The Tories and the Great Pension Release Stunt

I've been thinking long and hard about the release of pension funds that the Tories announced in the budget. It's unlike the Tories to trust working people with large sums of money when they could leave it in the hands of their fat cat cronies in the City to continue to rip us off with fees and charges on money that's locked into their wallets. What, I ask myself, could the motive be ? Well, I'm no Robert Peston but I can tell you what I think.

The Tories are in trouble. Not economic trouble, with the support of the Lib Dems they have the brass neck to screw the poor to bail them out of that. They are in political trouble. One of the problems that all governments face is that the economic cycle lasts for about 8 years, despite Gordon Brown thinking you can abolish boom and bust. That's just the way it is, You can stretch it or shorten it but not by much. But the parliamentary cycle only lasts for 5 years. If you come into government at the wrong time you are in political trouble come the next election.

Osborne came into government at the start of the downturn and 4 years later he has an upturn. Exactly as anyone who knows about these things would have predicted irrespective of any government action. But growth is very weak and the brakes he put on the economy by restricting the incomes of those who have to spend 100 % of their income every week means that consumption, which fuels growth, can't accelerate the economy to the extent that real cost of living issues will have been solved by the next election. Basically the upturn will be too slow for voters to feel better off by the time they go to the polls.

Now if you're a Tory chancellor then you can't just go giving money to poor people who will spend it, so traditionally, to pump up growth by consumption he would resort to fiscal easing, or as it is better known, printing money. But that's been tried and the ailing banks just kept the money to shore up their ailing balance sheets. It didn't make its way into the consumption side of the economy so the effects of the multiplier weren't produced. I suppose I should really try to explain the multiplier but it's complicated. So imagine you have £100 and put down a 10% deposit on a piece of furniture. You can produce £1000 of consumption from £100 of cash. That'll do as an explanation for the moment I think.

In any case, another round of printing money would have a very bad effect on the UK credit rating. It's already under severe threat, so as an option, that would have to be a last resort. So in the pragmatic way that the Tories always adopt in a crisis he has looked around to see who has money he can get his hands on. Releasing the pension handcuffs will produce significant tax revenue in the year of the election but it will have the added, and perhaps more important effect of injecting massive consumption into the economy. The effect on inflation he can brazen out because inflation is starting from a very low base, and a bit of inflation in the system will help consumption as well. People will be more inclined to buy now if they think things will be more expensive in the near future, and it is obvious that a lot of the released pension money will be spent, bringing into play the multiplier. And a lot will go into 'buy-to-let' property fuelling a house price boom and there's nothing like your property value rising to bring UKIP voters back onside. It'll be a price bubble of course, but as we all know, in a price bubble it's only the last fool in the chain who suffers, but it might not burst before the election.

So this act of generosity to workers by the most elitist chancellor in living memory is, as far as I can see, no more than a political stunt to try to get the Tories back into power with a majority government at the next election, and if they have to wreck the pensions industry to do it then so be it. Thatcher did it with the coal industry for the same reasons, but the miners were the enemy. Osborne is so desperate he will do it to his friends. He's in real trouble and his generosity is no more or less than a very destructive election stunt. There were many other better ways to act against the rip off artists of the pension industry, but they wouldn't have been quite so politically expedient.

Gordon Brown and Fuel Poverty

I must admit that, despite my severe misgivings, when Gordon (the big clunking fist) Brown followed Bliar I thought that there might be a slightly increased opportunity for some sort of anti-poverty measures. Today's announcement on measures to relieve fuel poverty show that he is as big a coward in the face of big business as ever Bliar was. Brown/Bliar, it's like a choice between the pox and the clap. Both are awful but one is worse.

Pensioners will die of booty capitalism this winter because power generation and distribution is in private hands and a toothless regulator can do nothing to control price increases. Shame!

Pensions Crisis Etc Continued

One of my friends tells me that he doesn't think I have really addressed the case of the money purchase pension schemes. I thought that I had done that in the opening of my previous posting, but for the sake of clarity I'll spell it out loud and clear. If you can afford to buy the pension you should be able to pay the tax. No party is going to re-instate that relief so stop whinging and pay your tax. If we can get the rich off welfare it will help us all, except the moaning middle classes.

The other problem is with public sector pensions. The impression that the papers give is that somehow public servants are going to get their state pensions 5 years ahead of the rest of us at age 60. They wont, thet will get that at 65 like the rest of us. What they will get at 60 is what in other occupations would have been an occupational pension. They forfeited income every week in order to build up that entitlement to a pension at 60 and that was the deal. Everyone involved knew that was the deal, it was part of their wages. The money held back from them was not, however, invested by their employer, the government, because they believed that current taxpayers would be able to pay these pensions when they became due. The economics of the madhouse.

Now, as the chickens come home to roost, they do not want to lose votes by burdening current taxpayers with the bill for these pensions which people have been working for for 40 years in some cases. So they think that they can just walk away from the problem by telling their employees that they have changed the rules because the agreement that they had is too expensive (politically) to honour. They want to delay the payment of these pensions which these people have worked for for 5 more years. and damn the agreements. Well you can't treat people like that and expect them to just suffer it, so you have a dispute. That's hardly a surprise, but if you can get the papers to put out your mis-information it will help get the public on your side, and it might not be noticed that this is a government with neither honesty nor honour. .

Pensions Crisis and the Financial Services Rip-Off

It is well known that I am no fan of Gordon ‘the big clunking fist’ Brown, but the current obsession with pensions crisis needs a more simple explanation, so it will be my cause to give it a try

Firstly, private pension provision is only available to those who can afford it, but speaking to some less well off people they believe that it is the state pension which is under threat. They do not appreciate, because the papers do not properly explain it, that if the better off pay more tax, then the less well off might be required to pay less. The papers try to give the impression that what is good for the middle classes is good for the whole country. Obviously in their agenda the less well off who may have no private pension don’t matter.

Secondly, the crisis arises because the financial sector of the economy by buying and selling stocks and shares at ever higher and unjustified values and trousering the profits put themselves in a position that, because of the high value (completely notional) of those shares as assets on their books, they believed that they were financially sound and their pension schemes were in surplus.

Because they imagined a surplus they gave themselves a ‘contribution holiday’; in other words, the money that they should have been investing in the pensions of their employees was paid out to their shareholders. The employees were never told that they had too much money in their pension fund and that they didn’t need to contribute for a while. Not bloody likely.

Now they find that they were too greedy and since their bubble has burst and shares have fallen to more realistic levels it is everyone’s fault but theirs. But who will suffer as a result of the fact that workers’ entitlement was given to shareholders. Well, not the shareholders. Certainly not the greedy directors and financiers. Yes, you guessed it, the employees.

Just another disgraceful episode in the world of high finance (grand larceny) that is capitalism.

I hope that this clarifies my views on the subject, I certainly feel better for getting it out

Scottish Nationalists and the Millionaires Club 3

A bit in the front of the Herald today might throw some light on the attraction of the Nats for the millionaires club.
It reports that a leading financier, one Ben Thomson, chairman of the investment bank Noble Group, backs the Nats because a Nat win would rid the finance sector of 'over-regulation from London'.

He obviously sees an opportunity for the financial sector to benefit from a reduction in regulation, and while I support the independence cause I am not sure that the Nats., who seem to have some unsavoury friends, are the right people to take us there. I hope that this is just a coincidence and not another under the counter deal done in advance of an election (a 'Souter' ? )

Looking back over the recent past it might even appear, when we think about Farepak, illegal bank charges, endowment mis-selling, millions lost in tax avoidance schemes, and the general bolox the financial sector has made of pensions with the assistance of 'the big clunkin fist' that a lot more regulation and scrutiny is required, not a lot less irrespective of whether it comes from London or Edinburgh.

Councillors Severance Pay : A Message to Rayleen

Rayleen decided to publish my last post, but she isn't happy about it. She says that it doesn't deserve a response and that is always a prelude to censorship, so just in case I will post a copy of my response below :-

Rayleen—I can’t think why my comments should not deserve a response but think of these questions
First . At about 18 years of service the severance would be as follows :-

‘The Local Governance (Scotland) Act 2004 (Severance Payments) Regulations 2006
Section 5 . 1 . (c) £20,000 for a member of a local authority who shall, at the date of the next ordinary election, have served for a period of 15 complete years or more.’

I invite you again to ask your constituents if they believe that the retiring councillors deserve this amount of money

Second The remuneration committee looked at the question of pensions and decided as follows :-

‘Scottish Local Authorities Remuneration Committee

Current arrangements

4.1 There are no arrangements currently in place to allow councillors to be part of an occupational pension scheme. Councillors who wish to make pension provision must make private arrangements, using part of their basic and special responsibility allowances’

So the pension was built into the allowances and councillors were expected to make provision themselves.

Third The payment is not a thank you for service to the community, it is a direct bribe for dead wood time-servers to go away and stop preventing innovative people from advancing better ideas and programmes. They must leave government totally (if they go into the Scottish Parliament then they will not be eligible) and the reasons are in this BBC report which says

‘Critics are likely to portray the severance scheme as a way of placating Labour councillors in the central belt likely to lose their seats under the new electoral system.

The executive argued, however, that it would be a one-off move that would provide some incentive for long-standing councillors to stand down and make way for fresh blood in Scotland's town halls.’

It could hardly be clearer without being downright insulting.

Finally, I am also grateful to the councillors for retiring, because they let the problems in our communities flourish for so long. I am not on the sidelines sniping, I am and have been actively trying to remove them (in line with your own policy) for some length of time. I only regret that I couldn’t embarrass them into going sooner and without a large wedge of public money that they scarcely deserve.