// BLOG
Concealed consultancy commission is raising energy bills
August 17, 2010
A well timed warning from Supply Management magazine this week regarding the hidden commission being charged by many utility brokers. Whilst it is probably fairly apparent that increasing unit rates is the way brokers make their income it is also clear that many organisations aren’t querying the actual amount being charged thus leaving themselves open to potentially poor deals. Clearly there is benefit in bursars using a utility broker to reduce their workload and find the best deals. However, the cost of this should be considered as it’s quite possible that a much better deal can be had by going direct to the energy company. In addition it is apparent that there is not only a lack of ‘after sales care’ with many utility brokers (sale is complete and commission received) but also that they are not aware of, for example, VAT rules for independent schools.
In dealing with a contract review for one of my schools last week I came across one such firm, which I won’t name, who were completely uninterested in assisting me with a query I had on the contracts they had already arranged for the school. The response from the ‘Account Manager’ was “I don’t get involved in this, if we looked at every bill for every customer we’d be here all day”. I also queried her understanding of VAT on energy for independent schools which was met with a stony silence.
I made further enquiries with two other utility brokers and neither of them understood the rulings around VAT either. In fact one broker told me that “all independent schools are charities and so they automatically qualify for 5% VAT. I always get the forms sent out to them to complete for that”. This statement is not correct and could very well lead to a school paying 5% VAT when they should be paying 17.5%. The implications are clear; a VAT inspection would lead to a requirement to pay backdated VAT for up to 4 years as well as fines for breaches in the rules. A costly mistake to make.
There are a number of times when VAT is payable at the lower level of 5% but applying for this should be done after careful consideration that the criteria has been met. After extensive discussions with HMRC and Baker Tilly VAT specialist Rupert Moyle, Minerva have a full understanding of these criteria and can confidently advise in this area.
I know you are probably wondering why I would be suggesting that it not such a good idea to use a utility broker when I am a consultant myself. The difference is transparency, expert knowledge and after sales care. At Minerva we deal direct with the energy companies and do not charge any commission on the unit costs nor do we receive any commission from the energy companies themselves. As a result you can be confident that you are getting the best deal. Our fee payment is based on a % of the savings you make against the existing tariff and you will therefore only pay if the school is saving money. In addition to this Minerva is keen to work in partnership with your school in any area, not just utilities, and this means we take customer care extremely seriously – we look after our clients so we can work with them again.
If you require any further information on this topic please don’t hesitate to get in touch.
Interest rates set to rise? Dr Andrew Sentance would like to think so.
July 13, 2010
I attended a very enlightening speech today from Dr Andrew Sentance, Monetary Policy Committee member at the Bank of England. Taking place at the Hilton Hotel, Reading and hosted by the Thames Valley Chamber of Commerce this was what’s known as an ‘on the record’ speech. As a result there were representatives from many financial media organisations such as Reuters and Bloomberg.
Dr Sentance used the speech to explain how his view of economic prospects has shifted and why he voted for a small rise in interest rates in June.
Dr Sentance began by explaining that last year the economic backdrop was one of sharp falls in demand and rising unemployment, uncertainty about recovery prospects and a general expectation of persistent below target inflation. “A year on, however, the economic situation has changed,”. He described a number of features of the current economic situation that he believes are very different from the expectations of last summer.
He argued that the world economy has bounced back strongly, and while uncertainties persist, “…worries about possible uneven-ness in the pace of global growth should not be confused with signs of a ‘double-dip’ recession”. In turn, he stated that he believes that “…the UK economy has also turned around since last summer”. He pointed to a reverse in the downward shift in money spending as well as positive business survey outturns as evidence of a rebound. He also believes that expectations of large margins of spare capacity have not been borne out by the available data. And he suggested this may, along with the depreciation of sterling, help to explain the failure of inflation to drop back in the way the MPC expected a year ago.
Andrew Sentance concluded by saying: “In my experience, recoveries have momentum. While growth might not be totally steady and even across sectors, as recovery progresses, various mechanisms begin to operate which can give it added momentum”. He added: “A year ago, the predominant worry was that inflation could be significantly depressed by the impact of the recession. That risk did not materialise. And while I’m not yet worried that we face a major and serious risk in the opposite direction, I do think we need to adjust the policy settings we put in place to head off the downside risks to inflation identified in the immediate aftermath of the big financial shocks in late 2008 and early 2009″. He also added that whilst there may be some nervousness about the economic recovery in the UK that this should not influence the MPC decision making.
Dr Sentance was keen to use the opportunity to give a message to the media about the choice of words they may use to report on the 0.25% Base Rate rise he would like to see. Out go the words “rate hike” and “tightening of policy” due to the potentially negative feelings these could generate. His preference being for language such as “slowing” or “normalisation of policy”.
He described the UK economy as a “patient coming out of intensive care and moving into the recovery ward” and that in this scenario a change in prescription (monetary policy) would be necessary.
Overall it was an extremely interesting speech which much food for thought. He certainly makes a compelling argument for a gradual increase in Base Rate and one suspects it is only a matter of time before his MPC colleagues start to come around to his way of thinking.
If you wish to view the text of the entire speech this is accessible via the Bank of England website.
Public benefit……..again!
July 8, 2010
No surprise this morning with much media coverage being given over to the reports published today by the Charities Commission on the two preparatory schools which failed the public benefit assessments last year.
Concerns remain due to bursaries seemingly being the only real area the commission is giving any weight to when making the overall pass or fail assessment. Any other activities deemed to be for the benefit of individuals and organisations outside of the independent school, such as shared facilities or public speaking events, seem to have limited impact on the overall decision as to whether the public benefit test is met or not.
BBC Online comments on possible legal action being taken by the Independent School Council (ISC). The ISC is bidding for a judicial review of Charity Commission guidance with Chief Executive David Lyscom advising that they “had no alternative but to challenge the commission in the courts”. He also raises concerns that there is no end to the uncertainty of the rules with the Charities Commission able to change their interpretation of them as it suits.
The ‘public benefit’ test was introduced as part of Labour’s 2006 Charities Act which places the onus on private schools to ‘prove’ that they offer benefits to the wider public in order to retain their charitable status and the tax breaks that brings.
It is believed that the tax breaks are worth around £100m per annum to the independent school sector. However, and I think this is a fact that is oft overlooked, this should be offset with the amount of money the schools are saving the Government by schooling thousands of children thus meaning that are outside of the state school system.
Even prior to his appointment as Education Secretary, Michael Gove has been a critic of the Charity Commission’s approach so it will be interesting to see if he takes action on this before the ISC have to embark on a long-winded and expensive legal battle.
Looks like this will continue to rumble on for some time to come.
Common sense prevails for a change!
June 29, 2010
I was delighted to hear the news that the new Education Secretary, Michael Gove, is looking to introduce School Olympics in a bid to increase the amount of competitive sport in our schools.
Thank goodness that the PC brigade have been over-ruled on something. I don’t know anyone who is happy that their children are having to participate in non-competitive sports days on the basis that no child should be made to feel bad for losing. All this will serve to do is give us a country of losers! We struggle enough in sporting success on national level – England football, British tennis champion (Mr Murray aside) – and so I am delighted that schools should be encouraging children in team working and striving to be the best they can be.
Of course in this sense the independent sector is ahead of the curve with a much greater percentage of school time being allocated to physical activity in addition to inter-schools competitions.
Using available space to generate revenue…..
I also wanted to make you aware of a recent article in FMX magazine which shows an excellent example of self-funded school St John’s in Marlborough making excellent use of their space in order to generate additional revenue for the school. In these more challenging times any schemes to bolster income can only be positive and I would urge all bursars to continue to look at new and innovative ways of increasing school income from commercial activities.
Kinnarps are a Swedish based furniture company and Angus Kaye, who wrote the article, also gives some interesting insights in to the ‘much talked about’ Swedish free schools model. On a more local level the Kinnarps Account Manager, who worked with the school to help more their ideas to realisation, is Steve Jones who was clearly an integral part of the success of the project.
Kinnarps are currently running a competition where you can win the school a FREE space plan or a Swedish picnic Pack!
And finally…….
If you have missed it, here is a link for the details of all of the schools who have registered their interest in becoming an academy. This was apparently only revealed after a Freedom of Information Act request!
So a mixed bag of updates on the blog today. Hope they’re useful
Trustee Induction and Refresher Training
June 22, 2010
Having recently run a presentation with the Blake Lapthorn team I am aware of their indepth knowledge and expertise in the charity sector. Whilst I have not personally attended the trustee induction course I am sure that it will be delivered to their usual high standards. Whether attending this or another event, I believe it is absolutely imperative for trustees of independent schools to receive professional training in order to help them fulfil their roles as successfully as possible. It will also ensure they fully understand their legal obligations which are often more onerous than trustees imagine when they take on the role. I suspect that it is well worth a small investment to ensure your school has robust and effective governance.
Lorraine's Twitter feed:
- Morning campers! Just watching Maisie at Little Kickers - more League 2 than Premiership right now! :-)
- Just switched over to get a quick tennis update and see if @ajhmurray is Scottish or British 2day! :-)
- Not as far or as fast as @MrJaseyD or @brookerh but managed to put in 5 miles this am which bodes well for Great South Run training schedule
- My Twifficiency score is 33%. What's yours? http://twifficiency.com/
- Picked up another new client yesterday! Am so delighted, business is progressing well.
- Post Edited: Concealed consultancy commission is raising energy bills http://bit.ly/dBds5N
