As austerity bites, why are local councils paying millions in perks to their employees?

Councils spend almost half a billion pounds giving driving-related perks to their employees while the rest of us are tightening our belts

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Local councillors love to drive their cars
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Emma Boon
On 14 April 2011 15:13

Councils across the UK have to find significant savings in the coming years. There has been much political posturing over these necessary spending cuts, with some determined to ignore millions in potential efficiency savings in favour of making headline-grabbing, smaller cuts to things like libraries and lollipop ladies. 

This fiddling around the edges shows an unwillingness to tackle the waste that lies at the heart of local government. Over the years, we at The Taxpayers’ Alliance have highlighted loads of examples of growing wasteful bureaucracy in local government. 

And today we have released information on a new example of this waste in a new report on council mileage allowances.

It might not sound like that big a deal, but those payments are eating up nearly half a billion pounds.

This is one more example of the unfairly generous perks many public sector staff receive. Lots of the same councils that are pleading poverty are paying up to 65p a mile to staff using their cars.

Of course staff who need to drive as part of their job should be reimbursed for petrol and other costs, but councils pay a lot more than that. Her Majesty’s Revenue and Customs (HMRC) has a recommended rate which was 40 pence per mile in 2010-11 and then increased to 45 pence per mile from April 6.

This rate is designed to fairly reflect the running costs per mile of a car and anything that is paid above that is considered to be a taxable perk. Research by the AA suggests running costs are under 30p for an ordinary car.

Councils could save millions by paying the taxman’s rate and many public and private sector employers pay less than that.

It’s hard to calculate exactly how much could be saved because of the varying thresholds and rates, but in areas where the mileage allowance has been reduced (like most Scottish councils) there have been clear savings.

Sandwell Council in the West Midlands are cutting to the HMRC rate and expect to save at least £1 million a year.

Motorists are one of the most overtaxed groups in the UK and with eye-wateringly high fuel bills many taxpayers will be angry that they are subsidising council staff to claim 25p a mile more than the rate treated as acceptable for the private sector.

In 2010-11 a driver claiming for 1,000 miles at the average council rate would be about £165 better off than someone who paid the HMRC rate.

Many local authorities pay mileage rates that are nationally agreed by Local Government Employers (the body which represents local authorities on the National Joint Council). 

These rates were 65p in 2010-11 which is, again, 25p more than the HMRC approved rate. Those who are paid less than the Approved Mileage Allowance Payment(AMAP) rate can claim relief against their earnings for the difference. Paying rates at HMRC guidelines involves no calculation of tax and national insurance, alleviating administrative costs as well as saving the actual difference between the rates.

There are those who would like you to believe that local government staff form a poor, downtrodden workforce, made up entirely of those doing tough and important jobs like social workers.

This is simply not the case; there are plenty of pen-pushers, spin doctors and grant chasers.  Organisations like the Local Government Association (LGA) understandably agitate for a better deal for their members, but the fact is that this has left taxpayers paying for perks for council staff that are all but extinct in the private sector, especially since the recession.

The mission creep, wasteful spending and non-jobs at councils must stop and they must work to save taxpayers millions while looking after the services that people rely on most

There are plenty of ways they can deliver better value.

Emma Boon is Campaign Director at the Taxpayers' Alliance

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