Wednesday, July 22, 2015

Submission on “Call in” over Pension Provision for Members 22 July 2015

UPDATE2: I have seen copy of advice from LGA solicitors that Pensions for Councillors are not lawful. Check out

UPDATE: Overview & Scrunity voted 5:3 on Wednesday to recommend to Mayor that he postpones the pension provision for some himself and some Cllrs until we can afford it. This is an account by a journalist of that meeting. However, at Cabinet the next day he approved paying the pension.

"This is a report I submitted today as a Councillor to Newham Overview and Scrunity Committee.

1. Firstly, I would like to thank members of Overview and Scrutiny for supporting my request that this decision is “called in” and reviewed.

2. The decision by the Executive Mayor to award himself and members he appoints as Mayoral advisers (and elected Scrutiny Chairs, Group Chief whip and Secretary) a non-contributory pension of 13.4% costing up to £603,000 at the Cabinet meeting on 25 June 2015, needs to be independently examined and reviewed by Overview & Scrutiny.

3. There is a clear and obvious conflict of interest for the Major (supported by his cabinet appointees) to make this decision without independent scrutiny since he will be significantly financially better off if it goes ahead.

4. I submit that this decision at a time of savage cuts in our Council budget is wrong for the reasons detailed below and that Overview & Scrutiny should consider making a recommendation to the Mayor that no such pension should be provided by Council taxpayers.

5. Newham Council is currently consulting on how to implement a £91 million in cuts including £50 million alone next year. I believe it is wrong that the Council at this time of unprecedented savage cuts to its budget and us closing children centres and community facilities, we should be considering to pay what is in effect an extra 13.4% in allowances for 29 out of 61 elected members.

6. We already have to spend £78,000 per year for the next 20 years to fund the deficit in Council pension arrangements for pre 2014.

 7. This proposal is in my view extremely damaging to the reputation of the Council and all elected members. It will be divisive and damage our relationship with residents who will not understand why at a time we are consulting on cuts, we are paying more to some elected members.

 8. If and when our financial situation improves then this matter could be reconsidered.

1. I have sent previously legal advice to the Investment & Accounts Committee, including Mayoral advisers and Council officers, that the provision of any Council funded pension to Councillors is likely to be Ultra vires (unlawful) in the view of the Local Government Association. I have received further advice that this view remains.

2. I have been refused copies of the legal advice in the original report on this provision (I am appealing this decision). As an elected Councillor representing the concerns of my constituents about possible illegal payments and expenditure of public money, I am extremely disappointed at this refusal. This has obstructed my work as a Councillor and this submission to Overview & Scrutiny committee.

3. I suspect from the main report that the legal advice is (as often the case) contradictory and that this decision will be open to challenge by either the Government or local residents via judicial review. In the report it is stated that “The Secretary of State could at any time by order, restrict the use of S.1 of the Localism Act 2011 and by doing so bring a locally introduced scheme to an end”. So it would appear that at any time this proposal if passed today could be struck out by the Government? As a Council facing massive cuts we cannot afford to waste money on costly legal opinions and Court costs.

4. I also think that this report is in contradiction to existing Council policy passed only last year regarding a defined benefit type of pension for all members. This decision has also been overtaken by events following the budget cuts.

5. I would like to make it clear that the decision by the previous government to pass legislation to bar all Councillors and Executive Mayors from access to a pension scheme was petty and politically spiteful. However, we are democrats who believe in the rule of law and therefore have to accept decisions that we do not agree with. This proposal may be well intentioned but it is misguided in the extreme.

6. Even if it was lawful to have such a pension scheme for the Mayor and his advisers, I think in light of the current financial crisis facing the Council, it would be inappropriate to fund this provision.

1. The original report on pension provisions is also in my view unclear, contradictory and confusing. It would be unsafe to make any decision based upon it. For example it argues that providing a pension will encourage younger Newham residents to become Councillors and existing Councillors to become mayoral advisers? Where is the evidence for this?

2. I have seen no evidence that the candidates and elected members 2014-2018 are less inclined to become mayoral advisers, part time or full time? I suspect that the average age of the current 2014-2018 Newham Councillors may well have gone down since we were barred from pensions in 2014.

3. The number and selection of cabinet members and those who receive (none Group elected) SRA is purely in the gift of the Executive Mayor, so there is no guarantee or objective process that they would ever be given a Cabinet position or SRA. This in contrast to the appointment and promotion of Council officers.

4. If the reason why the Mayor and only Councillors who are full time or receive a SRA should have a Council pension is because they suffer a determent in their careers by public service then surely it would be logical for all Councillors to receive a pension? Since all of us will suffer to lessor or greater extent in our professional careers by our public service commitments. It is noted in the report that the average councillor spends around 20 hours per week on their ordinary duties.

5. Since I believe that our existing SRA allowances are more than adequate then surely in the light of the unpreceded savage cuts Newham is facing then the Mayor and all Cllrs should pay their own pensions? Since 2014 I have paid 10% of my Councillor allowances into a private pension plan. For which I receive significant tax relief. Council officers could source an appropriate scheme at little or no cost to the council. This could be reviewed when austerity ends and the financial situation improves.

 6. Apart from the Mayor who receiving £81,029 per year, the 10 Full time advisors referred to in the report receive up to £44,672 in allowances. This is more money than I have ever earned or any member of my family. The Council has estimated that 20% of Newham residents earn less than a minimum wage and 50% less than a living wage. I do not think it is unreasonable for Councillors who are full time earning £44,672 to put 10% of their income into their own pension plan.

7. I think we separately need to look very seriously at the number of SRAs for executives and council members in light of cuts. Do we really need to have 10 full time Councillors plus the Mayor and 19 others receiving a SRA? Other Executive models have far less full time and part time Councillors on

8. I accept that elected members have to perform important legal functions such as scrutiny, planning and licensing but we employ professional officers and a senior management team to run the Council. Elected members should be concerned with setting strategy and oversight and should not in my view be running operational services.

9. If some elected members are to have a pensions then why has it been set at 13.4% of allowances? It seems illogical to set it at the old defined benefit rate which was an actuarial derived figure dependent on that schemes investment and mortality projections. Defined Contribution schemes should calculate contributions on the basis of replacement income. While I don’t agree with the principle of pensions for some elected members at this time the methodology should at least be consistent.

10. Why is it being proposed that the employer contribution rate being set at 13.4% when new employees of companies controlled and set up by the Council (for example NewhamActive) are only getting I believe a 6% employer contribution?

11. Also, why is the proposed scheme “non-contributory”? There no requirement for the selected elected members to personally contribute towards a pension from their allowances in order to receive an “employer” contribution? This is in my experience a standard requirement for such pension arrangements.

12. Nor do I understand why it is projected that not all members who would be eligible to join would fail to do so? It is unlikely that anyone will refuse to take up this pension if offered. Since it will cost them nothing to join.

13. Since the Council does not have any policies for maternity or paternity leave for elected members on the grounds that they are not employees, I am surprised that what is in effect an occupational pension it is being proposed for some members?

14. I note that there has been no mention of a Sharia compliant pension option.

15. In summary, I am also opposed to this proposal since I fear it is unaffordable and unlawful and will damage the Council’s resilience agenda and our desire to promote a “Strong and Cohesive Community” and as an “Efficient and Trusted Organisation”. We will run the real risk that we will all be perceived (wrongly in my view) in the most difficult of economic times as only be interested in ourselves and feathering our own nest".

John Gray West Ham Ward Councillor (and member of Investment and Accounts Committee) 22 July 2015

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