Category Archives: Taxpayers’ money
In 2018, the Times (paywall) reported the verdict of MP Meg Hillier, chair of the Public Accounts Committee: “The apprenticeship levy is not working. It was meant to incentivise large employers to invest more in apprenticeships by requiring them to pay into a central fund from which they can claim back some or all of their training costs.
Instead it has led employers to recoup the cost of existing in-house training schemes by relabelling them as apprenticeships.
She noted that more companies are setting themselves up as training providers and that Ofsted says that it will struggle to keep tabs on these. The following year her report pointed out that too many apprentices were still being trained by sub-standard providers.
Around a third of apprentices covered by Ofsted inspections in 2017/18 were being trained by providers rated as ‘inadequate’ or ‘requires improvement’. The poor quality of some contributed to a situation where over 30% of apprentices fail to complete their apprenticeship successfully each year.
A letter to the Times editor added: “The Learndirect scandal serves as a stark case: an organisation was allowed to take on more and more learners (reaching 75,000) when warning signs of inadequate training and poor financial management were already being issued”.
The Financial Times reminded readers that Learndirect was privatised and sold to the private equity arm of Lloyds Bank in 2011 but is still reliant on government funding. When the Public Accounts Committee questioned Learndirect and Ofsted, Ofsted revealed the findings of Learndirect’s “inadequate” performance and the ‘legal shenanigans’ used to prevent earlier revelations. The findings included:
The National Audit office’s 2019 report focussed on the cost of apprenticeships and the low rate of uptake. In its first full year of operation, the apprenticeship levy raised £2.7 billion and this is expected to rise to £3.4 billion by 2023-24. However, there have been repeated warnings in recent months that the funding pot generated by the levy is about to run out
Earlier this month the Financial Times reported on an Education and Skills (EDSK) report, based on official data, which has investigated what is happening with the apprenticeship levy and the apprenticeship system in England more broadly.
It found that 50% of apprenticeships funded by the levy are ‘fake’, citing figures which relate closely to those reported by the Public Accounts Committee, recorded in the FT box above:
- Some £1.2bn of the £2.4bn money raised since the levy was introduced in April 2017 had been spent on “fake” apprenticeships, rebadged MBA courses and low-skilled jobs training,
- £550m of levy funding had been spent on management training courses for experienced employees, which previously would have been funded from professional development budgets.
- Highly qualified academics, many of whom already have PhDs, had been relabelled as apprentices in order to put them through levy-funded professional development courses.
- And £235m had been used to teach people in low-skilled jobs, including working at a shop checkout or serving in a bar, often requiring minimal training, which pay low wages and do not meet any established definition of an apprentice.
Last July Boris Johnson said that, while he will always “defend and extol the advantages of having a degree, there are far too many young people who leave university with huge debts, and no clear sense of how their academic qualification has helped their career.” He has pledged to “elevate practical and technical qualifications” to “recognise their immense value to society and to the individual” and to raise funding for apprenticeships.
As – regrettably – Learndirect has re-emerged in the apprenticeship sector under a new name: Learndirect Apprenticeships Ltd., EDSK reflects that government pays private providers taxpayers’ money to deliver public services but can fail to monitor the results or truly penalise those that do not deliver. It recommends the Department for Education to tighten rules to stop financing of rebadged MBAs and low-skilled training and introduce a new definition of apprenticeship, benchmarked against the world’s best technical education systems.
DSEI arms exhibition protestors call for government spending on peace, adequate public services and addressing climate change
Extinction Rebellion demonstrators, who used a signature XR boat to block access to the DSEI arms fair to be held in the Excel Centre in Royal Albert Way said that war creates devastating environmental damage and with a warming climate leading to more extreme weather and causing more failed harvests and droughts, as food and water runs out, we can expect more conflict and a much bigger refugee crisis. They added:
“The UK has to own up to its part in creating these global problems, take real leadership in reducing warming and conflict, and create deliberative democracies which can solve this emergency.”
West Ham MP Lyn Brown said: “The DSEI arms fair causes a massive inconvenience for local residents every two years, from the added traffic and security it always requires. Added to the inconvenience to local people, the arms fair also piles an unwanted and unneeded burden on our local public services, like our police, ambulances, hospitals and transport, all already massively overstretched due to nine long years of Tory austerity cuts. Despite asking questions in Parliament for months, the Government haven’t been able to reassure me that we won’t be seeking to sell weapons to regimes that abuse human rights or are killing innocents in places like Yemen. I’m proud to stand with the Newham residents who are raising their voices against the arms fair this year, and I hope that together we can stop the DSEI from returning to our borough in 2021.”
Demonstrators advocated that instead of helping to promote and subsidise the sales of armaments, government should be creating an emergency budget:
- to bring down emissions and increase biodiversity,
- to transfer jobs from the arms industry into the sustainable economy now
- to stop fuelling conflict around the world
- and instead support ‘peace diplomacy’.
Extinction Rebellion’s Liam Geary Baulch said: “We envision a world where people have a right to a future and a right to live in peace with a home, food, and water – all things that are put at risk by fuelling conflict and the climate and ecological emergency around the world.
A call for building strong productive local and regional communities and new trade systems that fulfil human lives without wasting resources and energy
Today the Financial Times (paywall) reports that the number of foreign investment projects has dropped by 14% to 1,782 in the financial year ending March 2019, since the 2016 Brexit referendum. This is the lowest level in six years, according to a report published on Wednesday by the UK’s Department for International Trade.
As multinational profits continue to fly out of the country and taxes are evaded, we return to the valuable 2017 report by Victor Anderson and Rupert Read entitled ‘Brexit and Trade Moving from Globalisation to Self-reliance’, published and launched by Green MEP Molly Scott Cato.
“This report puts on to the political agenda an option for Brexit which goes with the grain of widespread worries about globalisation, and argues for greater local, regional, and national self-sufficiency, reducing international trade and boosting import substitution”.
Colin Hines comments: It details the need for an environmentally sustainable future involving constraints to trade and the rebuilding of local economies. On page 14, the report calls for ‘Progressive Protectionism’:
“Reducing dependence on international trade implies reducing both imports and exports. It is very different from the traditional protectionism of seeking to limit imports whilst expanding exports. It should therefore meet with less hostility from other countries, as it has a very different aim from simply improving the UK’s balance of payments. It could be described as ‘progressive protectionism’, or ‘green protectionism’“.
The report’s recommendations are summarised under three headings: the environment, globalisation and localisation (below):
- Change trade agreements to allow governments to promote greater national, regional, and local resilience.
- Shift taxes, subsidies, and public expenditure on infrastructure, away from unfairly favouring large and global companies, and redirect them to help build up local economies.
- Link banking directly to local and regional economies rather than to the international financial system.
- Boost the number of places for skills training in sectors where UK production can substitute for imports.
- bring in short-term government subsidies to invest in and develop economic sectors where UK production can be expected to substitute for imports as part of the new strategy. These would not necessarily be ‘infant industries’: they might be old sectors being revived and renewed.
- Introduce or increase tariffs on imports of goods and services, especially those where domestic production is a viable and environmentally sustainable option.
- Democratise English sub-regional devolution arrangements and reform local government finance, so as to provide for effective decentralisation of power.
The globalisation of recent decades has been very one-sided. There have been enormous benefits for large business corporations, financial institutions, and the super-rich. As smaller companies have found it difficult to compete, the multinationals have used a worldwide network of tax havens to escape from taxation and regulation.
‘Brexit and Trade’ sets put a new option for Britain. Instead of removing protective regulations against environmental threats it advocates establishing high Green standards and practical localisation measures. It would address the very real social, economic and environmental problems of globalisation, serving present and future generations well.
This eye-catching headline was placed above an article by Merryn Somerset Webb, editor-in-chief of MoneyWeek, in the Financial Times. She pointed out that Help to Buy (H2B) has been a huge boost to the housebuilding sector, as only new-build homes are eligible under this scheme, keeping it going through the years following the financial crisis.
Kate Davies, executive director of Intermediary Mortgage Lenders Association says Help to Buy is now “a cornerstone of the UK property market”.
Ms Somerset Webb points out that the main beneficiaries have been the big developers who have been provided with “an almost endless source of state financed, captured and slightly desperate buyers”. Jules Birch (Inside Housing), writing in similar vein, points out that housebuilding output has increased, but not ‘remotely as much as profits, bonuses and dividends’.
She comments that H2B hasn’t helped the smaller players much, as ‘hordes of them’ had already gone down with the market in 2008-9 and then records these relevant facts:
- Two hundred thousand people in the UK have now bought houses using former chancellor George Osborne’s Help to Buy equity loan scheme, paying the average 16% new-build premium.
- The taxpayer has lent those people £10bn, an average of £55,000 each . . . ‘a special kind of quantitative easing just for them’.
- The maximum you can borrow from the taxpayer is 20% of the purchase price cap of £600,000 in most of the UK and 40% of the cap in London — £120,000 and £240,000 respectively.
- Research suggests that Help to Buy purchasers pay 5 to 8% more than ordinary buyers of newbuilds, allowing the builders to increase their prices.
- 18% of Help to Buy house sales in early 2017 were leasehold properties with escalating ground rents.
- Half of Persimmon sales are H2B; their pre-tax profits have just passed £1bn.
Writing in the LSE journal, two senior Cambridge academics confirm that the main beneficiaries are large house-builders
In their report: Helping or Hindering? The latest on Help to Buy, they conclude that Help to Buy has had ‘regressive distributional consequences’. They quote ‘one executive’ in the FT who claimed that the scheme had allowed him to raise selling prices by 10%, which would almost double the profit margin for most builders. The market agreed: when rumours circulated on 4 August 2017 that H2B might be withdrawn, £1.3 billion was wiped off the stock market value of the five biggest builders within 90 minutes.
They also present some of the findings by Resolution Foundation research, which suggest that about 35% of H2B recipients could have bought a home without the subsidy:
“Those who have purchased a property with an HTB equity loan have an income significantly higher than the median – indeed, 40% of HTB loans have gone to those with annual incomes of £50,000-plus. Unsurprisingly, DCLG’s own assessment of the policy suggests that 35% of HTB recipients could have bought a home in the absence of the subsidy”.
Martin Wolf, former senior World Bank economist who left after becoming disillusioned with its policies, reminds readers that a goal of the Paris agreement of 2015 was to limit the global average temperature rise to less than 1.5C above pre-industrial levels. He comments:
“Achieving it means drastic reductions in emissions from now. This is very unlikely to happen. That is no longer because it is technically impossible. It is because it is politically painful.
He refers to the latest report from the Intergovernmental Panel on Climate Change on the implications of warming of just 1.5C, making plain the risks the world runs if this limit is ignored and concluding that life will survive, but not life as we know it, continuing:
“We are the shapers of the planet now. This ought to transform how we think. Unfortunately, it has not”.
Wolf believes that the theoretical and empirical arguments for man-made climate change are overwhelming, supporting this and other points made with graphs in his recent Financial Times article. The rise in average temperatures above the pre-industrial average is already about 1C. That shows how hard it will be to keep the final increase below 1.5C, or even 2C. Under the “nationally determined contributions”, he adds, we are in fact on a track towards warming of 3-4C by 2100.
if we are to have a high chance of keeping the ultimate temperature rise to below 1.5C:
- net global CO2 emissions would need to fall to zero not long after 2040
- and other sources of climate change — emissions of methane and nitrous oxide, for example — would also need to fall from 2030.
Emissions from industry would need to fall by 75-90 per cent by 2050, relative to 2010. This would need a combination of electrification, hydrogen and product substitution. These options are technically proven, but their deployment on a planetary scale is another matter. Emissions reductions by efficiency improvement will be inadequate.
(Ed) One reservation: many will disagree with Wolf’s assertion that generating energy from bio-based feedstocks is necessary and that agriculture will need to shift to production of energy crops on a huge scale.
He calls for planning changes in urban infrastructure and carbon capture and storage on a large scale, shifting the world on to a different investment and growth path right now and commenting, “This is more technically possible than we used to think. But it is politically highly challenging”.
The natural tendencies are either to do nothing, while insisting there is no problem, or to agree there is a problem, while merely pretending to act. It is not clear which form of obfuscation is worse.
Wolf points out that to preserve our planet requires co-operative effort on a planetary scale – a challenge human beings have historically only met in times of war. Climate change involves huge distributional issues between countries that caused the problem and those that did not, and, not least, between people today, who make the decisions, and people tomorrow, who suffer the results.
He warns that the chances of co-operative action seem near zero in today’s nationalistic world . . . Donald Trump has already repudiated the US pledge – other countries may fail, too:
“It is five minutes to midnight on climate change. We will have to alter our trajectory very quickly but appear to be set on running an irreversible bet on our ability to manage the consequences of a far bigger rise even than 2C, risking a world of runaway — and unmanageable — climate chaos.
“Our progeny will see this as a crime”.
Two ‘hidden’ reports see the light of day – how many more are buried?
In July, Andrew Gilligan reported that the HS2 high-speed rail project is “highly likely” to go as much as 60% over budget and cost “more than £80bn”. A Cabinet Office report by the government’s Infrastructure and Projects Authority (IPA), classified as “official-sensitive” and “not for publication”, described the scheme as “fundamentally flawed” and in a “precarious position”. A group of Conservative MPs, led by Jeremy Lefroy the MP for Stafford, mounted a new bid to cancel HS2.
Is Britain’s own “deep state” once again covering up mistakes and denying access to critical documents (Carne Ross)?
Yesterday the FT reported that an official report by consultants PwC covering the second phase of HS2, from Birmingham to Leeds and Manchester, has been kept secret for the past two years. It alleges that Britain’s new £56bn high-speed rail line will cost taxpayers 25% more than similar schemes in other countries. The project was compared with more than 32 other high-speed rail projects, including the 621km Madrid-Barcelona line and the 301km Beijing-Nanjing line.
Since 2016 the management of HS2, which answers to the Department for Transport, has refused to publish the report, despite freedom of information requests from Lord Berkeley, a transport expert.
He said. “The fact that the government is embarrassed by their findings should not be a reason to withhold publication.” The findings included the following factors:
- HS2 will have 25 stations — far more than equivalent schemes abroad — and they are more likely to be in city centres.
- The 10-year hiatus between the UK’s first high-speed line and HS2 meant that the UK did not have the “base, industry and knowledge to deliver the project easily”.
- The UK has a higher population density than some equivalent countries and so has had to pay higher land values, greater compensation and carry out more extensive environmental mitigation,
The benefits of HS2 are becoming harder to discern
The Treasury’s own Infrastructure and Projects Authority has given HS2 an “amber/red” rating for each of the past six years, meaning there is a “high risk” of it not delivering value for money.
A recent report by the European Court of Auditors (ECA), which monitors value for money, found that high-speed trains rarely run at the speed they are designed for, with most running at just 45% of top speed, with none running above 250km/h. The study of 10 European lines found that the decision to “build high-speed lines is often based on political considerations, and cost-benefit analyses are not generally used to support cost-efficient decision-making.”
The ECA found that only one of the 10 routes, from Paris to Lyon, have been profitable if construction costs were taken into account.
George Monbiot recently pointed out that the Commons report on the Carillion fiasco is one of the most damning assessments of corporate behaviour parliament has ever published. It trounces the company’s executives and board and laments the weakness of the regulators.
But, as Prem Sikka said in his April article, it scarcely touches the structural causes that make gluttony a perennial feature of corporate life.
Both agree that the problem begins with an issue the report does not once mention: the extreme nature of limited liability. Sikka points out that this system, under which executives are only financially accountable for the value of their investment, has also benefited frauds and led to the self-enrichment of executives at the expense of workers, consumers, creditors, pensioners and citizens.
Monbiot adds that the current model of limited liability allowed the directors and executives of Carillion to rack up a pension deficit of £2.6 billion, leaving the 27,000 members of its schemes to be rescued by the state fund (which is financed by a levy on your pension – if you have one). The owners of the company were permitted to walk away from the £2 billion owed to its suppliers and subcontractors. (Left: the former Carillion chief executive Keith Cochrane in Westminster after appearing before the Commons work and pensions select committee)
Monbiot continues: “There is no way that fossil fuel companies could pay for the climate breakdown they cause. There is no way that car companies could meet the health costs of air pollution. Their business models rely on dumping their costs on other people. Were they not protected by the extreme form of limited liability that prevails today, they would be obliged to switch to clean technologies”.
So what is to be done?
Prem Sikka (right) proposes that the bearers of unlimited risks and liabilities should be given rights to control the day-to-day governance and direction of companies.
He advocates including employees and citizen/consumers on company boards – because both ultimately have to bear the financial, health, social and psychological costs associated with environmental damage, pollution, poor products, industrial accidents, loss of jobs, pensions and savings. Through seats on company boards, they could secure a fairer distribution of income, challenge discrimination, curb asset-stripping and influence investment, training and innovation.
Across the 28 European Union countries (plus Norway), most have a statutory requirement for employee representation on company boards – unlike the UK, Belgium, Bulgaria, Cyprus, Estonia, Italy, Latvia, Malta and Romania.
George Monbiot proposes a radical reassessment of limited liability.
He points out that a recent paper by the US law professor Michael Simkovic proposes that companies should pay a fee for this indemnity, calibrated to the level of risk they impose on society. He adds, significantly, that as numerous leaks show, companies tend to be far more aware of the risks they inflict than either governments or the rest of society. Various estimates put the cost that businesses dump on society at somewhere between 4% and 20% of GDP
His own ‘tentative’ and ingenious proposal is that any manager earning more than a certain amount – say £200,000 – would have half their total remuneration placed in an escrow account, which is controlled not by the company but by an external agency. The deferred half of their income would not become payable until the agency judged that the company had met the targets it set on pension provision, workers’ pay, the treatment of suppliers and contractors and wider social and environmental performance. This judgement should draw on mandatory social and environmental reporting, assessed by independent auditors.
If they miss their targets, the executives would lose part or all of the deferred sum. In other words, they would pay for any disasters they impose on others. To ensure it isn’t captured by corporate interests, the agency would be funded by the income it confiscates.
Monbiot then says “I know that, at best, they address only part of the problem” and asks, “Are these the right solutions?
- support them,
- oppose them
- or suggest better ideas.
He ends: “Should corporations in their current form exist at all? Is capitalism compatible with life on earth?”
New Fleet Solid Support ships: cash-strapped MoD should look at the total cost-benefit of building in Britain
Jeremy Corbyn is in Glasgow today, where – reversing New Labour policy – he will call for Navy shipbuilding contracts to stay in the UK.
The contract could lead to over 6,500 jobs in the UK, 1,800 of those in shipyards: “Our proposal would both sustain existing shipbuilding and supply chain jobs and create new ones – right here in Scotland and also across the UK.”
The MOD, which is alleged to have ‘lost controls of costs’, hopes for a cheaper option. Its spokesman added: “We are launching a competition for three new Fleet Solid Support ships this year and strongly encourage British yards to take part”.
“Until the new Fleet Solid Support Ships (FSS) arrive, these hardy veterans must stagger on into the mid-2020s”
The three currently supporting ships supply ammunition, food and spares are “antiques built in the late 1970s and saw action in the Falklands War”. Corbyn warns:
“By refusing to help our industry thrive, the Conservatives are continuing their historic trend of hollowing out and closing down British industry. Over the course of the 1980s under the Tories, 75,000 jobs were lost in UK shipyards, leaving just 32,000 remaining.
“Our shipyards used to produce half of all new ships worldwide. Our current market share is now less than half a per cent. The Tories seem hell-bent on accelerating and deepening this industrial decline.”
SNP MSP for Glasgow Anniesland, Bill Kidd, is sceptical, saying: “Workers on the Clyde and people across Scotland haven’t forgotten Labour’s betrayal of the industry in 2014.