Nov 2007 20


TPA activist Barbara Lockwood, who also organises a local campaign against council tax (known as FACT), has informed us that Norfolk’s county councillors are increasing their pay by a whopping 28%, roughly an extra £2,000 – of your money in their pockets – a year.  Just for comparison, the average rise in private sector pay has risen by around 4% and the government have pegged the rise in public sector pay to 2%.  Yet again there’s one rule for the politicians and another for taxpayers.

Yet it’s striking that Councillor Sue Whitaker says more money is needed to attract people into politics.   But that’s exactly what we don’t need; we don’t need more snouts in the trough and people motivated by the money in politics and not ideals!   Whatever happened to principle, civic pride and community service as being they key driver of political involvement, Councillor Whitaker?   

Please make your voices heard by holding these politicians to account.  Write to the leader of Norfolk County Council, Daniel Cox, at [email protected] and ask him why Norfolk County Council deserves more of our money and where they’re getting this money from.  If you get a response, let us know so we can publicise their excuses.

Further to this, kick off a public debate on Norfolk County Council’s councillor allowances.  Already we’ve seen Norwich City Council waste hundreds of thousands of pounds on its campaign to go to unitary status, now Norfolk County Council are taking more of our money to line their pockets.  Write to the Eastern Daily Press at:

Letters Editor
Eastern Daily Press
Prospect House,
Rouen Road,
NR1 1RE,
United Kingdom
Email: [email protected]

Do be on the look out for more stories like this as councils begin to admit how much your council tax will have to go up next year to pay for their extravagancies.  It’s up to us to fight back and hold these over-spending politicians to account!

Nov 2007 20

Worth £300 grand of anyone’s money
We’ve blogged the state equality industry several times. In particular, we looked at the amalgamation of the Commission for Racial Equality, the Disability Rights Commission, and the Equal Opportunities Commission, to form Labour’s new super equality quango- the Commission for Equality and Human Rights (CEHR). It’s time for an update.

As predicted, the chairmanship went to Labour insider Trevor Phillips, and the whole thing finally kicked off on 1 October.

And also as predicted, it’s been an expensive shambles.

To start with, Phillips didn’t like the name- the Commission for Equality and Human Rights. So he changed it. To the far more expressive Equality and Human Rights Commission. Obviously all the old CEHR branded stationary, calling cards, ballpoints, souvenir back-scratchers etc had to be sent to landfill, and a whole new lot of EHRC branded stuff ordered up. But hey, you’ve got to get this important stuff right.

Cost? We’ve no idea, and it’s a fair bet they haven’t either.

But we do know how much was spent on the branding itself, because the figures were given to the House of Commons Communities and Local Government Committee (see report here). It was a third of a million quid, paid to an outfit called 35 Communications. Presumably they were the ones who came up with the new logo, shown above.

(No, honestly, that’s it. Geddit?)

The Committee also highlighted the shambolic and expensive way the three separate quangos were banged into one.

Naturally, consultants were hired to tell them what to do: Ernst & Young, who charged £0.5m for the pleasure. But they were hired before Phillips arrived on the scene, and were reporting to a gentleman by the name of Patrick Boyle. Boyle was the CEHR transitional programme director, put in post in 2006 to make sure the new organisation could hit the ground running.

But when Phillips was appointed earlier this year, he didn’t want that. He wanted his own consultants. So he fired Ernst & Young and hired Towers Perrin instead. At a further cost of £0.4m. Oh, and he "exited" Boyle as well.

So the new quango started operations with packing cases strewn all over the floor and many of the posts not permanently filled. Even though they’d had a whole year’s lead time. The Commons Committee reported in August:

"It is deeply disappointing that the responsible Minister could, with less than four months left before its launch, offer so little information on the extent to which the Commission will be operational at the time of its launch. It is indicative of a significant failure to manage the transition process.

indecision, instability and delays in Government’s management of the transition have undermined the ability of the Commission to deliver effectively from day one."

And then of course, having dug that hole, Phillips and his equality quangocrats flip-flopped into digging the other- rushing to appoint just to get the slots filled.

The appointment of a head for the Welsh branch is a case in point. According to the Western Mail:

"THE new “super body” for equality issues undermined its own remit by setting up a panel of three white women to pick its director for Wales.

Kate Bennett, the former director of the Equal Opportunities Commission in Wales, was appointed early last month to an equivalent post with the CEHR…. It has emerged that the interviewing panel which appointed Ms Bennett was composed of three white women…

A CEHR spokeswoman said… “The speed at which we are having to recruit, in particular over the summer months, meant we were not able to assemble as large and diverse a panel as we would have liked."

This all seems to have gone down very badly in Welsh equality circles, with mutterings about Ms Bennett’s previous track record, and Phillips’ "control freakery". In fact, there’s a brand new blog devoted to exposing the full horror: =Real Equality=.

Real Equality also points out that, while the equality quangos have all been banged together under Trev, equality reponsibility at ministerial level is still all over the place. Yes, there is the brand new Government Equality Office (GEO), under Harriet Harman, and that is the sponsoring department for Phillips’ EHRC.

But only "gender and sexual orientation are under GEO: race and belief are staying at the Department for Communities and Local Government (or “handling extremism” as Blears puts it), and disability is staying at the Department for Work and Pensions. Age? Who knows!"

So despite all that waffle about a unified approach and a single Equalities Act (still somewhere in the long stinging nettles), it’s yet another dog’s breakfast of indecision and muddled reponsibilities.

And what’s it all costing taxpayers?

Well, Phillips’ annual budget kicks off at £70m pa, plus £24m set-up costs (covering among other things the £3.5m so far spent on consultants).

But as we all appreciate, that’s just the tip of a very large iceberg.

Nov 2007 19

Junk bonds at least give you a nice certificate to hang on the wall
So following Darling’s statement on Northern Rock this afternoon, are we any the wiser?

Not really- "it would be quite wrong to dismiss any option now without proper consideration as some suggest," doesn’t really tell us anything.

More to the point, are we all up to speed on subordinated debt?

Because as taxpayers, it looks like we need to be.

In the event Northern Rock goes into liquidation, we will be waiting in line with all the other creditors. Hoping the liquidators can raise enough from selling NR’s assets to pay us all out. Our problem is that not all creditors are equal. Some have claims that rank a long way ahead of ours.

At the top of NR’s claims tree are the secured creditors. They are people who’ve lent money specifically secured against a chunk of those high quality mortgage loans we’ve heard so much about.

Now, Darling tried hard this afternoon to leave us with the impression that all of our exposure is of this kind- debt secured against "quality assets". But that’s not true.

First, we need to note that because of the way NR funded itself in the wholesale money markets, a large chunk of its mortgage loans have already been pledged as security against market borrowing. Those mortgages have been ringfenced, most via NR’s complex offshore financing vehicle Granite, for the benefit of investors in its Medium Term Notes. Others have been assigned to a presciently constructed "bankruptcy remote special purpose vehicle" as security for NR’s Covered Bond programme.

How much of NR’s mortgages are so pledged? In its mid-year report, NR said it had £54bn of such secured borrowing, implying that over 60% of its £87bn mortgage loan book was pledged.

Of course, we don’t know what’s happened since then because we taxpayers have been kept in the dark. But those who’ve seen the leaked sales memorandum (see this blog) tell us that £74bn of the mortgage loan book is now "encumbered"- ie pledged as security. A chunk is (presumably) pledged to the Bank of England against our £25bn loan , but it sounds like at least £50bn is still pledged to wholesale creditors.

After the secured creditors, next in line come the so called senior unsecured creditors. They get first dibs on any fire sale proceeds left over after the pledged assets have been stripped away. In NR’s case, this ought to encompass all the other creditors with the exception of subordinated debtors. That includes the depositors, and the holders of senior debt issues.

Taxpayers have exposure to this unsecured senior debt via our guarantee to depositors, including all wholesale deposits (see HMT statement here). As at mid-year, such deposits were somewhere between £33bn and £48bn (depending on what exactly comprised "deposits" as opposed to other forms of borrowing.

Subordinated creditors come last, ranking just above the equity investors, who of course get nothing in a liquidation.

And for obvious reasons, NR subordinated (or sub) debt is getting riskier by the day. Moodys just cut its credit rating today, while S&P already assigned it a junk rating two months ago.

Now in theory, we taxpayers shouldn’t have any subordinated debt exposure at all. But according to the BBC’s Robert Peston, the penal element of the interest charged by the Bank of England on our loans to NR is being rolled up as subordinated debt, apparently not to be repaid for five years. Worse, the penal element has been defined as not merely the c 0.5% excess over the normal market interbank rate, but as the c 1% excess over Bank Rate.

According to Peston, it is being held by the Treasury rather than the Bank. More important, it could amount to £500m.

This afternoon, Darling denied it was as much that, but he did not deny its existence. So that’s a tranche of unsecured sub debt we knew nothing about until today.

What else don’t we know? As Mr Rumsfeld pointed out, we don’t know what we don’t know.

But it’s increasingly obvious that taxpayers are exposed to all layers of Northern Rock’s stressed out financial structure. We can take no comfort at all in all those official assurances that our lending is all fully secured. We are at risk all the way down to junk rated subordinated debt.
Nov 2007 19

Liam Byrne, Minister for the West Midlands, has revealed plans for a major new Birmingham acting school according to a report in the Birmingham Post today.

Negotiations are underway regarding the ‘Brit School’, a school with an ‘arts led curriculum’ for 950 students aged 14 to 19, and designed to be a flagship project in the Eastside area which is the focal point of new development plans. The public are to learn more next month, but what we do know is that Birmingham City Council, Birmingham City University and Advantage West Midlands will all be major players in the scheme.Facesad

But why, when the country is so short of skilled young workers, are our public bodies encouraging young people into careers in theatre, television and the media?

Acting is not a profession that should be ventured into without considerable thought, and it is certainly not a career option that should be foisted upon impressionable young people who only see the glamorous successes of film and television. On average an actor will work only 11 weeks of the year, but many will never work at all. Big breaks are few and far between and life is tough temping between auditions, or signing on to the dole between jobs as is often the case.

Knowing the trials of a handful of young actors, all trained on intensive three year degree courses at the big drama schools in London, it is difficult to see why any young person would be encouraged into a life of heartbreak and rejection (not to mention poverty) unless they were quite clearly talented, driven and truly committed to the arts as a vocation. The trouble with arts jobs is simple – there aren’t very many of them, particularly when set against the scores of budding entertainers who want to perform and get paid for it. Nice work if you can get it, as they say.

It seems strange that taxpayers should be called upon to fund training more young people for a saturated profession when there are so many vacancies in numerous practical areas. And as Claire Short pointed out, the city already has the Birmingham School of Acting and Birmingham City University has developed a reputation for the arts. The school itself even appears to be a surplus.

Without intending to insult the artistic professions, it is still the case that the UK doesn’t need more performers. So why should we all pay for them?

Nov 2007 19

BBC correspondent doubts
We currently spend some £26bn pa on incapacity, disability and injury benefits. We have 2.7m people of working age drawing IB.

Everybody agrees* that many recipients are claiming for pretty dubious reasons (eg see this blog), and this morning we get some more detail:

"Almost two thousand people who are too fat to work have been paid a total of £4.4 million in benefit. Other payments went to fifty sufferers of acne.

More than £2 billion was paid in 2006-07 for mental health complaints, including £518 million to those with what are described as “unknown and unspecified” diseases.

Overall more than £1.1 billion was paid to people suffering from a depressive episode plus a further £276 million to the estimated 116,000 claimants with “other anxiety disorders” and £122 million to the estimated 50,000 suffering from a “reaction to severe stress”.

A total of 15,600 people received benefits for “malaise and fatigue” and a further 8,100 for “dizziness and giddiness”. The figures disclose that 4,000 claimants had headaches, 2,700 migraines and 1,890 suffered from eating disorders. About £100,000 in benefits went to those with acne and a similar amount to 60 people with “nail disorder”. Nausea and vomiting cost £2 million in benefits for 900 people."

The reboubtable Frank Field comments:

“It is a racket, which governments have allowed to exist for far too long. I do not blame people for working the system, it is the job of politicians to stop them doing it.

The big change over the last decade has been into illnesses which largely defy a clear medical classification: depression, dizziness and such. It is a move from the tangible illness to the intangible.”

The proportion claiming for difficult to diagnose mental ailments has doubled over the last decade, to an eye-watering 40%.

Of course, if you were unemployed in the North East, you might claim it too. Because incapacity benefits contine to be higher than the alternative Jobseekers Allowance. Yet another of Whitehall’s perverse incentives.

*Footnote- When we say everybody agrees about dubious IB claims, we should exclude Kim Catcheside, the BBC’s social affairs correspondent. This morning Humphrys asked her about the one million people claiming IB who are capable of work, and she reckoned she was not familiar with the figure. We think it probably comes from the Department for Work and Pensions 2005 report A new deal for welfare: Empowering people to work. "We should aspire to reduce the number of incapacity benefits claimants by 1 million over the course of a decade" (para 15). True, that doesn’t mean DWP reckons it can get existing claimants off IB. It’s more a case of reducing the number of new younger claimants coming onto IB to replace those dropping off through hitting pension age (the cohort effect).
Update- Kim Catcheside has been in touch with us following this post. She feels we misinterpreted what she said, and on reflection, we agree. She is of course fully aware of the DWP paper, and its aspirational target of reducing IB recipients by 1m. But that’s not the same as DWP saying 1m existing recipients are false claims. And we can see that. Yet at the same time, the way ministers present this figure, they make it sound like they’re mounting a massive crack-down to get 1m workshy scroungers off benefits and back to work. Sure, the DWP smallprint explains what’s really happening, but that’s not the headline ministers apparently want to see in the Sun and Mail.
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