New BSF delays imminent as Gove wreaks more havoc on schools

25 08 2010

The national school-building programme has been thrown into confusion once again after the government delayed work on schools that have been approved for development.

When Education Secretary Michael Gove scrapped Labour’s Building Schools for the Future (BSF) scheme earlier this summer, he allowed a small number of ‘sample school’ projects to go ahead where contracts had yet to be signed.

But according to business publication Infrastructure Journal [subscription required], Partnerships for Schools (PfS) – the national agency that oversees the BSF programme – has written to the councils and private firms developing these sample school projects, warning them to halt work pending yet another review.

The move throws many school projects back into limbo. Gove had delayed a decision on the sample schools before finally approving a number of them earlier this month. The latest review will delay these schemes yet again.

Under the review, Gove will consider the legal structures under which the schools are built on a case-by-case basis. The letter states: ‘There is no certainty as to what structure may or may not be permitted and it is possible [Gove] may conclude that no form of exclusivity is acceptable.’

This exclusivity point is crucial – it amounts to a strong suggestion that the government is trying to extricate the BSF schemes in question from the exclusivity arrangements that are automatically granted to the selected private sector bidder. This exclusivity gives the selected bidder the sole right to develop any school project over a certain value (typically £100,000) in the given area over a 10-year period.

The problem for the government is this:

  • where BSF schemes had selected a private sector bidder but not yet signed binding contracts, Gove kept some of their sample school projects but ditched the remaining projects
  • for the sample schools to go ahead, the schemes now need to sign binding contracts
  • signing binding contracts will give legal effect to the exclusivity arrangements, meaning no other company can carry out a major school project in the area for 10 years
  • this means that other than the sample school projects, no other school redevelopment would be able to proceed, no matter how necessary, without the involvement or blessing of the selected private sector bidder

Schemes that had already signed binding contracts before Gove axed BSF are not affected. Gove approved these schemes in their entirety, meaning all local school redevelopment is going ahead in these areas.

But the potential problems in areas where only sample schools were approved explain why Gove is now searching for a get-out clause from the exclusivity arrangements.

And while he looks for a way out via this latest review, important school redevelopment work must wait even longer. PfS has instructed the affected local authorities not to incur any more expenditure on their schemes pending the review.

Kiel Porter, the reporter who broke the story for Infrastructure Journal, told A Thousand Cuts: “Technically they can do it as nothing has been signed, but it would create all sorts of problems.

“First it would make a mockery of the bidding process and allow not just the preferred bidder but also losing bidders to claim the process was flawed. The test case (SITA v Greater Manchester Waste Disposal Authority) is still going on three years later with fees totalling millions.

“Second it would require a completely new project agreement that could take months to draft – and no one has the time to do it. Schools are already falling behind.”

Quite apart from yet another bungle from the increasingly hapless Gove – does anyone still describe him as a ‘rising star’? – it is also an example of how the government’s deficit machismo is blowing up in its face.

By rushing ahead with major cuts in an attempt to strike intimidating postures of intent, the government has not thought things through and is seeing unexpected problems crop up all over the place.

With BSF, we’ve already had the shambles over the publication of inaccurate lists of cancelled schools because Gove didn’t want to check the data first. Now we have Gove firing off panicking letters via PfS because he evidently didn’t consider the exclusivity issue when he axed BSF in the first place.

But it’s not just BSF. The in-year funding cuts to local authorities have forced councils to desperately hack away at local services such as Connexions. Had the cuts been delayed by a year, councils would at least have been able to prepare in advance and avoid making legally binding spending commitments.

Instead they must rush cuts through with large amounts of spending already committed. Council spending cuts have been determined not by the relative importance of specific services, but by which services have signed bits of paper and which do not.

Meanwhile Andrew Lansley’s hasty ‘denationalisation’ of NHS commissioning is heading for the courts over the legality of its unconvincing consultation process.

When millions of people’s personal details went missing under Labour in late 2007, the then-Shadow Chancellor George Osborne delivered this scathing attack on a government that had become obsessed with finding a grand vision:

“Never mind the lack of vision – just get a grip and deliver a basic level of competence.”

As the coalition revels in its epochal ‘transformation’ of the public sector, Osborne and co would do well to heed their own advice.





Step aside Sir Philip – government appoints ANOTHER tax avoider to advise on cuts

20 08 2010

Since his appointment as the coalition government’s new ‘cuts tsar’, Sir Philip Green has rightly made unwanted headlines over his tax affairs.

Retail billionaire Sir Philip’s (entirely legal) tax schemes meant that he avoided paying an estimated £285m in tax in 2005 after he transferred control of most of his business empire to his Monaco-based wife for tax purposes.

Senior Lib Dems – in particular Vince Cable – are known to be privately angry at his appointment to advise the coalition on public sector efficiency measures.

But it turns out that Sir Philip is not the only tax avoider appointed by the government to advise on how to cut billions from public services.

Step forward Adrian Beecroft, one of four City high fliers recruited by George Osborne earlier this month to act as key figures on the government’s ‘independent challenge group’.

As the FT reported at the time, ‘The group’s brief is to “think innovatively about the options for reducing public expenditure”. It will perform a similar function to the “red teams” used by intelligence agencies to question key conclusions of analysts.’

The issue here is not Beecroft’s personal tax affairs – of which I know nothing – but the tax policies of the businesses he worked in and ran.

Beecroft was one of the founders of private equity firm Apax Partners. In 25 years at the group he served as chief investment officer and then senior managing partner before retiring in September 2008 – after Apax had acquired media group Emap in partnership with Guardian Media Group.

This Apax-GMG acquisition of Emap in 2008 adopted a curious structure. As the Guardian explained in an article in 2008, the deal involved a holding company that was to be set up in the tax haven of Luxembourg, which itself would own a number of companies located in another tax haven, the Cayman Islands.

The vehicle for the Apax-GMG bid for Emap was a company called Eden Bidco, incorporated in the Caymans in December 2007.

As the Guardian article explained:

‘The Apax Caymans structure at the time of the deal involved a complex network: Apax Nominees WW Ltd owned Eden Acquisition1 Ltd which owned Eden Acquisition 2 Ltd which in turn wholly owned Eden Bidco. The rate of corporation tax in the Caymans Island is zero.’

A GMG spokesman told the Guardian that the offshore structure had been created at Apax’s request.

While Emap’s operating profits remain taxable in the UK – unlike the bid vehicle, Emap itself is registered in this country, not the Caymans – the offshore structure carries ‘unspecified’ benefits for Apax, particularly if it sells its shares in the future, a typical mid-term strategy for a private equity firm.

As the Guardian continued: ‘The level of taxation payable on any capital gains made from selling shares could have a significant impact on the financial performance of the investment in Emap.

‘Should the Emap asset be sold in the future, a potential purchaser may also avoid stamp duty on any acquisition thanks to the offshore structure, which could have the effect of enabling Apax and GMG to achieve a higher price on any disposal.’

Apax did not comment on its Emap acquisition tax structure for the Guardian article. But it may not be just the Emap deal. A search of the Cayman Islands’ company register brings up the following firms, all registered in the Caymans, all with the name ‘Apax’:

APAX CAYMAN EIGHT LIMITED
APAX CAYMAN ELEVEN LIMITED
APAX CAYMAN FIVE LIMITED
APAX CAYMAN FOUR LIMITED
APAX CAYMAN NINE LIMITED
APAX CAYMAN ONE LIMITED
APAX CAYMAN SEVEN LIMITED
APAX CAYMAN SIX LIMITED
APAX CAYMAN TEN LIMITED
APAX CAYMAN THREE LIMITED
APAX CAYMAN TWELVE LIMITED
APAX CAYMAN TWO LIMITED
APAX CSG HOLDINGS LIMITED
APAX EUROPE VI NXP FOUNDER GP LTD
APAX EUROPE VI NXP FOUNDER L.P.
APAX EUROPE VI NXP FOUNDER MLP CO LTD
APAX FINANCIAL CORP 221135 -SO
APAX GLOBIS PARTNERS & CO., LTD.
APAX NXP US VII, L.P.
APAX PARTNERS & CO (GERMANY) II LTD.
APAX PARTNERS & CO (GERMANY) LIMITED
APAX QUARTZ (CAYMAN) GP LTD.
APAX QUARTZ (CAYMAN) L.P.
APAX US VII GP, L.P.
APAX US VII GP, LTD.
APAX US VII INTERNATIONAL PARTNERS, L.P.
APAX US VII, L.P.

Given the secrecy around Caymans-based companies, it’s impossible to say how many are owned by the Apax of government adviser Beecroft or how many were created before he retired, but it’s reasonable to assume that at least some of them are and were, given Apax’s use of a Caymans-based network for the Emap deal.

There is no evidence or suggestion that either Apax or Beecroft ever did anything remotely illegal. But nevertheless, we have Adrian Beecroft, a multimillionaire Sunday Times Rich List alumnus who ran a company that used offshore tax avoidance structures on his watch, now advising the government on how to cut public spending in a way that will almost certainly impact on frontline services and welfare for the poorest in society.

Incidentally, the other three City hotshots hired to the government’s ‘independent challenge group’ are:

  • Douglas Flint, finance director of HSBC
  • Richard Sharp, former head of the Goldman Sachs European private equity arm
  • John Nash, a founder of the Sovereign Capital buy-out group and chairman of private nursing home firm Care UK

Putting to one side the clear benefits Nash’s firm Care UK will draw from Andrew Lansley’s ‘denationalising’ of NHS service provision, I have no evidence that any of these individuals have personally or professionally engaged in any form of tax avoidance. None at all.

But if anyone else has, do shout.





Building industry lambasts government’s first 100 days as ‘death by 100 cuts’

19 08 2010

The National Federation of Builders has attacked the coalition’s first 100 days in office as ‘death by 100 cuts’ for the construction industry.

The NFB, which represents many of Britain’s small to medium-sized building outfits, said that the government’s policies are forcing the industry into a double dip recession, with the current growth in the sector due to ‘companies scrambling to finalise deals before the government axe could fall’.

The body highlighted the decisions to scrap regional development agencies and regional spatial strategies with nothing in their place and no policies to handle the transition.

Describing the government’s execution of its agenda as ‘sadly wanting’, it delivered a stinging verdict on the coalition’s policies so far: ‘In much the same way as Gordon Brown redefined the word “prudence”, this government has redefined the phrase from the emergency budget “no more capital spending cuts” to mean “we are now cutting the £55 billion Building Schools for the Future programme”.’





STOP WHAT YOU’RE DOING! Government starts public vote on Spending Challenge

18 08 2010

STOP.

GO TO A COMPUTER.

VOTE.

Yes, the government has opened its much-mocked Spending Challenge to the public vote. All 44,000-plus ideas that were submitted to the website and didn’t breach moderation rules have been put out for the public to peruse.

As the Spending Challenge website says: ‘As you read through the ideas on the website, we’re asking you to let us know what you think by rating the idea from 1 star (poor) to 5 stars (excellent).

‘At the end of August, we’ll review the ideas with the most potential and investigate them in further detail to see if and how they could be taken forward for the Spending Review on 20th October and beyond.’

So, all you have to do now is give proper, considered thought to 44,000 suggestions by the end of August.

Excluding today – you need a bit of time to prepare, after all – that gives you 13 days until the end of August 31st. That’s 312 hours. Or 18,720 minutes.

In other words, you have a little over 2 minutes and 20 seconds, starting from midnight tonight, to read, consider and vote on each of the 44,000 suggestions. No eating, no drinking, no sleeping, no going to work. Just voting,

No doubt that is a terrifyingly daunting prospect, so just to filter out some gems for you, perhaps you might consider voting to sell the Royal Swans for meat. As the proposer suggests:

‘There are being many Wall by the River in Central London that are desolate except for Slime. Here I am proposing we put Pen for Swan and Employee of Government at minimum Wage for the upkeep and sale of Swan.’

That’s the spirit!

PS: interesting to note that there’s a large number of suggestions to scrap the proposed High Speed 2 rail link…





You already have a veto, Simon Hughes. It’s up to you to use it

18 08 2010

Simon Hughes. The 'aye' to the Left.

Liberal Democrat deputy leader and general centre Left head honcho Simon Hughes has been making headlines again, saying that Liberal Democrats should have a veto over government policy.

“If you want a coalition to deliver the vote then you have to make sure everybody has bought into that,” he told this morning’s Today programme. “It’s a matter of practical politics, the answer is therefore: yes, the parliamentary party, on behalf of the wider party, on big issues has to say, ‘No, we can’t go down this road.’”

Now, to paraphrase the words of his party leader, if Simon Hughes actually did something to bring about progressive policies every time he talked about the need for them, we’d be living in a social justice nirvana.

But he doesn’t. Today’s comments are a case in point.

Liberal Democrat MPs do, of course, already have a veto on government policy. It’s called the parliamentary vote. If they don’t like legislation proposed by the government, they are free to vote against it. If all Lib Dem MPs voted against a bill, there’s a good chance it would be voted down. It’s called parliamentary democracy – a novel concept, evidently.

There are a few honourable MPs on the Lib Dem benches who are not agog at the chance to take one of the plethora of ministerial jobs reserved for them, and have had the guts to vote against the government.

Mike Hancock (Portsmouth South) and Bob Russell (Colchester) were at least willing to vote against the VAT rise in the emergency Budget.

Later Hancock joined John Pugh (Southport), Annette Brooke (Mid Dorset and Poole N), Andrew George (St Ives), John Leech (Manchester Withington) and David Ward (Bradford E) in voting against the coalition over academy schools.

Note the absence of Simon Hughes from either list. Despite being widely reported as a VAT rebel, he actually spoke in support of the Budget and merely warned of possible amendments moved by Lib Dem backbenchers to make it fairer. Amendments that (correct me if I’m wrong) somehow failed to materialise.

The fact is that the parliamentary Lib Dems largely consist of Orange Book types who enthusiastically support the Conservatives’ cuts agenda (Clegg, Cable, Law etc), sort-of social democrats who generally don’t have the guts to vote against the leadership – and a third of their MPs who’ve been bought off with ministerial jobs.

Lib Dem grassroots members will have a chance to deliver a few vetoes of their own at their party conference this autumn. With any luck, they’ll teach Mr Hughes a thing or two.





Salami slicing in Maulden & Houghton Conquest

17 08 2010

With local government shutting down over August, I’ll take this opportunity to run down some of the cuts taking place in councils around the country.

First up, Central Bedfordshire. This fairly rural area, comprised of such wards as Maulden & Houghton Conquest, announced its in-year cuts in mid-July.

As ever, children and young people’s funding took the biggest hit, after the government cut education area based grants (ABG) by 24 percent.

But while some councils have cut sought to protect certain priority areas – Connexions, for example – Central Bedfordshire opted for a salami slice approach, cutting equally from all budget lines with no thought to priorities.

As a result, everything has had a 23.964557 percent budget cut. Give or take the odd one-thousandth of a percent.

Among the cuts are £450k from the Connexions service, £60k from work to support the prevention of exclusions from school, just under £70k from start-up costs for extended schools projects (breakfast clubs etc), and £6k from work to tackle substance misuse among young people.





Former government debt advisor “not confident” of avoiding double dip

16 08 2010

The former head of the government’s advisory body on national debt has said he is “not confident” about Britain’s prospects for avoiding a ‘double dip’ recession.

Sir Alan Budd, who ran the Office for Budget Responsibility until last week, told BBC Radio 4’s Today programme that a return to recession was a possibility, although he felt continued growth was the more likely outcome.

Asked about whether Britain would avoid going back into recession, Budd said: “I’m not confident of it. Our fan charts show that it is a possibility, just as much stronger growth is a possibility.

“It’s not the most likely outcome. The most likely outcome is that the economy will continue to grow. But you cannot rule it out.”

More here (subscription required).