Wednesday, 29 August 2018

MANORIAL RIGHTS

For most people, their housing worries and concerns focus on whether they can save enough to get on the property ladder or earn enough to pay the rent or the mortgage, or finance necessary repairs and maintenance.
Over the last couple of years, there have been some shock-horror stories about the nature of new leasehold properties, especially houses, where the leases contained provisions for ground-rents to double every decade. Either the conveyancing solicitors didn’t do their jobs or new home owners were too starry-eyed to take notice of the real financial implications to halt the purchase process. The government may stop new leaseholds with such onerous terms but, with the exception of exhortation to the developers to reimburse the purchasers – which most will not do because they’ve already sold the freeholds, booked the super-profits and distributed them to shareholders – the government still doesn’t know what to do with existing leaseholders whose homes are devaluing by the minute or unable to be sold, except at a big loss.
The appalling fire at Grenfell Tower has shone a huge spotlight on the complexities of who pays the bill, and when, for removing and replacing the cladding on multi-storey buildings and for paying for 24/7 on-site fire wardens until the work is complete. Obviously, the responsibilities will vary from building to building, dependent on the facts of the situation. But, it is already clear that there are some leaseholders who are stuck in their flats until the situation is resolved and others who potentially face bills significantly higher that the value of their homes.
I well remember how I learned for the first time about some of the complexities of UK property law when Right-to-Buy council tenancies were introduced. Just try getting your head around the concept and reality of ‘flying freeholds’ – where one freehold underlies or overhangs another freehold. At a simple level, they are quite common in our area – for example, where a ground-floor shared passage to the front and rear doors of terraced homes has the bedroom area for both properties on the first-floor. Of course, they become much more complex with properties which were built with no thought ever being given to splitting the ownership rights – for example, flats above shops above underground car-parking areas.
It was at about the same time that I learned about some of the legal and financial challenges to repairing and improving nineteenth century private homes which had been built on Sheffield’s hills. Houses were beginning to crumble, but so too were huge retaining walls. Too often the obligation to repair and maintain the walls rested with impecunious home-owners and the remediations costs would be many times the value of the property, but failure to maintain threatened the very existence of other homes and they, in turn, also became un-mortgageable, un-insurable and un-saleable. It often took considerable investment - of professional expertise, creativity and commitment, as well as cash - by the local authority, to find solutions to these problems.
When I was grappling with the demise of the South Yorkshire County Council, I learned about the importance of the mining archives in relation to negotiations about financial responsibilities for dealing with subsidence and settlement affecting many thousands of homes which had arisen from (particularly) coal-mining, perhaps more than a century ago.
But all these complex property issues can pale in to insignificance when you start asking questions about what your home-ownership rights might actually mean. For instance, have you ever asked yourself how far beneath the surface of your home and garden do you own? Is it to the centre of the earth? Do you own the gas in the rock a hundred metres below your house – particularly relevant as the Conservative government is pushing ahead with fracking in a quite reckless fashion? Could the National Grid erect a huge electricity cable a hundred metres above your house without your permission? They’re all good questions which, being well above my expertise-grade, I have no intention of trying to answer here.
This is all just a foreword to the latest position on addressing ‘manorial rights’ in English law. Fortunately, this will not affect most of us. However, these things have a tendency to rise up and bite us when we are not looking or expecting them.
At its simplest, much of our property law originated in Norman times. There was a feudal and medieval system of tenure. Basically, the Lords of the Manor owned the land and they decided who could do what and when with it. Some of these rights - including the rights to mine, extract minerals, hunt and fish - were very valuable. Together with other things, these were called ‘manorial rights’.
When landowners sold land, they often did so whilst retaining rights to the land below the surface and even rights to particular activities (for example, fishing) on the surface.
At the same time, there were sometimes obligations passed from the Lord of the Manor to new freeholders or leaseholders. Some residents of village cottages have been shocked to discover that they are affected by corresponding ‘chancel repair’ obligations and are legally required to pay their share of repairing the tower of the local church!
Manorial rights were specifically preserved when most remnants of the manorial system were abolished in 1926. These manorial rights over-rode other rights on property held by the Land Registry.
In an attempt to stop ancient manorial rights suddenly being brought forward to create chaos in land transactions, there was all-party support for the 2002 Land Registration Act. This required landowners to register their manorial rights by 13 October 2013 or lose them forever. In consequence, 73,000 applications were made claiming specific manorial rights on properties in England and Wales.
Many of these were known to relevant home-owners or businesses, but others were shocked to learn about the rights that others held over their land and about obligations they might owe to others in certain circumstances. Unsurprisingly, those affected made quite a fuss although it also has to be said that much of the fuss seemed to have come from solicitors who didn’t understand the law or its real implications.
Why not just abolish these manorial rights, many asked? Well, there’s no difference between manorial rights and other property rights; removal would require compensation to be paid. In this case, abolition would transfer an asset from one property owner (the claimant to the manorial rights) to another (the landowner). Thus, any attempt at abolition would almost certainly result in a legal challenge under Article 1 of the European Convention on Human Rights (ECHR), related to deprivation of possessions and property.
As a result of the large number of representations made about the Act, the all-party Justice Committee investigated and reported in January 2015. As well as examining arguments for and against the abolition of the protection of manorial rights in law, it recommended changes for more efficient operation of the Act.
Last month, the Law Commission published a report on updating the Act to make further improvements. Their recommendations were particularly targeted at sorting out rights and obligations claimed by ‘manorial rights’ owners who appeared to be trying it on and whose claims wouldn’t succeed but, in the meantime, were adding complications and costs to property transactions.
The excellent House of Commons Library has now published a summary on the Registration of Memorial Rights at https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN07072.
If you are interested in these things, or have trouble getting to sleep, it’s a great read!

There’s no accounting for it

The recent financial crashes of, amongst others, British Home Stores, Carillion and House of Fraser have rightly raised public concerns about the actions and responsibilities of company directors, their accountants and auditors.
On the face of it, all three companies appear to have been publishing accounts which did not reflect the financial reality, trading whilst they were insolvent, and been carrying huge pension deficits.
Working backwards, it is absolutely clear that the Pensions Regulator – who is meant to be acting on our behalf to ensure that companies comply with their legal obligations – has been asleep on the job and has simply failed to intervene to protect pensioners and the public purse.
19,000 workers fearing for their retirement incomes following the sale of the store by retail tycoon Sir Philip Green to former bankrupt Dominic Chappell for £1. It was only after intense parliamentary and media scrutiny that Philip Green paid £363 million into the pension fund to fill part of the gap. But not even that will happen in the case of Carillion and House of Fraser.
Further, It is quite extraordinary that, it is only in the last 6 months, for the first time, the Regulator has used its enforcement powers under the 1995 Pensions Act to deal with issues such as pension scams, scheme valuations and automatic enrolment and, in an investigation into pension fraud, secured production orders under the Proceeds of Crime Act 2002.
Incidentally, councils used to be required to keep their pension provision 100% funded at all times. However, when Mrs Thatcher was implementing the poll tax, she was so desperate to keep the level down that she changed the law and then told councils to cut their funding to 75%. So much for financial prudence!
It is quite clear that companies should not be allowed to seriously underfund their pension schemes. Not only does it put the pensioners at risk of seriously reduced pensions and add millions to public expenditure to compensate, but underfunding companies are also enjoying an unfair competitive advantage and disadvantaging companies which do the right thing.
Trading whilst insolvent can be a criminal offence (fraudulent trading) or a civil offence (wrongful trading). Basically, a company is insolvent when it can’t pay its debts, either because it can’t pay its bills when they become due, or it owes more than it has assets on its balance sheet. Company directors may be able to take some actions that allow the company to continue trading.
The law says that It is incumbent on a director to be aware of their company’s financial position at all times; saying “I didn’t realise guv’ is not a defence. Failing to realise that a company is in financial difficulties should be regarded as negligent, irresponsible, or a clear indication of being unfit to be a director.
Hard-working low-waged workers - struggling to keep their heads above water, and who would undoubtedly face disciplinary action, even dismissal, if they didn’t do their jobs properly – are fully entitled to ask why the same standards aren’t being applied to company directors who are often paid exceptionally well and then walk away from company car-crashes without a scratch.
Given the low numbers of investigations in to director failure, let alone action to pursue civil or criminal action for obvious failure, people are entitled to believe that the law is implemented unfairly. In 2017, 1214 directors were banned for periods of up to 5 years, but these were nearly all directors of small companies. To misquote John Maynard Keynes, “If you owe the bank £100 they will pursue you to the end of the world; if you owe the bank £100 million, it will make you a director.”
Finally, very serious questions are now being asked about the performance of auditors in their responsibility to verify that a company’s accounts are true and fair, in accordance with accounting standards. In a survey of chief financial officers in 2012, nearly 50% of them said that “massaging the accounts” (for example, by taking very optimistic views on the value of stock or the ability to get money from debtors) would be justified to help a company survive an economic downturn. It is in that context that auditors ought to be questioning and challenging the information they are given.
Audit has a community governance function. It isn’t just to protect shareholders. It’s also to provide transparency to employees, pensioners, suppliers, customers and the public at large.
Of course, accounting and audit scandals are not new. Older readers will remember Robert Maxwell and Mirror Group Newspapers, Asil Nadir and Polly Peck, and the Bank of Credit and Commercial International (BCCI). The 2001 collapse of Enron, the US energy giant, provided the spectacular example of large-scale accounting fraud. More recently, Bernie Madoff tricked investors out of almost $65 billion, the biggest Ponzi scheme in history.
A decade ago, the global financial collapse demonstrated that the auditors as well as the bank directors hadn’t the faintest idea about the real values (and risks) of many complex financial products, like derivatives.
American Upton Sinclair had written presciently in 1935 “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” And economist JK Galbraith concluded his history of the 1929 Great Crash by warning of the reluctance of men of business to speak up “if it means disturbance of orderly business and convenience in the present”.
Just four major global firms – Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG – audit 97% of US public companies and all the UK’s top 100 corporations. They don’t have any real competition for the audit of global corporations or the largest national companies. Just eight of the FTSE 350 companies are not audited by the Big Four. It’s an effective cartel in a guaranteed market – companies are legally required to be audited. In what is now taken for shareholder protection and a proxy for competition, the big four companies now exchange clients every 10 years.
Despite the cartel and the lack of effective fee-competition, the auditors know that their most profitable income comes from advice and consultancy services. If ever there was an opportunity to persuade auditors to be generous, if not compliant, in their assessments of the business’s financial status, this is it.
And, despite the high fees, the quality isn’t as high as it should be. Currently, none of the Big Four audit firms meet the 2018/19 target of no more than 10% of FTSE 350 audits requiring improvements.
Finally, some companies are playing fast and loose with accounting standards. Simply changing the way in which work in progress is valued (say, on long contracts) can make dramatic differences to the accounts and to the perception of the company’s health. For example, in its 2016 accounts, Capita stated that it had equity of £483 million at the year-end; but, in its 2017 accounts, Capita stated that, on the same date of 31st December 2016, it had negative equity of £553 million. A £1+ biliion difference, just by changing the way revenue was booked.
Similarly, Carillion directors failed to review and reflect the real value of ‘goodwill’ in its accounts. It kept the same value of goodwill in the accounts for five years, despite the evidence being that it was virtually worthless. And then the auditors simply failed to properly challenge the directors’ value.
So, what is to be done?
We need:
  • a Pensions Regulator who takes the job seriously and is intervening early to ensure appropriate amounts of contributions are being paid in to funds and deficits are not being allowed to build up, who is using all the existing powers to take action on pension scams, scheme valuations and automatic enrolment and get money back from fraudsters;
  • fearless investigations into the performance of company directors, not just where they have been clearly acting against the law, but also where they have failed to do their job by being negligent or irresponsible for failing to understand the company’s real financial position and taking the appropriate action;
  • bigger fines and stronger sanctions on audit firms and partners who are failing to challenge the accounts in accordance with the expected standards and are not clarifying or qualifying the accounts where there are significant issues relating to pension fund deficits, and the valuation of goodwill, work-in-progress and assets; and
  • action to increase the number of practices and firms which have the capacity to audit big global and national companies. As part of this strategy, there is a very strong case that accountancy firms should simply be banned from providing any non-audit services to their audit client.

Wednesday, 22 August 2018

Royal Mail

Let’s start by being clear that this isn’t a tabloid article or blog about William or Harry. We’re talking letters and parcels.
And, to reinforce that, why not a relevant quiz question next?
Which government minister led the privatisation of the Royal Mail? Was it
  1. Labour’s Peter Mandelson, or
  2. Conservative Michael Fallon, or
  3. Liberal Democrat Vince Cable, or
  4. UKIP’s Nigel Farage?
Still thinking? Let’s make it a little easier.
We can exclude d) Nigel Farage on two grounds. First, he was never a government minister. Secondly, Nigel Farage is never the answer to a serious question.
Give in? Well, it was c) Liberal Democrat Vince Cable…although he was supported by b) Conservative Michael Fallon.
Given the under-valuation of the shares in every previous privatisation (gas, water, electricity, telecoms), when the Royal Mail was privatised in 2013, it was not surprising that applications were made to buy seven, yes 7, times more shares than were available. In fact, the shares rose 38% on the first day of trading and were 58% higher just 6 months later. At one point, they were trading at an 87% premium.
When the all-party Business (BIS) Committee investigated, it concluded, with classic understatement, “…it appears that the taxpayer has missed out on significant value”. To put it another way, we – the taxpayers – could have received an extra £1 billion for the shares if they’d been priced at the value they traded on the first day, and a lot more just a few months’ later.
You’d think Messrs Cable and Fallon would have been embarrassed? No way. They told the Committee “We don’t apologise and we don’t regret it.”
So, why am I writing today about these events of 5 years ago? Well, it’s because they paint an important backcloth for a number of recent issues about the Royal Mail, its executives and its performance.
Let’s start with executive pay. The former chief executive was extremely well-paid but, recently, the Royal Mail board appointed a new chief executive, Rico Back. He was to be welcomed with a golden hello of £6 million and then be paid up to £2.7 million per annum. And, he would remain living in Switzerland whilst commuting occasionally to London.
No wonder, when shareholders got the chance to consider this in July, in one of the biggest revolts in shareholder history, more than 70% opposed it but could not stop it going ahead. So, 34% of shareholders opposed the re-appointment of the chair of the board, Peter Long. [Incidentally, last week, the shareholders at another company, Countrywide, where Mr Long is also the chair of the board, successfully revolted against a £20 million pay package for executives. Mr Long is also board chair at a number of other companies. He doesn’t have a zero hours contract; he seems to have a series of contracts which commit him to working more days every week than there are days.]
Then, last week, the Royal Mail was fined £50 million for breaking competition law. At its simplest, it had been found guilty of unlawfully blocking competitors for parts of its commercial services.
And, this week, it has been revealed that complaints about lost mail and parcels have reached record levels, topping more than 1 million last year. More than 250,000 people lodged formal complaints about lost parcels. There was a 58% increase in reports from customers complaining that they had never received their parcels, despite the Royal Mail saying they had been delivered.
That’s bad enough, but have you noticed what has been happening to the Royal Mail’s performance in delivering our letters.
Well, on the face of it, not much. Royal Mail claims that more than 99% of first-class letters are delivered the following day and more than 98% of second class letters are delivered within three working days. OK, it’s not quite as good as 150 years ago, when you could post a letter in the morning and have it delivered to the other side of town later that day, but it seems acceptable.
But, have you noticed the changes that the Royal Mail has been making to the collection times at post-boxes across the city? Until two years ago, most post-boxes in the city had ‘last collection’ times between 15.30 and 17.30. This was both appropriate and convenient. Businesses knew that as long as letters produced during that day’s work got in to the post-box on time, 99% were expected to be delivered the following day. Most workers were familiar with that call ‘Anything else for the post?” which rang around the office around 5pm each day.
However, the Royal Mail has been changing the ‘last collection’ times to post-boxes across the city and across the country and bringing them forward to 09.00. So now, post generated and posted during the day isn’t collected until the following day. [Unless you are prepared to take the post to the minority of post-boxes which have later collection times.]
This means that, effectively, the Royal Mail has given itself two days to deliver first-class post, and four-days to deliver second-class post, and yet can still claim that it delivers more than 99% on the following day. What a fiddle!
I’m just waiting to see some honest advertising from our privatised Royal Mail: “Prices up. Executive pay up. Lost letters up. Lost parcels up. Service down.” But, I expect I’ll be waiting some time.
Whatever, it is now time for all of us to keep our wits about us. The universal service obligation – in other words, the same price and target delivery times, including a requirement for daily deliveries Monday to Friday, to apply for mail throughout the UK – is only enshrined in law until 2021.
Just watch. There will be enormous pressure and lobbying from a number of companies over the next three years to end the universal service obligation for domestic mail. The sharks are circling.

Wednesday, 15 August 2018

Warm words only, so the housing crisis continues

In the last week, the government has made, what it purported to be, three major announcements about housing policy.
Let’s not be in any doubt about the timing. There is no reason why these announcements couldn’t have been made a month ago. They have been made now, in the peak mid-August holiday period, to avoid parliamentary and professional scrutiny. And, when we see the content, we can understand why.
The first announcement was, effectively, a ‘no change’ decision about funding for supported housing.
Supported housing is mainly for the elderly, people with mental, physical and learning disabilities who require personal care, support or supervision. It includes sheltered housing, group homes, hostels, refuges, and supported living complexes. About 270,000 people live in supported homes.
In 2011, the coalition government made proposals to fundamentally change housing benefit (as it introduced universal credit). This was followed, in 2015, by a bizarre decision to force rent cuts on social landlords – with the effect of cutting the number of new social homes for rent that would be built – and, in 2016, by the imposition of local housing allowance caps.
After a consultation in late 2016, which produced nearly 600 major responses by February 2017, Theresa May announced another set of policy changes for sheltered and supported housing in October 2017. This included a proposal that funding for short-term and transitional supported housing – typically homeless hostels, refuges for those at risk of domestic violence and those receiving support for drug/alcohol abuse – would be through a ring-fenced grant administered by local authorities.
Everyone with any knowledge about this specialist housing sector said this would be an absolute disaster. In response to the fierce criticism, the government announced another consultation which ended in January this year. It has then taken another seven months for the government to announce that it has climbed down and that housing benefit will continue to fund short-term housing.
It’s a welcome announcement, if only because it was the only logical decision. But, a listening government wouldn’t have got itself in to this mess in the first place and created a year of unnecessary turmoil. As it’s a no-change announcement, there is no new money involved.
The second announcement was by Secretary of State James Brokenshire about ‘a new £100 million programme to eradicate rough sleeping within a decade’.
Only under determined questioning did Mr Brokenshire admit that there was no new money involved at all. £50m was already part of the rough sleeping budget and £50m had been taken from elsewhere in the housing budget. 
The incoming Labour government in 1997 inherited a high and rising level of rough sleeping. In 1999, Louise Casey was made Head of a national Rough Sleepers’ Unit, backed with resources which then resulted in year-on-year reductions in the number of rough sleepers. But the incoming coalition government in 2010 abandoned those policies, with the inevitable result of a near tripling of the number of people sleeping on the streets.
It’s an absolute scandal that it has taken the government so long to acknowledge the disastrous impact of its policies on individuals, families and on communities. There was no need to wait until August to do something. And the attempt to portray the announcement as an extra £100 million to tackle rough sleeping, when it is nothing of the sort, was just disgraceful.
The final announcement was the long-promised Green Paper on Social Housing.
Last September, the then Secretary of State Sajid Javid announced “a wide-ranging, top-to-bottom review of the issues facing” the social housing sector. He said it would “be the most substantial report of its kind for a generation”.
Let me tell you that it is nothing of the kind. It’s hardly worthy of the epithet Green – it’s Pale Pistachio at best. It’s full of warm words, but is most optimistically described as “tinkering at the edges.”
I will write more comprehensively about the Green Paper in due course. Suffice it to say that on the single most important issue for individuals and families throughout England – how many new affordable homes are going to be built – the Housing Minister has confirmed that, last year, just 5,900 social rented homes were built, the lowest number since records began and that, next year, just 6,000 will be built, when everyone agrees we need to be building 80,000 a year.
There are more than one million people on housing waiting lists…and the government is not committing a single extra pound towards building the new affordable homes for rent that are required.
It is not surprising that I have been unable to find a single organisation or informed commentator who has given the Green Paper a warm welcome. I leave you to choose between ‘underwhelming’ and ‘pitiful’. It simply fails to rise to the challenge and so the housing crisis continues.

Monday, 13 August 2018

When cutting regulation increases crime

If you are tempted by the siren calls of populist politicians and journalists who try to seduce you with claims that our lives would be so much better with less regulation, I suggest you stop and think.
Last December, I wrote an article1 about legislation that had resulted in a dramatic fall in crime. After the Scrap Metal Dealers Act was passed in 2013, with tough measures to crack down on the trade in stolen metal, metal thefts dropped from nearly 62,000 in 2012/13 to fewer than 13,000 in 2016/17.
At its peak, metal theft was estimated to cost the economy more than £220 million per year. The Act has undoubtedly saved the national economy millions of pounds. Thousands of homes, businesses and churches were saved from the lead thieves.
That Act was an excellent example of how legislation can cut crime, save lives and benefit families, organisations, businesses and the national economy.
Today, I want to draw your attention to an example of what can happen when regulations are removed in the name of ‘cutting bureaucracy’.
Since the mid-1990s, the Crime Survey for England and Wales (CSEW) has shown long-term reductions in most categories of theft, with the overall number of theft offences having fallen by 69% since 1995.2
But recently, there has been an increase in some types of theft, particularly in vehicle-related theft. In fact, last year, vehicle-related theft increased by 17% and “theft of vehicles” increased by a massive 40% (to 82,000). In the West Midlands, vehicle theft has tripled in the last three years.
So, what the heck is going on?
Well, in 2015, the government removed the rule that, to get a salvage car back on to the road, the vehicle needed to obtain a vehicle inspection certificate certifying that it was fit for the road. It was all part of the government’s deregulation strategy.3
The unintended, but predictable, outcome is that criminals are stealing cars to break them down for parts. Then, they are using these parts to repair salvage vehicles which have been written off by insurers following accidents.
And, of course, we are not talking about minor accidents and cheap vehicles. The criminals make big money from expensive cars that have been involved in major accidents. It’s the luxury brands which are being sold at auction as fixable write-offs rather than as write-offs to be scrapped for parts.
Having bought the write-off, the Mr Bigs are then commissioning the theft of vehicles which will provide the parts for repair. The patched vehicles are then sold as second-hand through internet or auction sites.
Because these cars are being cobbled together in back-street workshops, rather than reputable garages and repair shops, the likelihood is that unsuspecting buyers are getting unsafe cars, especially in relation to safety elements, like crumple zones and air-bags.
The deregulation, which promised a better life, has actually resulted in a massive increase in car theft - including violent car-jackings and car-key burglaries - an increase in the number of unsafe vehicles on the road, and an increase in the number of people who are buying a pig-in-a-poke.
So, we have some very clear recent examples of how additional legislation can cut crime and improve our lives and of how cutting regulation can increase crime and seriously damage our lives.
I’m very clear. I have no interest in introducing or maintaining unnecessary legislation or regulation and we should keep these under regular review.
But neither do I – and nor should you – have any time for those who blithely assert how much improved our lives would be, if only we ended regulation and bureaucracy.
And, with respect to the single most important decision in front of us at the moment – Brexit – why is it that those, who loudly proclaim that Brexit will result in less regulation, have simply been unable to produce a schedule of laws and regulations that they intend to remove, despite being charged with that task for more than two years and having had thousands of people working on their proposals?
If you’re not worried, you ought to be.
1 Scrapping Crime, 11 December 2017, http://www.clivebetts.com
3 This included the Red Tape Challenge and the One in Two Out rule and a Deregulation Bill with a range of measures “to reduce regulatory burdens on businesses and public authorities”. http://researchbriefings.parliament.uk/ResearchBriefing/Summary/RP14-28

Friday, 10 August 2018

FINANCIAL TIMES

It wasn’t that long ago that Ministers and senior civil servants were completely dismissing any suggestion that some individual local authorities were heading for the financial rocks, let alone that the whole sector was rapidly approaching a cliff edge.
I don’t think they are as complacent today. However, despite the continued insistence that they are not expecting any surprises it is clear that there is a lot of nervousness and finger crossing.
Establishment complacency has largely been fuelled by the way in which local government has managed to cope with the significant cuts in resources since 2010 assisted by the disciplines brought about by best value and comprehensive performance assessment. These cuts have been on a scale not faced by any other service nor by any government department.
Of course, the cuts have not been evenly distributed, but even the massive redistribution of resources from the poorest areas to the wealthiest has not offered sufficient protection to the latter, which are now in the front row of red-flag wavers.
Northamptonshire may be blamed as simply a case of bad management but they are not alone. Surrey, East Sussex, Birmingham, Northants, Shropshire , Somerset and Lancashire are already posting warning signs. Earlier this year the National Audit Office (NAO) said 10% of upper-tier authorities were 'vulnerable to financial failure'. A large number of district councils are now actively considering full or partial mergers as one way of cutting costs.
The ‘vast reserves’, which Eric Pickles claimed could be used to avoid any cuts, are now being used at a dramatic rate – not for the purposes for which they were intended, but to cover in-year overspends and next year’s planned expenditure. The NAO suggests that one-in-ten councils could run out of reserves within three years.
Section 151 officers up and down the country will now realise that there is nothing to be gained by keeping their concerns private or by not drafting their S114 notices. Many auditors are busily re-reading S24 of the Local Audit and Accountability Act.
But the problem is a lot bigger than just a shortage of money. We have now reached a situation where the immediate financial challenges are absolutely compounded by all the uncertainties about local government’s financial infrastructure.
The Public Accounts Committee (PAC) asked the government to explain by the end of September why it believes that local authorities are sustainable in the current spending round, and, with local authorities, to agree a definition of financial sustainability and a methodology for assessing risk. Will ministers agree?
The green paper on adult social care funding is delayed till the Autumn. The problem doesn’t go away by delay. It’s a classic ‘wicked issue’. It is political leadership and courage that is required..
Given individual and collective failures in children’s services over the last decade and the justified criticism of councils’ performance , it was inevitable that we would see a significant rise in the number of children in the ‘care system’ . The Children’s Commissioner has now warned ministers that the £2bn resource gap inevitably means that crisis work will be prioritised and preventative work will be cancelled.
Housing is so high up the government’s agenda – we keep being told – but the promised social housing green paper has failed to materialise.
On the income side, the government has reaffirmed its long-term commitment to 100% business rates retention but refuses to give a timetable for implementation. NNDR is under attack as the retail sector is in turmoil and Amazon reveals that it paid just £4.5m in UK corporation tax last year and relatively little on business rates on its out-of-town warehouses, compared to its High Street competitors.
Similarly, unreformed council tax, with no extension of the bands and still based on 1991 valuations is increasingly seen as unfair.
So we need nothing short of fundamental reform. A significant increase in the quantum of funding available to councils and specifically a social premium and a slice of inheritance tax to meet the growing demands of social care as recommended by the joint select committee inquiry . Reform to council tax and business rates is needed to make them fairer and more effective.
Then there’s devolution , forgotten but hopefully not abandoned. Transferring powers to councils can improve services and value for money . Let’s start with the obvious candidates skills and transport. But if we are to see councils have a tax base able to grow with service demands we also need to devolve tax raising as well as spending powers. The Treasury may not like continuing demands from the LGA for more money but it likes the idea of giving councils the ability to raise that money themselves even less.
We may get some change but will it be fundamental reform?

Wednesday, 8 August 2018

Not bold, just criminal

Those with long memories (or those who own the appropriate box-set) cannot fail to remember the wonderful 1980s TV series Yes Minister, a political satire which featured the daily tussles between a government minister and senior civil servants.
Most of the episodes revolved around proposals for new policies, legislation or administrative change put forward by either the minister or civil service and the determined attempts of the other to frustrate the proposals, whilst purporting to support them. Of course, it was all fictional but, occasionally, so close to the truth that laughter was tinged with alarm bells.
The reason I mention this now is because, whenever Minister Jim Hacker put forward a scheme - which could clearly only end in a policy shambles, political calamity, public anger and a massive waste of money – Permanent Secretary Sir Humphrey Appleby would inevitably respond “Well that’s a very bold proposal, Minister”.
So it was when Conservative Minister Christopher Grayling – yes, that’s the same CG who the Yorkshire Post, thousands of rail users and MPs from all parties have been calling on to resign as Secretary of State for Transport, given the rail timetable shambles he oversaw this year, but then Justice Secretary - decided to press ahead with the privatisation of the probation service.
The probation service is responsible for the supervision of offenders in the community – either undertaking community service or following release from prison - and for providing reports to the criminal courts to assist judges in their sentencing judgements.
My Grayling is ideologically committed to privatisation. When senior civil servants told him his probation proposals were ‘bold’, he just told them to get on with it. When everyone concerned with the criminal justice system told him that his policies would end in failure, poor performance and waste vast sums of money, he told them they were wrong. In fact, the only people who supported Mr Grayling’s proposals were a few free-market think-tanks, ideologically committed to privatisation, and a number of companies which claimed wide expertise in the criminal justice system in the UK and overseas.
Yes, you’ve guessed. These companies included those – like G4S and Serco - who had been busy ripping off the public purse by charging millions of pounds for claiming to have fitted and be monitoring the tags of people who were dead or in prison. G4S had to repay £104m and Serco repaid £71m for over-charging. It wasn’t surprising that they supported privatisation but, given their performance, alarm bells should have been ringing loudly in Mr Grayling’s ears. But no, he pressed ahead with his ideological experiment.
It has been a complete and utter disaster.
Not only did service performance drop dramatically - we learned of offenders only being supervised over the telephone – but it also proved a financial disaster. Last year, the government was forced to spend an extra £342m to bail out the privatised ‘community rehabilitation companies’.
Earlier this year, the National Audit Office produced a scathing report about the new services. This was followed by similar scathing reports from the chief inspector of probation and the all-party justice committee.
Finally, last month, the new Conservative Justice Secretary David Gaulke announced that the eight private firms that run these ‘community rehabilitation companies’ will have their contracts terminated in 2020, two years earlier than agreed. Just to prop up this service until 2020 will cost an additional £170m.
So, Mr Grayling’s ideological venture has proved to have cost more than an additional £500m and much more money will now have to be spent in recreating a probation service from 2020.
Mr Grayling’s experiment was not bold. It was criminal.

Monday, 6 August 2018

Time for a re-think

Over centuries – and, in some countries, still today - men and women have battled to get the vote. As Churchill reminded us, when compared to the alternatives, democracy is the least worst form of governance.
Democracy requires elections. There is no one pure type of election process; all have their strengths and weaknesses. It’s perfectly reasonable to have different sorts of election process dependent upon whether the election is for a President or a Mayor, Parliament or Council, or Executive or Revising Chamber.
But, whatever the type or process, all elections have to be conducted with absolute honesty. In many countries, we rely on International Election Observation Missions to monitor and report on the integrity of elections. In the last week, in the maelstrom of contrasting views, we have had to place some reliance on observers of the elections in Zimbabwe to get an accurate picture of events.
What is little known in the UK is that international observers have long been very critical of some of the UK’s election infrastructure. Forget for a moment that we still rely on stubby pencils, attached to a piece of string, to mark our X.
The biggest criticisms are (1) the way in which the electoral register is constructed and (2) the lack of a requirement to produce ID when we arrive at the polling station to claim our voting paper.
The first arises from historic processes and an assumption that we will tell the truth about who lives in our home and is eligible to vote. Actually, the biggest disgrace about this issue is the level of under-registration, particularly in those inner-city communities with the highest mobility.
The second arises because, unlike most of the rest of the world, we do not have a single, reliable, robust method of ID. It might be argued that the then Labour Government approached the issue of ID cards in completely the wrong way but, there can be little doubt now, that the UK missed a huge opportunity to get some sense into policies and policy implementation when proposals for bio-metric ID were abandoned.
I have no time for those politicians and newspaper editors who bang on about ‘migration being uncontrolled/we don’t know who is coming in or out of our country’ or about ‘stopping unentitled people from accessing our benefits’ system or NHS’ when they have campaigned against bio-metric ID cards which are an essential element for implementing and managing such policies. It’s hypocritical to suggest otherwise.
I’m very clear that our election processes must demonstrate integrity. I’m intolerant of those who try to abuse or cheat the system, and believe that the law should come down hard on any perpetrators.
As it happens, I do think that elections in the UK are overwhelmingly honest. However, in every year since 1945, there have been a small number of reports of ‘personation’ (obtaining a vote by pretending to be someone else), but there have been very few prosecutions or convictions. At one time, in the 1960s, it was suggested that personation had become an Olympic Sport in some parts of N Ireland, but no-one suggests it is a significant issue today.
More recently, concerns have been raised about posting vote fraud. Occurrences are not new. As it happens, I was able to see at close hand when, in the early 1980s, Sheffield Liberal Democrat Councillor Malcolm Johnson was convicted of, and imprisoned for, postal vote fraud. He had collected unused postal votes from the homes of recently deceased electors, and then voted for himself.
There have been a small number of well-publicised but isolated examples of postal vote fraud in the near twenty years since electors could choose to have a postal vote instead of having to prove that they were on their deathbed or thousands of miles away on holiday or work.
So, despite a significant amount of well-argued criticism and opposition, this government decided to undertake trials in five areas in the last elections held in May this year, when electors would have to produce ID before they could obtain their voting paper. The government said that “A report from the Electoral Commission showed that allegations of people pretending to be other people to steal their votes doubled nationally between 2014 and 2016.”
However, the results of these pilots are now out. They show that some 350 people were prevented from voting in those five areas because they did not have the right form of ID.
So, how does this compare with the problem of ‘personation’ that these pilots were said to be solving? Well, in 2014, there were 21 alleged cases of personation at a polling station, in 2016 there were 45, but in 2017 the number actually fell again to just 28 cases. Even then, the UK Statistics Authority was critical of this analysis as it did not put its figures in context, they “are not typical of the fuller time series”, which showed an average of 22 cases pa over the last decade.
To summarise, there were 172 alleged cases of personation at a polling station between 2010 and 2017, and in just five small areas, and at a cost of more than £1 million, more than twice as many people (350) who were entitled to vote were actually prevented from voting.
It is time for the government to re-think.

Thursday, 2 August 2018

Leaseholders: Tell me now please

The Government is currently working with the Law Commission - the independent legal body charged with reviewing and simplifying the law and for making recommendations for changing or clarifying the law - on certain issues relating to existing leaseholders.
The Government has also promised to undertake further consultation and then propose new legislation on banning new leasehold houses and making restrictions to ground rents.
However, as an all-party committee of MPs concerned with Housing , Communities and Local Government, we are particularly concerned with what more can be done for existing leaseholders, in both houses and flats. There are around four million leasehold homes in England. We’ve heard evidence that leaseholders are often affected by onerous terms such as high service and administrative charges, large increases in ground rents and barriers to buying freeholds.
That’s why we have launched an inquiry1 into the Government’s leasehold reform programme and in particular how existing leaseholders in both houses and flats facing onerous leasehold terms can be supported. We will examine progress made on leasehold reform, following the conclusion of the Government’s consultation on tackling unfair practices in the leasehold market in 2017.
We want to ensure that any reforms do tackle some of the troubling practices in the sector. We will examine the effectiveness of any proposals, and find out what more needs to be done to boost confidence in the system and ensure fairness for both existing and future leaseholders.
We can only do this if you get involved.
We want you to tell us your views on
  • the adequacy of the Government’s programme of work on residential leasehold reform in both houses and flats and whether additional reforms are required
  • what the government could do to help existing leaseholders, in both houses and flats, who are affected by onerous leasehold terms; and
  • about the implications of providing such support and government intervention to these existing leaseholders.
It’s a really tight timetable. We need to get your written submissions by Friday 7 September 2018.
So, don’t delay. Tell me now please. Just go to:

Sunday, 29 July 2018

Not transparent. Don’t like scrutiny.

I’m an optimist by nature. I assume that people will do the right thing, until they don’t.
I understand all about ‘spin’ – promoting the most positive things about your policies, whilst relegating the negative aspects. After all, it would be a surprise if a salesman only told you about the worst features of the product, whilst forgetting to mention the best ones. I suspect his sales bonus wouldn’t amount to much.
And, of course, I’m familiar with some people proclaiming that the glass is half full, whilst their critics will claim it is half empty.
But I don’t think that I can ever remember a time when a government, collectively, and individual government ministers worked so hard to hide the truth, to avoid scrutiny, and to refuse to answer simple questions of fact. It’s like trying to extract blood from a stone.
Let’s just put to one side for a moment – even though Brexit is the single greatest challenge to our social, economic and environmental futures - the 58 reports on the impact of Brexit on particular sectors of the UK economy that the government has consistently refused to publish. Do you think they would be hiding these reports if they told us what a rosy post-Brexit future we should be looking at?
Let’s just look at the last week.
Immediately before Parliament adjourned for the summer recess , and without notice, government ministers made a record-breaking 21 written statements. Most of these had actually been promised weeks ago, but Mrs May held them all back until the last minute to try to avoid any proper parliamentary scrutiny.
In my own special area of interest – housing, communities and local government – the Secretary of State made hugely controversial statements, including
  • the National Planning Policy Framework (what some commentators called ‘a green light to developers to build all over the green belt’)
  • local government finance when, as each day passes, it seems that another council announces that it is heading for financial ruin because of the government’s cuts in, and repeated failure to agree new arrangements for, adult social care and children’s services
  • fundamental changes in the promised devolution of business rates
  • big changes to new homes bonus payments mooted, while councils are to be told to increase council tax above inflation rates next year to partially fill the gap
  • a whole package of proposed reforms to Local Economic Partnerships (LEPs)
  • proposals for filling the big hole that Brexit will cause in finds to support structural change and economic renewal in the poorest areas of England
Then, we learn that, in this last year, government departments applied to keep 7,406 documents from publication by the National Archives, an increase of more than 30 per cent. This is a record level of censorship in the number of official documents that were due to have been made public.
This means that the papers are transferred from Whitehall to the National Archives but remain sealed for years, often decades, before they are declassified. Some have no date set for their release at all.
The number of closure applications dramatically increased from 4250 in 2015 to 5,974 this year. These will be released eventually but at a date well beyond the 20-year rule. There were also 1,432 retention applications, up from 793 in 2015; these are documents without a release date and which may never see the light of day.
However, it is in the very simplest of issues that we can see the real extent of the determined obfuscation, avoidance of revelation of the facts, and authorised ministerial briefing which is simply untrue.
Earlier this year, I revealed that the government’s shambolic changes to national rail timetables would see a significant increase in peak rail journey times between Sheffield and London. A spokesman for the most seriously incompetent cabinet member in the government, Christopher Grayling, told the local and national media that this was not true.
Of course, when the new timetable was published, we find that the journey time of the main train of the day, the Master Cutler, has been increased by 8 minutes.
Ever since then, through written and oral parliamentary questions and Freedom of Information requests, I and others have been trying to find out when the journey time for the Master Cutler will get back to the 1997, 2007 and 2017 times.
Every request has been met with a response of sickening obfuscation.
We still don’t know the answer to those simple questions.
What I can confirm is that there is not a chance of reducing these increased journey times before 2022 at the very earliest. So much for the government’s commitment to the north.

Monday, 23 July 2018

Leasehold reform?

Just imagine that you wanted to buy a new car.
So, you visited your local car dealer and discussed the options with the salesperson who, from the moment you stepped through the door, was wondering about the size of the commission that might result from any sale.
The salesperson showed you the range of vehicles on offer. You are quite taken by one car, but it’s well outside your price range. ‘Never mind’ said the salesperson. ‘I can make that entirely affordable. We have a special offer for you. You buy the car at 20% less than the price on the windscreen, but you rent the car’s electrical system. The rent is very low – and you can buy the electrics at any time you want - but it doubles every year.’
Tempted?
Probably not, but it’s the sort of deal which some people have found themselves drawn in to when buying their new home. Of course, car life is measured in years rather than decades and cars tend to depreciate rather than hold their value or appreciate, which is why ‘ground rent on the house doubles every ten years’ might not have rung the loud alarm bells that it should have done.
Clearly some house-buyers just didn’t understand the real negative impact on a house’s value that an escalating ground-rent would bring.
There are also some big questions to be asked about the warnings that should have been given by the conveyancing solicitors, especially when the solicitors were acting for both the developer and the purchaser (‘we can save you money by doing this’).
Even bigger questions still need to be asked of the builders and developers who thought they could get away with this building model, at a time when they have already been making record profits and paying multi-million pound bonuses to their directors.
The government has now announced that it plans to ban on the sale of houses on a leasehold basis. However, we are yet to see the details. In the meantime, it really is a case of caveat emptor.
Any legislation will need to carefully distinguish between ‘ground rent for leasehold’ and ‘annual service charges for the maintenance of communal areas and services on the development’. The boss of one large developer of homes for the elderly has been conflating these two things to support his opposition to any ban. No doubt, some lawyers with sharp pencils will be looking to find ways around any such ban.
Meanwhile, the Law Commission – the independent legal body charged with reviewing and simplifying the law and making recommendations for consideration for changing or clarifying the law – has now put forward some proposals to help existing leasehold homeowners to buy the freehold of their houses.
As one of the Commissioners said about the existing situation “… the law is failing homeowners: it’s complex and expensive, and leads to unnecessary conflict, costs and delay.”
The proposed measures include:
  • making it easier for lease-owners to buy the freehold
  • options for changing the valuation formula, which would reduce the price to be paid for the freehold, whilst still appropriately compensating landlords
  • removing the minimum two year requirement before starting a claim
If you are already a leaseholder or you are contemplating the purchase of a leasehold property, I really do recommend that you make the Law Commission’s report1part of your essential summer reading. It’s an excellent summary of the existing law, the problems and the proposed solutions. And it’s great value as you can download it free!
In September 2018, the Commission intends to publish a consultation paper on enfranchisement. This will propose a new, single regime for leasehold enfranchisement designed to benefit leaseholders of houses and flats. There will then be a public consultation on the proposals; make sure you make your views known.
And, before the end of this year, the Commission also intends to publish consultation papers on commonhold and on the Right to Manage. So, your Autumn and Christmas reading is settled as well.
1 Leasehold enfranchisement: A summary of proposed solutions for leaseholders of houses, Law Commission

Wednesday, 18 July 2018

Time to end the second homes’ scam

Over the last decade particularly, there has been a robust discussion about what level of council tax should be incurred by second homes.
Naturally, second home owners have argued that a second home should have a discounted council tax because it is only being used for part of the time and the occupants are highly unlikely to be using the majority of the services – adult social care and children’s services – which are responsible for the bulk of council expenditure.
Others argue that second homes are actually used for most of the year – if not bY the owner, then by families and friends and through holiday lets – and that there is no justification for any reduction.
At the moment, in England, councils can offer a second homes' discount of up to 50 if no one lives in the property on a permanent basis. This depends entirely on the policy of the local authority where the holiday home or second home is located. [There are some exceptions relating to individuals who are required to live elsewhere because of their job or if the second home is a pitch with a caravan on it or a mooring occupied by a boat.]
However, the debate has become more heated and complex because the purchase of dwellings as second homes, particularly in tourist areas including the Peak District, has made owner-occupation quite unaffordable for local working families.
Many local people have argued that the predominance of second homes has destroyed the local economy and infrastructure; there are few resident children to go to local schools and there has been a collapse in the use of local shops, pubs and post offices making them uneconomic. There has, therefore, been pressure for council tax on second homes to be set at premium levels to discourage second home ownership in those areas.
Then, last November, Chancellor of the Exchequer Philip Hammond said he would give local councils the power to charge up to 100pc extra for council tax on unoccupied homes, up from 50% extra since April 2013. This reversed the direction set by the previous coalition government which had cut the powers for councils to tackle empty homes in their areas.
But, something else has been going on. Letting properties for holidays can be seen as running a business. And, if the business is small enough, it not only doesn’t require council tax to be paid on the property, it is also eligible for 100% tax relief on business rates.
There has been a dramatic increase in the number of second homes that have been registered as small businesses, thus avoiding all local taxes and making absolutely no contribution to the cost of local services (like highways maintenance, refuse collection, planning, parks and libraries) that all the visitors are using. Second home owners can do this if they state that the property is available for letting for 140 days per annum. It is clear that, in many cases, there is little letting at all, and certainly not to the extent intended by the legislation.
The issue is not dividing on party political lines. Some of the strongest complainants about the current situation are local and national elected Conservatives.
Lord Deben (the former Conservative Secretary of State for the Environment, John Selwyn Gummer) thinks that
‘…some second home owners are telling a very direct lie. They have no intention of running a business. It is something that angers people when their neighbours are not paying their way. It is very simple to change.’
Property consultants are complaining that businesses are picking up the bill for this scam. According to Colliers International
‘Second homeowners are being subsidised by ‘many millions of pounds’ at the expense of firms paying full business rates’
and say that system is ‘unfair’, as it gives these holiday homeowners a ‘windfall’ of millions of pounds in tax relief.
This week, in answer to my written parliamentary question*, local government minister Rishi Sunak confirmed that there are now more than 47,000 properties which have been designated as holiday lets meaning they are excluded from paying council tax but on which business rates should normally be paid. However, the 100% Small Business Rate Relief means that most are paying nothing at all. This could be costing councils up to £80 million per annum in lost council tax income.
This isn’t fair to local families who are paying their council taxes. Neither is it fair to other businesses. The reality is that councils are being short-changed and this scam is distorting the proposals for the devolution of the business rate.
Six months ago, Mr Sunak said the situation was being investigated. Now, in response to my written question, the Minister has acknowledged the scale of the problem but just says “…the Government takes any concerns about possible council tax avoidance seriously, and is considering whether the criteria under which holiday lets are valued for business rates are appropriate.”
Let’s be clear. The time for investigation is long gone.
It’s now time to act to end this scam.

Wednesday, 11 July 2018

Your data privacy is important

Technological change in the last fifty years has transformed our social and economic relations more than the whole of history which preceded it. You only need to consider some of the tools we use throughout the day – for instance, mobile phones, access to the internet – and then reflect on how different our lives today would be like without them.
The digital era has not just brought new opportunities and new ways of doing things and an ability to do some things we simply couldn’t do before, it has also brought new threats to our civil liberties and opportunities for the less scrupulous to try to take advantage of us.
Hardly a week goes by now, when most households don’t experience some sort of attempted scam through text, e-mail or phone call, all centred around disclosure of your personal data. And, certainly, police forces throughout the world are struggling to address both the scale and nature of this new criminality.
One significant aspect of crime prevention – and it goes hand in hand with our privacy rights – is the backdrop of data protection legislation. At its very heart is the principle that personal data we disclose to another party for one purpose should not be disclosed to other parties without our consent.
Over the years, the Information Commissioner – responsible for securing compliance with legislation and initiating investigations and action in the event of failure – has got better at identifying and tackling those individuals and companies which break the law. But, as technology developed, so the legal protections need to be updated.
UK law in this regard is based in the 1998 Data Protection Act. In recent weeks, many of the protections have been overtaken by the European General Data Protection (GDPR) provisions. The former has a penalty cap of £500,000 whereas, under GDPR the fines’ cap is Eu20m or 4% of global turnover.
GDPR was the reason why we all recently received communications, from just about every organisation and company with which we have some relation, asking us to confirm or update our agreements to the use of our data for the future.
All that provides a background to today’s reports by the Information Commissioner1 2 in to events at the time of the EU Referendum and the US Presidential Election which confirms that, amongst other things, the ICO:
  • has fined Facebook £500,000 – just over five minutes’ Facebook revenue - for data breaches under the 1998 Act (and it could have been up to £1.4bn under the GDPR). (Facebook was fined £95m in 2017, and Google was fined £2.1bn by the EU in 2017)
  • it is bringing criminal proceedings against some companies and individuals
  • has stopped some companies from processing data about UK citizens
  • has written to the UK's 11 main political parties compelling them to have their data protection practices audited
  • has served enforcement notices on and is continuing investigations in to a number of data-broking companies
  • is undertaking an investigation into allegations that an insurance services company illegally shared customer data with a Leave.EU group and used its call centre staff to make campaign calls
  • is probing data misuse by various organisations, including a university department, the official Remain campaign - Britain Stronger In Europe - and a data broker
The ICO expects its next report to be complete by the end of October.
One thing that I have noticed is that a number of the prominent individuals (company directors, funders, managers and senior staff, campaigners) identified in the ICO investigations to date were also prominent in campaigns and in funding and managing organisations against bio-metric, secure identity cards in the UK, which would have assisted in protecting our data, managing our borders, and in ensuring that only UK citizens entitled to receive particular services did actually receive them.
I hope our investigative media does a lot more to highlight the hypocrisy of those who campaigned against secure ID cards, whilst apparently having little regard for the law to protect our data as they pursued their personal and commercial objectives.