One of the problems with QUANGOs is that their autonomy makes it difficult to control their costs. The nature of the beast makes it difficult for politicians, who set them up in the first place, to step in and ensure that controls are in place to avoid exploitation of their protected status.
Attempts can be made to get around this at setup, with strict rules put in place in order to try to ensure value for taxpayers’ money but rules can be got around and with no commercial drivers, it is difficult to be sure that the political oversight which is supposed to provide control can actually spare the time to examine each one regularly enough.
Thus it was with the start-up of NEST, the National Employment Savings Trust. Determined to ensure that taxpayers’ money was secure, it was decided that the initial funding should be a loan from the taxpayer, in order not to distort the market. This loan was to be repaid from a special levy that was to be put on contributions to the NEST users of 1.8% that would last for c. 20 years.
However, the recent figures from NEST for the period 12 months up to end March 2013 cast doubt upon the feasibility of this approach. NEST has reported initial charges taken from members as being in the region of £61,000. This is based on having c. 80,000 members enrolled in their schemes. Though they point out that by the end of June, this had increased to 250,000 members, and one can extrapolate that the figures for charges must have increased proportionally, it still seems very low considering the other news in the report - that the loans drawn down have now reached £239 million.
It is impossible to see how a debt of this size would be paid back from the contributions of members in 20 years. Either charges will have to go up or else the loan will not be paid back in any reasonable timeframe.
It also begs the question of why costs are running so high in NEST. They appear to be actually out of control at this stage. Of course systems that can service all firms, regardless of scale, are not cheap and NEST does have the burden of public obligation to consider.
However, competitors claim that their costs are only a fraction of what NEST’s appear to be. Without the day-to-day commercial pressures from shareholders it appears QUANGOs can almost do what they like, and the government, at arm’s length, do not seem to be able to control it.
The amount of money being spent appears to be far in excess of their competitors and cannot be easily explained by the complexity of the service. At the very least, the Treasury Select Committee needs to examine this to put the public’s mind at rest that the executives at NEST are building on creating nest eggs for auto-enrolled workers and are not feathering their own nests at the expense of the low and middle income earners.
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— aidan o driscoll (@aidanodr) July 19, 2013
— Chris Fox (@chriscfox) July 20, 2013
— Bill Williams (@BillyBlackstock) July 20, 2013
A rather cutting perspective on NEST from Exaxe, Are potential increases in charges a seious cause for concern? http://t.co/FiX0qGLAHz
— Ian McKenna (@ianmckennaftrc) July 22, 2013
— Richmond House Group (@RHGHerts) July 22, 2013