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Mark Wallace: How independent are the Independent Remuneration Panels of local government?

Mark_wallace Mark Wallace of the TaxPayers' Alliance writes a regular column for ConservativeHome.

Further to my recent article about the benefits of transparency in council spending. the TPA’s latest report on council spending provides a good example of the worrying trend for every rock one turns over in local government to have something nasty hidden beneath it. Whilst investigating the huge cost of the Local Government Pension Scheme, our researchers uncovered a new development in the way councillors are rewarded that had previously gone almost totally unnoticed.

The headline finding of the report is that the unreformed final salary pension scheme operating in town halls is now costing £4.5 billion every year in employer pension contributions alone. Considering that that figure excludes teachers and yet is still nowhere near enough to cover the massive liabilities of the scheme, the current pension deal clearly needs urgent reform.

That monstrously large figure, though, conceals another worrying trend. Keen to gather as much information as possible from our Freedom of Information survey of the nation’s councils, we added a question asking how many councillors had also signed up to benefit from the scheme. The figure was unexpectedly high – over 3,500 local councillors are benefiting from the extra perk of a pensions heavily subsidised by their constituents.

This is not a small benefit – in some councils, employer contribution rates run at more than 24% of salary, so the direct cost to the taxpayer each year of a councillor whose allowance is set at £10,000 is increased to £12,400. Even at the low end of the scale, which lies around 12%, this is a sizeable benefit which has thus far not been properly discussed.

So how did thousands of councillors end up with this perk without the taxpaying public finding noticing? Part of the problem lies with the process by which councillors’ rewards are set. Whilst the councillors themselves have the ultimate say on the own remuneration, each council is bound by law to have an Independent Remuneration Panel (IRP) which recommends how councillors’ pay and perks should change.

Unfortunately, not only are the IRPs often unheard of, the way in which their membership is selected varies wildly from council to council. As part of our campaign for greater local government accountability, my colleague Tim Aker has produced a report on the membership and rules of each council’s Panel and discovered a bewildering patchwork that is unfortunately full of holes.

The rules simply state that each IRP must be made up of a minimum of three members who must not be councillors, council employees or disqualified from serving as a councillor. Beyond that, anything goes – quite literally.

For example, 13 councils including West Devon and Maldon either do not have a formal system for recruiting their panel or did not know what it was. 39 councils simply allocate places on the panel to “stakeholders” such as Trade Unions, clergy, teachers or even local newspaper editors whose papers carry council advertising, despite the obvious capacity for this to institute political bias in the system.

There is at present no requirement that members of a council’s IRP should be local taxpayers or service users, which means councillors can be rewarded by people who neither pay bills locally or see the quality of service delivered in return. Amazingly, 19 London Boroughs all have their remuneration decided on mass by a Panel of 3 people at the quango London Councils, who are supposed to represent the experiences of people right across these Boroughs despite wide variation in council tax and service levels.

In another example, typical of the recent fashion for substituting so-called “experts” for real local accountability, one academic, Dr Declan Hall of Birmingham University, sits on no fewer than 18 Remuneration Panels.

Most worryingly, instead of open applications and arms-length selection, some councils even allow their councillors to be involved in inviting and shortlisting candidates, whilst others simply let the Chief Executive nominate people that he or she thinks would be good for the job. There are clear conflicts of interest.

Following on from our report revealing the number of councillors receiving taxpayer funded pensions, Harry Phibbs asked on this blog whether it should be allowed. Personally, I think not – councillors are already well rewarded for what is a voluntary public service, and if they benefit from the bloated pension scheme then it is a conflict of interest which will block the scheme’s much needed reform. However, if we reform the system of Independent Remuneration Panels to make them truly independent, genuinely representative of local taxpayers and thus more able to judge whether councillors are doing a good job or not, then the people could decide for themselves. That is surely what local democracy should be about.

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