"Tens of thousands of public sector contractors to see net pay slashed by a fifth"

From a press release from Randstad (employment/recruitment agency) which landed in my inbox two weeks ago:

* Final legislation on off-payroll working or “disguised employment” comes into force on 6 April and could see contractors’ net take-home pay drop by 20% (1)
* Public sector organisations, having had little time to prepare for the change, are overwhelmingly following the line that all roles will fall within IR35
* Randstad warns of a mass exodus of public sector contractors to the private sector, leading to skills shortages in vital public services (2)

About time too.

It's fair enough if people/businesses in the private sector try and reduce their National Insurance liabilities by dressing up employment as self-employment. National Insurance is a nasty tax, so I have no moral qualms about that, even though in practice I don't recommend it as HMRC usually catches up with you and then it gets really nasty.

But it always horrified me that public sector employers go along with this charade. The tax withheld from wages by the public sector is not really tax, it is a pay cut, that's great news for taxpayers.

1) How on earth they work out that net take-home pay will fall by 20% is a mystery to me. Income tax rates are the same for employees and the self-employed, and Employees' and Class 4 National Insurance on earnings over the upper earnings limit is the same (2%).

The only difference is between Employees' NIC (12.8%) and Class 4 NIC (9%) on earnings up to that limit (so maximum cost/pay cut approx. £1,000 a year). The rules on allowable expenses are a bit more generous for the self-employed than for employees, but in practice, that doesn't make a huge difference.

2) And finally, let's see whether there is a mass exodus or not, I don't see how there can be. MBK tells me that if you have worked in the public sector for a few years, private sector employers aren't interested in you any more. Private sector employers are not going to magically create roles for all of them with their largely untransferable skills, are they?

Economic Myths: Taxes on public sector wages

We've done this one often enough, but here we go again.

From the BBC:

More than six million UK workers could find their take-home pay cut from April after the new flat-rate state pension comes into effect.

The move, first announced in the 2013 Budget, will boost the Treasury's coffers by £5.5bn a year. Most of that sum will be raised from public sector employers and employees by higher National Insurance payments…

The whole move to the flat-rate state pension is much to be welcomed of course, it's more like a 'Citizen's Pension'. This has the added bonus of highlighting that National Insurance is just another tax on earnings i.e. a very bad tax indeed, so hopefully we can move away from this bullshit that "National Insurance pays for my pension" or "I've paid for my own state pension, I'm just getting back the National Insurance I paid over a lifetime." This economic myth is so deeply engrained that people get quite angry when you challenge it.

The result being that people can no longer 'contract out' and pay the reduced NI rate if they are in an employer pension scheme…

Employers will now have to pay higher NI, amounting to that 3.4% of their employees' relevant earnings. The government said in 2013 that the new system was fairer for the self-employed and many mothers.

Public sector employers will pay £3.33bn and employees £1.37bn more to the Treasury in 2016-17 as a result of bringing in the pension earlier, according to the Treasury. From the private sector, employers will pay an extra £570m and employees £235m.

If public sector employers have to pay £3.33 bn more to the Treasury, then unless public sector employees reduce their payrolls by one or two percent, doesn't mean that their budgets, paid out by the Treasury, will also have to increase by £3.33 bn?

So this is neither a real boost nor a real cost to the Treasury at all, is it?

Here we go again...

The Thought Gang left a comment on Bright Idea Of The Day:

Paying public sector workers net is a very stupid idea indeed.

The cost of applying the PAYE/NIC system is small. It works the same for all employers, so all the computer systems can handle it, everyone who works in a payroll/finance/HR department understands it, and everyone at HMRC is entirely familiar with it.(1)

PAYE is actually a really good system for all those with a simple single source of income.(2) It only breaks down when we get into multiple income sources and wotnot.. and this suggestion would make that worse!(3)

The costs of developing a completely new way of doing things for the state sector would vastly outweigh what it currently costs.(4)

You cannot just reduce all salaries to their current net and leave it at that.(5) For one thing, you have to review and revise all salaries every time there's a change in the tax system.. which would only work by referencing back to a notional gross salary...(6) thus meaning that all we're doing is finding a new and more convoluted way to do the calculations we do now. Then there are huge knock-on effects to benefits,(7) pension contributions(8) and god-knows what else.(9)

Remember, please, that 'the public sector' is not one big thing with one bank account and structure. It's many thousands of organisations of varying sizes. Some are unambiguously part of the state, others are not.. as funding streams and lines of control vary.(10)

It's a 'proposal' I hear often... but it's so simplistic and short-sighted that not even today's politicians are dumb enough to give it any thought.(11)

1) The admin costs might be small, but the admin costs of paying out a net-of-tax salary are even smaller.

2) Agreed. But paying out a single net-of-tax figure is even better.

3) No it wouldn't, why would it? If people have multiple sources of income and gains, it will be taxed at lots of different rates with all sorts of different allowances. So people with multiple sources of income will have fewer complications when preparing their tax returns. And under a flat tax system, it just doesn't make any difference anyway.

4) There would be modest cost savings on the administration front, but that is only a small part of the benefit/the reason from shifting to paying net-of-tax salaries.

5) Yes you can. You just do it.

6) That's the whole point and I explained that in the original post - you wouldn't have to. If a public sector employee were paid £20,000 net-of-tax (i.e. tax free) instead of £25,000 with £5,000 withheld at source, then whatever happens to income tax/NIC rates, he continues to get £20,000 net-of-tax/tax free. Simple and honest.

7) What benefits, pray tell? Car allowance? Travel allowance? What has that got to do with anything?

8) The same logic applies to pensions. Instead of being paid £25,000 gross with a promise of a taxable final salary pension of x% of that, you are paid £20,000 net-of-tax/tax free with the promise of a net-of-tax/tax free final salary pension of y% of that, whereby y% would be slightly higher than x% for low- and average paid public sector workers.

9) Go on, what else?

10) Agreed, we have to draw a line somewhere - and this exercise would be very useful in actually tracking down who and what is actually public sector and who and what is faux private company. True public sector workers won't mind in the slightest and all the leeches who run stuff like the Work Programme will be spitting feathers.

11) It's not "simplistic", it is the current system which is unnecessarily hyper-complicated and opaque - which is what the politicians love about it - they can shuffle a lot of their employment income into private companies, unlike yer front line public sector worker who has to take the full tax on the chin. Paying out net-of-tax/tax free salaries is a highly sophisticated and transparent system.

Bright Idea Of The Day

From City AM Forum, on the topic of tax avoidance:

HMRC could pay all PAYE state employees on a net basis. There is little point in the state handing out money, only to reclaim it in tax.

State employees with other income could simply have their main salary grossed on their tax return, so the additional income is taxed similarly to private sector workers.

Tom Spencer

It would be a particularly good idea to move public sector workers to a net salary basis before we did our planned massive reductions in the rates of income tax/NIC, so if yer overpaid quangocrat or GP is currently paid £100,000 gross as quasi-self-employed, they would just receive £65,000 net of tax with a £35,000 income tax/NIC credit.

If we then introduced a flat rate of income tax of 20%, they would continue to receive £65,000 net, but instead of their P60 saying £100,000 gross minus tax/NIC of £35,000 = net £65,000, it would say £81,250 gross minus £16,250 income tax = net £65,000. if they don't like it, then they just get a P45 saying that instead.

Sorted.

Compare and contrast

From The Evening Standard, 26 June 2013:

Mr Osborne slammed the brakes on public sector pay and set in train an estimated 144,000 job losses. Public sector pay rises will  be held below inflation at one percent, while generous automatic pay rises scrapped.

From the BBC, 1 July 2013:

David Cameron has been warned he will not be able to block plans for a big pay rise for MPs, the BBC understands. The Independent Parliamentary Standards Authority is expected to say backbench MPs' £66,000 salaries should increase to more than £70,000 from the election.

BIG FAT MYTH: "London less reliant on state jobs than the rest of the UK"

From City AM:

LONDON and its commuter belt rely far less on the public sector for jobs than the rest of the UK, official statistics revealed yesterday.

In the third quarter of last year, public sector employees made up 19.4 per cent of the total across the UK, data from the Office for National Statistics showed, with just 16.6 per cent of those working in the South East directly employed by the public sector, along with only 16.9 per cent of London workers and 16.7 per cent in the East of England.

By contrast, 27.7 per cent of all those in employment in Northern Ireland were directly employed by the state, along with 25.7 per cent in Wales, 23.5 per cent in Scotland and 22.2 per cent in the North East. Public employees now total 5.7m, the ONS said, a fall of 55,000 on the second quarter, and 669,000 below the 6.4m peak in the fourth quarter of 2009.

(One factor we could strip out if we could track down the numbers is that a lot of large government bureaucracies have been 'outsourced to the regions' because wages and rents there are lower, so overall, there is a saving to the taxpayer if the ONS is moved to Newport, the VAT head office moved to Newry, the BBC to Manchester etc. OK, scrap that last one. It would seem a tad hypocritical to outsource these bureaucracies and then point the finger at those regions which benefit.)

Taking "London" as the entire population thereof, this is quite simply not true.

The more important metric here is "public sector wages per capita population". Public sector wages do not simply disappear into the ether, they get spent. If you run a private business, you don't care whether your customers are paying with money they receive from a private or a public sector job.

In which case the figure for London is the same as anywhere else, because of three effects:

1) The figures quoted are the percentage of total jobs in an area, not the total number of adults. So if we take two equally sized towns with 10,000 public sector workers each, if Town A has low unemployment and 40,000 people in private sector jobs and Town B is an area of high unemployment and has 30,000 people in private sector jobs, then superficially Town A has 20% of people in the public sector and Town B has 25% in the public sector. That comparison is meaningless; relevant is comparing 10,000 with 10,000.

2) The overall average/median public salary is (say) £25,000 and front line public sector jobs in London/South East have a London weighting of(say) £5,000 a year.

3) Most of the really high-paid public sector job; civil service, heads of quangos, Secretaries and Ministers, the Bank of England, the FSA (or its successor bodies) with an average salary of (say) £100,000 are in London, and the people concerned live in London/South East. Let's assume that one-in-ten public sector workers in London/South East is on £100,000.

Let's assume that the overall unemployment rate in London/South East is 0% and the unemployment rate in Northern Ireland is 10% to keep the numbers simple and put those three factors together and see what we get:

Northern Ireland:

27.7% public sector - 10% unemployment x £25,000 a year = £6,230 per working age adult.

London/South East:

16.8% public sector - 0% unemployment x weighted average salary of [0.9 x £30,000 + 0.1 x £100,000] = £37,000 = £6,210 per working age adult.

My figures are guesstimates, but reasonable ones. It is equally possible that the per capita payments to "London" are slightly lower or slightly higher than in the rest of the country, but it is not a big difference either way.

So the £180 billion annual public sector salary cake is not skewed against London. It is a capital city and lives off its hinterland, just like any other capital city.
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Further, there are plenty of other subsidy cakes; for example £40 billion tax breaks/subsidies for the "pensions industry" and £60 billion a year interest rate subsidies for the banks/borrowers, total £100 billion, at least half of which goes to London. The cream of the "professional classes" (auditors, accountants, lawyers etc) who depend on a steady flow of impenetrable laws and regulations from the government to enable them to soak up wealth from the rest of the economy are primarily in London. And half of Housing Benefit paid to private landlords goes to landlords in London/South East. And what about £13 billion on the Olympics, and so on and so forth?

A couple of notable absences, methinks...

Via Bob E from the BBC:

Viewpoints: The civil service and reform

Nick Herbert, former minister of policing and criminal justice: "Whitehall Wars" makes for a good headline but a bad debate. I believe that the time has come to look again at our system of administration and consider the case for more radical reform...

Lord Bichard, former permanent secretary: Sadly the current debate about the civil service largely misses the point by focussing almost solely on the relationship between politicians and officials and whether it is at an all time low.

Dave Penman, general secretary of the FDA union: The civil service, like any large organisation public or private, is constantly reforming and adapting to respond to new challenges. The current government has tasked the civil service with delivering a radical reform agenda with significantly fewer resources. Already at its smallest size since the Second World War, the civil service is still only just over halfway through the job reduction programme planned to 2015, with further cuts to come beyond this date.

Peter Riddell, director of the Institute for Government: At the Institute for Government we have identified serious inadequacies in Whitehall that need to be addressed by both ministers and the civil service.

Alan Downey, head of government and public sector at KPMG: There are some specific reasons for the latest breakdown: for example, it is clear that a 30% reduction in the number of senior civil servants has cut deep into Whitehall's capacity, capability and morale. Yet, the problems underlying the recent outbreak of verbal hostilities have been brewing for many years. The last government's relationship with Whitehall followed a similar pattern: after a honeymoon period ministers began to complain about obstructive behaviour and the difficulty of getting their policy intentions translated into practice.

Yup, the BBC didn't ask Timmy Taxpayer or Joan Public what they think of all this, and none of the quangocrats interviewed even mentions them.

Fun Online Polls: Rock'n'roll births and UK government spending

The top 'unlikely circumstances of your own births celebrated in music', as chosen in last week's Fun Online Poll are as follows:

I was born...

to be wild - 18%
in a crossfire hurricane - 10%
under a bad sign - 8%
slippy - 7%
to lose - 7%
to make you happy - 6%
to run - 5%
in the USA - 4%
In November 1963, the day that Aldous Huxley died - 4%
under the wrong sign - 2%
in a gasoline alley - 1%
Other, please specify - 28%

Blogging points go to...

Graeme: "in a trunk, in the Princess theatre in Pocatello Idaho"
Chuckles: "on the Bayou"; "to Boogie"
Wigner's Friend: "with a plastic spoon in my mouth"
Jesus Green: "under a wandering star"
Kevin B: "in the wagon of a travelling show"

Bragging rights go to...

DBC Reed, who was born twice within a single song: one time the sun didn't shine; the other time drizzling with rain.
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In these times of "austerity", you'd assume that the government would be looking at the largest items of government spending first to see where it can find savings. For some reason, they think that can make significant savings by freezing working age and child benefit payments and in popular myth, this is the largest item of spending

IMHO, the most sensible way of splitting up government spending is not into things like "health", "defence" and "welfare" and so on, but to look at who gets the cash:
1. Cash given to welfare claimants and OAPs;
2. Cash given to public sector workers and pensioners; and
3. Cash given to nominally private sector businesses, be that procurement of goods and services or subsidies, or some mish-mash of the two like bank bail outs, PFI deals, agricultural subsidies, Housing Benefit etc).

I'm ignoring non-cash subsidies (like bank guarantees, protection of monopoly rights etc) and a nurse's salary is in category 2 (instead of including the value of "free healthcare" as a benefit in category 1) for these purposes.

On which of these three areas does the government spend most actual hard cash?

No further clues. Guess here or use the widget in the side bar.

Reader's Letter Of The Day

From today's Evening Standard (page 61):

I am a public sector worker and have worked and paid tax for all but 10 months in 36 years. I object to my tax going towards people who refuse to work or towards child benefits for families earning far more than me. If my pension has to suffer under cuts I want the right to refuse to pay for such undeserving recipients.

Claire Harding

It's a great template, isn't it? See also:

I have been out of work for 10 months. I object to tax going towards people who have a cushy public sector job or towards child benefits for families earning far more than that. If my dole money has to suffer under cuts I want the right to refuse to pay for such undeserving recipients.

Wayne Slob

or

I am a high paid earner in the private sector and have worked and paid tax for all but 10 months in 36 years. I object to my tax going towards people who refuse to work or towards public sector non-jobs. If my child benefit has to suffer under cuts I want the right to refuse to pay for such undeserving recipients.

Disgruntled of Tunbridge Wells

etc.

Fun Online Polls: Last week's strike and Jeremy Clarkson (again)

A very high turnout for last week's poll, thanks for everybody who took part, results as follows:

Do you think the public sector strike on 30th November was justified?
No - 83%
Yes - 17%

As I suspected, the strike has back fired horribly as a PR measure. No doubt the government has done its own polling and come to the same conclusion, so if anything, the government's negotiating hand is now strengthened.
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It appears that The Righteous have are bored with pillorying Jeremy Clarkson for saying that public sector workers who went on strike should be shot, and have finally got round to criticising him for something else which he said on The One Show last week, which was to describe people who commit suicide by throwing themselves in front of/under a train as "selfish".

I'd completely agree, only I'd describe them as "wickedly inconsiderate" rather than "selfish". Those who suffer most are the train drivers themselves, followed by the poor sods who have to clear up the mangled limbs and blood afterwards, not to mention all the commuters whose trains are delayed.

Of course, there is such a thing as a Righteous Train Driver, who doesn't really know what to think :-)

So that's this week's Fun Online Poll: "Are people who throw themselves under trains selfish?"

Vote here or use the widget in the sidebar.

Winter of disco'n'tent

I'll tell you what's even more depressing...

From The Telegraph:

For all the Government’s talk of austerity, something seems to be going slightly wrong. On Monday, The Daily Telegraph revealed that two thirds of council executives received pay rises last year, and yesterday, it was reported that the Coalition is generally failing to gain control of public sector pay, with automatic pay rises still the norm.

Aside from the envy such news provokes in the private sector, this news is hugely important – and hugely dispiriting. With salaries making up almost 80 per cent of budgets, the cuts that the Government needs to make to reduce the deficit will simply not be possible without radical pay reform.

The article is well worth a read, but the author makes the usual deliberate Tory schoolboy error: "with salaries making up almost 80 per cent of budgets".

I'm not sure what budgets he's talking about but public sector salaries and pensions add up to less than a third of all government spending, i.e. total spending = about £700 billion; there are 7 million people officially on the public sector payroll x average salary £25,000 = £175 billion plus a bit for pensions. So if they think they can eliminate the deficit of about £140 billion by reducing spending on public sector salaries, they would have to reduce it by eighty per cent.

They'd save a lot of time if they had a closer peek at the £280 billion a year which the government pays to private businesses for the provision of this, that and the other. But that doesn't fit in with the Tory class warfare narrative, does it, whereby all public sector employees are leeches (no more than half of them are leeches) and privately owned businesses are the holy of holies (even though most of those with their snouts in the public trough are the most corrupt and wasteful of all)?

Maths puzzles in yesterday's Evening Standard

Question One

Public sector workers are paid almost eight per cent more than private sector workers - and the gap is widening, according to official statistics... TUC General Secretary Brendan Barber said: "Hourly pay has been higher in the public sector for over 30 years. This is because public sector workers tend to be more highly skilled doing jobs like teaching and health care."

Question - out of seven or eight million people on the public sector payroll (directly or indirectly), how many are actually teachers, nurses or doctors?

Clue: about three-quarters of a million.

Question Two

Diamorphine - pure heroin - has been given to addicts in a third of London boroughs over the past three years. They take it under medical supervision several times a day. The annual NHS bill per addict is put at £14,000.

Supporters of prescribed heroin say this is dwarfed by the cost of crime users might otherwise commit to fund their addiction. Experts estimate an addict spends £45,000 a year on average on street heroin.

Question: How many junkies inject heroin "several times a day"? I though once or twice was normal.

Supplementary: An ampule of heroin costs tuppence ha'penny. The other £38 cost per day is presumably "several" times a made-up figure. Why don't they just give the addicts a prescription for a couple of ampules a day and let them collect them from the dispensing chemist?

Question Three:

When Lehman failed, banks refused to lend or even transact with each other for a period, threatening a collapse of the entire banking system. On average, more than £250 billion changes hands between UK banks in so-called large payments every day. The system handles more than 40 times the UK's gross domestic product each year, but individuals encounter it rarely, perhaps only when they buy a house.

Just 18 banks are members of the real-time settlement system CHAPS which ensures that large payments are completed immediately. Salmon called it one of the "most systemically important payment systems in the UK". But the vast majority of banks - running to several hundred - choose instead to route their large payments through a member of CHAPS and so do not receive settlement until the end of the trading day.

That effectively means they are taking out enormous, unsecured loans with the 18 CHAPS banks. More than 50% of CHAPS payments are made by the 18 correspondent banks on behalf of customer banks, leading to potentially very high risks. If more banks joined CHAPS the risk would be spread more broadly.

Question: If all the cash machines physically stopped working, because of a technical failure, would that lead to a 'collapse' of the banking system? Nope. It would be a bloody nuisance but not the end of the world. Ditto if the inter-bank payments system grinds to a halt.

Supplementary: What sort of idiot multiplies an unfeasibly large number like £250 billion by the number of days in a year? Why not multiply the number of grains of sand on a beach by the number of MPs in the UK

Surely the point is that these transactions net off to about 99.99%, i.e. by the end of the year Barclays will have paid Lloyds £10,000 billion and Lloyds will have paid Barclays £9,999 billion, so will end the year owing Barclays £1 billion more than it did at the start.

Supplementary: Why didn't they (or why don't they) just run these payments through the Bank of England as intermediary to eliminate counter-party risk? There's no need for the BoE to actually ever make any payments, it can just chalk them all up in a spreadsheet and then sort out any accumulated differences at the end of each month or each year (i.e. in the example above, at the end of the year Lloyds would have to pay Barclays £1 billion).

Ah well. At least the caricaturists aren't on strike...

Good summary

Allister Heath in today's City AM:

The government is right to seek to regain control of the public finances – but its inability to implement austerity properly could yet destroy the coalition. The wrong cuts are happening – and far too little meaningful restructuring of the public sector is taking place...

The result is a looming disaster for the coalition. Take cuts: yesterday, London Ambulance said that it would be cutting 560 frontline positions over the next five years, which is very bad news. Yet at the same time local councils are still recruiting politically correct non-jobs.

One recent investigation revealed that “walking coordinators", “obesity strategy officers”, and “active” workers are still being recruited. One council has just hired an “age friendly communities” manager, a walking and cycling officer, a “community conservation”officer and an “Energy Island” administrator.

Meanwhile, many bureaucrats prefer to shut services such as libraries* rather than seek the help of more efficient private providers to keep them going at a much cheaper cost.

Worth a read in full.

* Brent Council recently announced it was closing six libraries in order to 'save' £500,000 a year; at £80,000 per library per year, they seem like exccellent value to me (sure, that's no reason not to charge for internet use etc, which might get the net cost down to +/- nothing).

Official: London & South East are overly reliant on public sector spending

One of the myths put about by the Home-Owner-Ists in London & the South East is that public sector spending cuts (to the extent there actually will be any) will reduce their house prices less than in 'the regions' because 'the regions' are overly reliant on public sector spending, i.e. that the proportion of public sector workers is lower in London & the South East.

Firstly, the ratio for London is the same as anywhere else: around one-in-four people are employed by the government or local councils (it might well be lower in the rest of the South East, of course).

Secondly, as today's Evening Standard explains:

Public sector wages in the capital are far higher on average than other parts of the country, just over £34,000 compared to slightly less than £26,000. Individuals who get more generous pay rises and are on the highest salaries are set to be the biggest losers from the reforms.

RMT general secretary Bob Crow warned: "The Hutton pension plans will hit public sector workers in London particularly hard because wages tend to be higher."

Jonathan Baume, general secretary of the FDA*, which represents senior public sector workers, added: "Clearly there is a big impact on London because of the concentration of public services."

So even if the ratio of public sector-to-private sector is slightly lower, average salaries are considerably higher (all the tens of thousands of Whitehall mandarins earning seven figure salaries), and the total amount spent is probably as much as anywhere else.

So there.

* Rather hilariously, if you follow the hyperlink in the article to the FDA, it cross references you to articles about the US Food & Drug Administration, and not the rather pretentiously named civil servants' lobbying group the First Division Association (who by rights ought to be called Premiership Association by now).

Misleading Headline Of The Day

From The Metro: Binmen in Birmingham paid £225,000 in a single year

Very clever use of the plural - the article itself makes it clear that it was actually a team of five binmen who earned about £45,000 each. That seems pretty generous to me, but the working hours wouldn't suit everybody and the work itself is pretty unpleasant.

And as far as I can make out, the total cost of domestic refuse collection for the whole of the UK is about £3 billion or £4 billion or something, i.e. just over £100 per household, which doesn't seem extortionate to me.

M People?

From the BBC:

[Manchester Council] Leader Sir Richard Leese said: "The unfairness of the government's financial grant settlement for Manchester, one of the five worst in the country, has been widely reported. We now have to find £110m in savings next year - £60m more than expected - because of front-loading and the redistribution of money from Manchester to more affluent areas...

"At the same time we will continue to invest through our M People employee programme to improve the skills and the productivity of the majority of our staff who will stay with us."

The M People programme, developed in conjunction with the unions, aims to match the skills of the existing workforce to roles that can improve services.

I guess that those employees will have to find the heroes inside themselves and move on up, or something.

On a lighter note: "to match the skills of the existing workforce to roles that can improve services"?? In other words, M Council didn't decide which services to provide first, and then recruit people who could do them. It appears that M Council just recruited an extra ten thousand people (they say that they have 24,000 on their payroll, about one-twentieth of the population of that great City) and then let them decide what they wanted to do.

NHS Reform - I don't think so

While leafing through the Sunday Times last weekend I came across some job ads for senior monitoring and other positions connected with the NHS. In the light of the coalition's aim to "reform" the NHS, I couldn't help noticing what is required of those to be appointed.

In addition to the usual diversity bollocks, candidates must have "significant board level experience in a complex, high-profile organisation and the stature to be effective in the Whitehall environment" or "a public or health sector background, with some knowledge of personnel and pay issues and an appreciation of the policy and financial constraints on pay decisions affecting the public sector". They should be committed "to the NHS and its values with the ability to apply their skills and experience to the advancement of the Trust’s business and strategic goals".

The message of the ads is clear. The NHS, despite a cursory nod in the direction of the parlous financial state of the country, wants more of the same: only apply if you have a bureaucratic mindset (honed in large private or, preferably, public sector entities), won't rock the boat and will commit to business as usual. I don't think "reform" quite catches the flavour of such appointments: perhaps "stasis" is more accurate.

This behaviour is not restricted to the NHS. Every similar position in every part of the public sector draws from the same well of smug, already generously-rewarded, uninspiring apparatchiks who have risen without trace in a multitude of non-jobs in dysfunctional organisations. As living examples, each time a scandal erupts in a public sector organisation you will find a senior sinecure holder blinking in front of the TV cameras telling the mugs – again - that "lessons have been learned".

To a lesser extent Big Corp is also a victim of this plague. The same slimy reservoir was apparently dragged to land the non-executive (and many executive) members of the boards of RBS, Northern Rock and Lloyds before these outfits disappeared into the taxpayers' arms. It is no surprise that the FSA – another pit of expensive non-talent – asserted that there were no corporate governance issues involved in the debacle at RBS. Even so, the private sector, generally speaking, has to deliver something consumers want at a reasonable cost and, more to the point, can go elsewhere to obtain. Accordingly, in theory anyway, a minimum of efficiency and executive competence must be achieved or the enterprise will go bust. Nevertheless, the business wing of the political class protects its own. Thus, for instance, in memory of his distant glory days at ASDA, Andy Hornby - despite bankrupting HBOS at minimal financial or, incredibly, reputational cost to himself - was appointed to run Boots.

What Lansley and others in the coalition should do is take a day off and read Antony Jay's Management and Machiavelli. One of the major lessons taught by Machiavelli and highlighted by Jay is that, if you want to reform anything, don't ask those with a stake in the existing set-up to manage the changes required . Needless to say no-one in the coalition would be interested. They'll blunder on and the apparatchiks currently on the payroll – together with those to be appointed per the ads in the Sunday papers - will hold on until Labour returns to re-reform the NHS and, while it's about it, shower them with a new splurge of other people's hard-earned money.

Umbongo

Killer Arguments Against LVT, not (84)

The ever reliable Sobers, still on top form:

Well now you're introducing an entirely different valuation system that involves fiddling with the size of each individual house/plot of land, meaning excessive bureaucracy again, appeals, tribunals etc etc.

If you're going down that route you might as well value every house individually and be done with it. Then everyone pays exactly in proportion to the value of their property, not the size of their garden.

Before we argue about vaguely defined principles and hypotheticals, let's look at the nice simple robust system I have explained time and again that would get us three-quarters of the way there. For sure, there are infinite tweaks we can introduce*, but let's look at the practicalities:

1. HM Revenue & Customs collect most taxes, administer Tax Credits and employ 200,000 people (71,000 civil servants directly plus probably twice as many again in back up stuff, outsourced functions to 'consultancies' etc). From personal experience, I would guess that the private sector employs five times as many people to prepare the income tax returns, the monthly and annual PAYE, the corporation tax returns, the VAT returns.

2. That's a million people doing something of no social value, or about three per cent of the working population - which of its own must reduce our GDP by about three per cent. And that's not including the dead weight costs - GDP would be about a third higher without VAT, National Insurance, income tax, corporation tax etc - that's £300 - £400 billion a year we are flushing down the toilet.

3. The whole problem repeats itself with the welfare system, so replacing the whole welfare state with a Citizen's Income (the flip side of Land Value Tax) would reduce running costs and fraud/error by about £10 billion and reduce the dead weight costs (i.e. those people who prefer to stay on the dole rather than go out to work) by another £100 billion.

4. As regards taxes and subsidies related to land and buildings, there are a whole load more civil servants working for e.g. Council Tax and Business rates administration and collection, Council Tax Benefits office, Capital Taxes Office (Inheritance tax), HM Land Registry, Valuation Office Agency (for Business Rates), Land Valuation and Housing Tribunals, TV licence fee collection, DEFRA to administration CAP subsidies, Local authority planning departments etc etc, and no doubt five times as many again in the private sector doing battle with them.

5. As I have explained, the ideal basic geographic unit for doing valuations is a postcode sector, there are 10,000 sectors with about 3,000 addresses in each. Even if it took one civil servant a whole year to arrive at some half way decent compromise for each sector, that's a one-off cost of ten thousand civil servants for one year only - in future years, a few thousand would be enough. Reality check: there are about 4,000 civil servants at the VOA alone, who regularly revalue each individual commercial building (or each office within a larger building) for Business Rates (about ten per cent of all addresses in the UK), which is far, far, too complicated, they could make do with a tenth as many

6. There is an irreducible minimum of 6,000 working for HM Land Registry, and it would be very easy to expand their duties slightly, so that they can update values as they go along (it all boils down to address, plot size and selling prices of land and buildings in that postcode sector), i.e. on an ongoing basis, ten thousand people could run the entire tax system, with half as many again to run the Citizen's Income scheme (which overlaps with people updating the electoral roll and the Registrar of births, marriages and deaths).
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* Here's another tweak - there are exemptions that relate to the plot itself and exemptions that relate to the individual who currently 'owns' the plot. If in the first year the valuer concedes that some houses are to be treated as having a plot size of 300 sq yards and not 400 sq yards because the houses on that street tend to sell for less than others in the sector, this could be treated as a 'personal' exemption rather than a site-specific one, and the exemption is only valid as long as the current owner(s) remain in it as their only and main residence.

The exemption will simply not apply to future purchasers, so when the house is next sold (or the current owners die), the next owner has to pay on the full 400 sq yards. This of course depresses the selling price accordingly, so the next owner is no worse off, and the previous owner has in effect merely deferred the tax he has to pay, and in future, valuations are even easier. And the people who stepped up to the oche and paid on the full 400 sq yards like gentlemen heave a sigh of relief, because mathematically, their tax bill goes down slightly each time an old exemption expires.

To remind you how this works in real life, I bought a 3-bed terrace which was in Band D for council tax, but I did a loft conversion to make it a 5-bed, and the council noted that after the next sale, it would be treated as Band E. So I got no tax increase as a result of the loft conversion, but the amount I eventually sold the house for was slightly lower than it would have been had it remained in Band D.

Other exemptions are high-level politically motivated ones, like giving exemptions, discounts or a deferment option to pensioners, Righteous organisations and so on. These can also be time-limited, i.e. a council can extend the exemptions for pensioners only to pensioners who have lived in the area for a minimum number of years. It's a beggar-thy-neighbour game, as any rational council will want to attract as many people as possible prepared to pay full whack, i.e. businesses and young people with a job.

If a local council is dominated by Muslim councillors and it exempts mosques, well that exemption only holds until and unless it is replaced by a new council with a majority of atheist or Christian councillors, who promptly exempt libraries and churches instead.