Named and Shamed

What is Croydon Council Doing?

I have been laying much of the blame for the decay and neglect in central Croydon at the door of Croydon Council. It may seem to some that this apportionment of blame is a little harsh; the Council do have other areas of concern.

I spent a while trawling through the Council website (http://www.croydon.gov.uk) yesterday, to get a feel for what goes on there.

One area that caught my attention is something that doubtless concerns many of the residents of the borough; namely pensions. I downloaded the Council pension scheme annual report for April 2002 - March 2003 via this link:

http://www.croydon.gov.uk/councilanddemocracy/Finance/165068/165083.pdf?a=5441

It made interesting reading, as we are being reminded on a daily basis, the slump in the stock market over the past few years has wrought havoc on company pension schemes; leaving them severely underfunded, and at risk of not being able to meet their future pension commitments.

Many private sector final salary schemes (whereby the future pension of the employees is a set percentage of their final salary) have closed their doors to new entrants; in order to ensure that they can meet their commitments to their current members.

Croydon Council operate a contributory pension scheme as well, and have doubtless been worried about meeting their commitments to the scheme’s members. By the way, the benefits to the members of the Croydon scheme are:

● A pension of 1/80th of your final salary for each year of service, plus

● A tax free lump sum of 3/80th’s of your final salary for each year of service

Clearly keeping this scheme funded, and ensuring that it is able to meet its commitments must take up some of the Council’s time.

The fund, £264m as at March 2003, experienced a fall in value of 28.9% in 2002/2003 compared with the local authority average of 19.5%. As the pension report, commenting on the 29% fall, states “this was well below the average” quite! Indeed the performance or, to use a more appropriate word, erosion of the fund over the last five years has been continually worse average:

Croydon vs Local Authority Average % fall

1 year -28.9 vs -19.5
3 years -17.9 vs -9.1
5 years -6.7 vs -1.6

However, unlike many schemes in the private sector, the scheme is still open to new members. Indeed following the implementation of new regulations and a report on the remuneration of Councillors in London, by the Independent Panel to the Association of London Government, the Council members are now entitled to become members of the scheme (and of course draw a pension when they retire at 70). Their pensionable pay is based on their allowances, summarised below (source
http://www.croydon.gov.uk/councilanddemocracy/policiesplansdecision/143092 )


Councillors’ Allowances 2003/04

All figures in £ p.a.

Basic Allowance 10490

Special Responsibility Allowances
(paid in addition to Basic Allowance).

Leader of the Council 36505
Deputy Leader 30555
Cabinet members 27778
Deputies 10322
Chair of Scrutiny and Overview Committee 23144
Scrutiny Deputy and Vice Chairs 10322
Group Secretary 10322
Chief Whip (Majority Party) 12504
Chair of Development Control Committee 12504
Chairs of Licensing and
Corporate Services Committees 10322

Minority Group

Leader of the Opposition 19050
Deputy Leader 10322
Shadow Cabinet members 5958
Chief Whip (Minority Party) 5958
Group Secretary 5958

The Council estimates that this largesse will cost an extra £250K for 2004/05.

Given the above, I am sure that many of you must be worried about how the scheme will be able to meet its commitments. I am happy to advise you that you may sleep peacefully, for you see the Local Government Pension Scheme is a scheme regulated by Act of Parliament.

The benefits payable to members are therefore not dependent directly on the investment performance of the fund. However, the Council has to make good any deficit that might arise in the fund at regular intervals.

This means that if it appears that the fund may not be able to meet it commitments, then the Council must inject extra capital into it. FYI, the Council contributed £13.5m to the fund during the year April 2002 – March 2003.

Where does this money come from? Why, that’s simple, from the Council Tax levied on the local residents of course!

That probably accounts for part of the 27% rise in Council Tax in 2003, and the proposed rise of 7% for 2004. Note, as you are no doubt aware Croydon have been awarded my prestigious “Worse Than Worthless” award for this disgraceful burden imposed on the borough’s residents (see "Worse Than Worthless").

It seems, from the above, that the Council is unable to manage the pension fund in as an effective way as other local boroughs.

In view of this demonstration of ineffective management, we probably have little chance of seeing the Council successfully reverse the creeping decay and neglect that is consuming the centre of Croydon. This is a task which requires competence, efficiency and a hard-nosed approach to business and money; something which Croydon Council, in my opinion, has demonstrated that it does not have.

The only saving grace for the Council is that, by being able to make up its shortcomings by levying higher Council Tax, it seems to have its own retirement safely covered.

Croydon Council, spending your money as though it was its own.