This week on Facebook: Being somewhat surprised by the scale of the political incompetence (although political connivance would fit equally well) that I came across in last week’s article on pensions, I decided that this week I would look a little deeper. I found that the sorry saga continues with perhaps the only positive slant that could be put on it would be that of politicians caring for their own stipends.
Media headlines are made when it’s claimed that the owner of a private company has raided its pension fund, with politicians making themselves the moral arbiters of actions they made possible through their own fiscal ineptitude. The monies siphoned off from companies by individual is counted in the millions of pounds, those monies siphoned out of the economy by politicians is counted in billions of pounds. The debts that political fiscal ineptitude has imposed on the public purse runs into trillions of pounds.
The publicly owned Royal Mail pension scheme alone was given a 13-year contributions holiday by successive governments, helping to create an £8billion deficit in the fund by 2009. The Royal Mail sell off was something that I covered in Cassandra’s Curse. As I remarked at the time it provided the government with about £28billion of the pension fund’s assets in a one-for-one reduction to the budget deficit. With the pension fund’s £37.5billion of liabilities they both represented a future fiscal deficit of a £65.5billion debt added to the public purse. This is without adding the cost of other raids on publicly owned assets, bailouts and state subsidies to the private sector, in what can only be described as yet another example of £trillions in deferred stealth taxation by the government.
The term free money is frequently used in connexion with tax avoidance schemes encouraged by the government. Particularly pension scheme contributions that don’t have the political opprobrium applied to other schemes that range from the legal to the quasi-legal. When the largesse of government notionally free money available to these schemes is exposed as a public scandal, politicians hypocritically question the morality of tax avoidance in the use of schemes that they devised and tax loopholes that they failed to close.
In reality free money is an exercise in lexical semantics by economists, financiers et-al, there is no free money in the sense that a government has no money. The only monies that a government has, are those raised through taxation, borrowing (debt) or the sale of publicly owned assets.
Government free money is a legal tax avoidance scheme that — in the case of pensions — is plundered by successive governments. Nevertheless, politically inspired schemes of tax avoidance largesse figure in the manifestos of successive governments, where this largesse is now added to ever increasing government deficit financing.
Monday 10 October 2016 How the Thatcher governments changed occupational pensions in the 1980s: Paradoxically, while Baroness Thatcher’s governments strived to roll back the state and reduce the burden of tax and regulation in many areas — pensions largely saw the opposite, with a huge increase in regulation and taxation.
Tuesday 11 October 2016 A tax change so stealthy that Gordon Brown would be proud of it: Well-funded, generous final salary schemes were the norm across huge swathes of the economy in both the public and private sectors. Now these pensions are rapidly dying out in the private sector and workers face all the uncertainty that goes with the alternative: “defined contribution” schemes, where your income is at the mercy of stock market returns.
Wednesday 12 October 2016 UK budget watchdog warns of Osborne’s £5bn pensions gap: The Office of Budget Responsibility reported that in recent years the government has made a number of changes to the tax treatment of private pensions and savings and introduced a variety of government top-ups on specific savings products. In doing so it has generally shifted incentives in a way that makes pension savings less attractive — particularly for higher earners — and non-pension savings more attractive — often in ways that can most readily be taken up by the same high earners.
Thursday 13 October 2016 Pension deficits vs company dividends: Companies are going to have to take “drastic action,” businesses could be forced to slash dividend payments in order to plug the gaps in their deficits — especially if new Prime Minister Theresa May follows up her tough rhetoric with legislative action. Investors starved of income from other sources have been increasingly focused on dividend yields in recent years, but the pension deficit crisis could snub out another income stream for them.
Friday 14 October 2016 The top plan to tackle Britain’s pension crisis would costs retirees £20,000 each: The gap between how much companies have promised to pay employees when they retire and how much they will have when that happens is estimated by the Pension Protection Fund (PPF) at £459 billion ($606 billion).
2017 @ A.P. Herbert AI Albert Haddock Banks blog book books budget budget deficit C.S. Lewis censorship China Civil Service constitution Crime CRT cryptocurrency CWG debt deficit democracy education ethics EU euro fiat money Film France freedom of expression free trade gdp government history human-rights inequality internet J M Keynes language Law Ludwig Von Mises Margaret Thatcher morality music Musical national debt New Labour NHS opinion parody PFI poetry police Police & Crime Commissioners politics Quantitative Easing research school Screwtape Sir Ethelred Rutt K.C. social-media Social Welfare statistics T.E. Utley taxation terrorism Thatcher The Telegraph UK Unemployment USA Victor Hugo war war on terror
© Peter Barnett and Aasof’s Relections. Unauthorised use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Aasof and Aasof’s reflections with appropriate and specific direction to the original content.