Tuesday, June 28, 2011

Why subsidise lazy Londoners?

Yet another Government U-turn is expected, this time over the plan to limit the amount of money a family can claim in benefits to £26,000 a year.

It seems this is not enough money to keep the undeserving poor in the manner to which they have become accustomed.

So there is every danger that David Cameron, who must giddy from all the U-turns he has completed in the last couple of weeks, will order yet another.

It would be one of the most unreasonable and unfair of all the twists and turns his Coalition has taken so far.

How could anybody complain that £26,000 a year in benefits isn’t enough money for the average work-shy family when most families in the Black Country already make do with less?

Wages in the Black Country are below the average for the West Midlands and they, in turn, are below the national average which is, itself, below the £26,000 benefits cap.

Average pay levels across the Black Country are running at £22,369 – and even that varies between £21,200 in Sandwell and £23,155 in Dudley (the figure for Walsall is £22,537 and for Wolverhampton it’s £22,584).

Yet the average for the region as a whole is £23,807 while the national average is £25,520.

So, under the Government’s existing plans, anyone who lives on benefits can secure an income – tax free, please note – which is almost £4,000 a year more than the average Black Country worker gets.

Last year, Chancellor George Osborne announced the £26,000 cap arguing it was unfair 50,000 families received more in handouts than the average family earned from going out to work.

The limit, which won’t be imposed for another two years, would apply to the total received from jobseekers' allowance, income support, employment support allowance, housing benefit, council tax benefit, child benefit and child tax credit.

It means that some people now living in expensive rented accommodation, especially in London, will have to move somewhere cheaper.

Yet it seems the “London lobby” is now demanding changes to the plan because they claim the cap is unfair on the poor of Kensington and Chelsea.

The Government is right to want to reduce Britain’s massive benefits bill – it hands out more than £164 billion in benefits yet revenue from income tax comes in at only £140 billion.

Someone on the average Black Country wage of £22,369 can expect to pay £4,795.72 in tax and national insurance.

This is a huge amount from a relatively modest pay packet – especially when the money is being used to subsidise people who don’t work at all and prefer to live off the State.

The Archbishop of Canterbury, Dr Rowan Williams, condemns the Government for bringing back the idea of the “deserving” and the “undeserving” poor – as if there’s something wrong in that.

There’s no doubt many people on benefits are perfectly capable of fending for themselves, they just prefer not to.

The snag is, as even Labour leader Ed Miliband has finally acknowledged, we live in a culture where it is perfectly acceptable for some people to milk the system and do nothing in return.

“Red Ed” admitted Labour was guilty of supporting “those on benefits who were abusing the system because they could work – but didn’t.

“We did too little to ensure responsibility at the bottom. I say – no more. We will be a party that rewards contribution, not worklessness.”

Successive Governments have been content to sit back and watch the benefits culture grow and blossom.

Many people regard a life on the dole as a perfectly reasonable career option – especially when, as some do, they can supplement their income in various shady ways.

When even the leader of the Labour Party realises something has to give, it offers a little encouragement for the vast majority of grafters who slave away to keep their financial heads above water.

Some people must wonder why they bother to work at all when they can see their workless neighbours living high on the hog.

A friend of mine was complaining only the other day that the “workless” family over the road has a better car, Sky TV and foreign holidays which he and his working wife simply can’t afford.

Where, he wondered, did all their money come from?

One answer is that it comes from him and the millions like him – honest taxpayers doing their best to make ends meet and look after their families.

If thousands of families want more money so they can continue living in London, the answer is not to lift the £26,000 benefits cap. It’s to encourage them to get a job.

It’s not as if work in London is in short supply. At the moment, all the low-paid jobs go to immigrants (legal and illegal) because they are prepared to put in the hours and make the effort required to earn a living.

If lazy Londoners really can’t be bothered to work, they should move out and go somewhere where the rents are lower.

Not that they’ll be coming to the Black Country to work – they couldn’t afford the drop in income.

Monday, June 13, 2011


Which is the lesser evil: starving or freezing? That will be the choice facing some pensioners this winter as fuel prices soar higher than ever before.

Very few old people starve to death and very few die of cold. But it happens.

And you can be certain the latest price rises announced by one of our six monopoly gas and electricity companies will make matters worse.

Most of us won’t be faced with quite the same life-or-death dilemma but a staggering increase of 19 per cent, or £200 a year, does make you wonder how the power companies are allowed to get away with it.

There are only six companies and between them they represent a price-fixing cartel which is supposed to be policed by a quango called Ofgem, the Office of the Gas and Electricity Markets.

Ofgem is a £50 million-a-year organisation which claims: “Protecting consumers is our first priority.”

This is, of course, the usual corporate bull. It claims to regulate “the monopoly companies which run the gas and electricity networks”.

But instead of tackling what Ofgem itself calls a monopoly, it busies itself worrying about global warming and “helping the gas and electricity industries to achieve environmental improvements”.

All very nice and cosy – another neutered watchdog with no teeth.

No doubt the failure of Ofgem to protect consumers is one reason why foreign investors are so keen to buy up British energy companies.

Of the “big six” gas and electricity suppliers, only Centrica and Scottish and Southern Energy are British-owned.

E.ON is German so is NPower, Scottish Power is Spanish while EDF is French.

They clearly view this country as a profits goldmine and why shouldn’t they when the watchdog responsible for policing them is so hopeless?

Ofgem flounders around whimpering feebly: “We are concerned that energy companies still have not done enough to make the market work on behalf of consumers.”

And it trumpets as some kind of triumph the news that it has forced energy companies to give us 30 days’ notice of price rises. Whoopie-doo.

These companies don’t need to sit down in a room together to fix prices.

They simply wait for one of them to lead the way – as Scottish Power has done with its 19 per cent hike – then they all pile in afterwards.

There are price comparison websites and it’s easier to change suppliers than it once was. But they still manage to pull the wool over our eyes.

My own experience with Scottish Power is not unusual. Over the past 12 months, we were paying them £215 a month for gas and electricity.

At the end of the year, we got a statement telling us we were £574.49 in credit – in other words, we were over-paying by almost £50 a month.

To add insult to injury, they slipped into the statement the news that our monthly payments for the following year would be £231 a month – an extra £16 when we were already paying too much.

We called to complain and, immediately, without question, they offered to reduce the payments back to £215. But we tried E.ON and the bill is now £146.50 a month.

No doubt we are under-paying but I’d far rather owe money to my utility company than use it as an interest-free savings bank.

Many people don’t shop around and suppliers rely on consumer ignorance to boost their little profiteering scams.

Ofgem would no doubt claim credit for allowing us to switch suppliers. But the quango’s own statistics show what a feeble job it’s really doing.

It produces a quarterly report on energy prices which breaks down the customer’s bill into various components: the actual cost of the gas and electricity, VAT, environmental costs and other charges and the companies’ operating costs.

It then shows the profit per customer – what it calls the net margin – that the energy companies actually make.

According to Ofgem, in March this year – before the latest round of price hikes – they were making a profit per customer of £75 on an average fuel bill of £1,170 a year.

Back in March 2007 – only four years ago – the average bill was £955 and the companies only made a profit of £20 per customer.

In other words, our bills have risen 22 per cent which is bad enough. But energy company profits have risen 275 per cent per customer.

If Ofgem was doing its job, it would have already enforced a price cut of £55 per customer.

If the cost of producing gas and electricity has risen, it may be reasonable to expect the customer to pay more. But why should the profits of these companies be allowed to soar at the same time?

Of course, if you complain about excessive profits, Ofgem and its clients, the energy monopolies, will witter on about security of supply and investing in the future.

These are necessary evils and the industry is supposedly spending £200 billion over the next decade to secure our “low-carbon energy needs”.

That rather suits an ineffectual watchdog like Ofgem because boils down to a lot of hot air and wind.

Tuesday, June 07, 2011

Private sector bad; public sector worse

All the criticism around Southern Cross is aimed at the American private equity firm Blackstone, which bought the business in 2004, floated it on the stock market two years later and sold all its shares in 2007 at a huge profit. But what none of these complains seems to recognise is that a seller needs a buyer. If it was such an asset-stripping scam, how come investors put money into it? The new owners are not entirely stupid, are they? If between them they found £425 million to buy Southern Cross, they must have thought there was money to be made despite the sale of the company’s properties. If blame is being handed out and everyone is looking for a greedy villain, surely the buyers and owners today are more culpable than the people who sold them the business.

Opponents of the private sector are rubbing their hands with glee over the potential collapse of Southern Cross, the largest provider of old people’s homes in the country.

The company crisis has led to demands for the Government to step in and rescue the business in much the same way as it was forced to bail out the banks in the depths of the recession.

It would be mad to do so. The taxpayer cannot be expected to step in every time some badly-run business gets into trouble.

And while this is not a particularly good advertisement for private-sector provision of public services, it doesn’t mean the State has to run things.

It’s not a good time for the private sector. Apart from concern over any collapse of Southern Cross, there’s the BBC’s exposure of a care home for people with learning disabilities and autism.

“Panorama” revealed “torture” by staff at Winterbourne View in Bristol, the police have been called in and the owners, Castlebeck, say they are “shocked, disgusted and ashamed” by what’s been going on.

Meanwhile the “Financial Times” says care at one in seven privately-run homes is “poor” or only “adequate” compared with one in 11 in the public and charity sectors.

Critics are queuing up to attack the private sector for putting profits before patients, for inadequate levels of care and for threatening old people with being turfed out of their homes – and with some justification.

The Southern Cross debacle is based on an over-expansion in the days before the recession, when the company in effect borrowed to expand.

It provides care for 30,000 old folk in 750 homes and is now desperately trying to cut its rent by 25 per cent to stave off bankruptcy.

It may succeed because the owners of these properties have been enjoying over-the-odds income from the company for some time and if they rejected the move they would probably end up even worse off.

There is a danger, though, that even this rescue won’t succeed and Southern Cross will go to the wall. The company’s share price has already plummeted. It’s now worth about £12 million compared with £1.1 billion in 2008.

Clearly the business is deeply flawed. The expansion plans drawn up at the height of the Brown-Blair boom have been blown out of the water. The company is struggling to keep afloat.

The people who run Southern Cross are not victims. They are guilty of bad planning and abominable business skills. They wouldn’t make it past round one of “The Apprentice”.

But if the company does go broke, that doesn’t mean its homes have to close. It doesn’t mean the public sector should step in. And it doesn’t mean the taxpayer should be expected to cough up even more money.

Southern Cross, like Castlebeck, relies on the taxpayer for its income anyway. It’s a substitute for council-run care. It has a secure income as long as it can provide good care for old people.

If it went into administration, other companies would want to snap up its empire at knock-down prices. It would be a valuable opportunity for a buyer which wasn’t too greedy or reckless.

The residents themselves, elderly, frail and settled in their homes, would not necessarily see any difference at all.

The worst thing for them would be months of uncertainty over the fate of the roof over their heads.

The private sector stands accused of poor levels of care. But the Government has armies of inspectors responsible for ensuring standards are maintained.

If they are inadequate then the Government, as the ultimate paymaster for these businesses, has sanctions it can impose. If Government inspectors are failing, they must share the responsibility for low standards – just as bank regulators were asleep on the job.

Of course, a case like Winterbourne View is unforgivable and, for all we know, it may not be an entirely isolated incident.

But care, whether of the elderly, children or people with mental disabilities, is fraught with difficulties. Among the hardest tasks is recruiting and keeping genuinely caring members of staff.

Low pay is part of the problem – if employers insist on cutting wages to the bone they shouldn’t be surprised if the only people who will work for them are the desperate or the dubious.

All of this makes the Government’s plans for more private-sector provision in the NHS look even more controversial.

Yet there is nothing wrong with the profit motive itself. Companies can make decent returns on their investment while at the same time providing good quality care for their customers. There are many excellent private homes for the elderly.

We would be in terrible trouble if we reverted to the old “public sector good, private sector bad” attitude of the taxpayer-funded classes.

At the Alexandra NHS hospital in Redditch the Care Quality Commission found patients weren’t even given water to drink – something I know to be true because doctors there turned their backs on me when I was searching for a tap to fetch water for one of their parched patients.

And that’s in the public sector.