Friday, February 25, 2011

Women on Boards: as the public and third sectors do better than PLCs, is there anything to worry about?

In November I blogged on the possibility that Lord Davies’s independent review into Women on Boards would recommend mandatory quotas for boardrooms. Yesterday, Lord Davies’ report was launched; I opens with the bald fact: at the current rate of change it will take over 70 years to achieve gender-balanced boardrooms in the UK. However, his report does not recommend quotas. It recommends that FTSE 100 companies should be setting their own targets for a minimum of 25% female board member representation by 2015.

Lord Davies’ report also recommends that the Financial Reporting Council should amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity. This would include how they would implement such a policy and require an annual disclosure summarising progress made.

Corporate Governance Code requirements usually flow through to the governance codes and requirements in the public and third sectors. Targets of 25% would not make sense in many organisations where women are well represented. (Last week I was presenting at a housing conference. When I started talking about gender balance on boards, one of the seminar participants pointed out that housing associations do much better than the 7.8% figure for women on the boards of FSE250 companies.)

While sectors such as housing associations may do better but there is no room for complacency when 37% of board members are women and only 21% of board chairs and chief executives.

Thursday, February 24, 2011

Mind the [narrowing college funding] gap: the impact on school sixth forms

In the media coverage of the cuts there has been surprisingly little coverage of sixth forms. While overall 16-18 funding is set within the constraints of the deficit reduction program, there is the policy expectation that increased participation levels from raising the school leaving age should be funded by efficiency gains. In addition, schools are to be funded at the same (lower) rate as colleges. While there is “transitional protection” limiting losses in any one year, austerity will bite.

What does this mean? The local press around the country is starting to pick up on the implications. Staffordshire County Council is warning schools to prepare for significant challenges and to look at whether their courses will remain viable. This means collaboration and – for small uneconomic school sixth forms – closure. While in Croydon the Council wants schools and colleges to share sixth forms.

It is ironic that in the early noughties the Learning and Skills Council was expected to reshape 16-18 education with unviable school sixth forms being reorganised out of existence. Now the LSC is gone, this might well happen.

Sunday, February 20, 2011

LGPS – mounting opposition to increased contributions

I was doubtful that the Coalition was retreating on public sector pensions when it was announced that the consultation period for the 3% pensions levy on most public sector workers would end three months later than previously planned. However, I think there is now a real chance that the Coalition may U-turn on the planned increase in employee contributions Local Government Pension Scheme.

There is mounting opposition to the suggestion that LGPS members should pay an extra 1% each year from 2012 for three years. First a group of London pension “administering authorities”. Then the Conservative leader of the Local Government Association. These concerns are on top of and different from the unions’ resistance.

The new opposition are concerned about the effect of the 3% pensions levy on the sustainability of the LGPS if it triggers a “mass opt-out” and spiralling contributions as the contributing membership shrinks.

The alternative advocated by some of these opponents is a paring back of pension entitlements within LGPS. There case makes a lot of sense. However, the savings will be over decades – George Osborne’s Spending Review was looking for about £3billion for the LGPS employers and the rest of the public sector by 2015. How can that gap be filled if the Coalition does another full or partial U-turn?

Wednesday, February 16, 2011

In the news: demographic pressures and failing secondary schools

A "youth bulge" may have been at work in the Tunisian and Egyptian revolts but demography has political implications closer to home. Since the turn of the millennium many education providers have been conscious of demographic decline. Now there is a recognition that rising birth rates are starting to feed into demand for primary school places as an extra 100,000 babies every year are fed into the equation.

This week the quality media has turned its attention to the longer term and post-11 places.

The Financial Times reports that secondary schools will be affected by both rising birth rates and slower rates of migration of middle-class families out of cities. The FT analysis of official projections indicates that an extra 80,000 secondary school places will be needed in England by 2016/17 in areas of population growth. However, in those areas, there is space for only 50,000 students at schools that meet government targets. In addition there are currently 6,000 places available in schools that do not meet the government’s minimum “floor standards”. This might become a major political issue unless new places are created through the free schools and other policies.

The ever excellent Guardian DataBlog maps the location of the current surplus capacity. It’s a shocking statistic that 225 schools - 7% of England's school estate - are more than a third empty and most of these have poor GCSE results. (Off course some may have poor results due to challenging circumstances but the persistence of such concentration of educational disadvantage remains a serious social issue.)

Wednesday, February 09, 2011

The OECD on Housing and the Economy – arguments and evidence

Yesterday I stumbled on an OECD survey Housing and the Economy: Policies for Renovation. The report seemed to have been overlooked by the UK press apart from the Financial Times. Even Inside Housing appears to have overlooked it.

The report recommends reforms to financial sector oversight, taxation, land use policies, rental sector regulation and social housing provision. It argues that these changes will improve the functioning of the housing market and benefit the economy more generally. (The relevance of the report can be seen in US’s jobless recovery where negative equity is hindering the ability of America’s unemployed to move for work.)

As housing has been a casualty of the financial crisis and now the deficit reduction plan, it might have been expected that this objective, balanced and well-researched report might have been read by someone. Even if it had not been carefully studied, chunks could easily be copied and pasted to provide fodder for arguments on all sides.

Advocates of the Coalition’s housing benefit curbs could point to:

Where housing supply is constrained in the short run, however, part of the benefit of government rent allowances may shift from renters to landlords without necessarily enhancing housing availability for needy households. Indeed, there is some evidence that rent allowances are passed onto higher rents.

Opponents of the government’s moves to weaken security of tenure in social housing could signpost:

means-tested social housing systems may potentially reduce job seeking incentives amongst the unemployed, or discourage low-wage workers from seeking higher paid jobs if social housing is withdrawn or rents are increased as earned income grows.

Even abuse and manipulation of the report might have been better than being ignored.

The report is written to draw conclusions from across the OECD’s membership of advanced industrial countries. Inevitably this means that the report’s recommendations may not all be relevant to all 30 countries. Even where the recommendations such as looser land use policies, freer rental markets and more reliance on rent allowances than social housing may be appropriate, there are practical and distributional concerns. However, the study is worth reading with an open mind.

Saturday, February 05, 2011

Inside Housing’s board performance survey: cause for concern?

This week's Inside Housing has a survey of governance in the social housing sector. My initial reaction (or rather tweet) was: Shock! Horror! 82% of board members in #socialhousing think they do a good job - "only" 71% of chief execs agree

More important that some mismatch in satisfaction with board performance is the level (and again) some mismatch in the level of dissatisfaction with board performance: about one in ten board members was "dissatisfied or very dissatisfied" with board performance and a little more than that among chief executives, company secretaries and governance officers.

Arguably more serious than all of this is the problem of weak boards not realising that they are failing and not doing anything about this. (History shows us that often such weakness is only diagnosed after the event by regulators for all sorts of reasons.)

In the world of corporate governance good practice, external facilitation of board performance reviews are increasingly seen as important. I doubt many housing boards have accepted that challenge. Maybe something for the next Inside Housing survey?

The notes to the survey report need to be read:

95 valid responses were recorded. 62% were from board members, 9% from chief executives and 22% from company secretaries and governance managers.

I struggle to get those percentages to get anywhere near 100% - even allowing for roundings on all the figures. Am I missing something or is there a typo? (The percentages in the report are different from those in the article but do still fall short.)

The fact that we are talking about a survey of 95 must mean that we have to treat the findings with some caution. You do not need to be a statistical boffin to recognise that the margins of error may be somewhat substantial – possibly bigger than some of the mismatches between executives and non-executives. If 9% of the 95 were chief executives and 22% were company secretaries and governance officers, we are talking about 29 people.

Inside Housing should be applauded for commissioning the survey. However, a larger survey might have allowed some of the issues to have been probed more effectively and robustly.

Wednesday, February 02, 2011

The IFS Green Budget: public finance challenges and public sector pay premiums

Much of the media coverage of the Institute for Fiscal Studies’ (IFS) Green Budget (press release and full document pdfs available) has focused on the message that George Osborne should resist the temptation to have a giveaway Budget. A quick look at Google News suggests that there are fewer headlines about the Green Budget on desirability of a Plan B.

The IFS forecasts that the government will borrow slightly less in 2010/11 than the Office for Budget Responsibility (OBR) forecasts. Will the Chancellor splash out or even give a gentle stimulus when the recovery stalled in the fourth quarter last year?

There has been speculation that the Chancellor may delay the planned fuel duty rise. I had wondered if he may find some loose change for 16-18 students who lose the EMA grants.

The IFS’s warning against a giveaway on 23 March arise from two downside risks for the public finances.

1) the economy might not grow as quickly as the OBR expects, and even if it does the public finances might not bounce back as strongly as it forecasts.

2) the planned spending cuts might prove formidably hard to deliver.

Other commentators have suggested that the cuts may be hard to stomach. The IFS warn that the success in reducing public spending in the 1990s is of limited relevant. This is “the tightest five-year period for public spending since at least the Second World War”.

The IFS notes that

Spending plans set out in the October 2010 Spending Review imply a significant public pay freeze and large employment cuts.

Controversially it goes on:

Before the financial crisis, public sector employees were, on average, paid at levels roughly in line with their private sector counterparts once observed differences in skill composition were taken into account. Since 2008, a significant public pay premium has appeared. We do not therefore believe that the planned two-year pay freeze will lead to widespread recruitment problems in the public sector in the near future. However, the average pay differential hides large variations in relative pay between different areas of the country. Consequently, some public sector vacancies, especially in London and the South-East, will remain hard to fill.

Talk of a 6% public sector premium for men and over 10% for women could well show up in this spring’s debates about pay and pensions.