Category: Economy

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November Inflation Rates

New Inflation Rates

 

The Office for National Statistics has published inflation figures for the twelve months to November 2016.

 

The Retail Prices Index (RPI) stood at 2.2% for the year to November 2016, up 0.2% from the year to October 2016.

 

Some private and public sector employers are attempting to sideline RPI as the measure for pay negotiations and are pushing other measures – such as CPI (1.2% for the year to November 2016, up 0.3% from the year to October 2016) or CPIH (1.4% for the year to November 2016, up 0.2% from the year to October 2016). These alternative inflation measures are not appropriate for pay negotiations as they are an inaccurate measure of workers’ average costs over the year.

 

Any attempts by an employer to link pay awards to CPI or CPIH must be opposed and logged with the National Policy Department.

 

Posted on

August 2016 Inflation rates

New Inflation Rates

The Office for National Statistics has published inflation figures for the twelve months to August 2016.

The Retail Prices Index (RPI) stood at 1.8% for the year to August 2016, down 0.1% for the year to July 2016.

Some private and public sector employers are attempting to sideline RPI as the measure for pay negotiations and are pushing other measures – such as CPI (0.6% for the year to August 2016, unchanged from the year to July 2016) or CPIH (0.9% for the year to August  2016, unchanged from the year to July 2016). These alternative inflation measures are not appropriate for pay negotiations as they are an inaccurate measure of workers’ average costs over the year.

Any attempts by an employer to link pay awards to CPI or CPIH must be opposed and logged with the National Policy Department.

Further information will follow in the Pay Bulletin and I would be grateful if you could bring this Circular to the attention of all Branch members.

Yours sincerely

 

Mick Cash

General Secretary

Posted on

RMT PAY BULLETIN: August 2016

RMT PAY BULLETIN: August 2016

 

Headline forecasts

Inflation rate: Average new forecast

July 2016 RPI inflation (change in cost of living relative to same time one year earlier) was 1.9%

For the final three months of 2016, annual RPI (according to the latest forecasts) will rise to 2%

For the final three months of 2017, annual RPI (according to the latest forecasts) will rise to 2.9%

 

Average earnings growth: Average new forecast

Over the course of 2016, average earnings are predicted to increase by 2.4%

Over the course of 2017, average earnings are predicted to increase by 2.5%

 

Transport co shareholders receive big dividend payments, while workers’ pensions are under-funded

Jan 2003 – Dec 2015: National Express paid £548m to shareholders, but just £255m was allocated to pension costs. Meanwhile, at FirstGroup the size of the workers’ pension fund deficit is being obscured (by switching from valuing pensions with RPI inflation to using the inferior CPI measure).[1]

 

 

 

Forecasts in detail: RPI inflation[2]

Predictions for RPI inflation made by a range of forecasters are:

 

Q4 2016

Average forecast (non-City): 2.1%

Average new forecast: 2%

Average forecast (City): 2.1%

Highest recent forecast: 3.4%

Lowest recent forecast: 0.9%

Median recent forecast: 2.1%

 

High RPI Q4 2016 forecasts to quote to employers in pay negotiations are:

ITEM Club (3.1% – forecast made in August 2016), Citigroup (2.7% – forecast made in August 2016), Experian Economics (2.6% – forecast made in August 2016), Centre for Economics and Business Research (2.5% – forecast made in August 2016)

 

 

Q4 2017

Average forecast (non-City): 3%

Average new forecast: 2.9%

Average forecast (City): 3.1%

Highest recent forecast: 4.5%

Lowest recent forecast: 2.3%

Median recent forecast: 3%

 

High RPI Q4 2017 forecasts to quote to employers in pay negotiations are:

National Institute of Economic and Social Research (3.7% – forecast made in August 2016), Citigroup (3.6% – forecast made in August 2016), Société Générale (3.4% – forecast made in August 2016)

 

 

Forecasts in detail: Average earnings growth

Predictions for average earnings growth made by a range of forecasters are:

 

2016

Average forecast (non-City): 2.3%

Average new forecast: 2.4%

Average forecast (City): 2.2%

Highest recent forecast: 3.4%

Lowest recent forecast: 1.4%

Median recent forecast: 2.4%

 

High average earnings growth forecasts for 2016 to quote to employers in pay negotiations are:

Economic perspectives (2.8% – forecast made in August 2016), ITEM Club (2.6% – forecast made in August 2016), Beacon Economic Forecasting/ Capital Economics/ ING Financial Markets/ Santander GBM/ Scotiabank (2.5% – forecast made in August 2016)

 

 

2017

Average forecast (non-City): 2.4%

Average new forecast: 2.5%

Average forecast (City): 2.2%

Highest recent forecast: 4.8%

Lowest recent forecast: -1%

Median recent forecast: 2.5%

 

High average earnings growth forecasts for 2017 to quote to employers in pay negotiations are:

Economic Perspectives (3.5% – forecast made in August 2016), ITEM Club (3.4% – forecast made in August 2016), Beacon Economic Forecasting/ Goldman Sachs (3.1% – forecast made in August 2016)

 

 

Recent RMT Settlements

Company

Award

Effective From
Train workshop and maintenance
Alstom West Coast Traincare (WCML and PSG grades)
  • 2.2% on base salary and London Weighting Allowance (plus 37/42 adjustment)
 1 April 2016
Wabtec Year One

·         2.9%

 

Year Two

·         March 2017 RPI (min 2%, max 3.6%)

  

1 April 2016

 

 

1 April 2017

Cleaning and catering
Churchill (E Midlands Trains contract)
  • Increase of 50p per hour on the basic hourly rate
  • No compulsory redundancies for the lifetime of this existing contract
  • An additional day’s annual leave for all members
 1 April 2016

 

 

 

1 July 2017

Road Transport and Buses
DHL Preston Brook Warrington
  • 1.5% on basic pay
  • Increase to the overtime and rest day rate from 1.25% to 1.5%
 1 April 2016
Stagecoach Yorkshire Chesterfield Depot (Drivers)
  • 10p per hour rise for all rates and grades
  • Introduction of a 10 minute (taking bus out of depot) or 5 minute (not taking bus out of depot) paid sign-on allowance for all duties
  • Introduction of a 5 minute signing off allowance for all duties
  • 10p per hour rise for all rates and grades
 1 May 2016

Asap, not later than end Oct

 

23 April 2017

 

29 Oct 2017
Stagecoach Yorkshire Chesterfield Depot Engineering Grades Year One

  • 1.25% on all hourly pay rates
  • Further increase of 1% on all hourly pay rates

 

Year Two

  • Increase of 1.25% on all hourly pay rates
  • Further increase of 1% on all hourly pay rates
  

1 May 2016

2 Oct 2016

 

7 May 2017

1 Oct 2017

London Transport and other Metro
Alstom Metro Trains
  • 2% to basic rates of pay
 1 April 2016

 

 

Recent non-RMT settlements

Company (Sector)

Award

Effective From
Asda – N Ireland (Retail) ·         3.9% 1 April 2016
Crown Paints (Manufacturing) ·         2.625% 1 April 2016
Western Power Distribution (Utilities) ·         2.5% 1 April 2016
2 sisters (Food processing) ·         3.1% 1 April 2016
RS Components – Corby (Distribution) ·         2.2% 1 June 2016
JD Williams Logistics (Distribution) ·         2.7% 1 July 2016
Construction Industry Joint Council agreement (Construction) ·         2.5%

·         2.75%

 25 July 2016

25 July 2017

 

 

We use RPI and not other measures of inflation such as CPI or CPIH

RPI, which includes housing costs and excludes high earners’ spending, is the only inflation measure to use for negotiating pay (referencing average earnings is no longer recommended).

 

RPI is also used to calculate index-linked government bonds, privately issued index-linked bonds, National Savings and Investments, Corporation Tax, Business Rates, Alcohol Duty, Tobacco Duty, Gaming Duty, Air Passenger Duty, Vehicle Excise Duty, Climate Change Levy, car and van Fuel Benefit Charge, regulated rail fares, regulation of water and sewerage charges, indexation of British Telecom’s wholesale charges and interest payments on student loans.

 

 

CPI is designed for comparing different EU countries’ economic performances and not for internal UK purposes. It excludes housing costs (though includes stockbrokers’ fees and foreign students’ university tuition fees), is calculated to a mathematical formula less responsive to price fluctuations and doesn’t adequately reflect changes to ordinary workers’ cost of living: so says the Royal Statistical Society.

 

Any attempt by an employer to link a pay award to CPI or a new variation CPIH must be refused and should be logged with the union’s National Policy Department.

 

Yours sincerely,

 

 

Mick Cash

General Secretary

[1] Last two sentences of page 43: http://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/indexed-pdfs/2016%20ARA/FirstGroup%20plc%20Annual%20Report%20and%20Accounts%202016.pdf

[2] The average of forecasts generally suggest a modest rise or fall.

 

While forecasts can be useful in indentifying a plausible trajectory for inflation and average earnings, the data is unreliable.

This is especially the case during periods of heightened volatility – such as now.

 

Accordingly, the main use of forecasts to us is as a negotiation tool with employers

and not as an accurate predictor of changes in our members’ cost of living.

Posted on

Inflation Rates July 2016

 

Dear Colleagues

 

INFLATION: FOOD AND FUEL PRICES UP (following Sterling fall & more money printing)

WITH PRICES OF OTHER IMPORTED GOODS SET TO RISE TOO (c10% by mid-2017)

 

The Retail Prices Index (RPI) was 1.9% for the year to July 2016, up from 1.6% for the year to June 2016. This figure will be used to set next year’s regulated rail fares[1].

Some employers/ government agencies are attempting to sideline RPI and are instead pushing other measures of inflation – such as CPI (0.6% for the year to July 2016) or CPIH (0.9% for the year to July 2016). Both CPI and CPIH are inappropriate for use in settling pay claims. This is because they are designed for comparing different countries’ economic performances, rather than average workers’ costs. Furthermore, CPI and CPIH tend to understate changes in the cost of living:

Attempts by an employer to link pay awards to CPI or CPIH must be resisted and logged with the Policy Department.

Further information will follow in the Pay Bulletin presently.

 

Yours sincerely,

 

Mick Cash

General Secretary

 

[1] Regulated rail fares include season tickets on most commuter journeys, some Off-Peak return tickets on long distance journeys and Anytime tickets around major cities

Posted on

INFLATION SET TO SOAR

 

STERLING DOWN c15% FROM RECENT HIGH (meaning imports dearer)

+ LIKELIHOOD OF MORE MONEY PRINTING (stimulus) = INFLATION SET TO SOAR

 

The Retail Prices Index (RPI) was 1.6% for the year to June 2016, up from 1.4% for the year to May 2016.

 

Some employers/ government agencies have attempted to sideline RPI, instead pushing other measures of inflation – such as CPI (0.5% for the year to June 2016) or CPIH (0.8% for the year to June 2016). Both CPI and CPIH are inappropriate for use in settling pay claims. This is because they are designed for comparing different countries’ economic performance, rather than average workers’ costs. Further, CPI/CPIH tend to be less responsive than RPI to changes in the cost of living.

[1] Attempts by an employer to link pay awards to CPI or CPIH must be resisted and logged with the Policy Department.

Additional information will follow in the Pay Bulletin presently.

Yours sincerely,

Mick Cash

General Secretary

 

[1] https://www.google.co.uk/?gws_rd=ssl#tbm=nws&q=%22UK+inflation+could+explode+to+5.2%25%22

https://www.google.co.uk/?gws_rd=ssl#q=%22UK+inflation+expectations+surge+after+Brexit+vote%22&tbm=nws

 

Posted on

May 2016 Inflation Rate

Head Office Circular No. NP/168/16

 

To the Secretary, all Branches and Regional Councils

Tuesday 14 June 2016

 

Dear Colleagues

 

INFLATION: INSIST ON YOUR PAY DEAL BEING BASED ON RPI

 

The Retail Prices Index (RPI) was 1.4% for the year to May 2016, up from 1.3% for the year to April 2016.

Some employers/ government agencies are attempting to sideline RPI and are instead pushing other measures of inflation – such as CPI (0.3% for the year to May 2016) or CPIH (0.7% for the year to May 2016). Both CPI and CPIH are inappropriate for use in settling pay claims. This is because they are designed for comparing different countries’ economic performances, rather than average workers’ costs. Furthermore, CPI and CPIH tend to understate changes in the cost of living:

Attempts by an employer to link pay awards to CPI must be resisted and logged with the Policy Department.

Further information will follow in the Pay Bulletin presently.

Yours sincerely,

Mick Cash

General Secretary

160614gb(InflationCircular_June2016)

Posted on

RMT PAY BULLETIN: May 2016

Headline forecasts

Inflation rate: Average new forecast

April 2016 RPI inflation (change in cost of living relative to same time one year earlier) was 1.3%

For the final three months of 2016, annual RPI (according to the latest forecasts) will rise to 2.2%

For the final three months of 2017, annual RPI (according to the latest forecasts) will rise to 2.9%

 

Average earnings growth: Average new forecast

Over the course of 2016, average earnings are predicted to increase by 2.6%

Over the course of 2017, average earnings are predicted to increase by 3.1%

 

Proportion of company turnover paid to Exchequer as tax, is falling

Even companies reliant on public contracts avoid tax. In the year to 30 April 2015, Stagecoach had a turnover of £3.2 billion, but paid just £25.7 million tax. It is unclear how much Stagecoach spends on tax advisers – other firms, such as National Express, admit to sometimes spending £1 million a year.

 

Forecasts in detail: RPI inflation[1]

Predictions for RPI inflation made by a range of forecasters are:

 

Q4 2016

Average forecast (non-City): 2.2%

Average new forecast: 2.2%

Average forecast (City): 2.3%

Highest recent forecast: 3%

Lowest recent forecast: 1.6%

Median recent forecast: 2.1%

 

High RPI Q4 2016 forecasts to quote to employers in pay negotiations are:

Schroders Investment Management (3% – forecast made in May 2016), Nomura (2.8% – forecast made in May 2016), Pantheon (2.6% – forecast made in May 2016), Experian Economics (2.6% – forecast made in May 2016), Commerzbank (2.5% – forecast made in May 2016)

 

Q4 2017

Average forecast (non-City): 2.9%

Average new forecast: 2.9%

Average forecast (City): 2.9%

Highest recent forecast: 3.5%

Lowest recent forecast: 1.8%

Median recent forecast: 3%

 

High RPI Q4 2017 forecasts to quote to employers in pay negotiations are:

NIESR (3.5% – forecast made in May 2016), Pantheon (3.5% – forecast made in May 2016), Economic Perspectives (3.3% – forecast made in May 2016)[2], Bank of America/ Merrill Lynch (3.2% – forecast made in May 2016), Nomura (3.2% – forecast made in May 2016), Experian Economics (3.2% – forecast made in May 2016)

 

Forecasts in detail: Average earnings growth

Predictions for average earnings growth made by a range of forecasters are:

 

2016

Average forecast (non-City): 2.6%

Average new forecast: 2.6%

Average forecast (City): 2.5%

Highest recent forecast: 3.2%

Lowest recent forecast: 1.8%

Median recent forecast: 2.6%

 

High average earnings growth forecasts for 2016 to quote to employers in pay negotiations are:

European Commission (3.3% – forecast made in May 2016)[3], Schroders Investment Management (3.2% – forecast made in May 2016), Liverpool Macro Research (3.2% – forecast made in May 2016), Oxford Economics (3.2% – forecast made in May 2016)

 

2017

Average forecast (non-City): 3.1%

Average new forecast: 3.1%

Average forecast (City): 3.1%

Highest recent forecast: 3.5%

Lowest recent forecast: 2.6%

Median recent forecast: 3.1%

 

High average earnings growth forecasts for 2017 to quote to employers in pay negotiations are:

European Commission (3.5% – forecast made in May 2016)[4], Capital Economics (3.5% – forecast made in May 2016), Economic Perspectives (3.5% – forecast made in May 2016), Pantheon (3.5% – forecast made in May 2016), IHS Global Insight (3.5% – forecast made in May 2016)

Recent RMT Settlements

Company

Award

Effective From
Train Operating Companies and Rail freight
First Great Western
  • Year 2 of two year deal was for a 2% increase or Feb 2016 RPI, whichever was greater. Accordingly pay award was for 2%.
 1 May 2016
Serco Caledonian Sleeper ·         2.32% 1 April 2016
North Yorkshire Moors Railway
  • 1%
 1 Jan 2016
Infrastructure Companies
Babcock Rail Year One

a)    2% increase on basic rates for all members covered by Procedure Agreement 1 (General Collective Bargaining)

b)    An additional 0.5% on the basic rate for those working as Infrastructure Assistant (IA Grade); Infrastructure Technician (IT Grade); Clerical Officer  Grade 2 (CO2 Grade); Clerical Officer Grade 3 (CO3 Grade); Professional & Technical Grade 1 (Grade PM1 Basic & Steps 1 -6 inclusive) and Apprentice. This will give a total increase of 2.5%

c)     A minimum increase in salary of £500 will be applied where implementation of a) and b) results in salary increase of less than £500.

d)    The levels of meal, lodging disturbance and associated allowances will be increased by 2%

 

Year Two

a)    2.5% increase or Jan 2017 RPI, whichever is greater, on basic rates for all members covered by Procedure Agreement 1 (General Collective Bargaining)

b)    An additional 0.5% on the basic rate for those working as Infrastructure Assistant (IA Grade); Infrastructure Technician (IT Grade); Clerical Officer  Grade 2 (CO2 Grade); Clerical Officer Grade 3 (CO3 Grade); Professional & Technical Grade 1 (Grade PM1 Basic & Steps 1 -6 inclusive) and Apprentice. This will give a total increase of 3%

c)     A minimum increase in salary of £500 will be applied where implementation of a) and b) results in salary of less than £500.

d)    The levels of meal, lodging disturbance and associated allowances will be increased by 2.5%

 

  

4 April 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 April 2017
Unipart Rail Doncaster Year One

  • 1.9% increase to base pay, effective

 

Year Two

  • 0.5% + CPI (CPI as of Jan 2017, published in Feb 2017) on base rate
  

1 April 2016

 

 

1 April 2017
Volkerrail ·         2% on basic rates or £400,

whichever is greater

·         2% to taxable allowances
Colas Rail Year One

·         2% increase on all base wages

 

Year Two

·         Increase of Feb RPI + 0.5%,

subject to a minimum increase of 2% and a maximum of 2.5%

 

Year Three

·         Increase of Feb RPI + 0.5%,

subject to a minimum increase of 2% and a maximum of 3.25%

  

1 April 2016

 

 

1 April 2017

 

 

 

 

1 April 2018
Train workshop and maintenance
Voestalpine VAE UK ·         2% increase to basic rates of pay for everyone

·         Maintain £400 bonus attendance bonus if Company remains.

·         Increase the employee’s Engagement Bonus from currently £175 to £325

 1 April 2016

Cleaning and catering
Carlisle Cleaning Services Ltd (Transpennine Express)
  • Living Wage (level recommended by the Living Wage Foundation) or 3%, whichever is greater
 1 April 2016
Carillion Year One

  • 2% or £520 to basic rates,

whichever is greater

 

Year Two

  • Feb RPI +0.5% or £535,

whichever is greater

  

1 April 2015

 

 

 

1 April 2016

Ships and Docks
DFDS
  • 2%

 

 1 Jan 2016
Heysham Ports ·         2% on basic pay

·         0.5% on basic pay

 

 1 Jan 2016

1 June 2016
Harwich International Port ·         2% increase on basic pay and variability

  • Changes to the long service awards
 1 Jan 2016

 
Serco Ltd (PNTL/ INS)
  • 2%
  • 2%
 1 April 2016

1 April 2017

 

Recent non-RMT settlements

Company (Sector)

Award

Effective From
BMW – Mini (Manufacturing) ·         3.5% 1 Jan 2016
Aldi (Retail) ·         3.07% for store assistants outside London 1 Feb 2016
Asda – N Ireland (Retail) ·         3.9% 1 April 2016
Crown Paints (Manufacturing) ·         2.625% 1 April 2016
Western Power Distribution (Utilities) ·         2.5% 1 April 2016

 

We use RPI and not other measures of inflation such as CPI or CPIH

RPI, which includes housing costs and excludes high earners’ spending, is the only inflation measure to use for negotiating pay (though referencing average earnings is also recommended for the coming period).

 

RPI is also used to calculate index-linked government bonds, privately issued index-linked bonds, National Savings and Investments, Corporation Tax, Business Rates, Alcohol Duty, Tobacco Duty, Gaming Duty, Air Passenger Duty, Vehicle Excise Duty, Climate Change Levy, car and van Fuel Benefit Charge, regulated rail fares, regulation of water and sewerage charges, indexation of British Telecom’s wholesale charges and interest payments on student loans

 

CPI is designed for comparing different EU countries’ economic performances and not for internal UK purposes. It excludes housing costs (though includes stockbrokers’ fees and foreign students’ university tuition fees), is calculated to a mathematical formula less responsive to price fluctuations and doesn’t adequately reflect changes to ordinary workers’ cost of living: so says the Royal Statistical Society.

 

Any attempt by an employer to link a pay award to CPI or a new variation CPIH must be refused and should be logged with the union’s National Policy Department.

 

Yours sincerely,

Mick Cash

General Secretary

 

[1] The average of forecasts generally suggest a modest rise or fall.

 

While forecasts can be useful in indentifying a plausible trajectory for inflation and average earnings, the data is unreliable.

This is especially the case during periods of heightened volatility – such as now.

 

Accordingly, the main use of forecasts to us is as a negotiation tool with employers

and not as an accurate predictor of future changes to our members’ cost of living.

 

[2] https://www.economicperspectives.co.uk/downloads/HMT201605.pdf

[3] “Growth in compensation of employees is expected to accelerate as the labour market tightens further” http://ec.europa.eu/economy_finance/eu/forecasts/2016_spring/uk_en.pdf

 

[4] Table at end of doc – entry labelled “compensation of employees” – final two columns

http://ec.europa.eu/economy_finance/eu/forecasts/2016_spring/uk_en.pdf

Posted on

New Inflation Rates

New Inflation Rates

The Office for National Statistics has published inflation figures for the twelve months to March 2016.

The Retail Prices Index (RPI) stood at 1.6% for the year to March 2016 up from 1.3% in the year to February 2016.

The Consumer Prices Index (CPI) stood at 0.5% for the year to March 2016 up from 0.3% in the year to February 2016.

Posted on

RMT SLAMS "TRANSPORT FOR LONDON BILL" MULTI-BILLION POUND RIP OFF BY THE SUPER-RICH

RMT SLAMS “TRANSPORT FOR LONDON BILL” MULTI-BILLION POUND RIP OFF BY THE SUPER-RICH

Tonight, Tuesday 12th April, the Transport for London Bill has its third reading – a Bill which transport union RMT has slammed as a “multi-billion pound rip off tailored yet again to the tax-dodging, global super-rich.”

The Transport for London Bill was introduced into Parliament to help TfL maximise, at all costs, the profits that it makes from developing its property.

Specifically, under clause 5 of the bill, TfL would have been able to enter into novel company structures – including opaque, tax avoiding offshore structures known as “limited partnerships”. Limited partnerships are well-known vehicles for laundering capital and were used recently to defraud the Moldovan Central Bank of millions.

RMT in conjunction with Andy Slaughter MP, John McDonnell MP, and numerous other labour MPs and the Save Earls Court Campaign combined together to petition against the Bill and try to prevent the most ill-conceived aspects of it from becoming law.

As a result of our campaign, TfL finally conceded defeat on clause 5 and abandoned its attempt to acquire the power to enter into limited partnerships. However, it persists with the remainder of the bill.

The union has undertaken further investigation into how TfL was persuaded to engage in the development of the Earls Court site – the model for future TfL development. After an examination of Capco’s (the property developer behind Earls Court construction) annual report, new concerns have arisen.

Specifically, a note in Capco annual report causes us to believe that the TfL Bill still has potential for TfL to give away its assets too cheaply and too riskily. In the case of Earls Court, TfL has already invested nearly £400 million in Earls Court Partnership Limited non-interest bearing loan notes – notes which are not redeemable until 2064 [Note 1].

Under clause 4(2) of the TfL Bill, TfL would be able to permit “charges” to be entered against its property as a way of funding joint property development. To raise finance more cheaply, TfL would be able to mortgage its assets to fund property development activities.

There is a fresh financial crisis brewing – meaning that there is an increased risk of corporate defaults – especially in the over-leveraged property sector. TfL is entering the property development game at precisely the wrong moment and in precisely the wrong way.

RMT General Secretary Mick Cash said:

“The wholesale withdrawal of central government financial support for TfL is forcing it to risk its assets in complex property gambles no matter how dodgy and no matter what the real cost to Londoners.”

“The construction firms with which TfL plans to engage, are running rings around TfL, helping the hapless organisation offload its prime London assets at well below the market rate.

“We have no confidence in TfL to be able to secure a fair price for its land – and our concerns are borne out by its dreadful governance failures in relation to the development of Earls Court.”

Posted on

Briefing on State Aid complaint alleging Earl's Court developer

The RMT and LUEngineering Branch have been working hand in hand with the local community around Earls Court to save our LillieBridge Depot and support the West Kensington and Gibbs Green Estates against social cleansing.

Below is some information about the campaign and how state aid is used to help the rich get richer.

 

State Aid Complaint summary final

 

WKGG News 24

 

Briefing on state aid complaint March 2016

 

Earl’s Court: Complaint to European Commission alleges Council gave £1.5 billion in unlawful state aid to Capco

A West Kensington resident has submitted a formal complaint to the European Commission alleging that Hammersmith & Fulham Council gave £1.5 billion of unlawful state aid to Capco, the company redeveloping Earl’s Court. The state aid arose from the Council’s previous Conservative administration signing a contract for the sale of 22 acres of land occupied by the West Kensington and Gibbs Green estates for £90 million – well below market value. For the past seven years, the estates have been at the centre of a high profile campaign by residents to save their homes from demolition.

The amount of unlawful state aid provided by the Council to Capco was estimated on four different commercial bases. All of them showed a very large element of state aid. The analysis, carried out by consultant Dr Richard Fordham, estimated, on the strongest basis, state aid of £1.5 billion. This was calculated using figures Capco published in its annual results on 25 February 2016, which showed the company valued the profit on a similar sized area of adjacent land at £1.274 billion.

The complaint to the European Commission highlights many unusual features of the arrangement with Capco, including:

  • Capco was chosen by the Council for the scheme without a public tender, in contravention of Government Guidance on the sale of public land. The Council offered no logic for avoiding a tender process. The market was not tested; and many other well-qualified development companies in London and the EU were denied the opportunity of bidding for the land. Therefore it is impossible for the Council to prove that it obtained the best possible price.
  • The phased payments for the land, which run from 2015-2019, were not indexed for inflation, nor is there any review mechanism for the Council to benefit from property price increases. So no value growth was allowed for, despite the deal being struck when the property market was at its lowest point in the recession.
  • The Council used PricewaterhouseCoopers to confirm that financial due diligence had been satisfactorily undertaken and Jones Lang LaSalle to confirm the Council had obtained best consideration for the land. Both these firms were also engaged by Capco to audit its own accounts and value its Earl’s Court properties. PwC’s advice was so heavily qualified that, according to its letter, it did not constitute investment advice or provide an assurance.
  • The £90 million sale price for the estates’ land is far less than the current estimate of £140 million it would cost the Council to buy back homeowners and to obtain vacant possession from the secure tenants.
  • Although the 760 replacement homes were counted in the CLSA as part of the consideration for the estates, they were also calculated into the £452 million planning gain that formed the S106 agreement signed as part of the planning permission agreed in 2013.

Now that the European Commission has received the complaint it is for them to decide whether to mount an investigation. Should they find that there has indeed been unlawful state aid, the most suitable remedy would be either for the CLSA to be declared void and unenforceable or for Capco to pay £1.5 billion to Hammersmith & Fulham Council (net of £45 million it has already paid the Council).

Keith Drew, the resident who made the complaint, said: “The Council entered into a contract for the sale of our homes to Capco for a pittance. They used state resources to confer a huge exclusive unfair economic advantage on a wealthy developer. That £1.5 billion belongs to us. If this is not stopped, Capco stand to make an obscene profit out of public resources, causing misery to a community of 2,000 people. I hope the European Commission will mount a full investigation.”

23 March 2016

Additional information:

Article 107(1) of the Treaty on the Functioning of the European Union states that any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall be incompatible with the internal market, in so far as it affects trade between Member States.

In January 2013, the Council’s then Conservative administration signed a Conditional Land Sale Agreement (CLSA) with EC Properties LP, a Limited Partnership presently owned and controlled by Capital & Counties Properties plc, otherwise known as Capco (the name used generically by the Council to describe the holding company and limited partnership).

The CLSA requires the Council to transfer phases of the estates to Capco with vacant possession. In exchange for the estates land, Capco has to provide 760 replacement homes and pay the Council £90 million. But the Council has to buy back 171 homes from leaseholders and freeholders and arrange to rehouse all the tenants out of its own resources. Although it will then own 171 extra homes, it will have borne the associated costs of repurchase and taken the risk on the date of signing the CLSA that it would have to buy the properties at progressively higher points in the market to achieve the vacant possession it had undertaken to provide in phases over 25 years to EC Properties LP.

The CLSA is an option in favour of EC Properties LP, exercised wholly at their choosing. There are no obligations on them that can be triggered by the Council unilaterally without their willing participation. Thus, the Council cannot require EC Properties LP to proceed with, or once commenced to complete, the development. EC Properties LP can stop whenever it might be financially convenient for them to do so.

The Council claimed that only Capco could offer replacement accommodation so as to facilitate one rather than two moves for tenants. However, this was plainly wrong since the Council owned a redundant school in the middle of the estates occupying sufficient land area to have provided the replacement homes needed to empty out the first phase on the estates, and which it sold to Capco for £9 million, again without any tender or competition.

According to a review of the financial viability assessment conducted in September 2012 by District Valuer Services, the total Earl’s Court scheme value was estimated at £12 billion. Land Registry data puts the uplift in house prices in Hammersmith & Fulham between 2012 and 2016 at a factor of 1.57. This increases the total scheme value now to nearly £19 billion. Yet, the context for the price agreed by the Council in 2012 was a scheme value of £8 billion.

 

 

 

 

 

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PM, the Mayor and being Open

When it comes to disclosures about people’s salaries that work for TFL and other public bodies, it seems Boris and his mate, Dave are more than happy that the public has a right to know. They believe in accountability and openness apparently. It is not a private matter, its a public one

However, when the PM appears to tell ‘porkies’ about overseas accounts, it is a different story and it took a week for him to reveal the full facts regarding his £30,000 account. Nice gift too from his mum of £200,000.

We all pay our taxes because we have to and because ultimately that money is used for the essential services that we need. There is no morality when our so called ruling classes are telling us we have to cut, telling us we are all in it together, taking our NHS and everything and right we have away from us, whilst at the same time they ‘avoid’ paying their tax and playing their part.

In their view, us underlings pay our share and we should pay their share too. We are not in it together, we are in it alone and they are in it up to their snouts.  As Jeremy Corbyn  has said “this is money that’s taken from our health services, our local services.”

So next time Dave and Boris is talking about how much a tube driver earns, perhaps they should remember that at least they pay all their taxes, unlike many of the country’s rich

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Major Transport Projects may be Compromised

General Secretary Mick Cash said;

“Major transport infrastructure projects are compromised by a failure to plan for the future in terms of the skilled workforce Britain needs to drive forwards.

“There has been a catastrophic failure in terms of workforce planning with skilled engineers seen for too long as a group that can be kicked about, downgraded and casualised with severe consequences for the country as a whole.

“The government need to get a grip and they need to do it now if we are to address the skills gap in the transport industry that RMT says is all set to worsen in the future. ”

 

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