Midland Labour council leaders are embroiled in a war of words over claims the region’s local government pension fund has wasted £1 billion on management fees – one describing the other as ‘Mr Pompous’.
Birmingham City Council leader John Clancy and his counterpart in Wolverhampton, Roger Lawrence, are locked in battle over a West Midlands Pension Fund (WMPF)demand that Birmingham City Council pays a £48 million top-up to tackle a deficit next year.
Cllr Lawrence even queried whether the two could now work in harmony as part of the new regional combined authority.
Cllr Clancy’s claims revolve around almost £1 billion of pension fees over a decade, which he said could have been ploughed into council services rather than lining the pockets of fund managers.
He said a comparable fund in West Yorkshire spent a mere £28 million over the same period.
Cllr Clancy said: “There is a missing £1 billion paid to investment managers that should be in the pot for pensioners.”
But defending the fund, Cllr Lawrence stormed: “I don’t claim to be a pension expert like ‘Mr Pompous’, but I know that you can’t make direct comparisons between funds. It is disingenuous.”
The pension scheme caters for council workers in several Midland authorities.
Cllr Clancy has been a long-standing critic of the fund and recently blocked handing over £75 million in deficit reduction payments on top of the regular employee contributions.
He accused the fund of wasting too much on fees and expenses and demanded better returns for the investments.
The fund, relied upon by almost 300,000 current and former council workers, had already hit back in an email to all Birmingham councillors, accusing Cllr Clancy of being out of step with other West Midlands council leaders and warning that a large top-up is needed because the council has failed to make adequate contributions in the past.
Despite the public spat, negotiations have already secured a £24 million reduction in Birmingham’s contribution next year, meaning the city has more money to put into council services.
But Cllr Clancy (Lab, Quinton) has now drawn the direct comparison to the West Yorkshire Pension Fund – which is of a similar size to the West Midlands fund.
In the 10 years to 2014, WMPF spent £1 billion on management expenses compared to just £28 million spent by West Yorkshire.
In the North, the fund is managed entirely in-house, whereas the West Midlands scheme is 60 per cent outsourced.
Both have delivered similar rates of growth over the period – with the West Midlands growing by 68 per cent from £6.7 billion to £11.3 billion and West Yorkshire by 69 per cent from £6.9 billion to £11.7 billion.
Cllr Clancy said: “I know Yorkshire folk have a reputation for being canny, but this is ridiculous.
“If West Yorkshire had run the West Midlands scheme with the same returns on investment that it managed to produce between 2004 and 2014 with the same level of management expenses the West Midlands fund would have been £1 billion better off in 2014.
“There is a missing £1 billion paid to investment managers that should be in the pot for pensioners.
“I feel I am asking reasonable questions on behalf of Birmingham council tax payers, but I am yet to be given any plausible answer as to why the difference in investment management fees between the West Yorkshire scheme and the West Midlands scheme is so vast.”
He added that if the WMPF management costs of £80 million a year could be cut to £3 million, there would be no need for top-up payments to close the deficit.
But Cllr Lawrence said that the West Midlands costs were not in fact significantly higher, it was merely that they declared all of them – including fees paid by funds who are paid by WMPF.
He suggested that other funds do not declare these deeper of costs.
He added: “Cllr Clancy is trying to suggest someone else is responsible for the financial problems Birmingham is facing.
“The failure of Birmingham to enter into proper discussions around the way forward does not fill me with hope for our future cooperation on the West Midlands Combined Authority. We have got off on the wrong foot.”
