New Office for National Statistics figures published this week have shown that the Government is on course to fail to meet its deficit reduction target again. Indeed, so far, the deficit is higher now than it was this time last year. Excluding financial markets interventions, public sector borrowing hit £11.8 billion in September alone, £1.6 billion more than last year. That has been the pattern so far this year, the Government has borrowed £58 billion in the first half of the fiscal year, 10 per cent higher than in 2013-14. So much for the Office for Budget Responsibility forecast of a 12 per cent fall.
Unfortunately, plans to deal with the deficit flatter to deceive. That goes for fiscal policy plans more generally, too. What to do about the problem? What we don’t need to drag us out fiscal stupor we don’t need hair of the dog, but rather strong dose of spending restraint and strategic tax reform.
Plenty of tough decisions are going to have to be made. Luckily, good fiscal management need not always be painful and unpopular. In fact, in some privatisation measures it can raises money as well as trim spending. The Met Office, the Royal Mint or Channel 4 are good examples of where there is potential to turn companies into globally successful enterprises.
The Ordnance Survey is another organisation that should be considered for sale. There’s no need for a government agency to retain mapping information when you see just how innovative people can be given the opportunity to use open data. The agency made a £32.3 million profit last year. But as with all publicly-owned agencies turning a profit, this is misleading. It sits on piles of valuable data – indeed the surge in revenue was driven by contracts with developers and urban planners for hi-res digital mapping. The only thing which stops it from contracting for similar work all over the world is the fact it’s a government agency.
The £32.3 million revenues it earns while taxpayers’ money remains stuck in keeping it in politicians’ hands might sound good. But that number could be dwarfed by the tax revenues from a much more successful global business that might arise from it. There are other options to consider, too, such as those outlined by the Adam Smith Institute. It’s time for the Government to look again at whether it really needs to hang on to our money so that politicians can hang on to their empires.
“NHS needs extra cash and overhaul” scream the headlines today, with NHS England boss Simon Stevens making the case for an additional £5bn in funding per annum to stave off a funding crisis.
There is no disputing Simon Stevens’ dedication to the NHS. He took a significant pay cut to take the job when he left private provider UnitedHealth, and has since then advocated a sensible approach to funding the NHS. But his call today did rather smack of hoping that ever more money will solve deeper-rooted problems.
Historically speaking, the NHS between 1979 and 1997 saw spending increases averaging 3.2% in real terms. The NHS Budget very nearly doubled between 2000 and 2010, and has been protected from the necessary savings that have been par for the course in other areas. Yet, as the National Audit Office noted in 2010, that didn’t necessarily translate into better hospitals.
“Over the last ten years, there has been significant real growth in the resources going into the NHS, most of it funding higher staff pay and increases in headcount. The evidence shows that productivity in the same period has gone down, particularly in hospitals.”
Why? More money created more middle managers. More money created higher pay . My colleague Alex Wild did a fantastic job last week demonstrating where a lot of that money went. Spoiler: the pockets of executives.
More money certainly didn’t do anything for the patients at Mid Staffs screaming in agony down empty corridors.
This is why today’s announcement, and the NHS arms race we saw during party conference season in which every leader assured more funding and more nurses, is the wrong way to go about delivering a health service that works in ten or twenty years. In today’s Daily Telegraph, Andrew Haldenby, the director of the think tank Reform, makes this argument in a most compelling fashion.
We need to think more critically about the long-term, and about cutting out waste and inefficiency. Our research demonstrated £50 million a year is lost on PR officers and non-jobs; last week, The Times reported on some £5 billion worth of inefficiencies. That’s money that could be on the frontline. That’s before we mention the seemingly endless financial black hole that appears whenever the NHS – or any Government department – attempts to tinker with its IT systems.
Governments are in a tough spot, of course. Reform the NHS, and you’re accused of meddling, opposition politicians ready to barrack you for fiddling with the “envy of the world.” Some of the reforms announced by Stevens today will save money in the long-term and should improve care for patients, but we need to go much – much – further.
And we need a little more honesty about the debate. Last year we spent just over £50 billion on debt interest, half the budget. As Norman Lamb, the Health Minister, said in his speech at Liberal Democrat conference:
“Yet, as our national debt grows year by year as we borrow to keep public services going, so the amount we spend on interest to service that debt grows.
“Every pound we spend on interest on debt means a pound not spent to support someone with dementia, to provide therapy for someone with severe mental ill health or to ensure that a cancer patients gets access to drugs that can keep them alive.”
Never let it be forgotten that Britain’s national debt is the greatest challenge to the NHS, to the police, to the fire service, to local government social care and to every other essential public service. In short, every decision must be made with the intention of bringing the deficit down. And with that in mind, regrettable as it is, it’s impossible to support any calls for more NHS funding.
Expenditure data: HM Treasury
News broke this week from The Treasury that the “tax gap” between what is owed to HMRC and what is actually collected hit £34 billion last year. It’s an eye-catching figure and it understandably makes the millions of taxpayers who pay every penny they’re asked wonder why they bother.
HMRC attributed some £3.1 billion of the gap to tax avoidance, whilst another £14.2 billion came from uncollected Income Tax, National Insurance Contributions and Capital Gains tax. £12.4 billion of the gap came from VAT, whilst £3.9 billion of Corporation Tax and £2.9 billion of excise duties went AWOL.
This is, clearly, a less than ideal situation. That £34 billion would go a way to taking a chunk out of our extraordinary £100 million-plus deficit, so HMRC must do everything they can to close the gap.
However – brace yourself – it actually is possible to have a little sympathy with the taxman in this particular instance. It’s not the fault of the tax staff that politicians over the road in Parliament have conspired to create a tax code so lengthy and labyrinthine that it is borderline impossible to understand all of it, though there’s still no reason other than incompetence that HMRC got 5.5 million tax bills wrong last year. It’s undoubtedly true, though, that one of the reasons that there’s a £34 billion gap in the finances is that our tax system is simply too complicated.
It shouldn’t be a surprise that if you create a 17,000-page tax code, people who can afford it will find accountants who can find loopholes. Nor should it be surprise that it’s difficult to administer the plethora of tax breaks, industry subsidies, and exceptions that have turned what should be a simple document into a rival to War and Peace. We challenged Britain’s fastest reader to reel off the tax code back in 2011 and it nearly killed him; it’s got longer since.
Delving further into the numbers reveals a little more. Some £1.1 billion of tobacco taxes went uncollected, largely because 9% of packets were sold on the black market. This represents a £300 million increase on the year before. Turns out if you put up the price of something through high taxes, people try and avoid them. Who knew?!
A ground-breaking study into the amount of office space provided by public bodies to trade unions has revealed that many organisations up and down the country are ignoring government advice to restrict the use of taxpayer-subsidised facilities.
Over the last financial year, the total area provided to trade unions was 273,753 square feet, which is equivalent to the size of the Grand Kremlin Palace in Moscow. Despite this space having a market value of up to £27.4 million if it were in Central London, our research was only able to identify £307,093 in rental payments from the unions.
The key findings of the research are:
Many public sector organisations do not provide dedicated office space to trade unions, implying that doing so is unnecessary both legally and practically. This extensive study demonstrates that too many organisations are still subsidising unions. Much of this office space is used for union activity which has led in recent years to large-scale industrial action, disrupting the essential services taxpayers have paid for and rely on.
Welcome government guidance from the Department for Communities and Local Government issued last year said that “political activity by unions should not be financed by council funds” and that “restrictions should be placed on the use of office facilities for trade union representatives” but it is clear that many local authorities and other public sector bodies are still ignoring this advice.
Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:
“It’s completely inappropriate for public sector bodies to be subsidising the work of trade unions which take great pride in disrupting essential services, especially after government guidance has told them not to. The drastic difference between the value of this space and the pittance that unions have to pay for it is striking. Taxpayers will be furious at this Kremlin-sized subsidy, especially on top of the amount gifted to unions through facility time and direct grants.”
Yesterday’s strikes by NHS workers elicited strong responses from patients, NHS workers and politicians. Nurses and midwives were understandably put front and centre of the unions’ campaigns – the public tend to prefer NHS nurses to NHS bureaucrats.
But some of the unions (most notably Unison) don’t just represent nurses and ambulance staff, but tens of thousands of NHS middle-managers.
For the avoidance of any doubt, all NHS staff got a pay rise.
Staff can move up the Agenda for Change pay scales regardless of what percentage increase Jeremy Hunt decides upon. What happened was that those who received an “incremental increase” by moving up the pay scales did not get an extra 1 per cent on top of that.
Those who did not move up a rung on the pay scale did get a 1 per cent rise.
Historically speaking, the NHS has received large, real term budget increases for a couple of years in a row, and then had a few years of lower spending. This changed around the turn of the century when the NHS was handed big budget increases throughout the 2000s. Between 1979 and 1997, NHS spending increased in real terms by an average of 3.2 per cent. Between 1999 and 2008, this figure was 6.3 per cent. NHS spending has been pretty much frozen in real terms under the current government.
But what was routinely lauded by politicians as “investment” by Gordon Brown et al was no such thing. As the National Audit Office noted in 2010, most of the extra funding went towards higher staff pay and increases in headcount. During that period, productivity went down. Taxpayers got worse value for money.
But what’s happened since 2008? The table below shows the mean basic pay pay per full-time equivalent for 8 different categories of staff. If this really the best way what little money for pay increases could be allocated?
Each year is for the 12 months up to the June of that year. Data taken from HSCIC’s NHS Staff Earnings Estimates to June 2014
New analysis by the TaxPayers’ Alliance demonstrates that British foreign aid spending has little to no bearing on the freedom experienced in receiving countries. The research, which uses a series of well-respected indices to deliver an overall “freedom score”, plots that score against the amount of foreign aid a country has received. This freedom score encompasses freedom of speech, freedom of the press, freedom of the internet and business and economic freedom.
As Parliament returns with a Bill to enshrine foreign aid spending in law entering Committee stage, our research suggests that the current approach to development is not delivering the progress many hoped. There are many reasons for this, but as donor countries look to improve the effectiveness of their aid spending, it is crucial to assess the progress made over the last decade.
Among the key findings of this research are:
10 countries showed little or no change at all in their freedom score despite an increase in the bilateral aid they received (Argentina, Bangladesh, DR Congo, Ethiopia, India, Malawi, Mozambique, Pakistan, Turkey, Uganda, Vietnam and Zimbabwe)
5 countries had a falling freedom score despite an increase in bilateral aid received (Afghanistan, Kenya, Mexico, Nigeria, Somalia and Sudan)
2 countries showed improvements in their freedom score despite a reduction in the bilateral aid they received (Ghana, Paraguay, Peru and Zambia)
Just 3 countries had an improved freedom score with an increase in bilateral aid (Nepal, Rwanda and Tanzania)
Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:
“With Britain’s public finances in such a horrendous state, it’s crucial that foreign aid delivers results. Too often, British taxpayers’ money is spent propping up governments that refuse to grant fundamental freedoms.
“The arbitrary spending target of 0.7 per cent so loved by politicians means that money is spent for the sake of it, rather than for any obvious need. Every penny of foreign aid should have one goal – making the lives of ordinary people in developing countries better. If it isn’t doing that, it should be stopped.”
The TaxPayers’ Alliance has long called for a freeze in foreign aid, and for the end of an arbitrary target of 0.7% of GDP. Much of the aid given to third countries is important, particularly at times of humanitarian crisis, but too much is wasted. Whilst Britain is £1.3 trillion in debt, this cannot continue.
It was revealed this week that Her Majesty’s Revenue and Customs have – again – managed to get millions of tax bills wrong. It’s hardly a surprise that even the professionals can’t administer our overly complicated, 17,000-page tax code.
Our Director John O’Connell discussed HMRC’s blunder on ITV News with Consumer Affairs Editor Chris Choi last night.
Of course, the context is crucially important. It has been proposed that HMRC receive additional powers to dip directly into people’s bank accounts when they suspect tax evasion. But how can anybody trust HMRC to do it fairly, when they bungle the system they’ve already got? Until HMRC can be trusted, there’s no way tax collectors should be given the power of judge, jury and executioner over individuals’ tax arrangements.
Strange goings on in Plymouth with the City Council paying out £10,000 a day to costly temporary managers in order to pursue a project aimed at saving money. “It seems to me at this moment in time Plymouth taxpayers are being asked to take a tremendous leap in the dark in the hope that we get a result at the end of the day,” says one baffled councillor. “It’s far from clear what that result might be.”
The full story goes back to earlier in the year when Plymouth City Council (PCC) caused a storm by hiring 15 senior managers, each earning over £100,000 a year, with some being paid as much as £840 a day—the equivalent of £178,000 a year. The managers were hired for their expertise in dealing with a council budget shortfall over the next three years and were meant to find ways to save money. But PCC chief executive Tracey Lee hired the costly managers without getting the approval of city councillors, many of whom are now furious at the £5.8m splurge.
The most expensive consultant was appointed as an interim director of corporate services with a wage of £172,144, but that was way above the council’s set maximum pay of £136,877 for this post. The consultant’s appointment has since been terminated. All 15 temporary positions should have been advertised and the candidates interviewed by a panel including councillors. The council has been accused of a cover-up over investigating the expenditure.
“There was categorically no attempt to cover this up as has been suggested,” said a council spokesperson. “The council agreed an amended pay policy that aims to be more transparent than councils are required to be about the remuneration of senior interim appointments… Projects of this magnitude and ambition require expertise, specialist skills and capacity that councils do not usually have for running day-to-day services. Interim appointments are the best value way of acquiring the necessary specialist skills and capacity in the short term and are considerably less expensive than consultancy firms.”
A recent PCC report disagrees. Though using anodyne wording, its conclusions are clear. ‘We have continued to use interims, primarily to support us in the delivery of our Transformation [money-saving] Programme,’ says the council report, but ‘Moving forward, we have clear plans to reduce the reliance on interim support, imparting knowledge and development on to internal resources within the council.’ Plymouth taxpayers will be relieved to hear that!
Tim Newark is the Grassroots Co-ordinator for the TaxPayers’ Alliance in the South West
Norman Lamb MP – the Liberal Democrat Minister for Care and Older People – gave a very interesting speech at the party’s Conference in Glasgow earlier. Ostensibly a speech about the NHS, Lamb made a few points which are worth picking up on that suggest the TPA’s campaigning on the deficit, and public debt, are getting through to politicians.
Talking about the NHS, Lamb said:
The central threat to the NHS is the state of the public finances
He’s not wrong. Regardless of what anybody thinks about the NHS and its current model, the performance of certain hospitals, and whether there are other contributory options which might deliver better outcomes, it is disingenuous to suggest that the health of the public finances is somehow divorced from policy-making.
Lamb noted something else about the deficit, public debt, and the result it has on public services.
Yet as our national debt grows year by year as we borrow to keep public services going, so the amount we spend on interest to service that debt grows. £52 billion pounds this year alone in interest on debt.
“Every pound we spend on interest on debt means a pound not spent to support someone with dementia, to provide therapy for someone with severe mental ill health or to ensure that a cancer patients gets access to drugs that can keep them alive.
Lamb is right. When taxpayers’ money is spent servicing debt, it has no impact whatsoever on the quality of the public services we receive. All decisions on public services made by any politician must be made through the prism of paying down that credit card bill. Many who campaign for even more spending pretend that things like the NHS or the foreign aid budget are somehow separate from the wider economic conversation. They can’t be allowed to get away with that dishonesty. The Treasury’s coffers are inextricably linked to the services we can afford.
Now, the Minister’s speech wasn’t perfect, with the obligatory giveaways – easy with other people’s money. But it did make a number of other points – particularly around the cost of our outdated way of dealing with mental health issues – that should be heard. Not least, his reminder that the way we fund our health service currently confuses inputs and outputs.
Let’s end the rewards to hospitals for just doing more and instead reward patient safety, compassionate care, and achieving the best outcomes.
This should be the mantra for all politicians’ spending decisions. One – should we be doing this at all? Two – if so, can we afford it? Three- if we can, how can we deliver the best outcomes? More of that in the NHS, and the rest of the public sector, would be a step in the right direction.
UKIP today announced a number of new policies, the details of which can be found here. Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, responded by saying:
“For every good policy announced today, UKIP conjured up a bad one. Despite all the talk of simpler, fairer taxes, many of the proposals announced today will only increase taxes and add further complexity to our already baffling tax system. The frankly bizarre “luxury tax” on handbags and Jimmy Choos would be a nightmare to administer, add hundreds of pages to the tax law books, and would send a very strong anti-aspiration message.
“All parties should promise to abolish the unfair and unjust Inheritance Tax, and the Barnett Formula needs significant reform. But where were the radical proposals to reduce spending? It’s wrong to claim savings from HS2 – which should be scrapped – could pay for anything else, as the money needs to be borrowed anyway. Tax cuts deliver economic growth and raise money in the long-term, but they must be accompanied by clear proposals showing how to bring the deficit down.”
A report by the Public Accounts Committee released today has accused the Government of botching the restructuring of the Army.
The “Army 2020” programme plans to integrate a regular Army of 82,500 with a larger and more frequently used Army Reserve (formerly known as the Territorial Army) of 30,000. Pre-2010 there were 102,000 regulars and 19,000 reservists.
The Government stands accused of failing to adequately consult the Army before embarking on the restructuring and risking capabilities by missing recruitment targets.
The defence budget is notoriously difficult to control. Massive cost overruns on major projects are commonplace and decisions are subjected to intense scrutiny, especially when the armed forces are deployed on operations.
However George Osborne announced at the Spending Round in 2013 that the MoD’s Capital and Resource Departmental Expenditure Limits would be frozen in cash terms for 2014-15 and 2015-16.
Given the need to make savings and the political unpopularity of making service personnel redundant, there will have to be a substantial decrease in the number of civilian staff at the MoD if the Chancellor is to hit his spending targets. Indeed at the Strategic Defence and Security Review in 2010 it was announced that 25,000 civilian jobs at the MoD were to be cut by 2015.
A new research note by the TaxPayers’ Alliance examines the long term trend in the number of military personnel compared to the number of civilian personnel in the UK since 1945.
This morning saw Salford Council’s Audit Committee meet to discuss the findings of an internal report into the exact circumstances of a £164,000 taxpayer-funded “bailout” paid to the local rugby league club, Salford Red Devils, in 2013.
Journalists at the Manchester Evening News as well as other local writers have covered this story with aplomb. In particular, they have revealed that the council official – Martin Vickers – who signed off the bailout very soon left after the decision, taking up a position months later at the very same Salford Red Devils rugby club.
It appears from newspaper reports that not only was the bailout agreed without proper record-keeping, but that it was agreed by Mr. Vickers, the Mayor Ian Stewart and his deputy David Lancaster without the knowledge of Council Chief Executive Barbara Spicer, against Council procedure.
Even more remarkably, reports go on to say that Mr. Vickers soon after requested voluntary redundancy and, again without the Chief Executive’s knowledge, three days later a £79,000 “golden goodbye” was paid. This package, stunningly, included a Volkswagen Golf and an iPad.
At this morning’s Audit Committee meeting, it became clear that any spending decision over £100,000 had to have a proper paper trail and be made public. That was not the case, though the Council’s Monitoring Officer suggested this was due to “human error” rather than anything more sinister.
The Audit Committee voted to accept the recommendations of the internal report which places into procedure the various checks and balances which were already in place before this bailout was put together. Despite the Chair asking for the Committee to look into an independent inquiry into what occurred between Mr. Vickers, Mr. Stewart and the rugby club, it appears this matter will – at least officially – be laid to rest. This is despite the Monitoring Officer admitting this morning that the way in which the bailout was negotiated and the speed with which the redundancy package was paid was “unusual.” Apparently understatement is a key part of the job description for the role.
Regardless of the rights and wrongs of bailing out a private rugby club – and, when the Council was attempting to find savings elsewhere in the budget, it is difficult to justify the move – the lack of transparency and accountability will stick in the throat of taxpayers. Nobody should be allowed to hide behind procedure, regardless of whether they have – as in Mr. Vickers’ case – left the Council’s employment. It is wrong that Councillors have no ability to question him.
To quote Jennifer Williams, the Political Reporter at the Manchester Evening News, “the point of democratic process and transparency is to allow criticism.” That entire page, reporting on this morning’s discussions, is worth reading, as is the report by Neal Keeling, also from the MEN, on leaked emails which appear to show those in charge knew that they were avoiding due process.
We hope that individuals and the local newspapers will continue to put pressure on Salford Council so that taxpayers are able to understand how nearly a quarter of a million pounds without anybody apparently thinking to write it down.