There has been much media coverage today about a survey into whether councils intend taking up the government's offer of funding a 2.5% rise in council tax from next April in order to create a freeze. According to a sample of 146 council finance directors, '20%' may not take up the offer.
I'm puzzled by the attention given to the survey. The percentage of councils likely to reject this offer is actually only 4% i.e. 7 with the remaining 16%, about 21, undecided. They are undecided because as yet they haven't made up their minds, quite probably because a decision about council tax rises for next April has not yet been taken by their authority.
It will be almost impossible for a council to tell its taxpayers that it has turned down a subsidy from the government in order to put its tax up by 5%. The government knows it is a populist gesture which shows it feels voters' pain. Long-term it will whittle away councils' tax base but in the short-term councils have little choice but to accept it or face derision followed by extinction at the next local polls.
Mark my words, come next spring councils will take up this offer.
Thursday, 24 November 2011
Friday, 11 November 2011
Councils should get on with their own community budget plans despite the pilots
The LGA and its leaders are right to criticise the modest ambitions of the next round of cxommunity budget pilots, that is, the two for neighbourhoods and the two for a single pot in a whole place. When they were first announced at the LGA conference in June by Nick Clegg I made that point myself to one of the DCLG ministers, Greg Clark, and was given the impression that there would in time be more to come and that these pilots were merely the start of the process.
What puzzles me is that I have yet to meet anyone from across the political spectrum who disagrees with the principles behind expanding the community budgets programme. Eric Pickles is now an enthusiastic convert and - as he told The MJ last month in an interview at an LGA conference on community budgets - is keen to 'smash down the silos' between government departments both nationally and locally. So if no one disagrees with the concept, then why not make the next stage of community budgets much more ambitious than merely announcing four pilots?
The answer has to be that Whitehall itself is concerned at the prospect of seeing departmental, silo-based budgets morphed into single pots, thereby blurring its own accountability lines even though Mr Pickles told councils at the conference to 'make Whitehall an offer.'
Okay, then councils should take him up on it. Forget the modest number of pilots and the DCLG form-filling required to apply to be one. Why can't a council simply set up its own shadow whole place, single pot budget along with its local partners and present the findings to Mr Pickles? Don't wait for guidance or pilots - just get on with it anyway.
What puzzles me is that I have yet to meet anyone from across the political spectrum who disagrees with the principles behind expanding the community budgets programme. Eric Pickles is now an enthusiastic convert and - as he told The MJ last month in an interview at an LGA conference on community budgets - is keen to 'smash down the silos' between government departments both nationally and locally. So if no one disagrees with the concept, then why not make the next stage of community budgets much more ambitious than merely announcing four pilots?
The answer has to be that Whitehall itself is concerned at the prospect of seeing departmental, silo-based budgets morphed into single pots, thereby blurring its own accountability lines even though Mr Pickles told councils at the conference to 'make Whitehall an offer.'
Okay, then councils should take him up on it. Forget the modest number of pilots and the DCLG form-filling required to apply to be one. Why can't a council simply set up its own shadow whole place, single pot budget along with its local partners and present the findings to Mr Pickles? Don't wait for guidance or pilots - just get on with it anyway.
Wednesday, 26 October 2011
More redundancies means less paying members in the pension scheme
News that the Local Government Pension Scheme is losing members in droves is hardly surprising considering the job losses in the sector in the past year. Nor is it much of a surprise that neither the DCLG- which issued the figures - or the unions or employers have shouted it from the rooftops; after all, fewer members making contributions means less income coming into the scheme and more pressure on the funding level which is not helpful to the current delicate negotiations about reducing the LGPS's costs to the public.
The DCLG says the number leaving the scheme because of redundancy in the year ending last March was up 40% to more than 17,600. The number of former staff entitled to deferred benefits is also up. Many of these will be ex-employees who have left before retirement, either voluntarily or through redundancy. Not only do they cease to contribute but their deferred pension sits as a cost in the scheme ready for when they retire.
While the scheme's assets rely heavily on stock market performance for their income, a reducing number of paying active members is bad news. On top of this the town hall unions, in their campaign to prevent the government from forcing the LGPS to increase contribution levels, has already issued warnings that staff on average salaries - above the threshold for increased contributions - will quit the scheme because of its extra costs.
Another figure to bear in mind is the number of early retirements triggered by cutbacks. These in effect become another burden on the pension fund. A decade ago the Audit Commission issued a warning about councils using the pension fund as a means of managing out staff. In those days it could afford it; now it cannot.
The DCLG says the number leaving the scheme because of redundancy in the year ending last March was up 40% to more than 17,600. The number of former staff entitled to deferred benefits is also up. Many of these will be ex-employees who have left before retirement, either voluntarily or through redundancy. Not only do they cease to contribute but their deferred pension sits as a cost in the scheme ready for when they retire.
While the scheme's assets rely heavily on stock market performance for their income, a reducing number of paying active members is bad news. On top of this the town hall unions, in their campaign to prevent the government from forcing the LGPS to increase contribution levels, has already issued warnings that staff on average salaries - above the threshold for increased contributions - will quit the scheme because of its extra costs.
Another figure to bear in mind is the number of early retirements triggered by cutbacks. These in effect become another burden on the pension fund. A decade ago the Audit Commission issued a warning about councils using the pension fund as a means of managing out staff. In those days it could afford it; now it cannot.
Friday, 7 October 2011
The impact of quantitative easing
What is the difference between quantitative easing and public spending? Or for that matter what is the difference between QE, public spending and the billion pounds that Messrs Pickles and Osborne together found down the back of their sofas for weekly bin collections and freezing council tax?
There will undoubtedly be a technical argument - that the billion pound bung was 'found' in Whitehall from money already collected in taxes and simply unallocated and therefore does not count as extra public spending on the balance sheets. And QE is directed at banks and bonds. But the principle remains the same. The economy is stagnating, liquidity is tight, consumers are cutting their spending and the government wants to get things moving by injecting more cash into the economy. The effect of £75 billion of electronic money created to purchase bonds issued by the Treasury is aimed at stimulating spending. The £800m announced by Osborne to hold down council tax is aimed at not further deflating consumer demand through tax rises.
Would it have been better instead not to have imposed such a severe spending round for the public sector in the first place in particular local government which has caused job losses and further depressed the economy? And would it now not be better for the Treasury to revisit its spending plans for the next two years and alleviate some of these cuts, especially in the more depressed regions like the north and Midlands?
There will undoubtedly be a technical argument - that the billion pound bung was 'found' in Whitehall from money already collected in taxes and simply unallocated and therefore does not count as extra public spending on the balance sheets. And QE is directed at banks and bonds. But the principle remains the same. The economy is stagnating, liquidity is tight, consumers are cutting their spending and the government wants to get things moving by injecting more cash into the economy. The effect of £75 billion of electronic money created to purchase bonds issued by the Treasury is aimed at stimulating spending. The £800m announced by Osborne to hold down council tax is aimed at not further deflating consumer demand through tax rises.
Would it have been better instead not to have imposed such a severe spending round for the public sector in the first place in particular local government which has caused job losses and further depressed the economy? And would it now not be better for the Treasury to revisit its spending plans for the next two years and alleviate some of these cuts, especially in the more depressed regions like the north and Midlands?
Monday, 3 October 2011
The Osborne council tax freeze bung
Perhaps the Conservatives should take up the emblem of a sofa for their annual conference backdrop in Manchester this week judging by how useful said item of furniture has proved in the past few days. First Eric Pickles found £250m down the back of the DCLG sofa for his favourite pet project of weekly bin collectiions. Now George Osborne has discovered another handy sofa in the Treasury behind which he has extracted £800m to fund a second year of council tax freeze.
No wonder people get cynical about politicians. Firstly, this billion pound bung just happens to coincide with the Conservative Party conference. Secondly, I thought we were supposed to be broke. Thirdly, where has this money come from and don't tell me it's from that hoary old chestnut 'Whitehall efficiency savings'? And fourthly, maybe it was always there from the start, deliberately kept back for a rainy day. For George Osborne in opposition always maintained that he would freeze council tax for two years - then made it only one year in his last Budget, thereby allowing himself the room to 'announce' another year.
Furthermore it is just more nails in the coffin of localism. If councils can't even decide on their bin collections or their council tax levels then what powers do they really have in the end?
No wonder people get cynical about politicians. Firstly, this billion pound bung just happens to coincide with the Conservative Party conference. Secondly, I thought we were supposed to be broke. Thirdly, where has this money come from and don't tell me it's from that hoary old chestnut 'Whitehall efficiency savings'? And fourthly, maybe it was always there from the start, deliberately kept back for a rainy day. For George Osborne in opposition always maintained that he would freeze council tax for two years - then made it only one year in his last Budget, thereby allowing himself the room to 'announce' another year.
Furthermore it is just more nails in the coffin of localism. If councils can't even decide on their bin collections or their council tax levels then what powers do they really have in the end?
Friday, 16 September 2011
Clegg plays to the Lib Dem gallery in fast tracking 40 infrastructure projects
As always with politicians their speeches are significant not so much for their content as for their timing and their message.
Take Deputy PM and Lib Dem leader Nick Clegg's address at the LSE on September 14. Some of the national media in the morning trailed the fact that he was 'fast tracking' 40 major infrastructure projects. But the real story was how he was setting out his wares in advance of the Liberal Democrat conference.
Clegg has to stand by the government's deficit strategy and indeed he said so in his speech. But this is unpopular in his own party, many of whom are calling for 'Plan B' with a slowdown in public spending cuts. So Clegg then maintained that there was a backlog of big projects sitting in Whitehall, already accounted for in the budget, but grinding through the system. If these could be pushed through, was his message, then they would help alleviate some of the impact of spending cuts on employment and the economy. In effect he was calling for more public spending to offset public spending cuts, surely as near an appeal to bring in Plan B as he can.
But Cameron and Osborne will be relaxed because they know the Liberal Democrat conference is looming and the last thing they want is Clegg being howled down. They also realise that highlighting the headline 40 infrastructure projects is the usual example of political smoke and mirrors. The aim is entirely to get Nick Clegg out of a tight spot by being seen to 'do something' about the economy without really doing anything at all.
Take Deputy PM and Lib Dem leader Nick Clegg's address at the LSE on September 14. Some of the national media in the morning trailed the fact that he was 'fast tracking' 40 major infrastructure projects. But the real story was how he was setting out his wares in advance of the Liberal Democrat conference.
Clegg has to stand by the government's deficit strategy and indeed he said so in his speech. But this is unpopular in his own party, many of whom are calling for 'Plan B' with a slowdown in public spending cuts. So Clegg then maintained that there was a backlog of big projects sitting in Whitehall, already accounted for in the budget, but grinding through the system. If these could be pushed through, was his message, then they would help alleviate some of the impact of spending cuts on employment and the economy. In effect he was calling for more public spending to offset public spending cuts, surely as near an appeal to bring in Plan B as he can.
But Cameron and Osborne will be relaxed because they know the Liberal Democrat conference is looming and the last thing they want is Clegg being howled down. They also realise that highlighting the headline 40 infrastructure projects is the usual example of political smoke and mirrors. The aim is entirely to get Nick Clegg out of a tight spot by being seen to 'do something' about the economy without really doing anything at all.
Wednesday, 31 August 2011
Has the government run out of steam already?
The political party conference season is loooming and if I were a government minister I would be increasingly worried that my policy cupboard was looking bare after hardly 18 months in power. The question now is what does the Coalition stand for? What does David Cameron stand for? What is the direction of travel?
Absolute core to the government's economic policy is reducing the deficit but this is increasingly suspect due to the feeble state of the economy and rising inflation. George Osborne's gamble was to hope the private sector would pick up in time to offset early public spending cuts. This looks unlikely and in UK cities and regions where public spending is already a large part of the local economy, spending cuts are tipping them back into recession.
The Prime Minister's White Paper on public sector reform early in the summer was a disappointing mish-mash of existing policies and vague expressions of intent. Big Society, which once defined Cameron's political philosopy, was hardly mentioned. The recent riots have placed a question mark over cuts to police budgets. The health reform plans have had to be revised. Housing is rapidly moving up the political agenda with no apparent strategy to tackle shortages. The welfare reform plans are still in their infancy. Only in education has Michael Gove's academies and free schools moved inexorably forward.
The paucity of policy contrasts with the deep-seated fundamental challenges faced in UK society. They range from inner city youth crime to long-term pension provision, elderly care, the impossibility of finding mortgages for young housebuyers, the decline in the average standard of living, the long-term position of financial services as engine of the UK's economy. Let;s have some serious policy papers on these.
Absolute core to the government's economic policy is reducing the deficit but this is increasingly suspect due to the feeble state of the economy and rising inflation. George Osborne's gamble was to hope the private sector would pick up in time to offset early public spending cuts. This looks unlikely and in UK cities and regions where public spending is already a large part of the local economy, spending cuts are tipping them back into recession.
The Prime Minister's White Paper on public sector reform early in the summer was a disappointing mish-mash of existing policies and vague expressions of intent. Big Society, which once defined Cameron's political philosopy, was hardly mentioned. The recent riots have placed a question mark over cuts to police budgets. The health reform plans have had to be revised. Housing is rapidly moving up the political agenda with no apparent strategy to tackle shortages. The welfare reform plans are still in their infancy. Only in education has Michael Gove's academies and free schools moved inexorably forward.
The paucity of policy contrasts with the deep-seated fundamental challenges faced in UK society. They range from inner city youth crime to long-term pension provision, elderly care, the impossibility of finding mortgages for young housebuyers, the decline in the average standard of living, the long-term position of financial services as engine of the UK's economy. Let;s have some serious policy papers on these.
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