Water companies impose a hosepipe ban

Chris ponders how to beat the hosepipe ban that just came into force

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3 in 100 pound coins are fake

The gang discuss what is really to blame for the pound's devaluation – £44m of fake pound coins, or something else …

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How the government is using the “Public Sector Pay Differential” to divide, conquer, and rip-off both private and public sector workers.

It is a lesson handed down by a succession of marauders, from bloodstained raiders in longboats to their ink-stained heirs in the party political policy units, that a small focussed determined well incentivised force will always scatter a larger uncoordinated opposition. 


Make a well targeted attack, scatter the enemy, then pick them off.

The masters of using a small force to scatter numerically superior opposition - Hannibal, Caesar, Napoleon, "Fast Heinz" Guderian - are joined by a politician no less adept at this tactic: "Faster than I look" Eric Pickles, Secretary of State for Communities and Local Government.

The continuing government assault ostensibly on public sector pay uses the ‘confuse and conquer’ tactic to provide a downward ratchet on all pay, both private and public. As an example of confusion, these two graphs on "Average Weekly Pay, 2011" show the same Office of National Statistics data. Because of the different scales on the left hand side of the graphs one seems to show a big pay differential while the other seems to show a very small difference.

The ratchet being used here is a five-step rip-off.

• Step1 – Transfer low paid staff from public sector to private sector. (According to a report by Income Data Services, "20 to 25 per cent of public sector cleaning jobs have transferred to the private sector over the last 14 years")
• Step2 - include high paid staff from the rescued banks, RBS and LloydsTSB, who since 2009 have been counted as Public Servants by the Office of National Statistics.
• Step3 – Compare public sector and private sector wages. Private sector now looks lower, because of the swap of low paid permanently out and high paid temporarily into the public sector, as described above.
• Step4 – Cut public sector wages - using the differential as an excuse.
• Step5 – Cut private sector wages – which no longer have to compete with a public sector differential.

The inclusion of staff from RBS and LloydsTSB, the banks rescued by the British taxpayers, as ‘public servants’ naturally added some va-va-voom to public sector salaries. 

Fortunately the Office of National Statistics helpfully strips out the bankers from their statistics. This reveals that the actual wage differential is much lower than Whitehall would have you think - less than 2%. A difference significantly accounted for by the lack of minimum wage burger-flipping and casual/ temporary labouring jobs that pull down The private sector average.


And as we all know, there are some things done in private that are best not done in public. The IDS report shows the pay distribution in the Public Sector  does not show the same degree of male/female pay disparity.

To further accelerate this rip-off, the Department of Communities and Local Government has quietly removed the promise made by private sector employers who have taken over public sector staff to “ensure that new joiners to the transferred-out workforce are offered terms and conditions which are, overall, no less favourable than those of the transferred staff”.

This little noticed change removes the requirement that outsourcing companies must not slash the salaries, pensions, and other terms of employment of the roles - whether filled by existing staff or new recruits. Now, new recruits into these roles are no longer protected. With the staff turnover rates higher in low paid jobs, an outsourced former public sector department can be quickly ‘refreshed’ with new faces on lower pay. Thus further increasing the ‘public sector premium’, driving down public sector pay, thence driving down private sector pay. You get how it works?

Eric "faster than
 I look" Pickles

On this shameless backsliding, Pickles asserted:

Removing this guidance will help create a level playing field, ensure more opportunities for innovation, help ensure better value for taxpayers' money in the provision of public services, and remove red tape that hinders job creation.

This joins a continuing spew of ridiculous mullarkey from our politicians:

• MPs claiming controlling their allowances would discourage the poor from becoming MPs. 
• George Osborne claiming he is cutting pensioners allowances because they are too complicated for them. 
• Gordon Brown claiming that multi-year pay deals should be welcomed as they gave employees certainty on their income (forgetting the remaining uncertainty on their expenditure).

In a further whack with the "Divide and conquer" crowbar, the government plans to give each taxpayer an annual statement on how much of their taxes go in benefits. The purpose is to focus on the amount that goes on benefits, hoping to generate mass support for cutting benefits in order to cut taxes. Cuts in taxes that would provide a few extra pounds for the majority on the basic rate, but save thousands for those paying at higher and top rates.

Mock up of a 'tax receipt', produced by HM Treasury

In this rush for clarity and transparency, will the government also require pension providers to provide a statement of how much of your pension fund goes in charges?  Or will it force the Office of Fair Trading to change its decision that the banks don't have to tell you how much you lose when they quietly drop your interest rates.

Britain is already the most unequal of the large EU countries. 

Driving down pay doesn’t mean things get cheaper for us ripped-off Britons. Nor does it mean more decent jobs will be created.

What does not get into the salaries of the many goes into the bonuses and dividends of the few.

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Bakers take the heat out of the VAT rise

Fee and KJ discuss the 'pasty tax' levied on hot takeaway foods

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Cameron and cash for access

Chris seeks access to a David Cameron TV appearance

SOURCE TELEGRAPH: Cash for access: David Cameron's private dinners for donors revealed
David Cameron has been forced to admit that 15 donors who between them gave the Conservative Party £25million enjoyed secret dinners and lunches with him at Chequers and in Downing Street.

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Budget serves up more bad news for older people - how much can they take!

 

By Dr.Ros Altmann, Director General of SAGA 

This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.

There was plenty of bad news for older people in this Budget:

Shock rise in age allowance hits middle-income pensioners - poorest and richest are unaffected:  The big shock in this Budget was the astonishing stealth tax announced for 5 million of Britain's middle class pensioners.  Any pensioner with income between around £10,000 and £24,000 a year will pay more tax in future than they would have done without this change.  The Government says this is a measure to 'simplify' the tax system - and it is true that the age allowance is very complicated - but the reality is that this is really just a revenue-raising exercise.  People reaching age 65 in the next couple of years will be £4 a week worse off as a result of this measure.  If their state pension had been reduced by £4 a week there would be uproar, but abolishing the age allowance has a similar effect - although only for the middle income pensioners.  The very poorest and very wealthiest are not affected, because the age allowance is phased out once older people's incomes reach around £24,000 a year. So it is the decent middle income pensioners, who worked hard and saved hard to have a bit of extra income in later life - the very people that we should be valuing highly - who are hit by this move.  The Office for Tax Simplification report did point to the complexity of the age allowance, but recommended that, if it were removed, other measures could be introduced to offset the income reductions for pensioners.  The Chancellor chose not to listen to this and just removed the allowance.

Nothing for savers:

There was nothing in this Budget to help savers, especially older people trying to live on the income from their savings.  The policy of ultra-low interest rates for the last three years, has hit savers hard and there was still no help from the Chancellor. 

The very least he could have done would have been to relax the restrictions on ISAs that mean older savers cannot put their full annual ISA allowance into cash savings.  At the moment, only half can be in cash, with the rest having to be put into more risky shares or bond investments.  The Chancellor should allow older savers, who may not be able to afford to gamble their lifetime savings on the stock market, more flexibility to decide what type of savings are best for them, rather than being denied a choice and forced to take risk in their ISA.  More flexibility and choice would be far better for older savers, helping to offset some of the damage done by ultra-low interest rates and would have softened the blow of the abolition of the age allowance, allowing people to keep more of their meagre interest income tax free would be far fairer than adding insult to injury by taxing them even more!  There was no announcement about new incentives to help people save for later life care needs either.  It seems that savers simply do not matter to the Government.  The message it is sending to the population is that those who save are valid targets to take money from, while borrowers are baled out.

Nothing to mitigate the damage caused by Quantitative Easing and high inflation - annuities, income drawdown and pension funds all hit with no relief in sight:

There is precious little evidence that Quantitative Easing (the Bank of England's policy of creating billions of pounds of new money to buy up Government bonds) has actually stimulated the economy, but there is plenty of evidence that it has done dreadful damage to pension funds, pensioners and annuities.  By buying so many gilts, the Bank of England has forced long-term interest rates down, but has not kick-started huge amounts of help for the small firms that are the lifeblood of a growing economy.  QE was meant to be a 'temporary' policy to avoid economic meltdown and stimulate the economy.  Unfortunately, the policy is still in place, even though deflation and depression are no longer on the horizon.  In fact, this temporary policy has permanently impoverished over a million pensioners already, with more facing the same fate each week.  Nearly half a million pensioners buy annuities each year, and the lower the interest rates on government bonds, the lower annuity rates fall and the less pension income people will receive for their pension savings.  Since QE started, annuity rates have fallen by 20%, so pensioners face a fall in their lifetime pension by a fifth - and this is a permanent reduction, because once the annuity is bought it can never be changed.  In addition, the annuities being bought are almost all 'level' annuities, which offer no protection against inflation.  The income stays the same for the rest of the person's life.  Therefore, the current high levels of inflation are continuing to whittle away these pensioners' purchasing power.  There has so far been no recognition of this problem and the Chancellor continues to consider very low Government bond yields as an unalloyed benefit for the country.  This is not the case.  Annuity rates have fallen by a fifth, inflation for older people has risen by over a fifth and pension deficits have increased by more than £90bn, largely as a consequence of QE.  Measures to help alleviate these problems are needed urgently before our pension system is further undermined.

Perpetual and 100-year gilts not good for pension funds, try longevity gilts instead:

The Chancellor's announcement of a consultation on issuing 100-year gilts seems more of a gimmick than a useful tool for pension funds to consider investing in.  One has to wonder why pension funds would want to buy 100-year gilts at all, but especially not at current yield levels.  Today's pension fund and annuity liabilities do not have a 100-year time horizon and, after the Bank of England has just been buying up a third of the outstanding stock of gilts, artificially depressing long-term interest rates - pension investors would be reluctant to lock into current rates for so long.  It would be far more helpful to pension funds if the Government were to issue longevity gilts, rather than 'century' bonds.  Longevity gilts would pay an interest rate dependent on rises in life expectancy, which would allow pension schemes and annuity providers to better match their liabilities.

So that's the bad news, but there were actually some pieces of better news:

Radical state pension reform at last:

A long overdue and very welcome announcement was that there will be radical Sate Pension reform.  This is great news and there will be a Consultation later 'this Spring' on a flat rate state pension of around £140pw, above the means-testing level.  This would merge the Basic State Pension with the State Second Pension in future and this new state pension will still be based on contributions paid in, finally moving us towards a system without mass means-testing for pensioners.  Of course, we need to see the details when the consultation comes out, but if introduced correctly, this measure could end the penalty suffered by those lower income pensioners who save for retirement or try to keep working in old age and find they lose much or all their extra income in the means-test.

No changes to pensions tax relief - great news for the pensions industry:

There was great news for top rate taxpayers, as the Chancellor announced he was not changing pension tax relief rules. The pensions industry will welcome this and it is a great chance for 50 per cent taxpayers to pile into pensions and contribute as much as they can this year - before the 50% rate is cut to 45% next year.  50% relief means anyone contributing £3 to a pension will get another £3 from taxpayers.  Those on 40% tax will only get another £2 for every £3 they contribute, while basic rate taxpayers get about 80p extra for every £3 they contribute.  By not changing pensions tax relief, the Chancellor has avoided more negative headlines about pensions.  2012 is a very important year for pensions, as all workers will start to be automatically enrolled into a workplace pension scheme, to which they and their employers will have to contribute unless the employee opts out.  This would not, therefore, have been a good time for negative news on pensions.  In fact, pensions confidence has collapsed, particularly in the private sector in the past few years.  Official figures, released today, show that less than one third (only 32%) of private sector workers are in a workplace pension scheme.  So any measures that would further reduce the attractiveness of pensions would be unwelcome, if the Government is really serious about encouraging pension provision.

Good to see pension funds assets being harnessed to stimulate the economy:

Another welcome announcement is that the Chancellor will be using pension fund assets for major national investments, with a Pension Infrastructure Platform providing investment in long-term projects to modernise our outdated infrastructure. Harnessing the power of pension fund money to help stimulate the economy is a very sensible move.  I would hope that many pension funds, not just the twelve already working with the Treasury on this, will be able to join in.  Investing in infrastructure is a good way to stimulate the economy but is also potentially attractive asset for pension funds.  Infrastructure projects, if successful, can offer inflation-linked returns and some capital appreciation for investors, which is an ideal return profile for pension funds.

Finally…We are very fortunate that we have so much money in pension funds, which is the result of people saving for retirement in the past.  We must recognise the value that these assets bring to our economy and not take for granted the value of long-term saving.  Policymakers please take note.  Borrowing will not provide sustainable long-term growth - we also need to encourage saving and investment.

Dr. Ros Altmann

21 March 2012

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Liebrary: Does the UK have to keep reducing corporation tax to tempt businesses to come here?

"Stopping the lies is an impossible task. But spreading the truth just takes a re-tweet."


With the Chancellor's Budget announcing a drop in Corporation Tax down to 22% in 2014, her Majesty's Treasurers got their crayons out and came up with this super poster.


It Demonstrates very effectively how low Britain has dropped its Corporation Tax. 


With only Turkey, Saudi Arabia and the Russian Federation offering lower corporate tax rates, how much lower can the Chancellor get?


As an added temptation, the Chancellor has offered the 'patentbox' scheme offering a 10% corporate tax rate. This is available for profits made on intellectual property and patent licencing income. Not much job creation there. No factories needed, just a couple of guys counting the money as it rolls in. But the chancellor has worked out that if someone is going to get their tax, it may as well be him. Should I have said "it may as well be Britain"? Not really. Politicians collect the sugar to distribute to whom they will, in return for what they want. For example, tax cuts for millionaires paid for with tax hikes for pensioners.



So why, inspite of all these temptations, are all those companies still incorporated in the US, Japan, Germany, France and other countries who charge oodles more corporation tax? 


Could it be that British Chancellors, from Gordon Brown through Alastair Darling over to George Osborne have not yet learned the lesson of the nightclub slapper? A short skirt only guarantees you a drafty backside! 


 


And yet, the message from a succession of Chancellors - Britannia is ready to drop everything to get your business.


Improving infrastructure, investing in training and education, they would make Britain more competitive and attractive to business. But investing in Britain and in Britons costs money. Much easier to cut the rate of tax.


Britain becomes ever more like a tax haven for companies and foreign oligarchs. But not if you are an ordinary domiciled ripped-off Briton.

*************************************************************

Budget 2013 Update: Corporation tax to drop to 20% in 2015, equaling the lowest rates of the G20.  And way way below corporation tax rates of G7 countries who are supposed to be our main competitors as shown in this graphic by our HMRC doodlers:

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Don't be fooled. It was bank borrowing that caused the debt crisis, not consumer borrowing.

So who was the "irrational" borrower that brought down the economy? And was the culprit actually "irrational"?


If you weren't sure why the banks got themselves, and everyone else, into such a pickle with the Credit Crisis, the 2012 Budget Document is the source of some nice nuggets of information. Civil servants, competent and on the whole moderately paid, have little incentive to avoid the truth and will often slip it in if they can.

The financial sector, having burned down the economy, tried to plant the box of used matches in the hands of the public. Ordinary Britons were fingered as a major cause of the crisis due to accepting a rush of cheap credit they couldn't afford. 


They glossed over the fact that the banks and building societies were the pushers of the cheap credit. And they also omitted to point out that actually it was overwhelmingly the banks - not the consumers nor the non-financial businesses - that went on a borrowing frenzy.

Why did the banks borrow so much? "Casino banking" is intended to be derogatory, but bankers probably don't realise they are supposed to feel insulted - as it couldn't be closer to the truth. Idiot sons for hundreds of years have been gambling away their family fortunes - relying on indulgent parents to bail them out. Cunning bankers have been gambling the nations money in the same way - knowing that indulgent politicians would bail them out using the taxpayer's money.

Here is how borrowing boosted bankers bonuses in the good times, and crushed the economy when their bets went wrong:

Idiot Son: I have £50. 

• I bet it on a "six line" (odds 5:1) spin of a roulette wheel.
• If I win. I pocket £300 (my original £50 plus 5 x £50). 
• A 500% return on my original money! 
• If I lose.
• There goes my £50. Back to daddy for some more cash.

Cunning Banker: I have £50 million. I borrow another £250 million.

• I bet it all on bonds, equities, derivatives (odds 5:1) not unlike the spin of a roulette wheel. 
  
• If I win. I get £1,800 million (my original £50+£250 million,  plus 5 x £50 million plus 5 x £250 million)
• I pay back the £250 million. I pocket £1,550 million.
• A 3,100% return on my money!
• If I lose. 
• The taxpayer bails me out. The taxpayer loses his job, has his benefits cut, has his pension reduced and deferred, the nation is protected by an aircraft carrier with no aircraft.

*** MORE DATA FROM McKINSEY report "Debt and deleveraging: The global credit bubble and its economic consequences" added to this post in December 2012***

"The United Kingdom and Spain stand out for having the biggest increases in financial sector debt relative to GDP. These figures reflect the rapid growth of the financial sectors in those countries as well as a gradual shift by their banks away from relying on deposits to fund lending towards raising money by borrowing in the wholesale markets."

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Government does us a favour by taking away our money because it is all to complicated for us.

At last, we know why governments in recent decades, both “left” and right and right-ish, have thrust more money at the wealthy and snatched more from the less well provided for. 


It is because it is all too complicated for us, having all that money. Which is why the recent Budget included a 'major simplification' for pensioners.

We have to thank the Chancellor, George Osborne who made this clear in his 2012 Budget speech:

“We should also simplify the age related allowances - which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system.

The National Audit Office points out that many pensioners don't understand them.

These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded away.

So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6th April 2013 and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.

This will protect the existing level of allowance pensioners have, while introducing a single personal allowance for all.

It is a major simplification.”

In summary:

• Age related allowances are complicated.
• The National Audit Office says many pensioners don’t understand them.
• Pensioners have to fill out self-assessment forms.
• Conclusion: to simply things, we will take these allowances away.
• “It is a major simplification”, says Osborne.

In the words of Ros Altmann, the Director General of SAGA:

“This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.”

Could it be it isn’t just the government? Could it be all companies – banks, electricity, rail etc. – are doing us a favour by ripping off our money? Because having money is just too complicated for us? Well thank you so much!

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Fee is dismayed by the 50% fees banks levy on pension pots

Foreign pension providers are just the ticket

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