Friday, 8 October 2010

ConDem Planned 'bonfire of the quangos' plan FAIL

The Government's 'bonfire of the quangos' plan will cost as much as it saves. Doh.

pound coins

Papers reveal multi-billion pound bill to close up to 180 quangos – and savings might not be felt for 10 years if at all.

In several cases the liabilities from pensions, redundancies and rental contracts could outweigh any of the savings being claimed for up to 10 years.

The Audit Commission alone, which the communities secretary, Eric Pickles, has axed, is facing nearly £500m in liabilities. A letter from the chief executive, Eugene Sullivan, to the permanent secretary in Pickles's department and the National Audit Office warns that the costs include £75m in redundancy packages and £15m in contracts for rented properties. There is also an estimated £400m in pensions liabilities.

The nine regional development agencies, which have a joint budget for this year of £1.4bn to help promote industry around the country but are to be abolished, are understood to have liabilities in the region of £1.5bn. They are also responsible for dozens of contaminated industrial sites, such as disused coal fields, which cannot be sold unless they are first decommissioned.

Standards for England, the local government watchdog, receives an annual grant of £6m, but the costs of scrapping in terms of its pension liabilities alone could be up to £12m. The Film Council, axed by the culture secretary, Jeremy Hunt, last month, distributed £160m over 10 years with an annual administration budget of around £3m, which Hunt has said would be better spent on directly making films. Its estimated winding-down cost, obtained under the Freedom of Information Act, amounts to £11.3m.

As mullering quangos will not produce the immediate savings the coalition had hoped for expect the poorest in society to be hit even harder.


Jonathan said...

Pension liabilities exist whether the Quango stays open or not, so they shouldn't be included in the cost of closing it.

Adrian Windisch said...

Will they save money by closing the quangoes as promised or not. Not. FAIL.

Jonathan said...

Take the Audit Commission example. The £400m pension liability has to be paid either way, so is not relevant. It is deferred salary for past work done. The £15m rent has to be paid either way. They have a rental contract for the building and have to pay the rent whether they use the building or not, so it is not relevant. If they move out, they might find someone else to sublet the building to, though probably not in the immediate future with the economy the way it is. That leaves £75m in redundancy costs, which is a relevant expenditure in closing it down. A lot of the staff will transfer to the National Audit Office, and therefore won't be made redundant. I don't know if that has been taken into account.

The March 2010 accounts for the Audit Commission show that total running costs were £220m. We know that the £15m rent has to be paid anyway, so there is £205m of potentially saveable expenditure. Take £75m off that for the first year only and you are left with £130m savings in year one and £205m in subsequent years until the office lease expires or we can find someone else for the building, then £215m per year after that.

The one figure we don't have, and this is very important, is how much extra will the National Audit Office have to spend to take on the work currently carried out by the Audit Commission.

Adrian Windisch said...

Your quite correct it will cost even more money, so an even bigger fail.

Particularly the audit commission which itself improves efficiency of councils. The move to cut it seems to be a personal ambition of Eric Pickles. Makes no policy sense.

It will increase the role of central government, which will contradicts usual Tory policy.