Paying Teachers Less?

Jersey C.I. – There was an awkward exchange in the States chamber on Tuesday – the first ever sitting to be streamed live – when Deputy Geoff Southern suggested the Education Minister, Deputy Rod Bryans, was misleading the assembly.

It was all to do with how much newly qualified teachers get paid in the UK and after the Deputy Bailiff muttered something about serious accusations it all died down.

But it was an easy misunderstanding to arrive at and I know because embarrassingly I made a similar mistake (on-air) after an Education Department briefing on the subject a few months ago.

Is the confusion because Deputy Southern and I are simple creatures (possible) or has it something to do with the way that plans to lop £8,000 off new teachers’ starting salaries in Jersey are being pitched.

RESERVATIONS

Deputy Southern has reservations about the idea but the Council of Ministers are unmoved (see why here).

Their stated top reason for pressing ahead is that new teachers in Jersey earn up to £16,000 more than in England & Wales, where new teachers get £22,000.

And ministers say their proposals – for a £30,000 starting rate – will merely reduce the “Jersey premium” by half, to £8,000.

What’s more, they say Jersey’s 5% sales tax (compared to the UK’s 20%) makes life cheaper here AND they say the UK’s income tax rate of 25% is an awful lot more than Jersey’s 20%.

All told, the young bucks will still be quids in.

Hmm. All that seems a bit spinny, or just wrong, for a number of reasons….

  • After London, Jersey has (and not by a long way) the most expensive property market in the UK. It’s disingenuous to wave that £22,000 figure about. Salaries in Jersey are, as the ministerial comments eventually concede, far more commonly compared with London, not Merthyr Tydfil.
  • If the sales tax situation is so much better in Jersey, how come everything (apart from cigarettes) costs the same in Jersey as in the UK… or more?
  • The UK income tax rate, for this pay range, is not 25%, it’s 20%, just like… umm.. Jersey.
  • When this comes into effect, post 2018, Jersey’s tax rate won’t be 20%, it will be 21%, because of the health charge.

So let’s ignore the £22,000 nonsense, get the calculator out and see if we can put this in black and white, sans spin….

screenshot-2016-09-27-19-54-11

(Look at the tax rates! And they call Jersey folk tax dodgers? Harrumph.)

(MPS stands for Main Pay Scale)

The above numbers are what you might call back-of-a-fag-packet, but the assumptions are consistent and the results accurate enough for illustrative purposes.

And they make the official fog seem unnecessary. Here’s the story in a nutshell: new teachers in Jersey have indeed been getting paid (a lot) more than their colleagues in London and will continue to do so, albeit to a much lesser extent, after the proposed salary cut.

Unions might take a different view but the current States assembly has passed far more unkind spending measures.

THINK TWICE

Luckily, the only people affected don’t know it yet. They’re still at uni.

Yet when they do come to consider living in a small island hundreds of miles and a flight away from family and friends, they might make different calculations in 2018 than would be the case today.


Indeed, in another debate this week, the Council of Ministers are opposing the lifting of the health tax cap for the wealthiest.

Their thinking? Rich folk might think twice about coming to Jersey if they have to pay 1% towards health on all their earnings rather than just on the first £164,000.

Applying that logic to cash-strapped graduates, it’s entirely possible that new teachers will view salaries of £38,000 and £30,000 differently.


In short, recruitment could become more difficult (or less easy).

Sure, ministers point out that £30,000 is still more than they’ll get in the UK, but only by 10% or so, and in Jersey we also have the easyJet tax. For most young British graduates, afterall, this place is a long way from home and their mates.

So if teacher recruitment is not to suffer, Education may have to target more adventurous sorts who prefer surfing to nights out with all their old uni mates in Brixton.

HOWEVER…

Even then, that 10% more in the pay packet might not be enough.

Turns out graduates with a relaxed attitude to distance and a penchant for surfing have other options.

New teachers in Australia get paid A$62,282 a year. That’s…

screenshot-2016-09-27-20-00-55

Which is more than in the UK; will soon be more than in Jersey; and is definitely enough to set you up somewhere like this…

screenshot-2016-09-27-21-07-16

A three-bed house with a double garage in the sun with plenty cash to spare for the price of a one-bed flat in Jersey.

Yikes. Time, perhaps, for Education to pitch Jersey’s truly unique selling points.

“Come and work in Jersey, an island of simple pleasures, where you can have a kebab on Mulcaster Street after a boozy day-trip to St Malo.

“Nurse the hangover in a pricey bedsit watching webcast re-runs of Deputy Geoff Southern in the States.

“(Oh, and the smokes are cheap.)”

Failing that, as seems likely, Education will just have to keep on paying top whack for the teachers it really needs.

The USS Liberation

Jersey, C.I. – So an aluminium triple-hulled ship built by Austal has been having trouble again. Nope. Not that one.

If you think Condor’s been having headaches with the Liberation (above), spare a thought for the US Navy.

It signed up to buy twelve similar ships from the same ship-builder and hasn’t had much luck either.

This CNN story about the latest breakdown aboard an eerily familiar-looking Independence-class warship actually appeared online the same day (August 30) that the Liberation suffered its latest problem.

So where do the similarities begin and end?

WELL…

The Liberation and the first Independence-class ship were both built years ago by an Australian company called Austal.

(Although the Liberation entered service in Jersey in 2015 – billed as a brand-new ship – it was actually built seven years ago, in 2009. Austal just couldn’t find a commercial customer. Global financial crisis, etc.)

Around the time the Liberation was built – a year earlier in fact – Austal also launched a similar-looking triple-hulled warship called the USS Independence. It did have a buyer: the US Navy.

And it was supposed to be the first of dozens.

Suffice to say, Uncle Sam no longer wants quite so many.

LESS WELL ARMED

They’re not identical to the Liberation – which is less well armed – but from the “waist down”, you can see the similarities.

The Liberation and the USS Indpendence are based on the same aluminium hull – an Austal speciality -with that distinctive large main hull supported by two smaller mini-hulls. The American frigates are a little longer and wider than the Liberation.

condorbehind
Not the same, but… (click on the image for more background)

condorindependence

Both have engines which appear to be causing problems for both Condor and the US Navy.

The Liberation has three Rolls Royce diesels. The American warship has two of those same diesel engines (which are the ones that cause the headaches) plus two gas-powered engines made by General Electric.

Both have the same water thrusters to propel them along.

The US Navy has so far taken delivery of two Independence-class LCS2 frigates and has had a multitude of problems.

Many of these problems are to do with military stuff Condor doesn’t have to deal with – radar, guns and so on – but like Condor, they’ve also had big problems with the engines and the steering.

They’ve also had a lot longer to deal with these niggles yet the problems keep happening (see the CNN link above… and many, many others).

Remember, although the first of these warships and the Liberation were both built seven-ish years ago, the Liberation and its problems sat idle until Condor bought them. The US Navy, meanwhile, has been testing the USS Independence and its ilk the whole time.

SO WHAT GIVES?

Condor is increasingly open about the problems with the Liberation but rarely provides a full engineering report. The US Navy is a public agency so has to publicly report its problems. Well, some of them.

That job goes to a man called Dr Michael Gilmore.

He’s appointed directly by the President of the USA to oversee military equipment testing.

Late last year, he was asked to report on how the US Navy was getting on with its new LCS frigates, to a Congressional Defence Committee.

Dr Gilmore’s report makes for uncomfortable and fascinating reading, especially around page 237.

Apparently the USS Independence is armed with all sorts of clever electronic machine guns that don’t talk to each other, and can be out-foxed by terrorists in fishing boats.

Fortunately, Condor doesn’t face those sorts of risks on a daily basis.

But remember it has the same engines and thrusters.

The upshot is that SIX YEARS after the USS Independence entered service, Dr Gilmore describes it as STILL unreliable.

The latest news coverage from CNN supports his view.

TEETHING PROBLEMS

After six years, how can they still be having teething problems? Afterall, that’s what Condor is alway saying is what the Liberation is having.

They’ve been asking the same question in America for the past six years.

Mere observers can’t be sure the problems are identical but military failings aside, the similarities are striking.

Here’s what Dr Gilmore told Congress about a five-month test only last year:

  • The crew had difficulty keeping the ship operational as it suffered repeated failures of the ship’s diesel generators, water jets, and air conditioning units
  • It spent 45 days over a period of 113 days without all 4 engines and steerable water jets operational
  • This includes a 19-day period when 3 of the 4 engines were degraded or non-functional
  • During the five-month evaluation period, seaframe failures caused the ship to return to port, or remain in port for repairs on seven occasions
  • During one part of the test, the ship was unable to launch its remote-controlled mine-sweeping submarine on 15 out of the 58 days because of 4 separate failures involving diesel engines, the water jets, and associated hydraulic systems

And they’ve had six years to sort this out.

Thank heavens Condor didn’t pay $700 million for its boat, although you wonder if management had access to Google before spending £50 million on the Liberation.

Either way, hopefully Jersey won’t still be experiencing the Liberation’s teething problems six years from now.

“Do not mention Iran” *

HSBC clearly not in the Middle East
HSBC Middle East’s HQ until June this year. Clearly not in the Middle East

Jersey C.I. – If British politics hadn’t been in leopard-print convulsions a week past Tuesday, this little gem on the BBC News website about HSBC might have made bigger headlines.

It comes from a U.S. congressional report entitled (you have to love this) Too Big to Jail.

In a nutshell, it turns out the UK’s biggest bank escaped money laundering charges in the U.S. because of fears such a case would cause another financial meltdown, a la 2008. That was despite “blatant criminal violations”

And there we were thinking it was moral hazard that CAUSED the 2008 crisis. Silly us.

Oh, and HSBC’s biggest cheerleader? The UK’s very own Chancellor of the Exchequer, George Osborne (although apparently the UK’s very own “regulator” the FSA, was getting in the way too).

FAST AND LOOSE

So what the heck’s this doing on a blog about Jersey?

Remember all that brouhaha about HSBC, Iran, Mexican drug cartels and money laundering? A lot of that was going down in Jersey about ten years ago, especially the Iranian stuff.

How? HSBC staff in places like Jersey were pretending money from Iran wasn’t from Iran in order to sneak the cash past regulators in America, which has (or had) rules against that sort of thing because Iran sponsors terrorism, wants nukes and is run by nutty mullahs.

Here’s what U.S. Senator Carl Levin said back in 2012, after it all came to light: “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules.

“Due to poor anti-money laundering controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions [Iran].”

One of those “affiliates” – the one at the centre of the dodgy dealings with Iran, outlined at length in U.S. congressional reports – was HSBC Middle East.

$2 BILLION

It is (or was) based not in the Middle East but on the Esplanade, right here in Jersey, opposite where the little choo-choo trains tootle along packed with holidaymakers.

Even if criminal money laundering charges never transpired, U.S. authorities eventually forced HSBC to stump up nearly $2 billion in a settlement.

You can bet the regulators in Jersey took an equally tough line.

Umm…

The Jersey Financial Services Commission has actually never said very much about HSBC Middle East.

Late last year it made this announcement, but it makes no mention of Iran.

And why would it?

For some reason, the announcement is an outline of an inspection the commission ordered focused on the years immediately AFTER the period (up to about 2007) when the U.S. identified so much iffy business going on down on the Esplanade.

Unsurprisingly, HSBC was well in the process of cleaning up its act by the time of the aforementioned Jersey investigation.

NO CIGAR

That said, what little the commission did say is still interesting. Here’s a snippet:

“The general trend was material non-compliance with Jersey’s regulatory, anti- money laundering and sanctions regime during the beginning and middle of the Reporting Period [from 2008 to 2012], followed by a substantial improvement in standards.”

And get this: the commission found that even after HSBC was in clean-up mode, 86% of a sample of HSBC Middle East’s customers between 2008 and 2012 posed a money-laundering risk.

86%. Almost. All. Of. Them.

Yet no $2 billion cigar for Jersey.

The commission’s crushing punishment for HSBC?

“HSBC Middle East’s remediation plan has been discussed at length with the Commission and significant progress has been made to date in its execution.

“The effectiveness of implementation of the plan will be independently verified during the course of 2015/16, and closely monitored by the Commission in liaison with regulators in the relevant jurisdictions.”

They must be terrified.

So terrified, in fact, that exactly two weeks after the commission published the above statement, HSBC announced its Middle East business would be moving its brass plate, if not its actual offices, to Dubai, a move it completed a couple of weeks ago.

How on earth will the commission keep an eye on it there?


*  The headline for this article is a quote from correspondence between HSBC employees during the bank’s sanction-busting dealings with Iran. They were discussing how to keep Iranian transactions off U.S. regulators’ radar

More States Accounts: Woops!

This is what the front cover of the States accounts looks like. Click on it, and you can see for yourself...
This is what the front cover of the States accounts looks like. Click on it, and you can see for yourself…

JERSEY C.I. – Financial reports contain so much more than numbers.

Often, they also contain priceless gems, buried away in the notes.

So instead of boring everyone with figures, this week’s take on the States of Jersey 2015 accounts will be all about words.

No analysis. No maths. Just straight plagiarism.

Apart from anything, it’s quick and I’m busy.

If you want a look for yourself, check out pages 91 to 100


INAPPROPRIATE

Interim staff whose annual cost exceeded £100,000 were appointed without following the prescribed recruitment process, including the requirement for States Employment Board approval. [Risk that] inappropriate interim appointments may have been made.


DUPLICATE

Following the identification of a duplicate payment in excess of £1 million, Internal Audit undertook a review. Funds were immediately recovered.


CASH

In 2014, a grant had been approved even though the recipient had cash balances in excess of £1 million.


CHILDREN

Between 2010 and 2015, 15 serious case reviews (SCRs) have been commissioned in total and 12 of them relate to children.

The first serious case review, produced in 2010, has resulted in a substantial civil liability quantified in 2015 for many millions of pounds by States of Jersey insurers.

The outcome of the Independent Jersey Care Inquiry is likley to lead to changes in the systems and procedures to safeguard and protect vulnerable children, including potential legislative and other changes.

There is a risk of significant cost to the States of Jersey both financially and in terms of resources to deal with these cases. In addition, there is a reputational risk both to the States of Jersey and the island as a whole.


LOANS

An internal audit report commissioned by the chief officer was not able to confirm that appropriate or sufficient due diligence had been carried out on loans that had been proposed to the minister and subsequently made to third parties… [risk that] loans may be made to inappropriate third parties.


TRAVEL

The approved corporate travel provider was not always used in booking flights and accommodation. Concerns were raised in public over the level and cost of travel and accommodation in 2016 and a review is being carried out.

(Watch this space. Scrutiny heard this week that sometimes the ‘approved provider’ is not used for good reason, unless you’re going to Cape Town – MW)


FRUITLESS

And finally….what on earth is this?

Fruitless? I'm clueless...
Fruitless? I’m Clueless…

Next week, more maths…

While Lawyers Argue, a City Chokes

Taranto in Italy. Choked. Picture from Italian newspaper La Stampa
Taranto in Italy. Choked. Picture from Italian newspaper La Stampa

JERSEY, C.I. – Taranto in Italy is so polluted that farming has become nigh-on impossible and cancer rates are sky high. Reportedly.

Local magistrates say the problem is the town’s steel plant, one of Europe’s biggest.

To pay for the clean-up, assuming a clean-up is even possible, authorities there are trying to seize €8 billion from the wealthy Riva family, which until recently owned the steelworks. They say they’ve done nothing wrong.

Officials have designated the whole sorry mess an environmental disaster. And it’s a legal mess with a paper-trail through Jersey.

SCRAP

Adriano Riva was a scrap metal merchant who started his steel company with his now-deceased brother Emilio in the 1950s.

By the 1990s, the brothers had come a long way.

Having made untold millions building one of Europe’s biggest steel producers, Gruppo Riva, Adriano set up four Jersey trusts* called Antares, Orion, Sirius and Venus. You don’t have to remember their names.


*A trust is no more than an agreement that someone (say, a Jersey trust provider) will look after something (money, castles, yachts) for someone (perhaps a wealthy industrialist) for the benefit of someone else (perhaps the children of wealthy industrialists). Apparently trusts were invented by knights of olde dashing off on crusades wanting to make sure their families were looked after if the crusade didn’t work out. A modern-day trust can also help mitigate tax liabilities. Generally speaking, there’s also normally no record of a trust outside the trust provider’s office, so trusts help keep things private. 


Adriano must have known Jersey is good at trusts.

These ones are run for the Riva family by UBS Trustees, a Jersey subsidiary of Swiss bank UBS.

They hold €990 million of “assets”, which Italy now wants to help pay for the clean-up in Taranto.

Complicating things, the actual money is at UBS headquarters in Zurich. Complicating things further, the Rivas say they haven’t been convicted of anything, and are fighting hard to keep the money. Here’s how…

SQUIRRELLED AWAY

Adriano set up the trusts to benefit his late brother’s children and….himself. Jersey Royal Court papers say it was in fact the late Emilio who put up the money for the trusts.

Whatever, it’s the family fortune.

And it’s not the first time the Riva fortune has been the subject of wrangling, which is relevant.

In 2009, the beneficiaries (Adriano, Emilio’s children, etc) took part in a tax amnesty whereby Italians with fortunes squirrelled away abroad could pay a one-off 5% tax rather than the normal full whack IF they brought it back to an Italian bank so it could work out the tax and pay the Italian treasury.

On paper, the money came back to Italy, but really it stayed in the Swiss accounts controlled by the Jersey trusts. Technically, though, it was henceforth held in the name of an Italian subsidiary of UBS: UBSF. All of this was above board, but the arrangement has now created a three-country legal nightmare. Mama mia!

That’s because now, the money in the trusts belongs to UBS in Jersey (which looks after it for the Rivas) while legal title to whatever’s in them belongs to UBS in Italy.

If you haven’t worked it out already, here’s why that’s a problem…especially for the Rivas.

CRIMINAL CHARGES 

In 2012, senior executives at Riva’s Taranto steel subsidiary Ilva S.p.A. – including members of the Riva family – were charged with criminal environmental offences.

The case is on-going and the Rivas deny wrong-doing, but the steel plant was put into administration by the Italian government and is now bankrupt.

A year later, in 2013, in an unexpected and separate turn of events, an investigation was launched into the Riva brothers and two accountants.

They were suspected of selling Ilva S.p.A. shares cheap to companies owned by Adriano with the proceeds being squirelled away… into the Jersey trusts. These allegations are also denied and to date no charges have been brought.

Not long after that, the State Attorney in Milan asked his Swiss counterpart in Zurich to freeze the Swiss UBS accounts belonging to the Rivas’ Jersey trusts while the environmental case is worked out.

The accounts remain frozen.

A decree issued by the Italian government now says the money should be handed over to help clean up Taranto, even though the Rivas have not been convicted of anything. The Rivas say this is unfair.

And to make things worse for them, the Italian government has also decreed that any money seized in any potential un-related prosecution (eg: suspect share deals) can also be seized for the same purpose, ie: cleaning up Taranto.

WORRIED

Worried about their fortune, the Rivas are appealing against all these rulings.

Initially, they were assisted by the Swiss authorities, which ruled that sending the cash to Italy broke Swiss law, but the Swiss have since changed their minds and ordered the accounts to be unfrozen.

Somewhat ironically, that has prompted the Rivas to instruct a Jersey law firm, Mourant Ozanne, to demand that the family fortune be re-frozen.

Various appeals are pending. It’s a quagmire, and all of it puts poor old UBS in a bind.

UBS Trustees (Jersey). Down here somewhere, past the Spar
UBS Trustees (Jersey). Down here somewhere, past the Spar

Like trustees everywhere, they’re duty-bound to do the best thing by the beneficiaries – while complying with the law. Doing both is not always possible.

Swiss and Italian authorities say that not releasing the money could result in criminal charges. Yet the trusts are with UBS in Jersey.

UBS in Jersey looks like it wants to comply but faces stiff opposition from the Rivas’ lawyers in the island, who have a big beef with how the Italian government’s going about all of this.

A temporary reprieve has been granted by an Italian court. It agreed with the Rivas who say the Italian government’s attempt to seize the money (officials want to use it to buy worthless bonds in the now-bankrupt steelworks to help fund the clean-up) amounts to illegal expropriation.

That might be alright if anyone had ever been convicted of anything, but the Rivas, they point out, haven’t been.  The Italian government’s appealing this one.

In the mean-time, UBS remains in a bind: comply with Italian and Swiss wishes and hand over the €990 million, or face the long arm of the law in its own backyard.

UBS in its Zurich home turf, where the bank DEFINITELY doesn't want to get in trouble
UBS in its Zurich home turf, where the bank DEFINITELY doesn’t want to get in trouble

A CUNNING PLAN

The Rivas’ attempted novel solution to all of this has been to simply change the trustees in Jersey: in effect, to take the conundrum out of UBS Trustees’ hands.

It hasn’t fully worked out though.

At Jersey’s Royal Court the Rivas’ lawyers have successfully applied for two completely different companies – one from Hong Kong and another from New Zealand – to become additional trustees alongside UBS in Jersey.

In theory, that gives them the power to over-rule UBS, and even send them packing, or at least order them to NOT hand over the money in Switzerland…. or Italy…or wherever it is.

A fly in that ointment, though, is that Jersey’s Financial Crime Unit (the police) does not approve of attempts to take the trusts out of UBS control. Nor, indeed, does UBS in Jersey, which fought the move.

Sir Michael Birt, a judge at Jersey’s Royal Court, met them halfway.

Allowing the new trustees to be appointed, he said there’s nothing irrational in trying to protect the family fortune. And confiscating it without a conviction, he pondered, may be in breach of European Human Rights.

So now the trusts are in the hands of those Hong Kong and New Zealand companies, a situation which Sir Michael backdated to September 2015.

But what’s inside the trusts remains tied up with UBS, which won’t play ball with the new trustees, not least because doing so would land it in hot water with the Jersey Financial Crime Unit. The JFCU suspects the contents of the trust could indeed be the proceeds of crime so won’t allow it to be shuffled about willy-nilly.

That means the new trustees, though now in charge, have to prove the money ISN’T the proceeds of crime if they want to do anything with it.

And it looks like that’s ultimately a call for the Italian courts, so don’t expect anything to happen quickly.

In the mean-time, Taranto festers.

Public Sector Pay: Gravy vs Salt?

Money. Jersey's got stacks of it, but not enough for everyone
Money. Jersey’s got stacks of it, but not enough for everyone

Jersey, C.I. – Thorny subjects don’t come much thornier than public sector pay. No-one likes a gravytrain, yet hard-working teachers, nurses and street cleaners always deserve better. Hmm…

Right now, there’s a lot of talk in Jersey about how many people the States should employ, and how much they get paid.

Teachers just got a pay rise they say amounted to a freeze. Manual workers face the chop by the dozen. We have fewer firefighters than before.

Meanwhile, senior officials jet round the world in business class.

(Or at least, they did. That sort of thing is frowned upon now.)

In any case, the ubiquitous ‘They’ say £145 million – half of it in payroll costs – must be shaved from States annual spending by 2019. The public headcount is, therefore, shrinking.

So why isn’t the wage bill?

WHO GETS WHAT?

So ‘They’ have to save £145 million.

That’s a big slice of the States £1.15 billion total spend (or £742 million, depending on your outlook), which we know because the 2015 accounts are just out.

The real bloodbath doesn’t get underway in earnest until at least this year, but by the end of last year they’d made a start.

The picture has doubtless evolved in the first half of 2016, but we only have figures for 2015, which is still helpful.

They show us that through last year, the States’ full-time equivalent headcount (not including arms-length bodies such as SOJDC, Ports, Andium Homes, etc *) dropped 138 from 6,272 to 6,134, ie: by more than 2%.

Meanwhile, total departmental wage and salary costs barely budged from just south of £300 million.

So are they only getting rid of those who are paid next to nothing, or are they paying more to those who stay? Guess what…

TO THE ACCOUNTS…

States of Jersey Staff Costs 2015... and scribbles
States of Jersey Staff Costs 2015… and scribbles
20160616_211405
States of Jersey Staff Costs 2014… and even more scribbles

On paper, the answer looks emphatically to be the latter.

In 2015, eight out of 11 departments lost staff. Education, Social Security and “Non-ministerial States Funded Bodies”, were the exceptions, between them gaining 75 jobs (meaning other departments shed 213) while keeping average salaries more or less flat.

In most of the rest of government, average salaries jumped, in some cases considerably…

CHANGE IN AVERAGE STATES SALARY IN 2015

  • Economic Development (30 staff) £53,820 to £78,497 (+46%)
  • Chief Minister’s Department (222 staff) £51,913 to £62,953 (+21%)
  • TTS (420 staff) £38,124 to £40,612 (+7%)
  • Health & Social Services (2,373 staff) £46,388 to £48,117 (+4%)
  • Environment (107 staff) £53,965 to £55,690 (+3%)
  • Home Affairs (640 staff) £51,439 to £52,371 (+2%)
  • States Assembly Support (25 staff) £48,021 to £48,854 (+2%)
  • Non-ministerial bodies (192 staff) £60,415 to £60,556 (0%)
  • Education, Sport & Culture (1,655 staff) £45,947 to £45,284 (-1%)
  • Social Security (237 staff) £39,341 to £38,932 (-1%)
  • Treasury & Resources (233 staff) £50,537 to £49, 219 (-3%)

It’s possible that a small number of highly paid people moving between departments are doing funny things to the figures. But keep reading…

BROUHAHA

The noise just now is about manual workers at TTS facing redundancy.

From the brouhaha, you’d be forgiven for thinking there must be an army of them, tending our  open spaces, day and night.

It’s a small army. TTS employs about 420 all-in, and you can see from above they’re among the lowest paid in government (although their average is above-average, if you know what I mean).

And they are nowhere near the biggest demand on the wage bill. Civil servants are…

2015 CHANGE IN STATES STAFF COSTS BY JOB TYPE

  • Civil Servants: ROSE from £126.6 million to £127 million
  • Doctors & Nurses: ROSE from £68 million to £68.6 million
  • Teachers: ROSE from £48.6 million to £51.9 million
  • Manual Workers: FELL from £30.9 million to £30.1 million
  • Emergency Services: FELL from £22.6 million to £21.8 million
  • Lawyers and Chief Officers: FELL from £6.6 million to £5.3 million
  • Law Officers: ROSE from £2.5 million to £2.9 million (+16%!)

From the above you can see that last year the States spent £30 million (and falling) on manual workers and £127 million (and rising) on civil servants.

So why are manual workers bearing the brunt of the cuts?

PUZZLE

It may turn out to be a question of perspective.

To anyone affected (and I speak from experience) the prospect of redundancy is bound to feel painful, even unfair.

But it wouldn’t be surprising if the financial size of the cuts planned at TTS – if not the human size – are simply in line with other departments.

We’ll know more about the scale of the cuts in July.

The problem – for manual workers – is that other departments can make a big dent in costs by letting fewer but better-paid workers retire and/or not replacing others who decide their skills are better appreciated elsewhere.

Heck, if enough drift off of their own volition, you can even afford to pay more for those who hang around! Perish the thought.

To achieve the same financial effect, TTS will have to get rid of more people and a bigger proportion of its workforce.

And to boot, they may be less skilled and less mobile so justifiably more worried about their outside prospects and, therefore, less inclined to jump before they’re pushed, even though the writing’s on the wall.

In that context – and with no obvious common ground between worker and employer – compulsory redundancies, public argie-bargies, and strike action seem all but inevitable.

Yet a puzzle remains.

When civil-servant grades are, on paper, collectively doing so well while accounting for by far the biggest whack of the wage bill, it’s surprising ministers are so keen to kick the heavily-unionised manual workers’ beehive.

Perhaps they hope no-one will sit down with the accounts and a calculator and figure out what everyone else in the States is actually getting paid.

Thorny indeed.

(*SOJDC, Ports of Jersey, Andium Homes, etc, are in the accounts but are treated slightly differently and are far smaller, in staff and cash terms, than regular government departments . If you want to do the sums, you can, although they don’t record headcount. I haven’t. Another post, perhaps…?)

 

Tanker War Loot?

tankerwar
Norbert Schiller’s 1987 shot of a Cypriot tanker not long after it had been attacked by Iran

JERSEY, C.I. – Cast your mind back to the Gulf War. Not that one. Nope, not that one. Yup, that one.

The Iran-Iraq War lasted most of the 1980s.

It was a humdinger. No-one really has the foggiest idea how many people died, but most agree it ranged from hundreds of thousands to more than a million, a good many of them civilians.

At the time, the world was living with the daily possibility that tensions between the US and Russia could erupt into nuclear death being rained on at least Europe, if not the whole of humanity.

But one thing the superpowers could agree on was the need to prevent Islam – at least the revolutionary Persian sort – spreading too far beyond Iran’s borders.

So the US, Russia, UK, Germany, Brazil, etc, paid and/or armed Saddam Hussein to slaughter the Iranian revolutionaries, who – for their part – were then and remain now a pretty nasty bunch.

They all set about the bloodshed with tremendous gusto but nobody won. It was all completely in vain. That said, the Iranian revolutionaries are still in power… and we all know what happened to Saddam.

Either way, the war was costly. According to Iranian Perspectives on the Iran–Iraq War, by Farhang Rajaee, the economic cost was more than a trillion dollars.

In the 1980s, that was equivalent to about a quarter of the United States entire GDP.

Talking money may seem crass here, but where there’s war, there’s cash. Buckets of it.

And some of the money from that war – allegedly – is still being fought over in the Royal Court in Jersey.

HOW SO?

In 1987 the war took a turn that really made the West sit up and take notice. Both sides started attacking oil tankers, mainly – but not exclusively – each other’s.

American tankers tended to get left alone.

This got Abdul Fattah Al Bader thinking.

He was an executive at the state-owned Kuwait Oil Tanker Company, which was nervous about what was becoming known as “The Tanker War”.

So Al Bader and his cronies set up offshore shell companies all over the world (although not in Jersey) that allowed the Kuwaiti tankers to sail safely under American flags. The wheeze also allowed Al Bader and his chums to pocket about $140 million.

Al Bader fled Kuwait for England before being sentenced in the 1990s to 35 years in prison in his home country. He’s dead now, but 20 years later and Kuwait still wants its money back.

One of the places they’re chasing it is Jersey.

SWANKY PAD

In particular, they’re interested in a London property – a swanky pad at 104 Berkeley Court, Marylebone Road, NW1 5NE.

104 Berkeley Court. Yours for a few million. Pic from Google Maps
104 Berkeley Court. Pic from Google Maps

It was bought around 2003 by a Jersey company (see where this is going?) called Westport Limited, which is a run by the very-much-still-alive-and-kicking Jersey-based trust company, Sanne.

They looked after Westport on behalf of Nouriya Al Mutawa, Al Bader’s sister-in-law.

Here’s where it gets tricky, and contested.

She says she used her own money to buy the flat for her sister and the late Al Bader so they’d have somewhere to live after he was held to account around 2003 for the tanker wheeze and made bankrupt.

Not so, say the Kuwaitis. The money for the flat was, they say, Al Bader’s loot and should be returned.

The Kuwaitis have been pursuing this in Jersey’s Royal Court for years. Nouriya Al Mutawa recently tried to have the case thrown out but failed. A public trial looks likely.

LOOKING STICKY

As evidence, the Kuwaitis point to another London pad, 80 Viceroy Court. You might not immediately see why this bit’s important, but stick with it.

80 Viceroy Court on the right, Regent's Park on the left...
From Google Maps: 80 Viceroy Court on the right, Regent’s Park on the left…

It was owned by a BVI-registered outfit called Pontirana Investments Limited, and it was to this comfortable hideaway that Al Bader and his fairer half first fled when things started looking sticky for them in Kuwait.

Kuwait’s liberation by the US in 1991 hadn’t done Al Bader any favours. At least he could escape to neutral England.

Or could he? The English High Court has long since ruled that 80 Viceroy Court was bought with dodgy loot. The Al Bader family were kicked out and Viceroy Court was turned over to the Kuwaitis.

Not content, though, they say Al Bader immediately sweet-talked his sister-in-law, Nouriya, into setting up the Jersey company in order to buy him ANOTHER London home.

To back this up, the Kuwaitis say it was Al Bader who told lawyers at the now defunct London law firm, Gardner Weller, that his wife or sister was about to buy a flat for his family. He also allegedly mentioned it to his own lawyers at the still-up-and-running law firm Olswang, who allegedly told him to draw up a lease between whoever ‘owned’ the place (his sister-in-law) and whoever lived there (Al Bader).

This, say the Kuwaitis, was all smoke and mirrors and is actually evidence that the £1.4 million used to buy 104 Berkely Court came from none other than Al Bader, who in any case never paid proper rent.

According to court papers, the Al Baders paid £1,000 a month… pennies for a multi-million pound central London des-res.

CROWNING IRONY

Yet there they lived until Al Bader died in 2009. Not long after, in an irony to crown all ironies, Mrs Al Bader fled England for her native Kuwait before being required to clear up her dead husband’s mess.

According to Jersey Royal Court papers, a UK warrant for her arrest remains outstanding and she is on an all-ports watchlist.

The Berkeley Court flat has, by the way, since been sold and the money – £3.25 million (that’s London for ya!) – is held up in an English court.

The difference now is that it’s not Mrs Al Bader but her sister, Nouriya, who’s left with the mess.

Nouriya says the £1.4 million actually came from her cousin, Anwar Sultan Al-Essa, who claims he owed it to Nouriya’s late brother, Fiaz Abdul Aziz Almutawa.

In effect, she says she inherited her brother’s debt. We don’t what his children have to say about that.

In any case, the cash and the flat it paid for were and are, says Nouriya, her, hers alone, and nothing to do with Al Bader or the dodgy tanker war loot.

CIRCUMSTANTIAL

The Kuwaitis disagree, saying the family are all in it together.

Nouriya, through her lawyer, Advocate David Blackmore from Jersey law firm Appleby’s, says the evidence is circumstantial and has asked – unsuccessfully – for the case to be thrown out.

But acting for the defrauded Kuwait Oil Tanker Company (which is owed many millions) Advocate Bruce Lincoln, from Mourant Ozanne, says Nouriya’s whole argument smacks of the same legal arguments Al Bader used when unsuccessfully trying to hang on to that original London property…. 80 Viceroy Court.

Back then, in the English High Court, Al Bader had said that 80 Viceroy Court had been bought with repayment of a debt from another of Nouriya’s cousins, a Dr Al-Mutawa. That, said Advocate Lincoln, had held no truck with the High Court years ago regarding 80 Viceroy Court, so nor should the current argument in Jersey’s Royal Court regarding 104 Berkeley Court.

“PULLING THE STRINGS”

Advocate Lincoln points to faxes from 2003, when the second flat, 104 Berkeley Court, was being bought, that seem to suggest Al Bader was in fact “pulling the strings”.

This line, from Nouriya’s lawyer at City law firm Devonshire to Al Bader, is suggestive: “If we are seen to be taking instructions from you on a daily basis, that will produce the very evidence that we do not want, namely it will suggest you are the beneficial owner.”

The Kuwaitis, via Advocate Lincoln, also wonder why Nouriya has, to date, come up with five different explanations as to where this £1.4 million to buy the flat came from. The court heard she simply “can’t remember” why this might be.

Al-Essa, for his part (he’s Nouriya’s cousin who re-paid the alleged £1.4 million debt) says he owed the money to Nouriya’s late brother Fiaz, who he’d bought ANOTHER flat from…in 1982…in Lebanon…for $60,000.

Quite how or why a $60,000 property transaction would even take place amid the 1980’s other most dreadful middle-eastern war (250,000 dead) is a mystery. How the $60,000 turned into £1.4 million is another.

Neither mystery was answered in Jersey Royal Court, which came down on the side of Advocate Lincoln and the Kuwaitis.

That is to say, Nouriya’s attempt to chuck out the Kuwait Oil Tanker Company’s claim was itself chucked out.

The case continues.

As Expensive as London? Not likely…

 

Screenshot 2016-06-10 00.02.16

JERSEY, C.I. – Did you know house prices in Jersey are now as high as in London? Don’t believe the hype.

The story came from a press release circulated by Jersey-based mortgage broker Skipton International.

It matters because housing is such a big issue in Jersey and feeds into most others. About half of islanders can’t afford to own the roof over the heads. Meanwhile, many nurses, teachers and social workers thinking of coming here avoid the island, in part because they know they’ll struggle to buy.

In a nutshell, Skipton International claims to have produced a new house price index which shows that the average price of property in Jersey is now the same as  in London, ie: £456,000, give or take a few bob.

That’s a lot of dough, and the news probably didn’t surprise a lot of people in Jersey. But it surprised me because I’m one of those sad sorts who traipses down to the States Statistics Unit every three months to hear what they have to say on the same subject.

During my last traipse, in February, they said – click here for the details (page 15) – that while the average home in Jersey does indeed cost  £456,000, the average in London is a whopping £534,000.

That suggests London is actually 20% more expensive than Jersey.

So how did Skipton International arrive at such  a different result?

To find out, you have to look at where the numbers come from.

ROYAL COURT

The States’ statistics guys get most of their Jersey-related house price data from the Royal Court.

Given that property transactions are publicly approved in court (on Fridays) anyone who’s interested can easily find out exactly how much every house sold for.

Then our statistical heroes put the data together in line with guidance from the Office for National Statistics (ONS) in the UK.

That helps them compare like with like, especially given that they get their London data from none other than the ONS.

Turning to Skipton International. The mortgage broker gets its Jersey numbers from…. wait for it…. the States Statistics Unit. Presumably that’s why it arrives at the same conclusion as far as Jersey is concerned.

However, when comparing Jersey prices to London, Skipton uses the Nationwide House Price Index for the mainland part of the equation.

There’s nothing wrong with the Nationwide House Price Index. It’s been doing the rounds for eons, and the UK’s biggest building society is involved in many property transactions so it’s a pretty fair bet that if the Nationwide Index is going up or down, that’s a fair-ish reflection of the wider market.

However, the Nationwide only has access to mortgage data from its own customers (sorry, members). Nationwide’s index is therefore based on the value of mortgage approvals for people who have chosen to take out their mortgage through the Nationwide. See where this is going?

PROBLEMS

That throws up two problems. One is that according to the Nationwide’s own methodology it has to estimate actual house prices as opposed to knowing them. The Nationwide data is not backed up by completed transactions, as the data is in Jersey.

The second problem is that the Nationwide is a member-owned building society. Nothing wrong with that – in fact, it’s a great idea – but can we be confident that it is a universally popular mortgage provider for all sectors of the market? Do partners at law firms and investment banks, for example, take out their mortgages with the Nationwide?

Maybe they do, but there’s no way for us to tell from the data provided.

Perhaps that’s why the States Statistics Unit gets its London house price data from the ONS.

The ONS also relies on mortgage information but there are two advantages to the ONS way of doing things. One is that the ONS relies on mortgage completions – not approvals – and the second is that the ONS gathers information from across the market, not just one provider.

Here in Jersey we don’t have to estimate what average property prices are, because all (most) property sales have to be approved in the Royal Court on a Friday.

If it’s absolutely necessary to compare one place with another, then it’s equally necessary to be careful how you do so.

The UK is big and difficult to analyse but if you have to pick one way of putting a number on the average house price there should you pick the measure chosen by every policymaker between Shetland and the Scilly Isles, or should you pick the one sent out in a press release by a company that sells mortgages?

What’s in a Million?

Screenshot 2016-06-10 00.06.58

JERSEY, C.I. Two interesting and contrasting stories made the Jersey headlines lately.

In case you weren’t paying attention: a couple of civil servants went to Cape Town to network and play golf in February in rather-comfy fashion at a total cost to the public purse of about £15,000.

Days later – in a completely separate turn of events – it emerged that even though last year ministers persuaded the States to vote against giving everyone a Liberation Day bank holiday in 2015 (on the grounds it would add £1.5m to the public wage bill) public employees got the holiday anyway.

Union pressure was to blame, we were told, and departments would have to find the £1.5m from other budgets.

Handily, for a numbers-oriented blog, all that separates the two numbers in question are zeroes.

So without a calculator it’s easy to see that in money terms, the public holiday story was 100 times bigger than Cape Town-gate.

HOWEVER

It was to be expected that in the case of the civil servants, there were practically queues forming outside local media offices of seething politicians. All of them keen to publicly lambast the hapless officials not long after their return from South Africa.

The upshot was that when £15,000 went up in well-appointed, lie-flat smoke, it sparked an outcry that even ministers could get behind. One of them – who was also on the trip – has made no secret of the fact that he only billed you and I about £600.

So presumably when it emerged days later that £1.5m had slipped through the cracks for entirely different reasons, the furore would be a hundred times bigger?

Barely a peep, and certainly no queues of politicians – backbench, ministerial or otherwise – lining up have their tuppence-worth.

And that’s all the more surprising when the online response to the limited coverage the story did get, was none-too-happy.

Faced with these two stories, politicians had the opportunity to lambast two well-paid civil servants for flying their golf clubs in business class and/or to question the unexpected distribution of £1.5m to 7,000 middle-earners.

With busy schedules, picking only one must have been a tricky decision.

Flight of Fancy: Pricing Civil Servants’ Time

Screenshot 2016-06-09 23.58.26

Jersey, C.I. – A South African friend down the pub claims to only ever fly home in business class, never paying more than £2,000.

We were, unsurprisingly, discussing the curious case of the two States of Jersey civil servants who spent £6,500 each flying to a conference in Cape Town.

Skyscanner illustrates what the Jersey Evening Post already reported: that the way to make a trip from Jersey to Cape Town cost £6,500 is to book a flexible business class ticket with British Airways in advance.

The benefit of doing so is that if you need to change plans, you can.

The premium for this flexibility, easily deduced from British Airways’ own website, is about £1,000.

The resulting £6,500 fare is about 2.5 times the best value business class fares. More so, if my South African mate books the flights.

ALLOWANCES

Before we have a look at what else Skyscanner tells us, let’s make a couple of allowances for the civil servants.

Everyone’s time is wasted by hanging around in transit lounges, so we’ll only look for flights with no more than one connection and a total duration not exceeding 16 hours. The British Airways direct flight is 12 hours.

Definitely no overnights in Addis Ababa.

Let’s also say that overnight flights make the most efficient use of our civil servants’ time. Nodding off in Europe and waking up in South Africa allows them to start their day ready for business.

And let’s, for the time being, allow them to fly in business class. Afterall, working and sleeping – both desirable for public servants on the move – are more easily accomplished up front.

So allowing our civil servants to fly overnight in business class on either direct flights or those that have no more than one connection (avoiding airlines we’re not really sure about), what do we find?

The answer – which my South African friend and Skyscanner already knew – is that such flights are pretty easy to find for less than £2,500.

That means the flexibility in the £6,500 fare was only worth it if the civil servants had re-scheduled their flights not once, but twice. Unlikely.

BIG JUMP

So what did that extra £4,000 really buy?

What Skyscanner also shows us is that the big jump in fares happens between flights which stop once – say in Dubai, Schiphol or Johannesburg – and those that go straight to Cape Town, which are much rarer.

What our civil servants bought by spending £6,500 rather than £2,500, was four hours, and the convenience of not having to change flights.

That suggests that whoever signed off on the flights valued our civil servants’ time – subconsciously, perhaps – at £1,000 an hour.

Is the time of our civil servants worth that much? Perhaps. For important people, time is money.

There’s no need, however, to scratch our heads in deducing a true value for our civil servants’ time. The States does this for us, at least for one of them.

IMPORTANT PEOPLE

Jersey’s public accounts show the Chief Officer of Economic Development, Mike King, is paid between £140,000 a year and £145,000.

There are 260 working days in a year, so Mr King’s employers (taxpayers) value his time at between £540 and £560 a day. Nice work.

Many people are paid for eight hours in a working day.

Important people work long hours, though, so let’s try try this with 10 hours as well.

Dividing the daily rate by eight or ten (hours) we can see that Mr King’s time is worth between £54 and £70 an hour.

(That’s some way below £1,000 an hour)

And it implies that the value of 12-16 hours of our civil servants’ time (the duration of a flight to South Africa) is actually worth between £650 and £1,100.

That’s about what it costs to fly to Cape Town in coach.