Monday, November 12, 2007

Expenses- They Spend. We Pay.

He should be given a crack at sorting the public sector

Back in the Greed is Good eighties, Tyler worked for an establishment Blue-Blood London merchant bank. Like much of the City, it was undergoing a dramatic expansion not just in London but globally, and the expansion threw up a whole raft of new "management challenges". One of them was the control of personal expense claims.

Up until the eighties, an Englishman's word being his bond, the Bank's directors had simply claimed whatever they felt they'd spent on bank business. No questions asked. By then, of course, they all had corporate Amex cards, so the Bank did have some record of where it had gone (eg Beverly Hills Hotel $7,356; Sandy Lane Hotel $9,479, etc). But further enquiry- such as detailed receipts- was considered otiose and demeaning.

Then things changed. The boys at the top, minds concentrated wonderfully by the invasion of hard-assed Big Bang Yanks, urged on by the bank's private shareholders, and boxed in by new tighter tax rules, instituted a new policy. Henceforth, all expense claims, even those from the Honourable James St John Fauntleroy, had to be supported by detailed receipts and an explanation of why the expenses had been incurred.

This was not well received. There was civil disobedience. There was revolt. Charming old school directors refused to comply, or explained huge Middle East bar bills simply as "refreshments" (the price of single malt trebles in Abu Dhabi's western hotels has always been an absolute scandal). But eventually, everyone had to comply. Or leave. It was the harsh real world.

These days, all major businesses operate on the same basis- clear expense policies, with all claims fully documented and supported by receipts. And be you ever so high in the organisation, the expense policy is above you (as senior Citigroup exec Todd Thomson found this year when he gave a free $50,000 corporate jet ride to the CNBC "Money Honey" Maria Bartiromo- he got fired).

But things are so very different in the dysfunctional public sector...

Item One: for the last five years the Met Police has been dishing out Amex Cards to its employees, and automatically paying off the bills without requiring any supporting evidence.

"According to one former officer, suspicions of credit card abuse were raised by a Metropolitan Police Authority auditor in 2005. Some officers were said to be claiming expenses twice when it was found bills were being automatically paid by the force.

“Whatever balance was on it at the end of the month it was automatically paid off by the police, without checking whether it was for legitimate expenses,” he said. “When officers realised it was being automatically cleared they went ahead and made other purchases that were nothing to do with the police.”

Such purchases reportedly include luxury watches, flatscreen televisions and holidays.

There are a number of shocking aspects to this. To start with, why was the policy of automatic payment ever permitted in the first place? If even the Hon James St John F wasn't to be trusted with an Amex card, why would anyone think you could trust the cops? Doesn't the public sector ever bother to look at best practice in the real world?

Second, some of London's finest apparently think it's perfectly OK to defraud the taxpayer. We're used to them fabricating evidence and spinning crime stats of course. But this is our money, millions of it by all accounts. So far, just two detectives have been arrested.

Third, when this was first raised by the auditors in 2005, why was no action taken?

But at least some good may come out of this scandal- it may well be the final nail in Met Commissioner Bonkers Blair's coffin.

Item Two: our betters up in the House of Lords have been helping themselves to expenses of £300 per day:

"Hundreds of peers are exploiting a loophole on expenses to give themselves a tax free income of up to £48,000 a year.

Rules agreed by Parliament allow members of the House of Lords to claim up to £308 a day to pay for meals, hotels, taxis and other travel expenses associated with their role.

But peers do not have to submit receipts and an analysis of their expenses shows that nearly two thirds automatically claim the maximum almost every time they visit the Lords."

Peers' expenses cost us £17.7 million in the year to March, representing 18 per cent of the running cost of the Lords. All apparently undocumented.

Again, this would simply not be tolerated in the real world. But according to them, it's because they're worth it. Multi-millionaire Labour backer Lord Paul reckons:

“That’s far less than I deserve. If a lawyer can charge thousands of pounds, then I can charge that. I spend more money than that, so I put in for the amount I can. That’s what I’m allowed to do, and that’s what I do.”

Well, my Lord, I can see a win-win here. Since we voters have never asked you to rule over us, and since you feel so underpaid, why don't you just eff off? We'd all be miles better off.

It is outrageous that our legislators flout the rules that apply to the rest of us. It's bad enough that those grasping rascals in the lower house rinse their expenses (£87.4m last year, £136 grand apiece). But their graces on the red benches are just as bad.

As always, they spend, we pay.

Whether we like it or not.

PS Surely Blair must now go. We blogged here the extraordinary lack of accountablity in the public sector compared to the private, but you'd think even the commissars must now understand that letting Blair stay is damaging them all.

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