Jul 2007 16

One problem we face in British politics is the over-centralisation of the political system.  Taxpayers are often financing a system too unfair and iniquitous as to defy belief.  Yet we are too distant from the centre of power, we lack the ability to transform the system that forces us to pay more and more for smaller returns.

Look at this, altogether familiar, scenario.  An MP stands for a party on a platform committed to cutting tax, supporting tax reform or restrictions in public spending.  He runs in a seat overwhelmingly in favour of smaller government, a safe constituency and a seat for life.  Whilst in office, however, our MP votes for tax increases, spending hikes and regulations that impinges on our everyday freedoms.

How do we hold him to account?  His constituency is a one party state.  His constituency party is more loyal than a Politburo conference.  How can we take action?

One simple answer comes from a discussion I had last week at a meeting of Direct Democracy, a group committed to localism and decentralisation of political power.  The idea is one well used across the pond in the States, the innovation to ‘recall’ politicians the people have had enough of.

Simply put, the ‘recall’ is an election initiated when X% of the electorate sign a petition to put the politician on the ballot to see whether they should continue in office.  Should the politician lose, his seat is vacated and a by election takes place.

Eighteen US states have the power to recall their state officials, the most prominent being the 2003 recall of Californian Governor Gray Davis.  He lost the election and paved the way for Arnold Schwarzenegger to emerge as the incoming Governor. 

The situation in California was one the British taxpayer would easily recognise.  The essential problem was a politician interfering to the detriment of upstanding taxpayers.

Using their constitutional rights, Californians rallied to recall Davis.  Of all parties and none they came together to put his legitimacy to the test and ousted him – a real pitchfork rebellion if there ever was one, organised by Californian Tax Activist Ted Costa.

Imagine if we had that power here in the UK.  Directly elected Mayors and politicians can be directly held to account for gross breaches of conduct.  Defectors can be forced to test their new mandate.  Taxpayers can finally have a voice.

Political parties are beginning to democratise, the Conservatives using open primaries to select their candidates is just one example.  However, if we are to empower the taxpayers’ movement, we have to ensure the power to hold politicians accountable is taken away from compromised political hacks and put in the hands of the very people who pay the politicians salaries. 

Jul 2007 16

Good at PR… less good at doing the job on budget
Taxpayers should be very concerned about the parlous state of Metronet. That’s the company that has £17bn of Public Private Partnership contracts to maintain, renew, and upgrade nine of London’s Underground (LU) lines. And today it’s teetering on the brink of bankruptcy.

Metronet has only been going since 2003, when Gordon Brown forced the London Mayor to accept a PPP structure for running the LU. As always, Brown’s motivation was to remove debt financing from the public balance sheet. Everyone agreed the decrepit tube network needed a packet spending on it, but Livingstone’s plan to fund it via US-style municipal debt issuance would have blown Brown’s tricksy Golden Rule fiscal targets (see many previous blogs, eg here).

Hence Metronet, a special purpose company (an "infraco") set up specifically to do this job, but jointly owned by the five major contractors who are doing the actual work- Atkins, Balfour Beatty, Bombardier, EDF Energy, and Thames Water (Thames Water? you ask: that’s down to their tunnelling business and London’s rising groundwater level- see here for shareholder rationales).

Now the thing about special purpose companies like this is that their parent companies’ financial exposure is limited to the initial equity injection- in this case £350m in total. True, these companies have taken on additional "trade" exposure through the contracting work they’ve been awarded by the infraco. But there is no recourse to the parents in the event of the thing going belly up, like Metronet now looks like doing.

So will the parents simply walk away? Atkins Finance Director Robert MacLeod, says: "That’s a hypothetical question I am not going to answer." But we know he’s already been forced to write down Atkins’ £70m stake to zero, and take an additional charge of £30m against over-runs on their station refurbishment contracts. We also know that Balfour Beatty has done the same thing. I reckon we all can draw our own conclusions.

And then what?

Mayor Ken has said he will step in- a great comfort to us all. To prevent that, Brown may order Darling to mount a rescue from No 11.

Either way, I’m afraid we taxpayers are once again on the skewer. Remembering of course that improvements to the tube network formed a key element of that wretched deal to secure the 2012 Olympics. Britain has to do the work by 2o12, whatever it costs.

What’s more, in the real world, there aren’t that many people who can actually do the work. They inevitably include Atkins, Balfour Beatty, etc. So while their special purpose infraco may go under, they will then be free to renegotiate the terms on which their work actually gets done. We schmucks will just have to write the cheque.

PS There is another PPP infraco working on the tube, which doesn’t seem to have the same problems. That’s Tube Lines, owned by Bechtel and Amey. The difference seems to be that they are project management companies rather than contractors, so they put the work out to proper tender rather than carve it up among themselves. Since the latter approach sounds like a surefire recipe for poor value, the obvious question is who decided that was the way to go?

PPS We’ve blogged many times on how our Simple Shopper government routinely gets ripped off when confronted with commercial contractors and other suppliers (eg see here). The BBC’s File on Four has just investigated bid rigging in the construction market (see report and listen again here). Among other things, it reports an OFT investigation involving £30m of potentially crooked contracts at the Queens Medical Centre in Nottingham. An industry expert is quoted as saying "Fraud in the construction industry is widespread and this covers all sorts of new-build contracts, refurbishment contracts, and maintenance contracts, where overcharging can be disguised within invoices." So how well do we reckon the Simple Shopper deals with it?

Jul 2007 16

The Times reports that this week the government has proposed to allow local authorities to levy an additional tax on businesses in the form of an infrastructure tax which will be paid by business in the city of London, and will be limited to 4p in the pound. This new tax is being introduced to fund the Crossrail system which is estimated to cost the Government around £15 billion.

Business already pays far more tax than it needs to. For the tax year 2007-8 businesses will pay over £50 billion in corporation tax alone. This is more than enough to pay for Crossrail several times over in just one year.

The government could afford projects like Crossrail if it were to reduce the amount of money it squanders in waste. This year the government has wasted £82 billion of its tax revenue, which would pay for five Crossrail systems with £7 billion to spare.

Jul 2007 16

Yesterday the Sunday Telegraph reported on a TaxPayers’ Alliance study of local government’s attempts to fight global warming:

"Using figures obtained from 25 councils across
England and Wales, the Taxpayers’ Alliance, a pressure group,
calculated that councils on average now employ eight people to work on
green issues. If that figure were repeated across all 442 councils in
the UK, the total number of council staff employed to deal with the
environmental agenda would be 3,494. The average salary paid to such
staff was £29,283, suggesting a total expenditure by councils across
the UK of £102 million.

News
of the spending comes as many local authorities face criticism for
axing weekly rubbish collections and reducing long-term care for the
elderly. Help the Aged recently warned it was "deeply worried" about
councils slashing the number of people eligible for carers in their
homes and underinvestment in residential care. Since 1997/98, the
average council tax bill has almost doubled from £564 to £1,078."

The study found that:

  • On average, 8 people work on climate change in each council.  If the same is true in all the 442 councils that means 3,494 local government employees working to prevent global warming across Great Britain.  If they are all paid at the mid-point advertised for the (quite junior) Islington Carbon Reduction Advisor’s role their total salaries could add up to over £102 million.
  • Tower Hamlets employed the most with 58 staff working on climate change.  As we blogged last week, despite this and a Corporate Director of Environment and Culture earning £148,173.38, Tower Hamlets has the worst recycling record in the country.  Tower Shamlets indeed.

Matthew Sinclair, Policy Analyst at the TaxPayers’ Alliance, said:

“Council tax has doubled in a decade and town halls are spending more and more of our money just so they can say that they are doing something to tackle climate change.  Local bureaucrats are wasting huge amounts of staff time and huge amounts of our money trying to save the planet.  It is an expensive and futile gesture when China is building big coal power plants every ten days.”

Download The Global Warming Industry in Local Government (PDF)

Jul 2007 16

Antieu We blogged a while ago about a BBC probe into its own bias.  Last week we had the BBC smear campaign against the Queen.  Now the BBC is probing the Today programme to gauge the extent of its bias in favour of the European Union.

In a letter to Sir Michael Lyons, UKIP Peer Lord Pearson claimed only one in five interviewees on the Today show held a eurosceptic viewpoint.  Lyons’ reply pledged an inquiry by the BBC Trust into Euro-bias.

This is hardly surprising.

For years the BBC has been pilloried for its taxpayer-funded Euro-bias.  When the Euro was on the political agenda the BBC commissioned ‘Referendum Street’ where an ‘average’ street debated the pro’s and cons of the Euro and then voted – shock, horror – for the Euro.  This all came at a time when the overwhelming majority of the public were firmly opposed to the Euro, and have been since.

This means your money paying for views you don’t accept or want thrown through your TV screens day in, day out. 

Not that this development is anything to cry about.  With the BBC under even more scrutiny the public will quickly come to the conclusion that it needs to be privatised, so its views can reflect the demand and opinions in the market and not the wishy-washy liberalism of the metropolitan elite.

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