Nov 2007 26

The FT reports a new CBI report endorsing new green taxes.  The reports supports a range of policies.  Strengthening emissions regulations on cars are easy for British business to endorse as our car production is now almost entirely foreign-owned.  The central recommendation, to strengthen the EU’s Emissions Trading Scheme, has been characterised by economist Greg Mankiw as thinly veiled corporate subsidy:

"Cap-and-trade = Carbon tax + Corporate welfare."

Both BP and Shell made profits (PDF) from the scheme while NHS hospitals paid millions.  Both companies had members of staff contribute to this report.

More broadly, this report is an attempt to pay Danegeld to the environmental movement.  The authors hope that they can divert environmentalist fervour into corporatist policies that will either provide them with a subsidy or impose further regulation which gives a competitive advantage to big businesses competing with small firms.  The reality is that they will further strengthen unhinged, radical environmentalism and do immeasurable damage to business interests in the medium to long term.

Nov 2007 26

ClownsIs nothing in this country sacred, nothing too out of reach of the taxman?  Today in the Telegraph it appears the taxman is trying to get his beak into pigeon racing.  Yes, pigeon racing.  As pigeon racing isn’t recognised as a sport and therefore doesn’t qualify for tax relief, pigeon fanciers are subject to business rates on the shed where they store the competing birds.

We can add this to the list of reasons how the government is getting bigger and why we need to fight to get the government out of our pockets and back to doing what we want it to do, to keep us safe and let us get on with our lives. 

Usually with these blogs I encourage you to write and complain.  Not this time!  Write to the Royal Pigeon Racing Association to support them in their campaign to be registered as a sport to claim tax relief.  You can contact them by calling 01452 713529 or through their website.

Do get in touch with the RPA and stand by them in their struggle against the taxman. 

Nov 2007 25

Champagne bureaucrats
In the lavish expenses news this week:

Met chief spends £15 grand on drinkies- "Andy Hayman, the Metropolitan police anti-terrorism chief, has been questioned over thousands of pounds spent on hotel expenses and drinks for his staff. He has been asked to explain at least £15,000 expenses that included claims for “inordinate amounts” of drinking with colleagues. “Apart from the money, what happens if they are all out drinking when a bomb goes off?” said one Met official. The married father of two has been quizzed about his relationship with Sergeant Heidi Tubby, his former staff officer. Tubby is said to have accompanied him on foreign business trips at public expense." (Sunday Times 25.11.07)

£330 grand for MOD ducking stools and champagne- "DEFENCE officials entrusted with ensuring troops are properly equipped in Iraq and Afghanistan have spent £7,000 to go on a team-building event, featuring hot tubs, ducking stools and celebratory glasses of champagne… the Defence Equipment and Support division has allocated £330,000 for civil servants to go on courses." (Sunday Times 25.11.07)

Regional quangos blow £8m on boonies- "Nine regional development agencies… free-spending habits are revealed in documents obtained under the freedom of information (FOI) act, which show that expenses claims reached £8m (read the documents: click here and here). Eight of the nine development agencies decided it was essential to send a contingent to a property trade fair in Cannes. Seeda took 13 staff to Mipim, a four-day event based in the Palais des Festivals, spending £24,000 on dinner, brunch and other events at the exhibition. Meanwhile, the LDA flew in 14 people, allowing staff to stay at four-star hotels. The South West of England Regional Development Agency spent £61,000 at Mipim and the body promoting the West Midlands held an £8,000 cocktail reception in Cannes. Claer Barrett, managing editor of Property Week magazine, said Mipim was “basically a four-day party” with “loads of lobster and champagne” on yachts. Staff at Yorkshire Forward had an even more glamorous assignment: to mix with Hollywood actors, including Jean-Claude Van Damme, and Bollywood stars such as Preity Zinta and Shilpa Shetty, at the International Indian Film Academy weekend in Dubai in 2006. It cost £20,000 to fly 15 staff, 10 of whom flew business class, to the four-day jamboree." (Sunday Times 25.11.07)

Quango chief spends £50 grand pa on taxis and limos- "THE part-time chairman of the quango that promotes the southeast of England to business spent more than £50,000 on taxis and chauffeur-driven cars last year. James Brathwaite, who chairs the South East England Development Agency (Seeda) on a three days per week contract, spent £51,489 on taxis and “executive cars". (Sunday Times 25.11.07)

Defra books into £310 hotel rooms- "GOVERNMENT officials sent to contain the avian flu outbreak have enjoyed the luxuries of some of Suffolk’s most prestigious and expensive hotels it has been revealed. Critics have rounded on the Department for the Environment, Food and Rural Affairs (Defra) for spending thousands of pounds housing staff at The Ickworth, describing the move as a “grotesque extravagance”. Standard double rooms for bed, breakfast and dinner at The Ickworth, near Bury St Edmunds, cost £310." (Evening Star 23.11.07)

£1.4m Home Office art fiasco- "An annual competition would invite members of the public to describe, in 150 words, what it means to be British. The winning entries would be engraved on the pavement outside the Home Office in Westminster. Yet four years after the "artwork" was dreamed up, at a cost so far of more than £18,000… only three stones have so far been engraved, and the words are almost unreadable. No work has been done for the past 12 months…. Funding has come from a £1.4 million budget for artworks in and around the Home Office’s £311 million Marsham Street headquarters, which opened in 2005… This is the second art project to run into trouble at the building… a £125,000 deal to buy a six-storey high abstract sculpture by Eva Rothschild collapsed because it was too heavy to hang in the building’s atrium." (Sunday Telegraph 25.11.07)

Total for week- £9,795,310
Nov 2007 23

The race is on for the position of chief executive at the Regional Development quango Advantage West Midlands, and although the lucky winner will be paid with your money and have hundreds of millions of your tax pounds to spend, you will have absolutely no say on who gets the job.

Flying in the face of democracy, the decision will be made by the similarly unelected AWM board and then given the okay by Minister for the West Midlands, Liam Byrne MP. You can rest assured that your opinion will not be sought; you’re just expected to put up the readies.

According to the Birmingham Post the two front-runners are the current deputy Mick Laverty, and English Partnerships regional director for the North West and Midlands, Paul Spooner.Throne_3  

  And who can blame them for filing their applications? Not only does the chief executive preside over a £300million-per-year budget, they also get rewarded with a hefty £160,000 annual salary. Not bad, especially when you consider the 20% performance related bonus could bump the successful candidate up to a substantial £192,000 per year.

The job was advertised as ‘not for the faint hearted’, but the chief executive needn’t worry as if the pressures of the job become a little too much they have a whole seven weeks holiday leave to relax in…

Any applicant with their eye on the ball will also have spotted the potential for this salary grow even larger, with the quango taking on extra powers with the demise of the Regional Assembly over the next two years or so. Extra responsibility is likely to mean extra cash for their “troubles”.

So as another tsar prepares to take their place at the head of what has been called a ‘regional dictatorship’ all we have to look forward to is having our money spent in increasingly irrelevant and bizarre ways. Purple ornamental tree anyone?   

Nov 2007 22
Those HMRC staff cuts
Yes, the PM can blame the junior official who downloaded the data and sent the discs through the ordinary mail. But come on. How on earth was it possible for him to do it? What’s to stop a criminal gang member getting a job round at HMRC and just helping himself? How do we know it hasn’t happened already? The entire set-up is a shambolic disgrace.

And from what we know so far, it looks like a major factor was the impact of staff cuts. As HMRC’s Annual Report shows, since 2003-04, the department has cut over 10,000 staff (net, full-time equivalent), with a further 2,500 going this year.

These cuts are part of the Gershon "efficiency" programme, very familiar to regular BOM readers, and the personal idea of one G Brown. It was his blunderbuss scheme to make government more cost effective by cutting spending and staff so as to "release resources for the frontline".

He launched it amid much fanfare in the 2004 Budget, with the following ambitious targets:

Right from the off, it was a classic top-down exercise visited on departments, with very little practical idea how the cuts could be achieved down at ground-level. So right from the off, departments used every trick in the Sir Humphrey playbook to deliver their targets without necessarily making real cuts. Which is why BOM has always been very sceptical about the overall savings (eg see this blog, and many others).

Since 2004, in every budget and pre-budget report, we’ve been given an update on supposed progress. By October this year, according to Darling’s Pre-Budget (pre-aborted election) Statement, the Gershon programme had delivered "annual efficiency gains of over £20 billion… and is on track to deliver the goal of £21.5 billion by the end of March 2008". Moreover, there have been "gross reductions of over 79,000 civil service and administrative and support related military posts towards the target of 84,150, with over 13,000 of these reallocated to frontline roles" (para 3.28).

But according to the Public Accounts Committee, based on the most recent National Audit Office probe (see this blog), only one-quarter of the reported cuts are "reliable". By implication, the rest are a figment of the commissars’ fertile imagination.

So on that basis, of the claimed £20bn savings, real savings are only about £5bn.

But even those "savings" have come at a considerable cost in terms of service quality. For example, the PAC found that "savings" at the Department for Work and Pensions had increased the average time taken to process Jobseeker’s Allowance claims from 11 days to 16 days. And the Department of Health, while reporting over £1 billion of efficiency gains from reducing the average length of time patients stay in hospital, had taken no account the fact that emergency readmissions had risen consistently.

The very worst cases have been where cuts have been imposed in areas already struggling with other changes.

For example, last year, we had the fiasco at the Rural Payments Agency (eg see this blog). There, a quango was attempting to develop and implement a brand new, highly complex, and IT-intensive farm payments system, at the same time as Gershon cutting 45% of its staff (see this blog). The combined effect was disastrous. RPA staff were reorganised into specialisms, rather than the previous "case-working" structure, because that seemed to be more efficient. But it meant that there was no fallback when the new IT systems failed. The old experience and knowledge had simply been discarded.

And taxpayers had to pick up a big tab to put things right- around £0.6bn, including a £436m fine from the EU for failing to meet their deadline (see this blog). In other words, the Gershon "savings" ended up costing us money.

And now we have HMRC.

As we blogged yesterday, the problem goes beyond a simple matter of staff cuts. Just like at the RPA, there are also new IT systems, and there are new "lean production" work patterns being imposed- less case working, and more specialisation (aka dumbed down production line jobs). It’s a toxic combination, and staff morale is rock bottom (there is a dedicated chat room for HMRC staff called Disgruntled Lemmings- mysteriously "unavailable" at present).

Now, as taxpayers, we naturally applaud any sensible moves to make government more efficient. But imposing arbitrary staff cuts ahead of securing the IT systems required to support them is a recipe for disaster. And a shortcut to even higher costs.

Let’s just think the unthinkable. Let’s suppose these data discs have fallen into criminal hands. What will it cost us?

The going rate for bank account details on the international crime market is reportedly around £200 each. We don’t know how many of these lost 25m records include bank accounts, but given what we do know, 5-10m seems a reasonable guess. Which means the black market value of these two discs is an extraordinary £1bn – £2bn.

But if their black market value is £1-2bn, you have to believe the likely loss from bank accounts is a multiple of that. We have no idea what multiple, but five-times is as good a guess as any other. Which means a bill of £5-10bn. A ten-times multiple means £10-20bn.

And who do you think will pay? It won’t be the banks, despite the impression Bottler and Darling have sought to give. It will be us taxpayers.

And the cost doesn’t end there. Everyone will need a new bank account (if you’ve been claiming Child Benefit in the last five years and haven’t switched yet, do it tomorrow). Everyone may need a new National Insurance number. And for the next 18 years children hitting 18 will need to check their credit records to make sure someone isn’t applying for credit in their name.

And we taxpayers will have to make good all the losses. Which will hugely outweigh the savings made from the Gershon cuts.

You know, it may be time we stopped politicos playing with blunderbusses altogether.

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