Friday, September 18, 2009

Are taxpayers being ripped off?

Over at the Cambridge Evening News, Labour are getting exercised that rebuilding the house tragically destroyed in Cherry Hinton isn't covered by the Council's insurance, and the Council will have to find £150,000 itself to do the building.

That may or may not be fair comment - if the insurance excess was lower, the premiums would be higher.

What I am shocked about is the cost of this rebuilding. A friend in the building trade told me the other day that I could buy a brand new 3 bedroom house in Soham for £150,000 - and that needs to cover the cost of the land, the cost of all the stuff Councils charge developers for on new developments, the cost of marketing and profit for the developer and of course the cost of building. The City Council already owns the land, and is replacing an existing house - how on earth can this cost so much to do? It is pretty clear that so called 'affordable' housing isn't low cost housing - it is housing that is very expensive to build, but let at significantly below market rates. Someone has to pay for this situation - and most likely it is taxpayers in private housing that are footing the bill.

The costs charged to Government for getting capital projects done seem to be completely out of all control. When the Council refurbishes its sheltered housing schemes to create self contained units, I understand the cost to the Council on some schemes is around £125,000 per unit - to refurbish! The cost of the A14 upgrade is now estimated to be over £1 billion pounds, that is £1,000,000,000 - for a short stretch of dual carriageway. The Guided Busway will cost the Council around £120 million - and there are still huge cost overruns to be picked up by the contractor. A few speed humps and raised junctions for Mill Road - £400,000. Even a few metres of humble yellow lines in Coleridge are estimated to cost the Council £2,000.

I appreciate that some projects are just complex and expensive, but I do worry that when it comes to estimating jobs for the public sector, contractors seem to be able to get away with extracting the maximum possible cash from the taxpayer. Its time we looked into this aspect of public spending with a much finer toothcomb - what is it exactly about what the Council's specify, or how they go about procuring work that makes the cost to the taxpayer of these projects so mind-bogglingly high...

1 comment:

NickW said...

You are just scratching the surface Chris.

Public sector purchasing is an utter shambles with layer upon layer of unnecessary procurement controls - to ensure value for money.Usually spending a pound to save a penny.

One example from when I had the misfortune of working in local govt. I happened to need to contract in some specialist temporary staff. The specialist agency quoted £38 an hour. However I was not allowed to procure directly - oh no - this had to be done by the Council's specialist external recruitment agency (ie those leeches Commensura)who were highly skilled in negotiating the rates down.

So off went Commensura and later they came back with the unbeatable figure of £41.80 per hour......

Recruitment - vast sums spent on external contractors - Tribal / PPL etc etc which turns a 4 figure recruitment exercise into a 5 figure exercise - all in the name of getting the best candidate;-)

Also in terms of public sector costs - each real job / project is weighed down by a mill stone of non jobs and inflated departments.

Look at some of real services at Cambridge - and then look to see what they are charged in terms of 'Service Level Agreements'. This is where much of the hidden cost comes from - supporting an army of HR, finance, strategy,diversity awareness blah blah blah.....other totally meaningless roles that Joe Bloggs can't identify with.