The scandalous use of City\’s Cash

You\’ll recall, you well informed person you, the fuss that Nick Shaxson made over the City\’s Cash last year? How appalling it was that the City of London had some huge secret war chest of cash that was used to prop up the entirely evil system of late financial capitalism?

How the newly enobled Baron Glasman of Stoke Newington railed against this iniquity, how Ritchie leapt aboard the bandwagon and insisted that billions should be confiscated and used for the good of the nation?

Interestingly, a report on how the City\’s Cash is collected and how it is spent has recently been posted onto the net.

You can read it here.

This is what that man with the deep, deep, knowledge of banking, economics, taxation and the righteous way of living told us:

They tell him they’ve only got £3 billion of assets.

That’s £3 billion they don’t need to promote banking and £3 billion we need to save libraries, and so much more.

It’s so obvious what needs to be done – and the last thing that this money need do is promote global banking, but that’s what it’s being used for.

It really is time this tax haven within the UK was abolished.

If you read the actual report, they\’ve some £126 million coming in a year. Make up your own mind as to whether that\’s a decent return on £3 billion of assets.

How does that get spent? £55 million a year on schools, £19 million a year on open spaces (Hampstead Heath, Epping Forest etc), £17 million a year on markets (Billingsgate, Smithfield etc). That\’s the bulk of it, right there, in very standard indeed Local Authority type expenditure (why Yes, LAs do pay for schools, parks, markets, in places right across the country).

And, as I pointed out before, The City does have something of a financing problem. There are very few residents (9,000 I think?) meaning that there\’s not much to be had in council tax from them. And business rates, which you\’d think (in fact you know they are) would be substantial on some of the most valuable business properties in the world, well, that cash doesn\’t go to The City Corporation. We\’ve a centralised system you see, it goes off to central government where it is then allocated out around the country on the basis of need.

And as the City has City\’s Cash it doesn\’t have any need for any of the business rates so all of the business rates raised in the City go off to Burnley and the like.

So what we actually have, quite unlike what Glasman, Shaxson and Murphy tell us, is a local authority largely financing itself off land rents and the accumulated surplus from centuries of those land rents. Providing quite standard local authority services from that investment income. And the vast majority of current taxation raised from inside the City\’s boundaries is sent off to poorer regions of the country to pay for needed services there.

It is indeed possible to change the law, confiscate the City\’s Cash and spend it on libraries elsewhere. But if that is done (quite apart from the effects of changing the law to confiscate the money of a lawfully constituted LA) then there won\’t actually be any more money for libraries in Burnley: for the City would now need to be funded from the business rates which would have to be returned to the City rather than sent to Burnley.

In short, everything that Mssrs. Glasman, Murphy and Shaxson have told us is entire bollocks as none of them bothered to do a lick of research. I managed to work it out from first principles,  a bit of internet looking about and logic. Took about an hour. And here\’s the confirmation.

27 comments on “The scandalous use of City\’s Cash

  1. Hold on – Epping Forest is bloody miles away (20 miles?) from The City. Why would be paying for that?

    And yes, I do know.

  2. 11 miles or so, by road. And because they own it?

    I bet some of their property investments are outside the City boundaries too. Should they refuse to spend money on them?

  3. Actually the Corporation of London does get a tiny slice of the business rate income – nearly half a penny per pound of rateable value, which is less than 1% of what the business pays to fund other local authorities.

  4. @1
    Want the answer to that one & you need to go back to Forest Law. Epping Forest was once part of the monarch’s hunting grounds. When the Royals gave up on exercising their droit du seigneurs there & just gave them a quick walk round Hyde Park instead the City got it.

  5. Funny how you never hear a peep about Epping Forest and the City’s benevolent stewardship from the Greens and assorted righteous lefties, doesn’t fit the narrative I suppose.

  6. Epping Forest Act 1878.

    One of the great social reforms of Disraeli’s Second Ministry.

    Subsequently referred to as The People’s Forest. A hundred years before Blair got in on the “People’s X” gig.

  7. What did Shaxon think the City’s Cash *was* being used for? I mean, really, £126m to “promote banking” sounds a bit much.

    And why do Lefties always want to steal something and spend it all at once, rather than preserving the assets and just spending the interest?

  8. am I shocked and surprised that the WGCE, Shaxson (the tax dodging exile), and Glasman made fools of themselves?

  9. We’re discussing this because of the lack of transparency in respect of the Corporation’s assets and what it uses its income for outside of its local authority operations. Its activities may be benign or they may not, but until they publish the full facts, we have no way of knowing.

    If the Corporation is just a “standard” local authority, then why not merge it with Tower Hamlets? Having a separate authority for only 9,000 residents looks like a wasteful anomaly.

    Presumably the answer to this rhetorical question is the Corporation’s stated primary purpose, which is “promoting ‘The City’ as the world leader in international finance and business services.”

    Given these two points (i.e. the lack of transparency and the lobbying role), Epping Forest and Hampstead Heath are just diversions, albeit pleasant ones.

    Tim adds: That’s interesting. Are City Corporation accounts more or less transparent than other LAs? I don’t know the answer which is why I ask. And doesn’t every LA lobby for industries in their patch?

  10. The Corporation’s accounts are less transparent than other LAs because of the large amount of assets they hold via trusts and other charitable vehicles.

    The City has had quite a few centuries headstart on the rest of UK local government when it came to amassing wealth, plus local democratic accountability has meant that other LAs have rarely had the latitude to build up large surpluses – i.e. the ratepayers wouldn’t stand for it.

    All LAs, as you say, lobby for industries on their patch, but they don’t consider this to be their primary purpose. It’s a means to an end (local prosperity), rather than an end in itself.

  11. “And why do Lefties always want to steal something and spend it all at once, rather than preserving the assets and just spending the interest?”

    Because they don’t understand (or wilfully refuse to understand) the difference between capital and interest/income. To them its all just cash to be spent. Its the same when socialist governments borrow money – to them the only cost is the interest payments – the concept of having to repay the capital as well is alien. Thus its entirely sensible to borrow to consume rather than borrow to invest, because they have no intention of repaying the capital at all. They just roll it over ad infinitum (until they can’t of course, which happens to socialists all the time…).

    So the idea of preserving your capital, and living within the income does not compute for socialists. If they have a large lump of capital (such as the City does) the temptation to spend the lot in one massive splurge is irresistible.

    My local council (when Labour controlled) sold off its large shopping mall complex for (I think) £93m, £70m net after borrowing was paid off. For this handsome sum the local rate payers have got: £15m spent on repaying other old debts,£27.5m straight into the council pension fund to plug a deficit, £15m spent on refurbishing various council schools/leisure centres and £12.5m currently unaccounted for.

    So an asset worth a net £70m, bringing in an income of say 5% or £3-4m/year has been frittered away on current spending, leaving the ratepayer all the poorer. And to be fair most of the spending took place under a Conservative council, having ousted Labour after the sale took place, thus proving that Labour and Tory are but different sides of the same socialist coin.

  12. Dave @9
    “If the Corporation is just a “standard” local authority, then why not merge it with Tower Hamlets? Having a separate authority for only 9,000 residents looks like a wasteful anomaly.”

    Of all the potential weaknesses one could through at CoL LA, “wasteful” is perhaps the most riseable. An organisation that can arrange its affairs to defer its gratification and live within the means of its interest/dividends is – if it is nothing else – admirably prudent and minimally wasteful.

    CoL prudence applied post the takeover of Tower Hamlets may well not produce the outcome you imagine…

  13. Hugo (#7) asked “What did Shaxon think the City’s Cash *was* being used for? I mean, really, £126m to “promote banking” sounds a bit much.”

    He implied that it was being used to fund shadowy right-wing pressure groups.

    A pity it isn’t; some of us might have been able to grab a bit.

  14. @ David Timoney
    You blog on this thread
    So you can use the internet
    So you can read the Corporation’s accounts which are regularly published on the internet – including how they spend City Cash.
    The accounts of all City-controlled charities are available via the Charity Commission website.
    Now go and do your homework before saying the dog ate it.

  15. Dave Timoney.
    “Given these two points (i.e. the lack of transparency and the lobbying role), Epping Forest and Hampstead Heath are just diversions, albeit pleasant ones.”

    You may think it a diversion but I don’t, frankly I couldn’t give a stuff about the obsession with trying to prove the City is some kind of den of shady Blofeld like thieves and villains, as others have said it seems to be well run and financially prudent, if only we could say that about most other LAs. Maintaining parks and open spaces is one of the things I think councils should be doing and the fact that The City is responsible for preserving one of England’s remaining areas of ancient woodland is very much a point in its favour. My own council ( Tory ) tried to sell off an area of open Downland, purchased on behalf of borough residents in the 30s, without asking us and as quietly as possible, for the princely sum of £250k but as Jim points out you can’t get a fag paper between the parties for financial Fuckwittery. God knows what Epping Forest would look like if Tower Hamlets got its mitts on it, even if you were joking.

  16. John 77@15
    Indeed, I can read the Corporation’s accounts, and the returns of its associated charities, but these will not tell me the makeup of its assets (£800M in the case of Bridge House Estates ).

    The Corporation is also explicit that it is exempt from the FoI Act in respect of its “privately funded functions.” No explanation is given as to why.

    This makes it quite unlike other local authorities in the UK. This is not proof of any wrongdoing (I don’t think anyone is stroking a Persian cat in a secret bunker underneath the Monument), merely proof that it is less transparent, which was my point.

    This wouldn’t matter much if the historic wealth of the Corporation were the only difference. What makes critics twitchy is the combination of this lack of transparency with its stated role as a lobby for The City.

    I don’t think The City is a den of thieves (I’ve occasionally worked there), and I don’t think there is a secret slush fund to pervert democracy, but I do think the Corporation is rubbish at PR.

  17. No explanation is given as to why.

    One of the few remaining extant clauses of the Magna Carta, although much diminished, is:

    “That the City of London shall have all its ancient liberties by land as well as by water.”

    One of those is that it is quite separate from the Government (and Crown) resident in London.

  18. Of course, a pendant’s answer is that Schedule 1, Para 9 of the Freedom of Information Act 2000 specifically reads:

    “The Common Council of the City of London, in respect of information held in its capacity as a local authority, police authority or port health authority.”

    Therefore it is exempt by deliberate statute. Complain to Tony.

  19. @ David Timoney
    The Bridge House Estates accounts published on the CC website give as much data on its £863.7m of assets as you would get from any other set of accounts [with the exception of historic cost of assets which some accounts give but Bridge House estates cannot as some papers have been lost (possibly in 1666) and which would be meaningless as they would be in money whose value has varied by a factor of 70x between different purchases, let alone the fact that much of the property came as gifts].
    The Corporation states that FoI Act does not apply to its “privately funded functions”. That is a piece of information about the scope of the Act. The pigment green may be obtained by mixing blue and yellow pigments. The cost of your daughter’s wedding reception, assuming you paid for it yourself, is not subject to FoI.
    The difference between the Corporation of London and other local authorities is that the City feels a need to say this because it runs a whole load of charitable activities including a lot that the Lord Mayor pays for out of his own pocket. How the Lord Mayor spends his own money is, quite frankly, none of your business so don’t bother to issue the Corporation with an FoI notice about it. When I lived in the City I periodically spent some of my own money on incidental costs related to charitable activities and never kept any records: are you suggesting that I should have kept detailed records just so that I could respond to an FoI request? Really?
    The Bridge House Estates charity provides all the information that is required to be provided by charities. If you are desperate to know a complete list of the property it owns, go and ask the Chamberlain of London and he will probably tell you – really nice guys (when I first became Hon Treasurer of a charity I read all the papers and went and bought an ounce of peppercorns so that I could pay the rent, which they accepted courteously instead of telling not to be so stupid and naive)
    “the Corporation is rubbish at PR.” – Yes because it doesn’t hire a forest of PR types to refute all the lies spread by Murphy and his fellow lefties. But Catch-22 is the fuss the lefties would make if the Corporation *did* hire a forest of PR types – they can’t win.

  20. Dave@17,
    No organisation, whether listed, Limited Liability or LA lists the specific buildings, etc that comprise its Tangible Assets. Neither does the CoL.

    Is there a real difference you are referring to?

  21. John77@20 & Gary@21
    I am not attacking the Corporation, nor do I have any interest in the specifics of their asset register.

    If you recall, this thread started with Tim taking issue with Nicholas Shaxson’s speculations about the CoL’s finances. I pointed out (comment 9) that such speculation would always be around for two reasons: a) the relative lack of transparency of the CoL compared to other UK LAs; and b) the CoL’s mission statement regarding it’s role as a lobby for The City.

    The first of these is a consequence of its unique history, and the different electoral dynamics this has given rise to, which I alluded to in comment 10 (answering Tim’s question appended to #9). Compared to other LAs, a much larger part of the CoL’s wealth is managed through trusts. These are de facto less transparent than current account wealth in a bog-standard borough council.

    I’m not imputing anything nefarious here, merely pointing out that secrecy, whether intentional or an accidental consequence, tends to give rise to suspicions. That’s just human nature.

    As I said in comment 17, this would be much less of an issue (i.e. a target for suspicion) were it not compounded by the CoL’s lobbying role. This raises the stakes because it appears to highlight a potential conflict of interest – i.e. between the CoL’s role as an LA, looking after the interests of its electorate, and its role as a lobbyist for a specific sectoral interest (banking and finance).

    Again, there may be no actual conflict in practice, but that is not how it appears – Caesar’s wife etc.

    As regards PR, the CoL has its own PR department, like most LAs, not to mention access to the expertise of the City of London Guild of Public Relations Practitioners. The issue isn’t that they need to hire more people.

    The CoL is excellent at managing relationships with decision-makers, both in the political and financial spheres, but it has tended to be less succesful when it comes to relations with the wider public. Its strategy appears to be to keep mum whenever possible.

    To be fair to them, this strategy has stood them in good stead for the best part of a millenium, so you can see why they’d be loath to change it. I wouldn’t say “they can’t win” in this regard, I’d say they have the longest unbeaten record in Europe.

  22. @ Dave Timoney
    Apologies: I had been reading your comments on ill-informed complaints as if you agreed with them.
    However I am not willing to retract on the FoI issue: what I or the Lord Mayor spend out of my/his own pocket on charities is between me/us and God (unless we’re exceptionally careless about our finances in which our wives and bank managers may be interested) .

  23. So the upshot of your argument seems to be:

    1) “this strategy has stood them in good stead for the best part of a millenium”

    2) “they have the longest unbeaten record in Europe”

    3) “why not merge it with Tower Hamlets?”

    Can you see where I’m heading with this?

  24. John77@23
    We is cool. I don’t disagree with you re FoI. What you or the Lord Mayor do privately is none of my business. However, what the CoL does corporately is the business of its 9,000 electors.

    Gary@24
    As I mentioned earlier (comment 14) the reference to Tower Hamlets was a joke. I threw this in because I was amused by Tim’s use of the adjective “standard” in the description of the CoL “Providing quite standard local authority services from that investment income.” The CoL isn’t standard/average/typical in respect of local government, hence the absurdity of a merger with Tower Hamlets.

  25. £15m spent on repaying other old debts,£27.5m straight into the council pension fund to plug a deficit

    Erm, both of those are sensible and prudent uses of capital for a local authority (not current spending at all), and far more appropriate than trying to be a property developer would be.

  26. Can I please snidely note that Dave appears to be a fully paid up member of the Worshipful Company of Grocers?

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