Further to my recent article about the benefits of transparency in council spending. the TPA’s latest report on council spending provides a good example of the worrying trend for every rock one turns over in local government to have something nasty hidden beneath it. Whilst investigating the huge cost of the Local Government Pension Scheme, our researchers uncovered a new development in the way councillors are rewarded that had previously gone almost totally unnoticed.
The headline finding of the report is that the unreformed final salary pension scheme operating in town halls is now costing £4.5 billion every year in employer pension contributions alone. Considering that that figure excludes teachers and yet is still nowhere near enough to cover the massive liabilities of the scheme, the current pension deal clearly needs urgent reform.
That monstrously large figure, though, conceals another worrying trend. Keen to gather as much information as possible from our Freedom of Information survey of the nation’s councils, we added a question asking how many councillors had also signed up to benefit from the scheme. The figure was unexpectedly high – over 3,500 local councillors are benefiting from the extra perk of a pensions heavily subsidised by their constituents.
This is not a small benefit – in some councils, employer
contribution rates run at more than 24% of salary, so the direct cost
to the taxpayer each year of a councillor whose allowance is set at
£10,000 is increased to £12,400. Even at the low end of the scale,
which lies around 12%, this is a sizeable benefit which has thus far
not been properly discussed.
So how did thousands of councillors end up with this perk without
the taxpaying public finding noticing? Part of the problem lies with
the process by which councillors’ rewards are set. Whilst the
councillors themselves have the ultimate say on the own remuneration,
each council is bound by law to have an Independent Remuneration Panel
(IRP) which recommends how councillors’ pay and perks should change.
Unfortunately, not only are the IRPs often unheard of, the way in
which their membership is selected varies wildly from council to
council. As part of our campaign for greater local government
accountability, my colleague Tim Aker has produced a report on the membership
and rules of each council’s Panel and discovered a bewildering
patchwork that is unfortunately full of holes.
The rules simply state that each IRP must be made up of a minimum of
three members who must not be councillors, council employees or
disqualified from serving as a councillor. Beyond that, anything goes –
For example, 13 councils including West Devon and Maldon either do
not have a formal system for recruiting their panel or did not know
what it was. 39 councils simply allocate places on the panel to
“stakeholders” such as Trade Unions, clergy, teachers or even local
newspaper editors whose papers carry council advertising, despite the
obvious capacity for this to institute political bias in the system.
There is at present no requirement that members of a council’s IRP
should be local taxpayers or service users, which means councillors can
be rewarded by people who neither pay bills locally or see the quality
of service delivered in return. Amazingly, 19 London Boroughs all have
their remuneration decided on mass by a Panel of 3 people at the quango
London Councils, who are supposed to represent the experiences of
people right across these Boroughs despite wide variation in council
tax and service levels.
In another example, typical of the recent fashion for substituting
so-called “experts” for real local accountability, one academic, Dr
Declan Hall of Birmingham University, sits on no fewer than 18
Most worryingly, instead of open applications and arms-length
selection, some councils even allow their councillors to be involved in
inviting and shortlisting candidates, whilst others simply let the
Chief Executive nominate people that he or she thinks would be good for
the job. There are clear conflicts of interest.
Following on from our report revealing the number of councillors
receiving taxpayer funded pensions, Harry Phibbs asked on this blog
whether it should be allowed. Personally, I think not – councillors are
already well rewarded for what is a voluntary public service, and if
they benefit from the bloated pension scheme then it is a conflict of
interest which will block the scheme’s much needed reform. However, if
we reform the system of Independent Remuneration Panels to make them
truly independent, genuinely representative of local taxpayers and thus
more able to judge whether councillors are doing a good job or not,
then the people could decide for themselves. That is surely what local
democracy should be about.