July 15 2002

Funny Money

Sorting through some papers in the shed, I came across the County Council's accounts for the year 2000/2001 - published in September 2001- in which the Director of Finance reported a steep rise in the cost of members' allowances from £277,000 to £435,000 a year as a result of a recommendation by an "independent working group" from Cardiff University that councillors' allowances should be increased.
Within a year another "independent working group", this time from Birmingham University, had produced a report on councillors' allowances that called for yet another hike in their pay.
So, when the accounts are published in September 2003, we will be told that the total cost of members' allowances has risen to £840,000 - just over three times more than they were only two years previously.
During the meeting, at which our elected representatives voted overwhelmingly to get their snouts into this particular trough, members were assured that the Welsh Assembly had promised to provide extra funding so there would be no need to cut service levels to pay for all this extra gravy.
This is of course rubbish, because the £11 million or so that the Welsh Assembly has to cough up, to pay for these increases across Wales, is money that could otherwise be spent on um, er services.

What are they for?

Anyone still not convinced that the advent of the new Cabinet system has all but stripped democracy out of local government should get hold of a copy of the papers for next Thursday's meeting of full council.
These papers run to a mere 21 pages (compared to the 100-150 in the good old days).
Eleven pages are devoted to two planning applications.
The planning committee has already passed both but, because they are against policy, they have to go before full council for final ratification.
Another seven pages are taken up with a report on the Welsh language and the remaining three contain a recommendation to endorse (i.e. rubber stamp) the corporate plan; a report on the changed political balance following the Rudbaxton bye-election; and a paper on the possible repatriation of the Lord Lieutenancy and Shrievalty of Pembrokeshire from Dyfed.
What a waste of time and money!


Burst bubble

While stock markets were soaring in the last century all the talk was of the new economic paradigm, which would bring endless non-inflationary growth.
Hardly a week went by without Gordon Brown announcing that he'd killed off boom and bust.
All this optimism was founded on the supposed productivity gains to be harvested from the Internet and technology in general.
As I pointed out at the time, the ease of starting up in business in the dotcom age would only lead to greater competition and smaller profits.
In any case general increases in productivity are not necessarily good for business because they often lead to oversupply and, consequently, price wars.
"Before long", I wrote, "these dotcom firms will be ten-a-penny and with share prices to match."
And, writing in the Daily Telegraph about the fantasy values put on dotcom shares, Christopher Fildes observed that no one had yet mastered the art of letting a bubble down gently.
And they still haven't!

Two tier pensioners

Commenting on the financial scandals on the other side of the Atlantic, the veteran investor Warren Buffet observed that, so long as share prices were rising, nobody felt it necessary to ask awkward questions about the accountancy practices used to calculate company profits.
"But now the tide's gone out we can see who's swimming without their trunks" he said.
One prominent set of bare bottoms belongs to the pension funds and insurance companies whose managers and actuaries now realise that a combination of falling share prices; longer life-spans; Gordon Brown's dividend taxes; and Inland Revenue rules have left them with insufficient resources to cover their obligations.
This has resulted in the wholesale closure of final salary pension schemes, where the risk falls on the employer, and their replacement with money purchase schemes, where the risk is borne by the pensioner.
Which leads me to another interesting figure I spotted in the County Council's 2000/2001 accounts: the £5.2 million that taxpayers forked out that year to provide council staff with index-linked, final salary pensions together with a note from the Director that when the scheme was last valued in April 2000 it was fully funded.
It will be interesting to see what he has to say about the value of the fund this September.
Not that the denizens of Kremlin on Cleddau need worry their heads because, if there is a deficit, the taxpayer can be relied on to make it good.

It all adds up

Listening to Gordon Brown distributing large wodges of cash during this afternoon's public spending statement, I was reminded of the words of an unnamed American politician during a similar event in the Senate.
"A few billion bucks here, and a few billion bucks there" he grumbled, "and before you know it you're talking serious money."

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