Thursday 26 September 2013

Unlawful Payments - the Council's View

As news broke yesterday that the auditor appointed by the Wales Audit Office had labelled two payments to the Chief Executive as unlawful, the Council responded to inquiries from the media with a written statement.

Needless to say, the local authority remains "firmly of the view that we have followed the correct course of action."

As usual, the carefully chosen words spin the facts.

The Council took independent legal advice which concluded that the indemnity was in order, we are told, and that the Wales Audit Office had agreed at the time that the authority did indeed have these powers.

The facts of the matter are that using public money to bring libel actions is prohibited under the Local Authorities (Indemnities for Members and Officers) Wales Order 2006. What the council did was to find a legal loophole.

Instead of consulting extremely expensive libel specialists in London, you might think the council would have asked the Welsh Government, which after all employs a lot of lawyers.  That would certainly have been cheaper, and it seems odd to ask the Wales Audit Office for a legal opinion on a rather innovative interpretation of the law.

It's a bit like asking a carpenter for advice on new and untried plumbing developments.

Staying with the libel indemnity, the council's statement goes on:

"We would confirm that the Chief Executive of the council, who was the officer involved in the libel action, was not the author of the report to councillors on the matter, and did not participate or offer any advice during the process. As a result of the order for costs and damages awarded by the judge in the case we fully expect to recover our costs and that there will ultimately be no cost to the council."

There was indeed a report presented to a handful of councillors (the 9 members of the governing Executive Board at the time to be exact). The report was most likely written by the council's Head of Law and Administration, and it has never been made public.

Shortly before the Executive Board met to approve the report and its recommendations, the Head of Law wrote an e-mail to Mr James saying that she needed to talk to him about it. We know this because the e-mail was released in response to an Freedom of Information request.

Despite having a direct personal interest in the Board's decision, Mr James attended the meeting at which the report was approved, and if he did declare an interest, no declaration is mentioned in the meeting minutes. At the libel trial in London Mr James told the court that he could not recall these details.

Furthermore, the matter was treated as an emergency item and did not appear on the published agenda. Public and press were excluded from the part of the meeting which discussed and approved the report for good measure.

As for recovering the costs (stated by the auditor to be £23,000), the first thing to note is that the judge ordered Jacqui Thompson to pay costs of £41,000 in respect of the counterclaim.

Why the discrepancy?

Secondly, as the council knows only too well, Jacqui Thompson's insurers withdrew their cover when the verdict was published. 

In order for the council to recover its costs, Mr James to receive his damages and the council's own insurers to recover their losses, Jacqui Thompson will be forced to sell her home. The problem with that is that the value of the property is rather less than the sum of the costs and damages awarded against her.

How, then, can the council be confident that it will recover its costs?

If anything, the council's justification for paying Mr James money in lieu of an employer's pension contribution is even more disingenuous.

It is now clear that this arrangement was approved about 3 years ago because Mr James has been receiving the money for two years.

It is also clear that the arrangement is a tax avoidance scheme.

That means that it was approved by the council when it was led by Meryl Gravell and her Independents in coalition with Labour. 

Labour voters in Carmarthenshire may find it hard to believe this, but the bottom line is that Kevin Madge and his party colleagues supported a plan to reduce the tax liabilities of one of the highest paid people in Wales, let alone Carmarthenshire.

What happened to the principle that the more you earn and the more you have, the more you are expected to contribute to society?

The council's statement explains: 
This situation has been brought about by changes in tax rules which make it difficult for people earning above a certain level to remain in the occupational pension scheme. We believe there are numerous other employers including local authorities, universities and housing associations who have adopted the same practice. The decision was made having obtained expert advice from independent consultants. We have also sought independent legal advice.

Difficult to remain in the local authority pension scheme, or less tax efficient? Clearly the auditor could see no reason why Mr James could not remain in the same scheme as everyone else, and neither could the auditor in neighbouring Pembrokeshire (see recent post).

Readers may have noticed that the council has been forking out for a great deal of independent advice, whether legal or financial, at what was no doubt enormous cost. The main beneficiary of this was Mr James.

The final sentence is the one which really takes the biscuit:

We would also confirm that the Chief Executive was not present in the meeting in which this decision was reached and did not offer any advice to the councillors making the decision.

The implication of this is that one day one or more relatively junior council staff suddenly became concerned about the implications of tax changes which could adversely affect the pensions of a handful of the highest paid people in the council. So worried were they, that they wrote a detailed report and recommendations to give special treatment to this unlucky few. They also commissioned expensive financial and legal advice to back up their recommendations, all without any involvement from the beneficiaries of the scheme.

Observant readers will also notice that the wording of the council's statement places all of the responsibility for this tax avoidance arrangement on the shoulders of the councillors (in reality the 9 member Executive Board led by Meryl Gravell and her deputy Kevin Madge).

One other remaining mystery is the timing of the payment to the Chief Executive of some £20,000 in expenses in respect of his duties as Returning Officer.  A coincidence perhaps, but the money was paid well in advance of the elections to which the fees related, and the payment was made immediately before the end of a tax year.

Was this also an arrangement designed to reduce tax liabilities?


Anonymous said...

This statement reminds me of McAvity the mystery cat. When anything untoward happened he was never there. The ultimate responsibility for what goes on in this Authority lies with the one at the helm!

Anonymous said...

That is what I always thought.It's a different world though in Carmarthenshire.

Anonymous said...

This is why we should all bombard our elected County Councillors. After all we put them there and we have a right to demand answers.
It's also our money they are wasting.

Anonymous said...

I wonder how many of the 74 councillors will duck beneath the parapets of county hall when the brown stuff hits the fan.

Anonymous said...

It sounds more like a scandal on insurance. How on earth can a company just remove her insurance when your about to loose a case.

Anonymous said...

20.31 i agree with you - why attempt to pursue a court case when you know you were on thin ice . If Mark James did not have the support of CCC he had enough cash to defend himself Mrs T is pleading poverty so why the hell did you sue him - that's right she took the case forward and sued Mark James . You live by the legal brief you die by the legal brief .

Bean Counter said...

Re the lump sum instead of contributions to a pension scheme - I wonder how the tax was dealt with - as I believe it should have been paid at net of tax and NI and the employer should have paid over the tax to HMRC. Which may then be recovered by the personal pension company. it is the employer's responsibility to deduct tax, and if not done, it is the employer who is firstly and foremostly liable.

Anonymous said...

@ Anon 27 Sept 00:26 - As you quite rightly state Mark James "had enough cash". So why did he not use it to fund his counter claim? Using the taxpayers money for personal gain (financial or otherwise) is unethical and immoral and in the view of the Auditor and many others, considered to be unlawful.

Another thing, I don't hear Mrs T passing the buck and blaming others for the decision she made to assert her rights!