Why Eric Pickles is an eejit

Guest post by our Edinburgh Correspondent  shows why Eric Pickles proposal to allow 15 minutes parking on double yellow lines is a really bad idea.

"At about 18:25 last Sunday 4th August I left Maxies Bistro and emerged onto Victoria Terrace. I soon became aware of an open-topped tour bus stopped below in West Bow. The driver was headed from Grassmarket for George IV Bridge, but could not get round the bend into Victoria Street.

Someone had parked a car on the double yellow lines on the off side of the bus. Much consternation and discussion of what to do about it. Eventually 10 concerned citizens grabbed hold of a perfectly reasonably parked car on the near side and moved it. Two Lothian buses inspectors appeared and carefully avoided getting involved in that.

The 10 concerned citizens then crossed the road and moved the obstruction. Tourist bus departed and one person wrote an abusive message on the back window of the former obstruction".

London Labour Housing Group Policy Conference April 2013

Last Saturday (April 13) I went to the London Labour Housing Group policy conference in Paddington. This event was sponsored by UNISON.

I was a little late since I had my Council surgery in Newham first. By coincidence I had 3 people come to me with separate housing related issues and was presented with a petition!

So I missed the key note speaker Jack Dromey MP and arrived during the first workshop.  I did manage to have a very quick word with him about the possibility of Council Pension funds investing in Social Housing. 

The workshop was on "London’s changing tenures: what are the implications for policy?" The report backs from the workshops on policy implications included the need for a mansion tax; a London "not for profit" letting agency; we need new build since 93% of money spent on housing is spent on housing benefit and not on new housing investment; need to build communities; leaseback of right to buy properties if owners unable to maintain; build more homes is the solution to bedroom tax.

Newham Council was praised for its Local Space Housing company which has bought private homes for temporary lets and for its Borough wide Private Sector licensing project.There was also mention of the need of a concordat with local authorities and the more democrat and responsible housing associations. After lunch there was the 2nd workshop on "Housing policies: what should Labour’s key promises be in 2014?"

Key promises from the report backs included the regulation of landlords across London and a "Fair Deal" for the private sector; stop fraud and tax evasion by landlords; no eviction for non payment of bedroom tax (but you cannot write off the debt); pledge to build more homes at affordable rents; CPO abandoned properties and bring back into use; increase Council tax on empty properties; green our existing stock; look at balance sheets of Housing associations that are not building; support TRA and instead of "right to buy" what about a "right to build" for homeless or overcrowded residents in every borough?

Finally (see picture) there was a plenary and panel discussion, Chaired by Karen Buck MP on "Campaigning on housing in 2014".  On the panel was Sir Steve Bullock, Jacky Peacock OBE, Councillor James Murray and myself (in my UNISON capacity).

Karen in her introduction praised Tory Secretary of State for Communities, Eric Pickles, as being "brilliant" for the way he tries to justify his despicable policies by antidote e.g. inferring that if only Councils did not pay their CEO's so much then no cuts would be necessary. She pointed out that Government by antidote is a disaster but perhaps we should learn from the Tories how to campaign with antidotes.

Steve gave a measured but powerful speech about how our policy and values towards housing defines us as a London Labour Party.  In Q&A Jacky reminded us all of the vital campaigning role that tenant and residents groups had played in the past and how they must be part of any housing solutions future.

James stressed how we must be pragmatic in our campaigning. When Labour took control of Islington Council in 2010, they announced that they will build new homes on spaces in Council estates but were taken back at the hostility to this idea by existing residents. The solution was to promise that any new tenancies would firstly be offered to any residents in need on the existing estates that they were planning to build upon.

I pointed out that we must have a living wage plus in London Housing. Not only a living wage but to defeat poverty, a living pension and sickness benefits for all workers - whether directly employed or sub-contractors.  Also we need to change the debate about taxes in this country. We will not be able to do what we want to do with regard to the provision of housing unless we spend more money. The rich must play their fair share but all of us will also have to pay more in taxes to get decent housing for all.

LLHG secretary (and Red Brick blogger) Steve Hilditch closed the conference and then Karen thanked him and all members of the Executive for their hard work in organising such a successful event.

Some of us then retired to the nearest pub to continue putting our London housing world to rights.

(picture Cllr Ross Houston)

Boris and his Pension Merger Plan to Rescue GB Plc

On Monday the FT rather oddly announced that the new Chair of the London Pension Fund Authority (LPFA), Edmund Truell, with the support of Mayor Boris Johnson, is to merge all 34 London Staff Council funds "into a single scheme and channel more investment into the capital’s infrastructure projects".  The Evening Standard also waded in on Tuesday in a similar vein here

The fact that neither Boris nor the LPFA has any legal powers to do this was not mentioned.

Now it makes perfect sense to look into merger in order to see if it will save money and stop Councils and pension scheme members being ripped off by vested interests. Equally, no one would be more happier than me if we could use pension funds to kick start the economy and say build more homes.

But there is a problem. Some 4.6 million Brits have a local government pension entitlement. Its primary purpose is to pay an income in retirement and not to be a substitute for inadequate investment in infrastructure by Government.

Some people also think that the LPFA is looking at merger due to its own internal financial predicament as a mature scheme with many pensioners claiming their money but relatively few active members still paying into the scheme.

There has also been claims of scaremongering. The Local Government Pension Scheme as a whole has assets of £160 billion. It is not broke. Some schemes do indeed have difficulties but in many cases this is due to outdated and irrelevant accounting measures which price scheme liabilities on the current abnormal 200 year low in gilt yields.

So far there has also been no mention either that in the new LGPS 2014 scheme members (and their "widows & orphans") will face the future costs of poor investment performance.  Under European and UK law pension funds must be run in the interests of beneficiaries, then the case for or against merger or for investment in any particular asset class, must first and foremost take into account their interests. Not short term political ambitions for a flat in Number 10.

There are a number of obvious risks. What if merged Council pension funds invest in building homes for rent and there is a property price crash? What if investment in alternative electricity supply is undermined by a change in future Government policy? In other countries pension funds that invest in infrastructure get significant Government financial support or guarantees.

There is also the issue of "why only the LGPS?". While it may seem rather strange that there are 101 separate LGPS schemes worth £160 billion, there are about 53,000 private Pensions schemes. The vast majority of whom are tiny. How well managed are they? This is also important to GB Plc since the Private sector defined benefit schemes alone have £1.1 trillion in investments. Surely it makes sense to look at merging private sector schemes as well?

The Secretary of State, Eric Pickles, who the FT claims is a supporter of Council Pensions merger, may have the legal power to force merger.But unless this is done sensitively and by putting the interests of beneficiaries first, then it is likely to end in tears. Which if the supporters of merger are right, would indeed be bad news not only for the LGPS but also for GB Plc.

The Root of all Evil in the Local Government Pension Scheme

The Pensions Institute last week issued a very provocative report which does raise some important points about process and scale but misunderstands the real nature of the governance deficit in the LGPS (in London and elsewhere).

Which is Councillors have a clear fiduciary duty to Council tax payers, but pension funds should (must by European law) be run in the interests of beneficiaries not employers. This dichotomy does mean that some LGPS schemes have indeed made poor decisions based on Council tax considerations. However, this is not just a “London thing” and some of the larger schemes have faced similar accusations.

Unlike the private sector Defined Benefit schemes where you have at least 1/3 beneficiary representation there is no similar legal right in the LGPS. Some schemes have consistently refused to have any beneficiary representation not even as observers.

Member nominated trustees and representatives (MNR) have a real interest and “ownership” of their schemes. The trustee model has its faults but on the whole has worked well over the years in trying make sure that pensions schemes are well governed and principles are not ripped off by agents. We need to do much, much better, but if you have no effective beneficiary representation on schemes and also a fundamental conflict in fiduciary duty then no wonder some of them go astray.

The answer is to mirror the best practise in private sector DB schemes and have statutory beneficiary representation in the LGPS as well as employers. The fiduciary duty of all representatives must be to the beneficiaries.

It is disappointing that this Pension Institute report has not had any input at all from existing LGPS beneficiary representatives nor does it make any reference to the changes already agreed to the scheme such as theire will be an employer contribution “cap and collar”. This is probably the most significant development in LGPS governance in decades.

I must admit that the “evidence” in the report for the serious “wrong doing” suggested is pretty weak and antidotel. It may or may not be true (and I strongly suspect some of it is) but I wonder if this aggressive approach is the best way forward to win hearts and minds for change?

As s LGPS activist for a number of years, I would also disagree that elected Councillors are “dominant” on London schemes. In fact I will say the opposite and it is professional advisors and Council Officers who are dominant (and in that order). That makes for more potential fiduciary conflicts.

It is illogical to complain of Councillors dominating schemes when at the same time arguing that their 4 year election time span is too short? This is also obviously not just a problem in London and is another argument for MNR to play a positive role like they do in the private sector schemes. MNRs are also more likely to provide continuity. Since I have been a MNR in my scheme in 1996 all the original Councillors, Officers, professional advisers, actuaries and fund managers I first worked with have long gone.

Scale is a crucial issue but it is also one for the private sector. Having 101 pension funds sharing £150 billion is inefficient but what about the hundreds of thousands of tiny private DB/DC schemes? What about the billions invested in contract schemes which have no independent oversight or beneficiary governance?

No recognition either that the way pension liabilities are calculated in the public and private sector schemes is  a complete nonsense due to low gilt yields. Yet they are driving repayment plans and long term asset allocations.

I also wonder about the tabloid references to “gold plated pensions” and “DB in the private sector is dead” (in press release)? The average pension for a women retiring from the Council in 2011 was £2780 per year? Hardly “gold plated”, also there are still 3 million workers in the private sector accruing DB pension benefit. As well as 25% of the LGPS who now work for private organisations?

Just because in the private sector it is now the fashion for many employers to turn their backs on their workers and are seemingly quite happy for them to retire and then die in poverty, doesn’t mean that it is a good thing for teacher assistants, cleaners, clerks and road sweepers to have the same fate?

The taxpayer of course has to subsidise these bad employers and pick up the bill for their poverty pension provision. This will have to change and the reintroduction of DB into the private sector is the only way it is going to happen.

I am also surprised to the reference about the discredited Channel 4 programme and the supposed link with LGPS and Council tax? I think I am right that 80-90% of Council income comes does not come from council tax e.g. Government grants, business rates, charges, fees etc. How is it therefore relevant to link LGPS contributions only to Council tax?

In short I am glad that this report has meant that long standing concerns about LGPS governance being fit for purpose are at long last out in the open. Yet it has ruffled feathers amongst those who are broadly supportive of change and has failed to take on board the argument that it is the democratic deficit that is the root source of most if not all evil in the LGPS.