run out, that is changing (see here for Civitas overview).
PS I've just looked up the funding allocation for Tyler's PCT. Turns out it's 15% below the national average (£1274 per head), even though the cost of living here must be at least 15% above the national average. Needless to say, it's a blue constituency, and both "local" (ie within 6-7 miles) hospitals are threatened with the chop.

South East Still Paying

Oxford Economics have produced updated estimates of the fiscal transfers between UK regions. The story will be familiar to regular BOM readers:

  • the Greater South East (ie London, plus the South East, plus the Eastern regions) supports everyone else

  • the fiscal transfer from the GSE is currently some £30bn pa (2004/05)

  • that's equivalent to about 7% of regional GDP (see here), which is huge- much larger eg than any of those contentious EU transfers, and much larger even than the post WW1 reparations

  • the main gainers are Scotland, Wales, Northern Ireland, and the North East, where every single resident gets a sub of well over £2 grand a year

What the South East gets from the deal is entirely unclear. Apart that is, from a Big Spending Labour government imposed on it by those over-represented socialist bastions up North. And grandstanding excrescences like Peter Hain going on about how those that generate the wealth shouldn't keep it (for a more measured critique of Mr Hain, see here).

Simple Shopper At The Chemist

The Shopper's special pharma deal

So according to the Office for Fair Trading, the NHS is paying £500m pa too much for branded drugs. Overall, they cost us £7bn pa, with prices governed by a shadowy price fixing agreement called the Pharmaceutical Price Regulation Scheme (PPRS).

We haven't yet seen the actual report, but a number of immediate points need to be made:

  • the Simple Shopper strikes again- after all that cash the DoH gave away on new pay deals, we can't really be surprised

  • so much for the claim that NHS gets us a much better deal from Big Pharma than alternative healthcare systems (as you may recall, this was one of the claims spun out of Wanless by the wee fatty)

  • producer capture- listening to the Chairman of the Commons Health Committee this morning, he seemed mainly concerned that we shouldn't "throw the baby out with the bathwater", meaning that we shouldn't screw Big Pharma too much or they might close all their operations in Britain. The argument seemed to be Big Pharma may be rapacious profiteers, but their our rapacious profiteers. It is exactly parallel to the arguments for all that money we taxpayers routinely pour down the gullet of BAe in exchange for second rate military kit

We'll read the report with interest.

Monday, February 19, 2007

£30 Grand Dogsbody Jacks It In

Underemployed office dog

Joanne Collins landed herself a cushtie £30 grand a year job with Edinburgh City Council. The hours were light, and doubtless it carried a final salary pension entitlement as well. Yet in terms of work, all the "Information Manager" job actually involved was "photocopying and sending out files". Sweet as a nut.

But after just a year, Joanne decided to jack it in. With ten years of work experience and a degree, she felt she was underemployed. Even worse, she reckoned she was wasting taxpayers' money.

In fact, she told her bosses the job should be filled by someone earning only half as much. Naturally, they ignored her, and readvertised the job on exactly the same salary. Which is why she squawked.

Sure, there could well be some "backstory" we haven't heard, but her comments on the muti-million Edinburgh Children and Families' Department have the unmistakable ring of authenticity:

"I don't think my situation is unique. A lot of people are unhappy and feel their job description does not fit the work that they do. I think there is some empire-building going on. People are trying to make this department seem more important than it actually is within the council."

Now, who'd have thought that could happen? Apart, that is, from the Taxpayers' Alliance, and their annual Non-Jobs Report.

PS Labour controlled Edinburgh City Council has an annual budget of £1.2bn and employs 15,500. For those that don't know, its profligacy is legendary. Just like Ken in London, it's attracted its own fan-sites, such as the splendid Edinburgh Sucks!

Working For Politicians

Model employers
Back in 1997 most of our public service employees voted en masse for Tony. But as the Doc and his million commentators have been telling us for months, swapping the hated Tories for a snake-oil man turns out to have been even worse. Despite all that extra dosh.

Today has published an internet poll of 3,000 plus docs underlining the point:

"More than half of respondents (56 per cent) said that there had been no improvement in the NHS since 2002, when the Government increased funding. Only 27 per cent thought there had been.

Almost three quarters (72 per cent) did not believe that the extra money had been well spent, while 11 per cent said that it had. Similar views were held on the quality of care: 72 per cent said that there had been no improvement; 15 per cent said that there had been."

So what to do? Vote Tory?

"Faith in Labour’s ability to put it right is rock-bottom. Nearly twice as many doctors would trust the NHS with David Cameron, the Opposition Leader, than with Gordon Brown, though a larger number trust neither of them."

Of course, you'd expect the Docs to feel a little bruised, what with them being the bed-blockers to reform and all (eg see this blog). Morale among NHS bureaucrats- about to finally abolish waiting lists altogether- must be sky-high.

Mustn't it?

Er... well... not exactly.

According to the latest annual DoH staff survey, "84 per cent of the Department’s senior civil servants – more than five in six – did not believe that the Department was well managed, compared to 49 per cent for the civil service as a whole." And only one-third have any confidence in the department's leaders.

Switch to education. Are teachers any happier? A YouGov survey of classroom teachers has just found that half of them are considering jacking it in because of stress. Why? The key factors are lack of respect from pupils, and severe paperwork overload, both of which reflect a long long trail of political interference in the classroom.

But at least those close to the corridors of power must feel more valued. Surely.

Not according to the experience of Des Smith, the naive ex-headmaster "hung out to dry" by his old mate Tony over cash-for-honours. Things got so bad for him he considered following David Kelly.

We've known for a long time that all political careers end in failure. Unfortunately, with Big Government, the failure is not contained to Westminster. The painful lesson for all those millions who work for our politicos is that failure is highly contagious. And the more politicos promise, the more horrible and debilitating the outcome for all concerned.

Sunday, February 18, 2007

Firearms Facts

During Mr Ashley's cosy chat with the Dear Leader this morning (watch here if you can bear to), I was struck by the DL's unchallenged claim that "gun crime is down overall in the last year". Given the "black on black" carnage on the streets of our big cities, I looked up the figures.

According to the latest published Home Office Statistical Bulletin:

"In 2005/06 there were 11,084 recorded crimes involving firearms other than air weapons. This is an 0.1 per cent increase over 2004/05, and a 62 per cent increase in the five years since 1999/00."

Which doesn't sound much like a fall.

In fact, it's only only by including air weapons (where the crimes overwhelmingly comprise petty vandals taking potshots at inanimate objects) can you lay claim to a fall. A classic Bliar throwaway deception.

Maybe the next BBC "interviewer" on gun crime would arm himself with some facts.

Recent Bonfires 52

Worth £20m of anyone's money
In the news this last fortnight:

£12m unwanted debt quango- "The Debt Arrangement Scheme (DAS), which helps people rearrange their debts so they can pay them off, was launched in 2004 as a flagship Executive policy to tackle Scots' spiralling debt. Since then, it has ploughed close to £12 million into setting up the service and supporting advisers whose job it is to deliver it. Yet in that time, the advisers have helped only 202 Scots with a total of only £3.2 million of debt... An insolvency practitioner, who preferred not to be named, said: "The DAS is a total waste of money." (Scotsman 10.2.07, htp HJ)

£25m reward for failure- "The Child Support Agency, which is to be wound up by the government for poor performance, has paid out £25m in staff bonuses over the last five years, John Hutton, the works and pensions secretary, has revealed to MPs. Altogether 92,000 staff benefited, with nearly £4m going to nearly 11,000 in the last year. The agency has a backlog of 238,000 child support cases with £3.5bn of debt uncollected." (Guardian 10.2.07)

£20m industrial white elephant- "SCOTLAND'S most notorious industrial white elephant is to be demolished - just 10 years after it opened with the promise of creating 3000 jobs. More than £20million of public money was invested into the ill-fated Chunghwa picture tube plant in Mossend, Lanarkshire. But the firm closed in 2002 with the loss of 600 jobs and the building has lain empty ever since. Chunghwa was opened by the Queen and then First Minister Donald Dewar in a blaze of publicity in October 1997." (Sunday Mail 18.2.07)

£250m on top mandarins' pensions- "The top 300 civil servants have taxpayer-funded pensions worth a quarter of a billion pounds, new figures show. Just 20 senior current or former mandarins have index-linked retirement entitlements totalling more than £35 million... Sir Andrew Turnbull, the former Cabinet Secretary who retired in 2005, topped the list with a notional pension pot worth £2.62 million... the top 300 civil servants have an average pension entitlement of £826,970. That could give a pension of more than £55,000 a year." (Telegraph 16.2.07)

£30m smoking police- "AN army of anti-smoking “police” is being trained to root out anyone who lights up illegally when public cigarette bans come in. Councils are spending £30MILLION on thousands of snoopers who will patrol bars, restaurants and shops. They will slap £50 on-the-spot fines on people caught having an illicit puff. And they will be barking “Put that out!” orders — echoing Dad’s Army air raid warden Hodges, who famously wanted lights off in the classic TV comedy... In Scotland, where a smoking ban started last March, 11 full-time snoopers, costing £20,000 each, issued NO fines in the first 10 months. (Sun 16.2.07)

Total for fortnight- £337m

Saturday, February 17, 2007

Running On Empty

Big Government is bad enough when it's flush with cash, but it's ten times worse once the cash runs out. As it has now.

In any normal sense of course, the money hasn't run out: the government is still spending well over 40% of our income. But government spending works on growth, and without it, the real cracks soon start to show.
Because with capped spending, the easy options are gone. Henceforth, choices must involve grasping painful nettles, including the elimination of entire programmes. Obviously, the private sector has to do that all the time - eg Daimler's highly embarrassing decision to ditch Chrysler. But politicos have never been known for having the stomach for such heroics.

So instead they impose arbitrary across-the-board spending freezes, announce policy initiatives without funding, and issue streams of orders to economise on paperclips etc. The hope is that somehow, something will turn up.

Thus, four current stories:

Belgian Navy According to Admiral Sir Jonathan Band, the First Sea Lord, unless the Navy gets its new aircraft carriers and another £1bn pa asap, we will lose our first division capability and will be reduced to the status of Belgium. Yes, we know all about whinging Sea Lords and their boys' toys, but anyone who's read Lewis Page's book will recognise MOD's inability to grip the underlying issues, and the failure of our politicos to make the tough choices. As usual, although the demands clearly outstrip the available funding, it's our servicemen who are somehow meant to square the circle.

Unfunded prison expansion As we know, Doc Reid has announced the building of 8,000 new prison places. But although Gordo has given the go-ahead for the £1.7bn PFI capital spend, he isn't providing any funds to pay the running costs, around £350m pa. Somehow, the hopeless hulking Home Office will have to find the money from within its existing budget, and that will be on top of its required £240m Gershon savings. Watch out for cuts in policing.

Wasted nurses With 20,000 deficit driven NHS job cuts, many newly (and expensively) trained medical staff are leaving to work abroad. According to the Nursing and Midwifery Council, a total of 7,772 nurses and midwives left Britain during the last financial year, compared with 3,400 in 1997-98. That's in spite of the fact that we will soon need them to replace the 180,000 nurses who are due to retire over the next ten years.

Lightbulbs In a classic of the paperclips genre, Epsom and St Helier Hospital in Carshalton, Surrey- having already asked workers to empty their own bins, scrapped water coolers and cut the size of patient meals- is removing every other lightbulb to save electricity. But they're not alone: staff at the Royal Blackburn and Burnley General hospitals have been instructed not to use electric fans to cool wards because they cost too much to run.

All four stories reflect the same inability to grip underlying budget issues. Instead of taking bold decisons to prioritise, and to scrap entire programmes, the pain is simply spread around haphazardly across the whole piece.

It's set to get a lot worse.

Friday, February 16, 2007

Beware Of Experts

"Beware of experts, they built the Titanic."

Big Government always trusts experts, and this government has been more trusting than any since... ooh, since the last socialist government.

Right from 1997, they've hired experts in every conceivable field, in the primitive belief that "The Answer" is somewhere out there if only they spend enough taxpayers' money tracking it down.

Of course, the main beneficiaries have been the consultants, with annual billings now approaching £3bn.

The issue was the subject of that damning NAO report before Xmas (see this blog), now followed up by the Public Accounts Committee grilling the retiring head of the Office for Government Commerce, John Oughten (see transcript here).

In truth, we learned little new, although PAC member Don Touhig did at least slip in the line about experts and the Titanic.

As we noted last month, flesh-eating consultants against the Simple Shoppers of Whitehall was never a fair contest, and PAC members were predicatably aghast. Overpaying, and underdemanding, the public sector has been a consultants' dream. No wonder Richard Bacon was left spluttering:

"To me the most shocking single sentence in this report is "It is not possible to make an overall assessment of the benefits that have arisen from the money spent on consultants, in part because departments rarely collect any information on what has been achieved".

To which Mr Oughten's only reply was "That is right".

Well, Mr O, it sure doesn't sound right to us.

PFI Fudge Costs Plenty

How auditors see themselves

It's just possible you may not yet have set aside the time to study it, but as usual, it contains the name and shame list of central government organs that failed to produce timely and accurate accounts during the year. All our old favourites are there, from the old monsters of waste like DWP, HMRC, and the Home Office, right down to those rubbish NuLabour inventions like NHS Direct and the now-deseased Assets Recovery Agency.

The Report also notes that the whole issue of accounting for PFI liabilities remains a big concern:

"Obtaining good quality services at value for money should, of course, be the major incentive of PFI deals. But in addition to that objective, there are also more practical incentives for public sector bodies to structure projects so that the assets (and the corresponding liability to pay for the asset) are not recorded on their balance sheet. This has been particularly the case in the local authority and health sectors. For instance, in the local authority sector, ‘PFI credits’ allowing projects to go forward have been conditional upon the local authority obtaining off balance sheet status for the project. These incentives may present a temptation to public sector bodies not only to diverge from good accounting practice, but also to structure contracts so as to achieve off balance sheet treatment rather than the best possible value for money."

As always, the NAO's language is understated, but let's be quite clear what they're saying: we taxpayers have been put in hock for years to come on poor value PFI deals simply so Gordo could engineer a way round his own Golden Rules.
So there! It isn't just BOM wittering about a problem that doesn't exist.

Thursday, February 15, 2007

Doomed NHS Hulk Heads For Rocks

Shivering timbers

A couple of BOM correspondents highlight the latest extraordinary developments on board the doomed ship NHS Enterprise.

Following Accenture's recent leap overboard, Andrew Rollerson, a senior healthcare consultant at Fujitsu, which has a £896m contract to deliver part of the NHS "supercomputer", savaged it during a conference speech last week:

"It isn't working, and it isn't going to work. There is a belief that the national programme is somehow going to propel transformation in the NHS simply by delivering an IT system. Nothing could be further from the truth. A vacuum, a chasm, is opening up."

Noting that the £30-50bn fiasco is likely to be a "camel" not a "racehorse", he illustrated his apocalyptic talk with slides depicting sinking ships, alligators, and mud-wrestling women (...que?).

The response from the bridge is grim. The lower decks may be awash, there may be a huge gash in the ship's side, and the masts may have snapped, but NHS CEO David "Davey Jones" Nicholson just keeps rolling his eyes and promising to see them all in the Locker.

The only problem is, they're taking our money with them.

Not to mention our healthcare service.

(htp Chris L and Roger A)

PS Roger takes me to task over my use of the term supercomputer. He says my use of the term for the NPfIT is bringing Cray-style pipelined vector processors into disrepute: "the only super thing about the NHS fiasco is the size of the politico/bureaucrats' egos and the size of the price tag". Point taken.

24 Hours To Stuff Your Face

Hope everyone's making the most of National Chip Week. The bad news is that there's only 24 hours left to run. So may I suggest you head over to the Love Chips! website right now to gobble up every last greasy morsel.

And remember- all that fun, yet the British Potato Council still only costs £6.5m pa. Cheap as an emergency angioplasty (see here for last year's post).

Fight The Bin Tax

New multi-role spy bin tracking an illegal school run
The TaxPayers'Alliance are mounting a concerted campaign this year against Britain's burgeoning Green Taxes. And to kick things off, they've put a petition up on the 10 Downing St site opposing the proposed Bin Tax- the covert move by several local authorities to plant spy chips in their wheelie bins, which will be used to charge households for rubbish disposal over and above the payments already included in their Council Tax.

Please go there now and sign up.

The TPA's petition summary highlights the broader point:

"This bin tax, while purported to be for encouraging recycling, is in fact part of a green agenda that politicians are using merely as a new way to raise money. There are no plans to offset the charge with lower taxes elsewhere, nor are there any plans that homes that exceed recycling targets will be given a council tax discount. This is simply a tax on top of a tax."

Much the same can be said of the proposed new congestion charges (see this blog). In principle, we economist types like the idea of charging for road use instead of charging a poll tax road fund licence. But that's not what's on offer. In practice, the plan is to charge twice in order to feed the public spending monster.

Our Big Government commissars must be stopped now, before it's too late. We must not let them spread their tax net ever wider into whole new areas of our lives.

As our housewife PM used to say, government must learn to live within its means, just like the rest of us.

Wednesday, February 14, 2007

Lies, Damned Lies, And Unicef Reports

Time to break out Statistics Made Simple

The BBC and the rest of the media have been having a field day with the Unicef Report on Child Poverty in Rich Countries. Apparently we are the worst country in the developed world at looking after our children. And even more disgraceful- as Newsnight reported- it's all down to Mrs T (the first one that is).

As always, it's useful to look at the actual report behind the hysteria (here). According to the authors:

  • European countries dominate the top half of the overall league table, with Northern European countries claiming the top four places.

  • All countries have weaknesses that need to be addressed and no country features in the top third of the rankings for all six dimensions of child well-being (though the Netherlands and Sweden come close to doing so)

  • The United Kingdom and the United States find themselves in the bottom third of the rankings for five of the six dimensions reviewed

Once more, European Model good, Anglo-American Model bad. And as the York Uni Prof who's been the Report's main spokesman here has been telling us all day, since 1979- ie the first Mrs T- we have hugely "underinvested" in childcare. Much MUCH more taxpayers' money is required.


OK, there has been some debate- the politicos have been biffing each other over who, after a decade of Labour, is really to blame. But the underlying stats have barely been challenged by anyone.

And they should be.

First, as the Report itself admits, some of them are distinctly flakey:

"Findings that have been recorded and averaged may create an impression of precision but are in reality the equivalent of trying to reproduce a vast and complex mountain range in relatively simple geometric shapes. In addition, the process of international comparison can never be freed from questions of translation, culture, and custom."

It's a standard problem with international comparisons in the area of social policy- especially those that use opinion surveys, as this one does.

With such uncertainties, the responsible and professional approach is to be very circumspect about interpreting apparent differences. Especially if those differences are relatively small.

But that's not what Unicef has done. They've taken relatively small differences and blown them out of all proportion.

Consider the measures they used. There are forty of them, ranging from relative income stats, to poll data on cannabis use. For each measure, they rank countries from best to worst. Those rankings are then aggregated together to produce the overall rankings that have been so widely quoted today.

Well, straightaway you start asking questions. Like, have they chosen the right measures? For example, their first is a measure of relative income income distribution, with the UK and US marked down for having a less equal distribution than say Greece, and therefore ranked as worse places, even though in reality their people are much richer.

And what about the weights used to combine the individual measures? Because obviously falling short on some measures is likely to be much more significant than falling short on others. And the answer is they didn't use any proper weighting system at all. That is to say, they simply assumed equal weighting within each of the six indicators, and then equal weights to combine them into their overall league table.

Pretty crude.

But nothing compared to the distortion involved in blowing up relatively small observed differences on the raw measures into big differences in terms of their derived rankings.

We can see how that works by looking at their summary data tables in the Report's appendix. There, for each of the underlying measures, they report not just each country's score, but also the mean average across all countries, and the standard deviation of the measure (ie its "average variability" across countries). That's important because if a country falls a long way short of the average on a measure that that is generally not widely dispersed, it's much more significant than if it falls only a little way short on a measure that is generally widely dispersed anyway.

And guess what. Although the UK is ranked worse than average on most of the 40 measures, in almost all cases, the differences are statistically insignificant. Specifically, on only 10 of the measures is the UK even outside of one standard deviation (see here for a serious formula headache).

And the only measures where we see Big Jump-Off-The-Page (two standard deviation) Differences are:

  • the percentage of 15 year olds who claim to have had sex- at 38% we're off the scale

  • the percentage of 11, 13, and 15 year olds who claim to have been drunk two or more times- again, at 31% we're off the scale

  • the percentage of 11, 13, and 15 year olds who rate their health as only "fair or poor"- at 23% the highest in the OECD

Just three- and as you will have spotted, all three are opinion poll answers rather than cold hard stats. And on all the stuff you can measure- like childhood obesity- statistically, we're more or less in the OECD pack.

Not for the first time (cf Stern), we have a huge bigged up report based on the flimsiest of foundations.

Of course, we can all understand why it's had so much lib media coverage, playing as it does to all the themes so beloved of Big Government supporters everywhere.

But couldn't Newsnight etc have found just one person to go on and point out some of these obvious facts, and ask the real questions?

Like why is an international agency funded by us supposedly to help the world's real poor, wasting our money attempting to spin up support for Big Government in rich countries?

Tuesday, February 13, 2007

Pluck Off

I thought I made myself perfectly clear
In the immortal words of Jean Baptiste, "never give a sucker an even break, and never EVER give your taxpayers a chance to tell you to pluck off".

Somehow our rulers forgot. And the 400 million honking hissing geese who've signed the anti-congestion tax petition have sent them and their lib-media cheerleaders scurrying for the usual cover: "populist, not democratic... clearly an orchestrated campaign so it doesn't count... rule by plebiscite... that's fascism... worse than Hitler... etc"

But however much John Snow and the eco lobby stamp their feet, will Gordo actually have the Balls to go ahead now? With the fiscal situation looking bleaker by the month, he's going to have to find some new cash somewhere, but Bliar's crackpot petition website seems to have stuffed this one.

The best guess is that he will, but he'll make local authorities take the rap:

"Briefing notes from the Department for Transport said the national scheme would not be implemented until the middle of the decade but councils did not have to wait to gain some of the benefits locally. It says road pricing could raise up to £28bn by 2025.

"A well-designed local road-pricing scheme has the potential to reduce congestion significantly in the local area. These areas can expect to see reduced journey times ... and significant improvements in public transport provision. This is good for all sectors of society whether they be shoppers, workers or business," said the notes."

Translates as "we will be slashing Revenue Support Grant- especially for rich Tory/LD areas down south- and you local authorities will have to make up the difference by doing the plucking yourself; let's face it, you already collect the most unpopular tax- Council Tax- so another few sacks of hatemail won't make too much difference; see you later."

PS Apologies for brief post- we're still away and Tyler is only able to post by stealing some random neighbourhood bandwidth. He doesn't feel proud.

Monday, February 12, 2007

Bread and Circuses

Holed up in the Cotswolds with a broadband connection that doesn’t work. But the Bread and Circus news demands comment:

2018 World Cup- scarcely believable but Gordo and Tess have decided that one dose of misery is not enough. With the Olympics well on track for £20bn, they’re trying to hustle the blazered buffoons at the FA into bidding for the 2018 circus as well. Finance expert Tess was out this morning assuring us that the spinning dials on the 2012 debacle were perfectly normal for this stage of the “planning” process. There was still immense public support for the whole thing.

Right. Well, personally, I don’t know anyone who supports it once they understand the financial consequences for them. £20bn is about £800 for every family in the land. Later this week, I’ll get the Bloke to interview some of the public about this so we can hear what the punters really think.

Plague turkeys- Millipede was on the sofa yesterday telling us that he hadn’t acted to stop the import of infected Hungarian giblets because he didn’t want to risk retaliation against our exports by our EU “partners”. Translation- he’d rather put the health of British consumers at risk than jeopardise the profits of poultry producers.

He kept banging on about how it wasn’t his fault- the Food Standards Agency were advising him and as everyone knows, “they are independent of government”.

Independent. So who pays the Food Standards Agency’s salary bill? Umm…would it by any chance be Defra, that old compromised, conflicted Britain’s most useless department?

Despite massive and expensive reshuffling of bureaucratic deckchairs, the safety of our bread remains in the hands of a department that principally represents producers.

Politics of Envy- the odious and orange Hain has popped out of his tanning salon again to complain about City bonuses. Divisive and frankly unacceptable.

Meanwhile back in the real world, the City continues to earn the daily bread for much of Britain. Fantastically, it’s now overhauling NY as the centre of global finance. That’s partly thanks to all those 24/7 galley slaves chained to the oars in Canary Wharf- the ones Hain’s so jealous of. But it’s also down to the onerous post-Enron regulations imposed on New York by politicos rather like the Orange One himself.

Flexitime- by any normal standards of decency, Beverly Hughes would have disappeared after the cockle pickers disgrace. But in modern politics of course, it doesn’t work like that. So this morning she’s back telling us how all employees should have greater rights to demand flexible working.

Yes, you can make a case for it, but purleeeese, don’t try to tell us it’s actually going to help the employing companies and make earning our daily bread easier. If that was the case, they’d be doing it already.

No, this is the usual NuLabour wibble that always tries to pretend crippling burdens are really benefits. And of course, flexitime is precisely the thinking that gave us the Two Sues.

Saturday, February 10, 2007

ITBA 10- Common Agricultural Policy

This week's Bloke vid is on the £10bn pa plus we taxpaying consumers shell out on the EU's Common Agricultural Policy:

Friday, February 09, 2007

Gobby Coppers Meet PFI

Just one hello in future
BOM correspondent NW draws our attention to this hilarious report in the Northampton Chronicle and Echo:

"CHATTY constables will be handed a special CD encouraging them to use shorter words and sentences . . . as they are spending too much time on their police radios.

Officers are currently running up sky-high costs for cash-strapped Northamptonshire Police by spending too much time on their walkie-talkies, with a recent survey revealing bobbies had found more than 100 different ways of saying 'yes'.

A special CD called "Airwave Speak" will be introduced in Northamptonshire in coming months, to try to persuade officers to use shorter words to cut down talk time. Supt Bob Smart said: "In a recent survey of several forces they found 100-plus ways of saying 'affirmative' – all of which take considerable more air space than just saying 'yes'."

Ho, ho! How jolly rib-tickling. What would they do with the Laughing Policeman, eh?

Except of course, if you're a taxpayer you won't be laughing at all. Because this is just the latest reminder of the police radio saga, a £3bn plus tale of Simple Shopping for boys' toys.

Back in the nineties, the Home Office decided that the old analogue police radios were no longer up to the job, and the cops needed to move into the digital age.

Now, you and I might have gone down Carphone Warehouse, and done a deal on a couple of lorryloads of Nokias. But in time honoured tradition, the HO decided they needed a whole new dedicated comms network, with its own microwaves and 3000 dedicated masts across the land.

So they went to O2 and bought one. It is called Airwave.

We won't go into all the ins and outs here, but suffice it to say, the HO didn't get a great deal. When the National Audit Office investigated, they found that because O2 had been the only bidder (contrary to EU rules), there had been a "lack of competitive tension", so it was virtually impossible to say if the deal had been value for money (meaning- taxpayers got ripped off).

Moreover, although a key part of the original "business case" had been that the new bespoke network was to be used by the police, fire and ambulance services, both fire and ambulance actually went their own way. In a classic display of "not invented here"/non-joinedupedness, the Office of the Deputy Prime Minister opted out the fire service, and the Department of Health opted out the ambulance service. So potential economies of scale were missed.

Now the cost of this thing- in total money payments over the 19 year period of the PFI contract- was put at £2.9bn (see PAC report here). But that was only for the basic network provision. "Extras"- like buying the handsets and actually using the system- were all on top.

Now you may smell a teensy weensy problemette with that arrangement. Surely, you say, shhuuurrely once the police are committed to the monopoly Airwave system, the operator would have them over a barrel. They could pretty well charge what they liked, irrespective of how the price wars might be driving down tariffs in the commercial mobile market.

And guess what... that's pretty well what's happening. In fact, Northampton Deputy Chief Constable Davina Logan actually uses the term "over a barrel".

Moreover, now the network is up and running- paid for by us- O2 are able to sell the service to other public sector users and build revenue which they keep.
The police authorities are now putting understandable pressure O2 to cut their charges. BOM's correspondent suggests they might just be prepared to do that, but only in exchange for even greater freedom to sell the service to premium customers from the private sector. Since this is a superior network, with excellent 99% national coverage, that could work. But what would then happen in the event of a 7/7 style emergency with the police wanting other users barred? Who'd have to pay the thousands in compensation?
As things stand, Airwave is such a docile heavy milking cash cow, Telefonica- its current owner- has recently put it up for sale. Likely buyers include private equity players, who would gear it up to the udders and walk away with a nice juicy pile of cash. They could do that because as the Times commented:

"The business offers recurring revenue streams in the form of its long-term contracts with the Government and other parties. Analysts believe that at present Airwave — which in 2005 secured earnings before interest, tax, depreciation and appreciation of £72 million, up from £1 million in the previous year — could fetch up to £2 billion."

Those long-term recurring revenue streams? Well, that's us my friends.

PS On BOM we follow the money, but we should also note that the Airwave system is highly controversial for other reasons too. Quite apart from the erection of yet more landscape disfiguring masts, there are serious concerns about safety. Airwave uses a transmission technology called TETRA- Terrestrial Trunked Radio- and the organisation TetraWatch is dedicated to highlighting its risks and opposing its use. They reckon that "the system uses pulsed microwave radiation, at a pulse frequency of 17.6Hz, which is very close to a key frequency of electrical activity in the human brain at 16Hz (our beta brain waves are around 13Hz to 20Hz)". Which apparently makes it a serious health risk, both for police officers using the sets, and for those living near the masts.

PPS The whole Airwave project was driven through by an old friend of BOM's- Sir John Gieve, the ex-Perm Sec at the Home Office, who for obvious reasons was relieved of his responsibilities at the shambolic HO... but only to be rewarded with the post of Deputy Governor at the Bank of England (see previous blogs here).