Back office v front line in Liverpool
The government rhetoric around the council cuts in England includes a traditional and repeated storyline: that dinosaur Labour authorities are putting party politics before people, making unnecessary cuts to front-line services before they have exhausted in-house efficiencies.
Only the other day the prime minister singled out one authority for special criticism at prime minister's questions. "Let me take the case of one council - Liverpool council. The cuts to Liverpool council will mean that, by 2013, they will go back to the level of grant they got in 2009", he said. "So what we are seeing is politically-motivated moves by Labour councils."
One of the most deprived cities in Europe, facing some of the deepest cuts in Britain is accused of not having, in the government's phrase, a "can-do council". When I asked for evidence of what they meant, the Communities Secretary Eric Pickles' officials sent me "some general facts and figures about Liverpool that you might find useful".
They pointed out that the chief executive "has taken a 3% pay cut but that still brings him in at around £197k". They reminded me that even though the council is facing an 8.8% reduction in spending power next year, "they will still be getting grant funding of £795per head". And said that "there's no excuse for salami-slicing libraries and bus services before in-house efficiencies have been exhausted".
The criticism has led to fury on Merseyside where last week Labour, Lib Dem, Liberal and Green councillors put aside political differences jointly to sign a budget requiring £91m worth of savings next year.
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When I met city council leader Joe Anderson, he struck me as a pragmatist not an ideologue. He pointed out that since Labour regained control of the authority last May, the authority has implemented efficiency savings worth £30m, more than any other council in the country. He has challenged the government to go through Liverpool's finances.
"We have done everything that we possibly can with the budget we were given to protect services and people should come to the city and see the books for themselves and see what we are doing and they will certainly see that from our point of view we couldn't do anything any better."
Ministers have so far declined the city's invitation to examine the books, so we asked an independent management consultant to take a look. Colm Reilly, a senior executive with the global firm PA Consultancy, advises governments on how to make efficiency savings. When he scrutinised Liverpool's accounts he found the city has already saved £70m in efficiencies with plans for 30 million more. It wasn't the back office that required reform, but the front line, he said.
"They are going to have to start looking at sharing the front line services that they provide across their traditional boundaries, a regional approach to providing services, ranging from fire services right the way across to street sweeping, garbage collection and even public libraries."
The suggestion is that Liverpool's civic pride and political purpose has prevented it embracing ideas which might blur the city's municipal identity I have spoken to one official who claims that some council executives are lukewarm about shared procurement and service provision, reluctant to give up autonomy. Another source told me the authority, still the city's largest employer, will not want to lose control over jobs and services. But Mr Anderson says he is open to any ideas that will improve efficiency.
"Liverpool is progressive in its attitude in terms of changing and we will do that, but what I say to government is that we need time to do that. It cannot happen overnight and if you want it to happen overnight then people will suffer."
There is a hint in the government's criticism of Liverpool that this is a city still echoing to the battle cries of Militant Labour in the 1980s when the council fought Margaret Thatcher's cuts to local finances, setting an illegal budget. But Mr Reilly says that's "not borne out by the evidence of the documents and the plans that are laid out".
He noted how the council has strong links with the private sector including a joint venture with BT to provide many council services. Liverpool is an active member of a group of Merseyside councils looking to share procurement and service provision.
"Liverpool has saved significant monies in the back office in the last three years and they have increased that level to this year. What we see here is a city council that cannot actually make the scale of savings that they have to make without getting into the front line services and somehow reconfiguring those or somehow changing the way they are delivered."
There is an argument that Liverpool could perhaps have prepared the ground better for inevitable cuts. Greater Manchester councils, the rivals up-river and canal, have moved more quickly to sharing purchasing and service systems. But Liverpool insists it is on the same track and the problem is not ideology or a lack of can-do. Efficiency measures take time, they argue. The cuts start to bite within weeks.
PS In response to some of your comments the basic salary of Liverpool's previous chief executive Colin Hilton was £229,555. He was eligible for a performance related bonus on top with a total remuneration for the year up to last April calculated at £278,714. The new chief executive, appointed in the summer, receives a salary of up to £197,000 with no opportunity for bonuses.
At the time of the new chief executive's appointment, the council said:
"We are the first council in the country to cut the pay of its top 40 staff by up to 15%. We have also saved a further £1m by axing 12 senior posts. The new chief executive will be paid £35,000 less than the previous one, but this is one of the biggest and toughest jobs in local government - in charge of a budget in excess of £1bn - and we want the best candidate for the job."
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A Tory minister kicking Liverpool, there's a surprise. A think the chip is on Mr Pickles shoulder not Liverpool's.
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few chips remain on Mr Pickles shoulder for long.
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Sorry I cant think of any chip related gags, but I found this funny, "The government rhetoric around the council cuts in England includes a traditional and repeated storyline: that dinosaur Labour authorities are putting party politics before people"...It seems to me condem cuts are based on ideology and they are the ones putting party politics before people. What ever cameron says expect the opposite to happen, we will protect jobs, so they make more people unemployed, we will ring fence the Nhs etcetera, so they cut front line staff, we are doing all we can to help British citizens in Libya, oh sorry for not doing anything...
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Mark Easton.
"But Mr Reilly says that's "not borne out by the evidence of the documents and the plans that are laid out"."
yet another example of the government basing its policies on belief (or dogma) then, instead of evidence. living here is so depressing.
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I love how the denialists jump on anything that suits them without a hint of critical thought. First off, this whole summation relies on the assumption that the services provided by the council are all necessary. There is no suggestion that some things are outside the remit of the council and therefore should be scrapped.
Secondly, a 3% pay cut down to £197k a year when the overall savings are supposed to be at 8.8%? When you're getting paid more than the PM of the whole country, facing 8.8% budget cuts to your departments on average, to then go and take a below-average pay cut means you raise the average cut to every other cost across the council. By contrast, if he took the average 8.8% cut, he'd be on about 185k by my reckoning - still more than the PM. That's a political cut; one big enough to avoid attention but small enough that it's still silly money.
As for "ideological cuts", that's the common line bleated out by those who don't understand basic finance nor employ common sense. What does Cameron have to gain by making the lives of people harder? Nothing; it actually harms his chance of re-election. It's not ideological; it's economics. 57% of GDP in the North comes from the public sector. That leaves 43% from the private sector. Except, that 43% is the bit that pays taxes so that the 57% can exist.
Grasp this simple point: the public sector does not make money; it consumes it. Every job in the public sector costs money. You tax those public sector jobs, and all you're doing is taxing money that came from taxes on the private sector in the first place.
You seem to want the public sector to provide jobs for everyone who doesn't have one - sorry, financial suicide. Every job costs money in the public sector. Justification is what it's all about, and front-line services can be justified. The rest, such as £197k pa along with pensions far better than private sector ones, cannot. 3% pay cut is pathetic given the circumstances.
Want progressive policies? How about you tell the council chief exec that he earns more money, and so progressiveness dictates that he should share more - not less - of the cuts.
Especially when it leaves you about 7 times the national average salary.
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Mark
Well presented report last night. I am afraid I did not find Colm Reilly all that convincing as he was not going to bite the hand that feeds.
The clue to the issue perhaps lies in this part of the above:
`...I have spoken to one official who claims that some council executives are lukewarm about shared procurement and service provision, reluctant to give up autonomy. Another source told me the authority, still the city's largest employer, will not want to lose control over jobs and services.'
The power of patronage runs strong in local government particularly in those parts of the country which are more devoid of alternative employment.
However, as an outsider to local government who often due to my voluntary activities has to look inside from time to time I do get very agitated about how they operate their budgets. You are presented with five year plans which always show how income is to rise. One then asks the presenter as to how they know this trend in income is to continue. One is then informed these figures are to allow for inflation. Yet if there is lesser inflation the budget still gets spent in full. In my view there is an expectation of continuing ever-increasing budgets.
This is the problem with all government budgets both local and national, they have an in-built expectation of never-ending growth from a permanently expanding income stream. But life isn't like that. So when someone hits the reverse gear they are quite unable to cope.
The argument that it takes time to become more efficient is valid but the question then has to be asked as to why outcomes have not been optimised in the first place.
What I do find amusing is that despite all these cuts fiscal expenditure is still going up. There is no cut in government spending overall but only because more is having to be spent on debt-servicing.
Sadly the debate about cuts is largely bogus. They are not ideological, they are due to debt because we have aspirations well in advance of the ability of our economy to provide. The solution lies in arranging our economy to provide. Now that would be a neat trick but it is well beyond the competence of both the Town Hall and the government alike.
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Surprise Surprise that once again the tory-led gov't is attacking a labour council. I saw some figures and charts that came from the treasury the other week on a blog post at http://manchester.gov.uk it shows that liverpool and manchester are the hardest hit areas, which we knew. But it is so significant it is untrue, and indeed there are many lib/tory councils getting rises in grants! it is utterly ridiculous and it has to be said ... beyond the dreams of even the iron lady
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Marnip #5.
"Grasp this simple point: the public sector does not make money; it consumes it. Every job in the public sector costs money."
grasp this simple point: the public sector is comprised of the people it serves, making money is not the objective; you want to play markets? go into finance.
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#5 Marnip,
I’m reading this kind of tosh all the time now – most often in the right-wing press and from the ‘Taxpayers’ Alliance’.
Namely, ignore the tens of millions in cuts and savings that councils have to make and concentrate on the minutiae that will not make a blind bit of difference. In practical terms so what if the chief exec of a council earns £197k or £180 or whatever. This will not keep a single library open or pay for a teacher – it is the politics of the symbolic and is being used as a fig leaf to attempt to shift the blame for cuts from Government to some nebulous idea of ‘council fat cats’.
In addition, most things that council’s do that are considered ‘frontline’ are those things that central Government tells them to do. Councils have a statutory duty to perform certain tasks - if these statutory requirements are removed, then I’m sure that councils can find even larger savings.
And of course, we get lazy and disingenuous epithets such as ‘denialists’used to describe those who do not entirely agree with the pace, direction and depth of the cuts imposed by Government. Few if anyone denies that we need to make cuts in spending in order to reduce the national deficit. However, there is more than one way of doing this.
Right-wing apologists such as Marnip have very little to say after you strip away the symbolic politics and the ‘denialist’ rhetoric. Liverpool has been independently shown to have made tens of millions in efficiency savings, but is being blamed for making frontline cuts by a cynical Government that lies every time it opens its mouth.
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On this blog, contributor after contributor has stated that 'localism' is purely and simply a scam to pass the buck on cuts.
Tory central government makes cuts ... force local people to administer the cuts ... blame the local people for the ensuing collapse.
This is exactly what is happening in liverpool.
Are we all psychic ??? How could we possibly know this was going to happen even before it happened?
Clearly we are not as gullible as cameron and co. think.
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At 1:51pm on 24 Feb 2011, jr4412 wrote:
"grasp this simple point: the public sector is comprised of the people it serves, making money is not the objective; you want to play markets? go into finance."
You missed the point, as usual with those who take no thought for the 'morrow.
How does the public sector serve anyone when it doesn't make any money? Answer: as you keep being told, the money comes from the private sector. The more you expand the public sector, the more money you need. 43% is supporting 57%.
I really don't understand why you're so obstinate about something so blindingly obvious. It's not difficult to understand; you simply don't want it to be true. Those who live in a fantasy world have no business arranging affairs for those of us living in reality.
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5. At 12:54pm on 24 Feb 2011, Marnip
Grasp this simple point: the public sector does not make money; it consumes it. Every job in the public sector costs money. You tax those public sector jobs, and all you're doing is taxing money that came from taxes on the private sector in the first place.
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I do love this arrogant tory rhetoric.
A perverse ideology where a hairdresser IS contributing the economy because their service creates value ... but a doctor saving lives in the public sector has NO value because there was no direct charge for their service.
Apparently though, private health care, charged for by insurance, does contribute value and IS economic activity.
Even more bizarrely a spiv gambler in the city of london who creates absolutely nothing and costs the whole country trillions in lost economic activity is highly valued.
With people like this running the country, no wonder things are collapsing.
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Oh, and an addendum:
"the public sector is comprised of the people it serves, making money is not the objective"
Tell that to everyone without a job. If the public sector is comprised of the people it serves, and those people it serves logically need to make money, by your logic so should the public sector.
Of course the public sector doesn't have to make money, and no one suggested it did. What is being suggested is that it cannot replace the private sector - and that's how Labour tried to use it.
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9. At 2:29pm on 24 Feb 2011, Bluebaldee wrote:
"Namely, ignore the tens of millions in cuts and savings that councils have to make and concentrate on the minutiae that will not make a blind bit of difference."
You mean apart from suggesting someone should look at the remit of the council instead of simply saying they run what they run efficiently? If a bank started selling computers, you'd say it's not their market and they can't operate efficiently in it. Yet, when it's the council, there seems to be no suggestion that they could EVER provide something that's not cost-effective, or constitutes nannying the public...no...never.
"In practical terms so what if the chief exec of a council earns £197k or £180 or whatever."
So what if? You understand that they are paid through tax money...to spend tax money. It is more that the most important public office in the country; the PM's office. Yes it's a problem.
The point you missed, however, was that the average cut is 8.8% across Liverpool Council, and he took 3% cut - raising the cuts made for frontline services. In order for it all to average out to 8.8%, every other cost must be cut by an average of GREATER than 8.8%. This is mathematically, undeniably a move that causes front line services to be cut greater than is required. Basic maths is all that is required here. Why can't you see how taking a 3% pay cut is the definitive proof needed to say the councils are cutting more than they need to in more important places?
"Few if anyone denies that we need to make cuts in spending in order to reduce the national deficit. However, there is more than one way of doing this."
Yes - and whose job is that? The councils. They're claiming now that they have no choice. I just mathematically disproved that right above. Simple arithmetic means.
"Right-wing apologists such as Marnip have very little to say after you strip away the symbolic politics and the ‘denialist’ rhetoric."
Apart from the mathematical explanation given above. Yes, don't bother with facts. They cloud things.
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12. At 2:45pm on 24 Feb 2011, jon112dk wrote:
"A perverse ideology where a hairdresser IS contributing the economy because their service creates value ... but a doctor saving lives in the public sector has NO value because there was no direct charge for their service."
Oh for the love of...learn to read. Nowhere did the word "value" appear in my comment. You can add as many words as you like to justify your wreckless and cowardly approach to reality - which appear to be to deny it.
What I DID say was this: "the public sector does not make MONEY; it consumes it." (emphasis added).
If you don't know the difference between value and money, then there really isn't much point talking to you. Whether you like it or not, money. runs. out. You can place as much subjective value in doctors and nurses as you like, but if you can't pay them a salary because you can't borrow any more money because you spent too much and you have no private sector to tax because everyone works in the public sector...well then, they aren't going to do the job for free.
Doctors and nurses (my partner is a nurse in the NHS) do not, and cannot, work for free. The money that pays them comes from the private sector, or borrowed from other countries. Welcome to reality.
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Marnip #14.
someone as 'hot' on mathematics as you ("Basic maths is all that is required here") should be able to appreciate that averages are pretty worthless -- all it takes are a few outliers and the whole picture is distorted. use arithmetic mean if you want to construct meaningful arguments.
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#16 oops.
that what comes of trying to respond quickly, errors creep in, sorry.
"use arithmetic mean if you want to construct meaningful arguments."
should have read:
use the arithmetic mean to make your point, use the median if you want to construct meaningful arguments.
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16. At 3:15pm on 24 Feb 2011, jr4412 wrote:
Just a great big no. Do the calculation yourself - this cannot be distorted by anything. If you cut anything by less than the average, then the cuts made to everything else together must be higher than the overall average.
It can't be distorted the way you claim; you don't understand childrens' mathematics obviously. Stop embarrassing yourself.
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15. At 3:10pm on 24 Feb 2011, Marnip
What I DID say was this: "the public sector does not make MONEY; it consumes it."
================================
Adding 'value' to goods or services IS economic activity. Without added value, money is just something the government prints. Ask zimbabwe.
How about the hair dresser with their own business - do they 'make' or 'consume' money by your theories?
Do you accept a service can 'make money' ?
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Marnip #18.
"..you don't understand childrens' mathematics obviously. Stop embarrassing yourself."
{smiles} if you can't play the ball, play the man, eh?
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17. At 3:24pm on 24 Feb 2011, jr4412
I got that, but you're still wrong. No one is talking about what the nominal mean is. We're talking about relative changes in the variables which constitute the mean.
Those aren't distorted by anything. Think about it:
There are 10 different costs for a council, adding up to 1,000,000. You are told to cut 10% out of that budget. You could cut 10% by cutting each individual cost by 10%; ie. cutting each of the 10 costs by 10%.
Now, say instead of this, you cut 1 of those 10 items by...let's say 3% instead of 10%. That 7% saving on that item which you HAVEN'T bothered to save, must be found in one of the other 9 items in order to make an overall cut of 10%.
Therefore, the average cuts made to the other 9 items is actually above the original 10%, because you've cut one item by less than the overall cut.
Again...you don't understand what I'm saying.
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Here we are again with the `four legs good, two legs bad' arguments of Left and Right. This is a futile argument that does nothing to resolve the issues we have in hand.
For better or for worse local authorities provide public services. These services add value to the lives of the beneficiaries, which is the whole point of them. So there is value to the cost paid in both qualitative and quantitative terms.
However, having said that we also have to take on board the reality that government at both national and local level is notoriously expensive. In some instances it is inefficient and incompetent. At senior level in local government for both elected and appointed officers it can be quite self-serving.
All of this goes back to the managerial competence that prevails in the UK. In some places this is excellent but across entire swathes of the economy, in both private and public sector roles management is appallingly bad.
The only thing that prevents the same payola that persists at high level in local government from breaking out in the private sector is that the money would quickly run out. High pay has become a scandal in this country and needs to change as it is indefensible.
In my small experience of local government a Chief Executive being rewarded just short of GBP200K per annum equals either two libraries or half a regional museum. To me the libraries and the museum are more value to the public than a bloke sitting in a large office with some furniture.
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19. At 3:41pm on 24 Feb 2011, jon112dk
"Adding 'value' to goods or services IS economic activity."
Monetary value, yes. How do you think we add everything up in economics? You take the MONETARY value. You can't add up how much we all value doctors and nurses. It's a subjective idea.
Money is objective, at least in the context here. If you don't have the money to pay for something, you do not receive it.
Example: If you don't have the 21k to pay a nurse, you can't hire one.
As usual, naive and immature idealists accuse everyone else who disagrees with them of having an agenda, then twist the debate from one of mathematical/financial fact, to one where you actually quote me and then have the audacity to change words like 'money' to 'value'.
How dishonest of you.
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Marnip #14
"Simple arithmetic means."
Yes. Simple. Let's look at the figures.
A CE takes a 3% pay cut, which brings his salary down to £197,000.
Which means his salary before the pay cut would have been in the order of (£197,000 x 97/100)= £203,100 (with rounding).
You demand he should have taken an 8.8% pay cut (8.8/100 x £203,100)= £17,873 - a difference of £11,780
Now, Liverpool City Council needs to make savings of £91,000,000.
The difference between what the CE did take and what you say he should take amounts to (£11,780/£91,000,000 x 100)= 0.013% of the total saving required.
Where do you suggest the other 99.987% of the necessary savings come from?
Seems to me your argument is 0.013% arithmetic and 99.987% tory rhetoric.
Simples, yes?
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Marnip #21.
your (very) simplistic argument is based on the assumption that each of the budget areas is of equal importance. that is a big problem because that is simply not the case. I've re-read your comments and am inclined to agree with jon112dk that you've trouble with 'value's.
I also disagree wrt "..aren't distorted by anything"; averages are very sensitive to anomalous data points ('outliers').
I feel, however, that there's no value (pun intended) in carrying on this particular debate.
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19. At 3:41pm on 24 Feb 2011, jon112dk wrote:
Sorry, missed this:
"How about the hair dresser with their own business - do they 'make' or 'consume' money by your theories?
Do you accept a service can 'make money' ?"
Of course services can make money; of course a hairdressers can make money. It's private sector. I really don't see what's so difficult about this. You act as if I'm saying something controvertial.
We spend money on the public sector. This money comes from the private sector's taxes, and borrowing (currently). The private sector provides its services by selling its services - some of the profit goes to covering the cost of sales.
The public sector does not, however. Public sector money comes from private sector taxes.
I really shouldn't have to, but I feel the need to say this before you make up anything else I'm saying: I'm not against the public sector. I'm a Keynesian economist; I have no problem running deficits, nor providing public sector services that are required, such as the NHS, rubbish collection, schools, roads, street lamps, parks, and so on.
However, it seems to me that if anyone expresses any words of criticism against HOW something is run, people like you tend to jump on them accusing them of selfishness, rampant capitalism or of being ideologues.
The simple truth is money runs out. It runs out with your personal finances, so why there is such objection to the concept with public finances is beyond me.
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Efficiency savings take many months and some years and the example of the bodged DoT shared services shows that such approaches do not always save money. Dont be naive -. Pickles is not about efficiency - he's about cutting services and sacking council employees
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#22 stanilic
... having said that we also have to take on board the reality that government at both national and local level is notoriously expensive. In some instances it is inefficient and incompetent. At senior level in local government for both elected and appointed officers it can be quite self-serving.
All of this goes back to the managerial competence that prevails in the UK. In some places this is excellent but across entire swathes of the economy, in both private and public sector roles management is appallingly bad.
The only thing that prevents the same payola that persists at high level in local government from breaking out in the private sector is that the money would quickly run out. High pay has become a scandal in this country and needs to change as it is indefensible...
I have worked in the public sector for 6 years, having previously worked in the private sector for over 30 years. I agree with you, management in the UK is generally not good. I have direct experience of American management which I found much better.
The people are the same over the piece, the critical difference is 'Darwinian'. Poor management in the private sector makes firms go bust. More likely, they get taken over and much of the senior management sacked.
In the private sector I worked in companies which went through wave after wave of redundancies, year after year to survive. Usually it was middle management that was made redundant. Senior managers would always leave the 'coal face' alone because that's where the 'value' was created, to use the theme word here.
Now I work in a public sector organisation which is publicly ridiculed for the atrociousness of its organisation and I have yet to see anyone get sacked for it.
I am told, though, that when this service has been made to contract in the distant past, it's always the 'coal face' that gets reduced first. The management - and I stress this is only what I have been told by people who have worked here a long time - preserves itself.
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#27 watriler
...Dont be naive -. Pickles is not about efficiency - he's about cutting services and sacking council employees
How does that get him re-elected ?
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Marnip # 5
"[A]ll you're doing is taxing money that came from taxes on the private sector in the first place."
Yes, because the private sector is so good at paying taxes, aren't they. So good that Barclays (to use just one example) managed to cough up a whopping 2.4% of their 2009 gross in UK taxes.
Your CE, on the other hand, will have paid roughly £7,480 on his first £34,700, £45,040 on his earnings between £37,400 and £150,000 and £23,500 on his income over £150,000 - a total of £76,020
(£76,020/£197,000 x 100) = 38.6% tax on all his earnings - roughly 6 times as much, proportionally, as Barclays managed to cough up.
After all, if it's fair to use the CE as an example of why councils should save money by cutting wages, then it's fair to use Barclays as an example of how 'generous' the private sector is when it comes to returning profits to the nation by way of tax.
So what are we left with - public sector worker returns 38% of earnings in tax. Private Sector company returns 2.4%
Remind me, who are the parasites and who are they feedin off, again?
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24. At 4:00pm on 24 Feb 2011, Bandages_For_Konjic wrote
"The difference between what the CE did take and what you say he should take amounts to (£11,780/£91,000,000 x 100)= 0.013% of the total saving required.
Where do you suggest the other 99.987% of the necessary savings come from?"
Totally missed the point, as usual. Nowhere did I suggest cutting the salary of the chief exec would constitute the total savings.
The article we're talking about is not a discussion of specific cuts; it's about the accusation that councils literally cannot be any more efficient.
It is a mathematical fact that by cutting one area of spending - even a single salary - you raise the cuts that have to be made on front line services. Incrementally, sure, but if the councils are really doing their utmost to protect necessary services, shouldn't every increment be saved?
£11,750 as you rightly calculated has - under the system you're defending - been taken from the front line and put in the pocket of the chief exec.
I'll repeat: £11,750 pounds in the pocket of a chief exec who is taking a cut of LESS than the average. Do you understand that money goes towards things such as bank shifts for non-permanent nurses?
It is not a solution to cut the salaries of managers of every level, but two points: First, it sure as hell helps. Second, taking below-average pay cuts causes public services to sustain larger-than-average cuts, no matter whether that be a tiny percentage or a large one.
I was under the impression that the issue here is morality; the Conservatives have accused the councils of cutting front line services more than is required. Taking a 3% pay cut when the overall cut is 8% *does exactly that*. By a small amount overall, sure - but now you have no reasonable choice than to admit that Cameron was not idly speculating as it sounded in the Commons - he was factually correct, no matter how incrementally.
Most people count £11,780 to be significant, given it's about the value of a part time job in many areas.
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25. At 4:04pm on 24 Feb 2011, jr4412 wrote:
"I've re-read your comments and am inclined to agree with jon112dk that you've trouble with 'value's."
I bet, even though I never mentioned the word. Tell me, if you had £10k in the whole world, and you go to buy a car worth £15k, can you buy it? No, you can't. You may VALUE it at only £10k (whilst the dealer values it at £15k), but it makes no difference - you don't get the car.
It's the same principle. Value is subjective, cost is objective. It costs around 21k a year for a nurse. If that nurse saves your life, they're probably priceless to you - but someone still pays the 21k a year, whether you like it or not.
Money is not endless. I'd love to see the state of your personal finances if all you care about is how much you value things. I personally would like a TVR Speed 6, but I don't have the money for one. So guess what? I don't own one. Simple.
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"I also disagree wrt "..aren't distorted by anything"; averages are very sensitive to anomalous data points ('outliers')."
See my example. If you disagree, please give me a single example of how cutting 1 element out of 10 by LESS than the average results in anything other than that money being saved elsewhere (in order to preserve the overall average)?
Any example. Given it's mathematically impossible, I can't wait for the proof. Just tell me how you can cut one element by less and still maintain the average, without cutting more somewhere else.
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The Coalition have made cuts to the council budgets and remain of the view that the responses in Liverpool and Manchester are political cuts designed to embarrass the government rather than needed economic cuts which can be made without affecting frontline services.
Unfortunately, when the Coalition are challenged about the coalition cuts and their consequences they do not supply a long, helpful list of ways in which the cuts can be achieved without cutting frontline services. Instead they state that in keeping with their new found policy of localism it is for local authorities to decide where and how the cuts fall, knowing full well that the councils cannot achieve reductions without affecting frontline services. It is a move designed to give the maximum embarrassment to Labour councils.
Nobody is fooled by this petty feud between local and national government. We just hope that all the politicians concerned will grow up and genuinely put party politics aside to work for the benefit of the country, bearing in mind that many innocent and unforgiving bystanders are losing their jobs unnecessarily as a result of their actions.
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Mark
Next time a Government minister decries a Labour local authority just remind them of Suffolk County Council.
Here, in true blue tory land, we have a chief executive who is the 6th highest paid in the country at £220,000 pa and who refuses point blank to take a pay cut and a council who plan to 'divest' as many public services as possible - in reality this means cuts.
We have already lost ALL school crossing patrols; we are soon to lose two thirds of our libraries; we are losing old peoples homes and the management of our country parks is being handed over to 'other organisations' - and this is BEFORE they agreed a budget cut of £42.5 million over the next 12 months.
Perhaps it is time for David Cameron to make some serious comments on ALL local authorities who could make efficiencies. He might forget about cities like Liverpool and Manchester and look a little more to the East.
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30. At 4:36pm on 24 Feb 2011, Bandages_For_Konjic wrote:
"So what are we left with - public sector worker returns 38% of earnings in tax. Private Sector company returns 2.4%"
All of the money in the public sector came from taxes in the first place. That 38% you cite (which I won't bother checking because it's irrelevant) came from private sector taxes in the first place.
Oh hang on, no it doesn't actually ALL come from taxes - we're still borrowing £149bn in addition to the tax revenue to fund everything the state is involved in.
(That's not to say I ignore your point about private companies paying their taxes; more enforcement is necessary - but the public sector can't be compared to the private because all of its spending IS tax revenue and borrowings in the first place).
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#30 Bandages_For_Konjic
...because the private sector is so good at paying taxes, aren't they. So good that Barclays (to use just one example) managed to cough up a whopping 2.4% of their 2009 gross in UK taxes....
You are making a case for bigger bankers' bonuses.
They pay 50% tax on bonuses, only 28% in corporation tax - which is what the 2.4% was about. I believe it was so low because they are allowed to defer previous years' losses.
No doubt you will say they evade tax, it's a popular theme when talking about the rich.
The banking sector still manages to contribute about 11% of the UK's public wealth.
I'm not going to knock it, it's where my wages come from.
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"In the private sector I worked in companies which went through wave after wave of redundancies, year after year to survive. Usually it was middle management that was made redundant."
Yes, because the need for "wave after wave of redundancies" is purely in order to "survive" and never down to bad management, is it?
I have heard this argument trotted out countless times - private sector, lean, mean, efficient fighting machine, has to be or it won't make a profit. Public sector - fat, lazy, bloated, wasteful, sits on its a*se doing a 'non-job'.
Now, you've been very kind in sharing your own, singular, experience so here's mine - 5 years in the private sector (financial services) 10 years in the public sector and I. Would. Never. Work. For. A. Private. Company. Again.
You want to talk about waste. The waste I've seen companies generate! Programmes set up for the wrong reasons, run badly and then cancelled after ridiulous expense. 197+ page reports in impentrable business analysis jargon that no-one reads.
Consultants under every desk claiming at daily rates of £500+. £500/diem, incidentally, comes out over a year as nearly as much as a Liverpool Council CE - but do these people run organisations? They do not. Do they take decisions on a budget of £400,000,000 p/a? They do not. What do they do - well, they rely on the company's own staff (who are the ones who actually understand the business) to tell them what to put in their expensive 'feasability studies' which end up getting shelved because the Executive who commissioned the thing has moved on to a better job and his replacement wants to bring his own consultants in so his pals can get their slice of the cake.
Nepotism? Rife. Within six months of a senior manager moving jobs you can bet the farm they'll have brought at least 2/3 of their cronies across with them.
Morale? Frequently terrible. Staff stepped on, disregarded and when necessary deliberately managed out of the door. Job security? TUPE? Don't make me laugh.
The public sector on the other hand. I've worked in an NHS facility where we literally had to manage the budget down to the last box of paperclips. We had £x to spend and that was it, when it's gone it's gone, end of, no more.
I've had a private sector manager who reported me to her manager because she hadn't got the courage to speak to me about an issue herself. I've had public sector managers who I still, to this day, socialise with and consider my good friends - partly because they were so good at maintaining a happy, positive working environment - something only about 1 in 3 private sector bosses have been able to do, in my experience.
Yes, there are poor public sector workers but there are poor workers in every sector - but I would be willing to bet my heart and lungs that in any objective, controlled test you can think of, any public sector workers will outperform all but the most able 10% of the private sector workforce. Why? Because more of them care. You don't work in the public sector for money (at least most of them don't), you do it because it's something you believe in. Teachers don't teach 'just for the money.' Social workers don't go to bed at 2:00am after spending the evening with their laptop in front of the TV 'just for the money.' Nurses don't work 14 hour shifts 'just for the money.'
Laugh, whatever, I don't care. It's not 100% true but it's true more often than it's false. And I'll tell you something else, too - public sector workers are happier than private sector. Why? Because most of them, when they eventually make it to their beds, they feel they've done something with their day, something more than notching Bob Diamond's bonus up by another 0.001% - because that's all private sector workers achieve.
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26. At 4:12pm on 24 Feb 2011, Marnip
Of course services can make money; of course a hairdressers can make money. ..... The public sector does not, however. Public sector money comes from private sector taxes.
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Yep, that's precisely what I thought you were saying.
A hair dresser who provides a service and charges you on the day is 'making money' but the doctor who provides the service of saving your life and charges you via taxes is not 'making money'
Thats EXACTLY what I mean by an arrogant distorted ideology (#12).
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Marnip #31
"Totally missed the point, as usual."
As usual? That was my first post? But, anyway, I'm sorry but it's you that's missed the point. I'll try again.
The additional cut that you want to make to the CE's salary amounts to 0.013% of the saving required.
Nowhere did I suggest that you had suggested that cutting the salary of the chief exec would constitute the total savings. You'd be pretty silly to suggest that, wouldn't you, given the council needs to save £91,000,000 - which is a smidgen beyond even a Merseyside CE's salary.
What I asked was, given that the difference in the CEs salary cut (between the 3% taken and the 8.8% you want him to take) makes up such a tiny proportion (0.013%) of the total saving needed - where does the other 99.987% come from?
You're absolutely right. When you cut less in one area, yo have to cut more in another. But you would have to reduce the CE's salary by roughly 448,055% in order to generate the magnitude of savings needed.
So, I ask you again, stop hiding behind your piddly little salary cut (which makes such little (0.013%) difference as to be irrelevant and come clean on where the rest of the savings should be made.
After all, all cuts are 'specific cuts' when you're the one having to make them.
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Clive Hill #37
"No doubt you will say they evade tax, it's a popular theme when talking about the rich."
It's a popular theme amongst the rich as well, or so my wife's friends tell me.
But anyay, I was talking about a corporation, not a person.
Who are you talking about?
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23. At 4:00pm on 24 Feb 2011, Marnip wrote:
19. At 3:41pm on 24 Feb 2011, jon112dk
"Adding 'value' to goods or services IS economic activity."
Monetary value, yes. How do you think we add everything up in economics? You take the MONETARY value. You can't add up how much we all value doctors and nurses. It's a subjective idea.
==========================================
You believe that the service of a doctor has no monetary value ????!!?
If we stopped having you pay via taxes and had you pay it in cash on the day, would you understand the monetary value then?
The problem seems to be that you paid the tax last month, last year and you got the service some other time. Or is it because you paid the tax and someone else got the service?
A doctors service (eg. consultant cardiac surgeon) can be worth £300/h - and if you were going to die you would pay that long before you paid the hairdresser.
(Value is not just money. If I come and plough your field for the day and you pay me with a chicken, the work I have done still has value and also adds value. If you offer to give me 100 zimbabwean dollars I will laugh)
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It sounds like the Liverpool council has made genuine cuts to its back-room services, and that these are about as efficient as they can be made given the time available.
At the same time, we're told their budget remains the same as it was in 2009.
Total budget: the same.
Chief executive's pay: down
Chief executive's bonus: axed
Efficiency savings per Colm Reilly: £100million
Something else: has to be much higher.
The key question is, what is Liverpool spending MORE on now than it did in 2009? Is it possible that the budget for front-line services increased by £100million in the last year of Labour's government? That's about the only thing that would make these figures add up...
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Marnip:
The chief executive is claiming a 3% pay cut.
However, that is on top of the cuts he agreed to when he came into office. If you look at the figures in the blog post, the new CE is now paid 14% less than the old one - AND doesn't get a bonus.
If you take the bonus into account too, the new CE is paid £197k, while the old one was paid £279k. That's a 29% pay cut compared to his predecessor.
Given the council needs to make an 8% cut overall, then I'd say a cut for the top earners of 15%, led by a cut for the chief executive of 29%, is more than playing thier part.
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Someone wrote: "grasp this simple point: the public sector is comprised of the people it serves, making money is not the objective; you want to play markets? go into finance."
Agreed the public sector's objective is not to make money, but the crucial point is that all the money it spends comes from taxes. And some of us don't want to pay loads of tax to provide so many services.
The "cuts" only bring Liverpool council's grant back to what they had in 2009 - what on earth are they spending the extra money on? What new services have they added in 2010 and 2011 that are so crucial they can't possibly be cut?
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I support Marnip in this.
Explain please, 1997, an average of 3 local councillors in each council earned over £100,000 pa.
Now its is over 80 per council on average. This just shows the level of waste/greed. Take into account inflation and this figure should rise to maybe 20 at most, but nowhere near 80.
Cut the middle management, not the frontline services, i'd rather have slightly disorganised services than services cut for the sake of saving "managers".
The argument about the Liverpool city council chief executive getting paid £197k or whatever, he should not earn more than the prime minister, but his salary to £100k and there is enough money to keep open at least one library (and that is according to council sources).
How can you justify hiring a dancing coach coordinator as one council did for £40k a year?
I would like to see lists of the wages paid to council workers earning over £100,000, and then we can really decide where the waste is.
Some say these cuts are ideological, if ideological means making councils more cost-effective I am all for it.
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Mark_Milton_Keynes #45.
"And some of us don't want to pay loads of tax to provide so many services."
well, the UK is not like the former East-Germany, if you don't like paying taxes here, you're free to leave. bye.
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ScottishHornet #46.
"Explain please, 1997, an average of 3 local councillors in each council earned over £100,000 pa. Now its is over 80 per council on average. This just shows the level of waste/greed. ... How can you justify hiring a dancing coach coordinator as one council did for £40k a year?"
frankly, I don't even understand what point you're trying to make.
we live in a society where it is thought normal to pay a person who is talented enough to kick a ball (but o/wise little more that a lout unable to spell their own name) £10,000,000 or more per annum. but you begrudge a senior manager with a budgetary responsiblity in the 100's of millions a salary which, when compared to his/her peers in private industry, amounts to little more than a pittance? weird.
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"The rest, such as £197k pa along with pensions far better than private sector ones, cannot. 3% pay cut is pathetic given the circumstances."
The average local government pension is around £4000 pa, which hardly seems excessive. This salary doesn't seem unreasonable for an organisation as big as Liverpool Council.
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49. At 08:59am on 25 Feb 2011, SlaveofBaal wrote:
"The average local government pension is around £4000 pa, which hardly seems excessive. This salary doesn't seem unreasonable for an organisation as big as Liverpool Council."
The UK has a population of, let's say, about 70 million. That is the number of people the PM is responsible for. It dwarfs the size of Liverpool Council (obviously it includes it).
Both are public sector jobs. Are you really suggesting that one public sector job responsible for a fraction of people that the other is, should be paid about 33% more?
Whatever happens, the PM always gets the blame - that's what comes with being in the highest elected position in the land. Am I talking nonsense when I suggest that the PM should earn the most out of everyone in the public sector? Seems like it requires a greater level of responsibility than Liverpool Council's chief exec.
Honestly, I don't know how anyone can make that argument.
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48. At 00:16am on 25 Feb 2011, jr4412 wrote:
"we live in a society where it is thought normal to pay a person who is talented enough to kick a ball (but o/wise little more that a lout unable to spell their own name) £10,000,000 or more per annum."
You still haven't grasped the concept of public and private sectors, have you? Football is in the private sector. Football clubs are businesses (like it or not, and I don't) and they have to stay afloat financially. If they take on too much debt, they will go into administration and in the worst case, be wound up.
They can do whatever they want within the law with their money, because they legally own it. It is theirs. They can pay whatever stupid wages they want, and if they collapse, they collapse and bear practically all the suffering that may come from that.
The public sector does not do this. It doesn't own any money. It takes the money from taxes, and increases taxes when it wants more. It doesn't have to sell more of anything to make more money to spend - it just takes more money if the government decides to give it to it (or it borrows it at interest).
The private sector is ultimately linked to its results. If it wants to spend more money, it has to make greater profits, or where else does it get the money from?
The public sector is not linked to its results. It can fail to improve trasport conditions, fail to improve its health record through the NHS, fail to create economic growth, fail to defend the country, and so on - yet it can still take as much money as it chooses. It is not bound by performance-related spending.
That is the crucial difference between the two, and it has been abused for about 10 years (Labour ran a surplus for the first 3 years or so).
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47. At 11:52pm on 24 Feb 2011, jr4412 wrote:
"well, the UK is not like the former East-Germany, if you don't like paying taxes here, you're free to leave. bye."
Well, the UK is not governed by you. If you don't like the spending cuts, you're free to leave. Bye.
Isn't it ironic when you make a comment that works against you? ;)
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44. At 7:15pm on 24 Feb 2011, smallvizier wrote:
"Given the council needs to make an 8% cut overall, then I'd say a cut for the top earners of 15%, led by a cut for the chief executive of 29%, is more than playing thier part."
The chief exec didn't take a 29% pay cut. He earns less than his predecessor. HE is not taking any more than 3%. HE started on £203k. He took a 3% pay cut to HIS salary. He never earned £279k; his standard of living has not dropped by 29% because he never earned that extra 29%.
Compare that to the part-time nurse who will lose their job because of his greed: They DO earn £12k a year, and so they are taking a 100% pay cut (redundancy) so that he can avoid a 5.8% which would bring him up to the average.
I repeat: he has not suffered a 29% cut, because he never earned it before. His predecessor did; that cut has zero impact on his life. It cannot logically be included.
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#38 Bandages_For_Konjic
You kind of missed the 'Darwinian' point I was making.
I said that managers and workers in the public and private sector were pretty much the same across the piece.
Cronyism is rife in all managements. I don't think people even find it odd that some manager's mate's kid gets a job. 'It saves recruitment costs' etc. The fact that someone else recruited fairly could do the job better, well, that's life.
I believe what I just described - which I call 'connectedness' - is the factor making our working life less efficient and destroying social mobility, which I think is vital for our culture. That applies to both public and private sector.
The key difference is that the private sector has this thing that in the end your company - or at least your senior management - will not survive as you become more inefficient.
I'm not surprised you like working in the public sector - so do I. It is much, much less stressful. Everyone's sociable. There's a near-free gym and we get some time off periodically just to socialise. The people I work with are great and so are the 'local' management.
The wider organisation that I work in is, however, a disaster at doing what it's supposed to do. It will carry on that way at public expense.
In the private sector, it would have been bankrupt or taken over long ago.
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#38
...You don't work in the public sector for money (at least most of them don't), you do it because it's something you believe in. Teachers don't teach 'just for the money.' Social workers don't go to bed at 2:00am after spending the evening with their laptop in front of the TV 'just for the money.' Nurses don't work 14 hour shifts 'just for the money.'
Well, we're lucky we have that much job satisfaction. Most people work, I believe, for job satisfaction. I always have. Of course money matters up to a certain point but once you're getting enough, it's a sense of achievement that keeps you going.
What you are describing - and I am experiencing it now - is a privileged working environment. You get to do what gives you a satisfying life and you get paid for it. That can happen in the public and private sectors.
I'm sure that the bankers who get their big bonuses also get job satisfaction out of making smart deals that make them and their organisation a ton of money. It's job satisfaction that keeps them up until 2:00am as well, if you believe their comments on other BBC blogs.
The question I was trying to answer is in broad terms, how do you make the public sector efficient ?
It has a potentially infinite amount of money to spend (given QE). I know you spoke about cash limits on your budgets - they were introduced by the Margaret Thatcher government to screams of anguish from the public sector unions by the way - but the fact is, you will survive exceeding a limit.
Many NHS trusts were in the red last year and parts of the NHS may well be in the future. Does it affect their management ? Not much, if at all.
I make this point again. You are implying a qualitative difference between people in the public and private sectors. There probably are some differences in those groups but in the end, they are much the same people.
The difference between them is the financial environment in which they work. In many cases public sector organisations can fail and have their managements survive. In the private sector, that is much less likely to be true.
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Bandages_For_Konjic
You might also want to explain this:
Annual NHS sickness levels are 10.7 days a year per employee - higher than the public sector average of 9.7 days and 50 per cent higher than the private sector average of 6.4 days....
...The review found that while NHS workers were more likely to pick up illness and infections through their work, this could not explain all of the higher rates of absence.
It said: "Nearly half of all NHS staff absence is accounted for by musculoskeletal disorders, and more than a quarter by stress, depression and anxiety.
It looks like they're not all as happy as you. We really do work in a privileged environment.
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#41 Bandages_For_Konjic
But anyay, I was talking about a corporation, not a person.
Who are you talking about?
Well, if you read my post, you would know I was talking about bankers individual bonuses. They pay 50% tax on them whereas the bank pays 28% corporation tax.
So you personally are better off if they are paid bonuses because your salary comes out of the tax they pay.
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A few points I don't think have been covered so far:
a) Some councils are doing more than slightly downgrading the pay of their senior management. The local authority where I work is moving from six directorates to three groups - so instead of six first tier managers, by this time next year we'll have three. We're also reducing the number of second tier managers by five to seventeen. As part of the process, the each of the remaining managers will be expected to take on a broader role.
b) Single Status. It's practically a swear word in local government, but it's an ongoing process (started back in 1997 - many authorities are yet to implement it) to critically evaluate every (non-schools) post, and based on the knowledge, skills, experience, qualifications, duties etc. required assign a score. The HR department of each council then apply some mathematical magic to assign salaries to each batch of scores (e.g. say £19,000 to those whose job is worth 400-439 points) - with the inevitable result that some salaries rise while some fall. But the entire point is to ensure that (theoretically) everyone doing a job of similar complexity gets the same salary.
Of course, while it is possible to appeal, it's still the opinion of a handful of people in HR that is the sole determinant of what your new salary becomes. And different councils have different approaches to both paying for it and what happens with senior management. My authority paid for it by cutting back on travel allowances (e.g. getting rid of the Essential User lump sum and reducing the mileage allowance over three years to a maximum 40p per mile), while others caused huge controversy by adopting a revenue neutral approach (i.e. for every winner, there had to be a loser). As is probably the case in many local authorities, Senior Management were evaluated separately by the Hay process.
-oOo-
As councils contract and outsource most of their operations (commissioning the majority of services rather than providing them directly), a valid question is raised as to who takes them on. Since the services will be funded by the taxpayer, social enterprises (which reinvest profits back into services), non-profits and charities may be able to make efficiency savings, and pass the majority of money received onto the service. However, private companies are another matter. Since they will presumably expect to make a profit, there will presumably come a point whereby even if central government revenue remains the same, efficiency savings alone would not be able to retain the same level of profit with the same level of service. So the company would either have to reduce its profits or reduce its level of service. The situation would be even worse if the company was a PLC, as shareholders generally expect profits to increase year upon year. No doubt PLCs doing a significant chunk of public sector business would be looked upon in a not-very favourable light should they report increasing profits while their level of service diminished.
A more viable model for private sector businesses doing public sector work would be if they charged the public directly for the service they provide. However, as government (of whatever colour) would be unlikely to lower taxes in response, they'd either have to spend large sums of money implementing means testing to give poorer families vouchers to spend on the services, or the services would eventually become unaffordable to the poor.
And would private sector businesses operate for the benefit of the public - or increase competition? Public transport was privatised, but in many areas there's no competition - either Stagecoach or Firstbus have a regional monopoly on the vast majority of services. Train operators also have regional monopolies. They're certainly not democratically accountable, and are virtually impossible to displace. There's also the possibility of mergers creating a few super-companies providing the majority of privatised services - in much the same way as the numerous individual ITV companies eventually consolidated into two (Granada and Carlton), which then further consolidated into just one.
The move from local authorities being providers to commissioners is certainly a bold one, and there's a chance it may improve services available. But I wouldn't guarantee it, and I wouldn't bet that it will necessarily reduce administration costs.
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Back to Libraries closing, have a look at these pieces from Wales it is a Council decision, very few closures Council staff are taking paycuts at some Councils to maintain jobs and services.
http://www.bbc.co.uk/news/uk-wales-north-east-wales-12558323
http://www.bbc.co.uk/news/uk-wales-12569132
http://www.bbc.co.uk/news/uk-wales-politics-12268072
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Just a couple of small factual corrections to Mark's update: "The new chief executive, appointed in the summer, receives a salary of up to £197,000 with no opportunity for bonuses."
Ged Fitzgerald was actually appointed in the autumn of 2010, not the summer, and earns a salary of £197,000 "plus contributions".
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60. At 08:51am on 26 Feb 2011, CraigMorecambe
Some pretty poor reporting then. I don't think Mr Easton really delved deep into the logic of what he was being told. Bias, bias, bias.
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