Councillors’ pensions

Councillors and their disappearing pensions

/ inlogov / 1 Comment

Chris Game

There’s no doubt about the domestic conversation topic of the past week: pension pots. Which for many councillors, following a budget with little good news for local government – unless you’re a pothole hoping for a makeover under the Chancellor’s ‘potholes challenge fund’ – must have felt like being kicked when already down. No tricky Lamborghini or Bugatti choice for them. Their ministerial April Fools’ Day gift is having their Local Government Pension Scheme policies terminated at the end of their current term of office, and barred to their successors.

To put it in context, only a minority will be affected, they’ve had fair warning, and it’s unlikely their constituents, should they hear of it, will be overly distressed. There is another perspective, though: the democratic one – which, by chance, is being debated in Strasbourg this week by the Congress of Regional and Local Authorities of the Council of Europe (CoE).

The Congress of the Council of Europe (not to be confused with the wholly different Council of the EU) is the representative voice of Europe’s 200,000 regions and municipalities in the 47 CoE member states. Its function is to promote local democracy, which it does in myriad ways, including writing expert monitoring and advisory reports – like that being presented in Strasbourg, on the state of local democracy in the UK.

Disappointing and worsening would fairly summarise the report’s verdict, which is particularly critical of our councils’ highly centralised grant funding, their very limited local tax base and financial discretion, and the severity of the budget cuts imposed on them through the Government’s debt reduction programme. The effect can be to leave elected councillors, “the backbone of the local government system”, unable to exercise properly their political choice of weighing the benefit of services provided against the cost to the local taxpayer or user.

Ministers, by contrast, would seemingly prefer a completely invertebrate system. As the CoE report politely put it, they prefer and promote a “part-time logic of engagement” for councillors, who should see themselves not as paid elected representatives, but as altruistic volunteers – like scout troop leaders, the comparison chosen by Conservative Chairman, Grant Shapps, in a BBC Today interview last year.

European observers’ basic difficulty with this ‘logic’ is a linguistic one. They’re used to the ‘local’ in local government meaning, well, local – as in local pub, or shops, or school, or bus stop; stuff in one’s locality or neighbourhood.

They accept the French are a bit extreme with their 36,000 communes, whose mayors and roughly half-million councillors they are currently electing, and all of which constitutionally have more powers and service responsibilities than our district councils.

But, even excluding France, their Europe is one in which the bigger countries’ most local tier of government comprises several thousand local councils, with an average population of 8,000. England has just 325 equivalent councils with an average population of 160,000, and consisting – in cases like Cornwall (population bigger than Luxembourg), and Northumberland (area the size of Trinidad and Tobago) – of what even we until recently called ‘county’, rather than ‘local’, government.

And that’s our councillor problem. Successive national governments have taken a Tescoesque approach to local authorities and their elected members.  Instead of “Pile’ em high, flog ‘em cheap”, it’s been “Make ‘em huge, and pay ‘em peanuts”.

It’s a logic that bewilders advocates of local democracy like the CoE, who would prefer local government on a recognisably local scale, but also accept that there is a choice. If you want councillors to be genuinely part-time volunteers, then the size of councils, of councillor workloads and their ward electorates has to be kept manageable by sufficient numbers of such volunteers.

But if, in the interests of what you consider to be efficiency, you want enormous councils, huge budgets, large wards and the smallest number of councillors you can get away with, then you should acknowledge the time commitment that’s inevitably involved and allow them to be paid accordingly.

Trying to have it both ways – humungous local authorities run by overstretched, parsimoniously paid part-timers – is a recipe for poor quality government and a betrayal of local democracy. For many councillors, the apparent choice is: get out and leave it to those who don’t need the money, or grab what financial compensation you legitimately can through other means, like pensions.

Ministers should recognise the phenomenon, because it’s essentially the same as they and their parliamentary colleagues do: making up what they consider their inadequate salaries by ‘stretching’ their expenses. The difference, of course, is that MPs do get salaries, of £66,400, while the average councillor’s basic annual allowance – before PAYE and National Insurance deductions – is around £7,000 and already incorporates a Public Service Discount of between 25 and 50%, in explicit recognition of the principle of council work as voluntary service.

Despite Labour’s pledge to vote against abolition in Parliament, the Blair Government’s intention, when it first proposed extending council employees’ Local Government Pension Scheme (LGPS) to councillors, was to restrict eligibility to those receiving Special Responsibility Allowances.

Not surprisingly, the Local Government Association (LGA) wanted the LGPS open to all councillors, arguing that any differentiation on the basis of work patterns would be both discriminatory and unhelpful to the cause of attracting and retaining councillors. But it was the Occupational Pensions Regulatory Authority who ruled that, for pension law purposes, all councillors should indeed be treated as employees, and therefore entitled to join the LGPS – which is what happened.

Ministers invariably label them ‘gold-plated’ or ‘taxpayer-funded’ pensions – as if councillors themselves made no contribution. They do, of course, but the package is undeniably attractive. It’s a tax-approved, career-average scheme with retirement and death benefits based on years in the scheme and average pay over those years in basic allowances and SRAs. Councillors contribute a flat-rate 6% of their current allowances, with the council paying the employer’s contribution, at a fluctuating rate averaging, according to the Government, around 22%.

The TaxPayers’ Alliance (TPA) found that in 2010/11 over 4,500 or one in five UK councillors were enrolled on the LGPS – at an estimated annual cost, now quoted authoritatively by Ministers, of £7 million.

Numbers, though, aren’t really the issue.  Nor, apparently, is making any coherent case for change – the best the Government has bothered with being that allowances look a bit like a salary (a mini-salary, presumably), which could blur the distinction with paid employees, compromise councillors’ independence to represent their communities, and so have a negative effect on local democracy.

Really?  A more negative effect than gratuitously insulting and financially punishing your local democratic representatives?  Intriguing argument.

Jo Moore was right – councillors’ pensions finally are bad news

/ inlogov / Leave a comment

Chris Game

There’s an album track by the heavy metal band, Skyclad, inspired by the most infamous civil service email ever – the ‘good day to bury bad news’ message by Jo Moore, special adviser to Local Government Minister, Stephen Byers, at 2.55 p.m. on September 11th 2001, an hour after al-Qaeda terrorists crashed their hijacked jets into the twin towers of New York’s World Trade Center. I’m no metalhead anyway, but there are two things about the track that especially grate.

First, the title, which, presumably in the interests of scansion, is mangled into ‘A good day for to bury bad news’. Oh dear! Even more distressingly, it’s all stuff about the West waking up to a terror attack, but having the muscle to give it all back. Not one mention of councillors’ pensions – which was, of course, the toxic news on Jo’s mind when she actually typed: “It is now a very good day to get out anything we want to bury. Councillors’ pensions?”

You must admit, it’s intriguing. Not just that anyone should think that the most embarrassing thing New Labour was up to was contemplating pensions for councillors, but that at the time Ministers themselves intended it to be, if anything, good news. Following some unenthusiastic reports of the early months of executive-based local government, they were looking for ways of making council service seem a more attractive prospect to existing and, even more, to potential members.

In the consultation paper published the next day, there were proposals for councils to determine their own travel and subsistence allowances and, if their independent remuneration panels recommended, to pay pensions to those councillors – executive members and chairs of overview and scrutiny committees – whose special responsibility allowances would be likely to qualify them to join the council employees’ Local Government Pension Scheme (LGPS).

To repeat, it was definitely not Labour’s initial intention to extend the acknowledgedly generous and secure LGPS to all councillors, for most of whom, the consultation paper suggested, the Government’s recently introduced employer-sponsored Stakeholder pension scheme would be more appropriate. The consultation, however, changed all that.

The Local Government Association (LGA) and its Pensions Committee were opposed in principle to any differentiation of councillors based on work patterns and remuneration levels, seeing it as untenable, discriminatory and unhelpful to the cause of attracting and retaining councillors. They wanted the LGPS open to all councillors.

Somewhat to their surprise, however, they were also advised by OPRA – no, not Lance Armstrong’s chosen inquisitor, but the Occupational Pensions Regulatory Authority – that, for pension law purposes, all councillors should indeed be treated as employees, and therefore entitled to join the LGPS. Which meant that if, as proposed, most councillors were ruled ineligible for the LGPS, they would also lose access to Stakeholder pensions, and could take legal action against Ministers for introducing discriminatory legislation.

It was only at that later point that Ministers must have realised that their strictly limited-scale sweetener was turning into something approaching Cadbury World – too late, politically, to turn back, so they didn’t.  When the snappily titled Local Government Pension Scheme and Discretionary Compensation Regulations (Local Authority Members in England) Regulations came into operation in May 2003, the discretion exercised by councils’ remuneration panels applied to all members. A review promised in 2008, when the rest of the LGPS was significantly revised, never happened, and so that’s essentially where we are today.

Whether you describe the LGPS as ‘gold-plated’ depends probably on the newspaper you read, but it’s undeniably attractive, and popular. It’s a tax-approved, career-average scheme – in contrast to the final salary scheme for full-time employees – with benefits based, for councillors, on years in the scheme and average pay over those years, in basic and special responsibility allowances. Contributions are 6% of allowances, and additional benefits include a tax-free lump sum on retirement at 70, optional earlier retirement and ill-health retirement at any age, ability to increase pension by paying Additional Voluntary Contributions, a death in service lump sum of two times career-average pay, index-linking of benefits, and, certainly not least, the security of all this being changeable only by Act of Parliament.

The TaxPayers’ Alliance (TPA) uses Freedom of Information requests to gather and publicise such data that the rest of us can’t be bothered to, and it found that in 2010/11 over 4,500 or one in five UK councillors were enrolled on the LGPS – at an estimated annual cost, now quoted authoritatively by Ministers, of £7 million .

The 4,500 were in fact drawn from only about 240 participating councils. The bulk of non-participating authorities, as would be expected, are smaller shire districts, but by no means all. There are county, unitary and London borough councils that have chosen, with plaudits from the TPA, not to extend their LGP schemes to councillors, including – taking our own region of the West Midlands as an example – Coventry and, almost completely, Worcestershire. By contrast, nearly 90% of Warwickshire members were signed up, 54 in Birmingham, 28 in Sandwell, 22 in Solihull, 19 in Dudley, and 12 each in Walsall and Wolverhampton.

Not, however, for much longer. In a kick’em-while-they’re-down footnote to December’s finance settlement, Local Government Minister, Brandon Lewis, announced that from April 2014 councillors would no longer be eligible to join or accrue further benefits from the LGPS – though provocatively the bar does not cover London Assembly Members, Police and Crime Commissioners, and, to the particular irritation of full-time council leaders, elected mayors.

It’s a ministerial, not party, policy. Conservative councillors and leaders have been as vocal in their protests as their Labour counterparts, although it is the latter who reportedly are contemplating judicial review. Lewis, however, insisted that Ministers in this Government “take a fundamentally different view to the last Administration. We do not believe taxpayer-funded pensions are justified.” Rather, they are “a corrosive influence on local democracy and independent thought, blurring the distinction between council staff and councillors. Councillors are volunteers undertaking public service; they are not professional, full-time politicians, nor should they be encouraged to become so”.

In other words, don’t tell me that senior councillors are, in practice, full-time; that the National Census of Councillors shows one in five working over 36 hours a week. That’s their choice, as it is for other, though unpaid, volunteers – like scout troop leaders, the comparison used by Conservative Chairman, Grant Shapps, on Thursday’s BBC Today programme. So, just in case it crossed their avaricious little minds, don’t even think of it: there’s “absolutely no case for increasing councillor allowances to compensate”.

As it happened, it was allowances that prompted Shapps’ remark. He was facing Clive Betts, Chair of the Commons Communities and Local Government Committee, who have just produced a report on the role of the modern councillor, Councillors on the Front Line.  There’s an important section of the report on Support and Training directly relevant to some of the Institute’s work with councillors, but it was allowances that the Today programme wanted to know about.

The Committee identifies three key barriers to people becoming and remaining councillors: the time involved, the unsupportive view taken by many employers of their staff becoming councillors, and the levels of allowances: “high enough to offend the public, but not high enough to encourage any sane person to give up their career and earning capacity to take it on” (para.76).

Because of the public controversy involved, “few councillors will vote themselves higher allowances, even if there is a legitimate reason for doing so”, such as attracting more and a greater diversity of people to stand for election. Councils therefore, recommended the Committee, should be given the power to transfer decisions about allowances to independent bodies, with councillors themselves no longer having the final say, as they do at present with the recommendations of remuneration panels.

There must have been select committee proposals with even less prospect of being swiftly implemented than this one, but just at present I can’t think of many.

game

Chris is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political  leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.