Anchors aweigh

Posted by: Jules Birch

18/09/2009

Housing’s fattest cat is such an easy target for abuse that it’s almost tempting to give him a break.

After all, John Belcher was already paid a mind-boggling £338,000 as chief executive of the not-for-profit Anchor Trust. What’s a few grand more between friends even if his pay increase alone was four times the amount that Anchor pays its care assistants?

And it’s not as though he’s the only one with a bumper pay increase. I’ll await the details of next week’s Inside Housing salary survey with interest but an average pay increase of 7% (only just less than last year’s 7.3%) comes after a year that was probably the worst that many housing associations have ever experienced. 

As I argued last year, I think managers earn their money more in bad times than good. But the pay hikes they enjoyed while the sun was shining were justified in the name of the market. And just like for bankers and company chief executives, it seems that the market only works in one direction.

Still trying to give Mr Belcher a break, it’s also worth pointing out that he was not the only director of Anchor celebrating a bumper pay rise. According to the annual financial statement, executive directors earned total emoluments of £1.249 million in 2008/09, an increase of 19% on the previous year. The average Anchor employee saw their pay rise by just 2%

Belcher’s own £391,000 salary including bonus was up 20% on last year and Anchor paid another £35,000 into his pension plan.  

The remuneration and nomination committee justified that on the basis that it was competing with other private developers and health companies as well as housing associations and said it had used an average of date from private companies, large charities and social care companies. 

Remuneration committees everywhere say that. It’s the reason why executive pay started soaring in the private sector and the reason why the disease has spread to the public and voluntary sectors.

But how does Belcher’s salary relate to Anchor’s financial performance during the year? Turnover rose just 0.8% in 2008/09. Operating costs rose by 1.8% - in line with the pay increase for staff - and the basic operating surplus fell 31% to £5.7m.

But the accounts also include an impairment charge of £12.4m ‘to write down the carrying value of land following the cancellation and deferment of development projects due to the economic climate and the decision to close six care homes’ plus exceptional charges of £2.9m ‘arising from business reorganisation and closure costs for six care homes’.

The combined effect of that was to turn an operating surplus of £9.0m in 2007/08 into a deficit of £13.3m in 2008/09. Add in an actuarial loss on pension fund assets of £21.7m (2008: £7.2m) and the total recognised deficit for the year was £35.0m (2008: surplus of £470,000). 

That certainly seems to give a whole new meaning to performance-related pay.