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This is not an argument between public and private sector

December 1, 2011 5:15 pm

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20111201-170839.jpgThe financial crisis was caused by the behaviour of the banks, including the practice of lending to millions of people around the world who could never repay the loans. It is clear that the motivation for this absurd and very damaging practice was the obscene rewards on offer through bonuses which were paid at the time and have continued to be paid. Those bonuses were paid on the basis of the short term results achieved, ie the sale of financial products. The fact that the products sold very quickly turned into bad debts did not prevent the payment of bonuses. Therefore, we saw and quite possibly continue to see short term gains for many at the top of the financial sector with no consideration of the long term.

It is therefore outrageous that hardworking dedicated people in both public and private sectors, who are not responsible for the economic downturn, are having to pay the price for mistakes made by a relative few in the banking industry. The government has chosen to tackle deficit reduction by targeting those on low and middle incomes first and foremost and not those who caused the crisis in the first place. Why for example is almost £12 billion coming out of children’s benefits over the course of this Parliament; that is £1.5 billion more than is coming off our nation’s bankers. You have to ask what kind of Government take more off children than they take off bankers?

The staff under attack include nurses, teaching assistants, care staff and dinner. Some of the lowest paid workers in the country. The Tories are attacking pensions and also cutting the pay of 800,000 of these staff, mostly part time, rely on, through the tax credit system. Also included are police officers and other emergency service staff, with a 3% tax on pensions. That tax will leave these staff worse off today and with less to spend, hardly a sensible way to help support business as it will cut consumer confidence by cutting the ability of those in the public sector to spend.

The Hutton Report clearly states that the cost of public sector pensions going forward will reduce. The fact is, increased contributions are going straight into the pot to pay off the deficit not to help with the affordability of pensions.

And the chancellor’s Autumn statement was yet another attack on teachers, nurses, border control staff and all those who contribute to our well being and safety. We should not be penalising low and middle income public sector workers by cutting their pensions. The government plan is a tax on the pensions of those on low and middle incomes to pay for a financial crisis caused by some of those on the highest incomes.

This is not an argument between the public and private sector. We should be making sure that private sector pensions are also improved. There should be a fair deal for all workers across the board.

Our economy has come to a standstill. Cameron’s answer has been to demonised dinner ladies, cleaners and nurses. Plan A has failed and the costs of this are being put onto the shoulders of our public sector workers. We need to return the economy to growth, get Britain back to work and take a fair approach to tackling the deficit not target those who can least afford to pay.

Bill Esterson is the MP for Sefton Central

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  • Peter Barnard

    @ Bill Esterson MP,
    “We should be making sure that private sector pensions are also improved. There should be a fair deal for all workers across the board.”
    This is a laudable aim, but I’m not sure that it is affordable at the macro-level – unless there are some serious changes in attitudes.
    Total employer contributions to pensions schemes in 2009 were £62.7 billion. However, this only covered 8.7 million employees in pensions schemes (5.3 million in the public sector and 3.4 million in the private sector) out of a total employee workforce of 24.9 million.
    (Source : Pensions Trends 2011, Chapter 8).
    If the whole of the workforce were to be covered with employer contributions on the same rate as the public sector (about 15 per cent of wages), then perhaps £150 – £160 billion would have to be found by (mainly private-sector) employers.
    Question : where is this additional and substantial dollop of money (about 11 per cent of market prices GDP in 2009) going to come from? Increased prices? Reduced dividends to shareholders? A cap on high-earner pensions (now, there’s a thought …)?

    • Anonymous

      Hi Peter,

      Sorry very quick comment for now, but I do think we are dealing with a legacy
      of wrong headed decisions and wrong priorities/lack of balance between different sectors and areas of work- as a general picture.

      Maybe it’s all a knock on effect from allowing market forces alone to rule the roost?

      But also- unbridled capitalism and perhaps an ideological attack on public services-
      framed as “the state” and all that is associated, by successive governments?

      I do think the time has come for a purely pragmatic outlook on a range of issues;
      eg dealing with poverty; untainted by political interference.
      Values, yes- but not partisan politics!

      Maybe there needs to be more hybridization of thoughts and ideas,
      also sharing of expertise across all parties and externally to politics?

      These articles are a great sounding board for discussion too!

      Personally I’d love to see more people like you Peter,
      with your background experience, contributing to the pool of debate
      which could lead to policy ideas…..

      In fact, a whole democratic forum.

      Thanks; hope to return later- Jo.

      • Peter Barnard

        Thank you for your kind words, Hazico.
         
        The “wrong-headed decisions” were taken just after the Second World War, when the basic state pension was set at a very low level (taxation and government “bad,” private sector “good” mentality, even with the great Attlee government) in the hope that personal contributions to personal schemes would provide sufficient “top-up” to make life more than subsistence level for retired folk.
         
        It didn’t work out that way.
         
        The Europeans went a different way, to provide a “living pension” (pay as you go) that meant that state retirement pensions contributions absorbed about 10 per cent of GDP, rather than the miserable 5 per cent (taxation and government “bad,” private sector “good”) that we have in the United Kingdom.

        • jaime taurosangastre candelas

          @ Peter,

          oddly, I have come to the same conclusion as you, although probably from a different starting point and by a different route.  But I fully agree with you.  A “living pension” is surely the way to go,and to my mind that’s about £12,000 a year at today’s prices.  Ideally, the income tax threshold would be £1 a year more than the living pension, so that no pensioner pays tax.

          I’d fund it by not paying any public sector occupational pensions, but rather setting a level of state support (perhaps 3% of salary) that the state would pay into individual pension accounts that are invested according to the wishes of the account holder, and could top up or not as the account holder decides.

          I was always brought up to be entirely self-reliant and suspicious of the state, and organise my own arrangements accordingly.  It’s partly a hispanic cultural attitude, partly my own Scottish father’s suspicion of Government, partly by early years under Pinochet when all sorts of Government robbery and theft of private money was normal.

          I fully expect that while I have a very generous NHS scheme, that sometime between now and my retirement in about 25 years some Government will c*ck it up enough that I won’t actually end up receiving what they claim I will do (and that will apply to everyone else as well).  Not as a matter of ideology, but inefficiency and general over-optimism with all of the foresight of an ostrich with its’ head in the sand.  It’s what Governments do best, of either flavour.  So I plan accordingly, making the very worst assumptions and as a result providing for myself with purchases of gold, silver and land.  The latter a Government could confiscate, but the former not, as I have physical possession.  Gordon Brown showed me in 1998 to not trust even the British Government with pension savings held in fiat and that could be raided.

          • http://www.facebook.com/people/Mike-Homfray/510980099 Mike Homfray

            Given the complex mixture of benefits people without pensions end up claiming, I wonder how much more expensive a scheme like this might be – maybe not as much as it may appear on the surface?

          • jaime taurosangastre candelas

            I hope not, Mike.  I’ve spent a couple of hours doing some initial calculations and it looks as though it is certainly within about 10% cost neutral, but I don’t have access to (or know where to look for) really detailed information.  But I’m an NHS doctor, not a pensions specialist!  There’s some quite detailed academic thinking on this in Brasil, where Lula proposed something very similar.  The thing is that £12,000 is for everyone, public or private, regardless of contributions so long as some minimum NI is paid for X years (my spreadsheet says 22 years).  Even if my figures are a bit off, the mental exercise was good and brought me to thinking of a “living pension” as a national aspiration.

            The real difficulty would of course be with transitional arrangements.  If we took a view that no one should ever get less than what is currently on offer, the transition period looks like 15 or 16 years, which is long for any Government.  I don’t doubt the difficulty of that.  I think that there would also be enormous initial resistance from those used to receiving 10-20% public sector employer contributions, when I propose something like 3%, but those people would also benefit from the guaranteed £12,000 which is considerably more than the median £5,600 in some public sector pension schemes.  It’s just a difficult “sell”, saying we’ll contribute 3% not 12%, but you’ll end up no worse off.

          • Peter Barnard

            @ Jaime,

            Thanks, Jaime.

            I’m not going to nit-pick over numbers/percentages – apart from I feel that the “living pension” should be financed from general taxation, not dependent on a NI minimum contribution record.

            Us socialists (although some might comment that I am very pale pink) have a few things dear in our hearts : (i) universal health-care provision, (ii) human dignity – especially in retirement,  (iii) a fair day’s pay for a fair day’s work and (iv) maximum employment.

            All our proposals should lead to (ii) – human dignity.

          • Dave Postles

            It looks like there is a regressive element:  people on lower incomes paying higher contributions for the more affluent to have state pensions of £12k when they have already amassed considerable wealth already.

          • Peter Barnard

            @ Dave P,

            “Regressive element.”

            Not if it’s out of general taxation, Dave. It would be progressive.

          • Dave Postles

            Probably so, if the corporations and wealthy were not able to avoid tax.  I noticed that apparently the largest companies were contributing corporation tax at the actual rate of up to 14% up to 2007.  The tax rates are, it seems, just notional for companies and the affluent. Yes, however, you are right in principle.

          • http://www.facebook.com/people/Mike-Homfray/510980099 Mike Homfray

            Sounds sensible to me. Politics tends to be short-termist, though, which never helps schemes like this

          • http://twitter.com/Newsbot9 Newsbot9

             So what, this is the ONLY pension on offer?

          • derek

            @facebook-510980099:disqus , an extremely good point, not only have we been punching below the belt on pensions, we also seem to topping up earnings through tax credit (not that I oppose the sense of given more to those who have less) It seems to me that any new model economic future should provide a good wages that don’t need topped up. I’d like to expand the idea of the good company where the distribution of wealth and earnings are a shared. 8 hours work, 8 hours leisure, 8 hours rest under the knowledge that debt has become a past sense. 

    • Anonymous

      Peter, thankyou for reply below;
      I’ll try to return later on.

      Excellent input from you as ever!

      Family duties call…..

      Jo

      • Droxim

        I will totally agree with your article when I can be arsed to read it. Excellent input from everybody

    • Bah Humbug

      I employ eight people in what now seems to be called a ‘micro-business’ (joint-owned with a business partner); I used to think we were an SME, but that’s inflation for you.

      We set up a company pension scheme five years ago, well before the Pensions Act 2008 came into force. Our employers’ contributions are at 6% of employees’ salaries. We cannot give financial advice to our employees (for obvious reasons), but we have encouraged them all to think about contributing to their pension. All but two of them are in their thirties. None of them have so far opted to make any contributions.

      We committed a couple of years ago to increasing salaries year-on-year in line with inflation. So next month their pay packets will increase by approximately 5%. I bet none of them think about investing a proportion of their increase in their pension.

      My point is this: if people don’t have their contributions made for them, or are not forced to make them, the temptation is to procrastinate and wait until they are older. Of course, renting or buying property, paying off student loans, raising children etc may mean that they do not have sufficient disposable income to invest anything in a pension plan. Anecdotally, only one of my employees has children (two grown ups at university) and they all seem to enjoy a good standard of living. They just don’t seem to be concerned about how they will provide for themselves in their old age. Maybe they all think the equity in their parents’ properties will come to them? Oh dear, they are going to have a shock.

      The remuneration inherent in a public sector job should be viewed holistically. Think of the employers’ contribution as being “half from the employer and half taken from the employee and dressed up as being from the employer, because otherwise we know that the employee won’t bother contributing”. I have no problem with my taxes being used to fund public sector pensions, for the people who teach my children, may nurse me when I’m ill, sweep my street, police my village etc, but we do need an equivalent for private sector employees.

      The Pensions Act 2008 may have been a step in the right direction, but an employer only has to contribute 1% rising to 3% by 2017 and an employee only has to contribute 1%, rising to 4% by 2017; oh and employees can opt out if they want. Those figures need to be much higher and an employee should only be able to opt out if they contribute to another long-term savings option. Also, the self-employed do not have to contribute to any such scheme, which covers a large number of the working population.

      Given the poor performance of so many private pension schemes, a mechanism based on the above but with higher contributions that buys into a guaranteed living pension (Jaime TC’s phrase) that is state-run rather than private would be preferable. But no Gordon-dipping-hand-in-cookie-jar shenanigans please.

      BTW the reason we contribute 6% is because we care about our employees. Why wouldn’t we – happy employees who feel valued are more productive. In fact, two of them get paid more than me at the moment, but then they are very good at their jobs – software development – and I’ll benefit further down the line, because they are adding value to my business – intellectual property – and that’s my pension scheme :-)

      • Peter Barnard

        @ Bah Humbug,
         
        Excellent comment and I admire the way that you regard your employees.
         
        I think that your observation that none of your employees has started to make any contributions for their retirement income reinforces the need for a universal “living pension” paid for out of general taxation ; taxes, for most people, are unavoidable.
         
        Occupational pensions based on final salary are basically untenable and, dare I say it, unfair? Companies make contributions to their employee out of the money that they collect via sales, and just as the taxpayer funds public sector pensions, so do customers fund private sector pensions. Roughly, two-thirds (those without employer-assisted schemes) are funding the one third who do.
         
        The original intention of retirement pensions was to provide sufficient income to enable people to live their final years without worry about paying for the basics – housing, food, utilities, clothing plus something for small luxuries. I have absolutely no objection to this being tax-payer funded.
         
        However, when I see retired public sector employees in my local Labour Party taking half-a-dozen holidays a year, I think that the original purpose of retirement pensions has been lost.

        • Anonymous

          My MP has a habit of going on holiday a few times a year, mind you they do say it’s to check out living conditions in Brazil, although the golden sands and clean blue water maybe a draw as well.

          But they would never tell us fibs would they.

          • Peter Barnard

            @ treborc,
             
            Indeed, Robert.

            Our last Labour MP (lost the seat in 2010) used to go on boondoggles and they were of such significance and benefit to her electorate that she never told anyone, including the CLP secretary, about them. 

            But then, years ago, there those instances of doctors having to go to conferences in January, and the location just happened to be convenient for some Alpine ski-slopes ….

        • Hugh

          Final salary and DC schemes are both unfair. If we are going to rely heavily on occupational schemes, we need to see some sort of risk sharing between the employee and employer, so that both pay for increasing longevity or poor markets – perhaps a smaller guaranteed part, but then a variable part as well. That’s an area where government could help, just by changing the regulation.

          However, Jaime’s right, the basis of the pensions system should be a much bigger state pension, and that should be funded, fairly I’d say, by  cutting both private schemes’ tax relief and public sector pensions.

          • Peter Barnard

            @ Hugh,
             
            “However, Jaime’s right.”
             
            He may well be, but given that I wrote about this almost two and a half years ago, he’s a bit late to the party …
             
            http://labourlist.org/2009/07/labour-needs-to-make-a-bold-statement-on-the-state-retirement-pension/

          • jaime taurosangastre candelas

            Peter,

            you aren’t so early to the party, yourself!  Lula put the idea forward in his first manifesto in 2003.  See http://news.bbc.co.uk/1/hi/world/americas/3312175.stm ,although that is a shockingly one-sided piece of journalism from the BBC.  It completely fails to mention the massive uplift in pensions to everyone outside of the Brasilian public sector.

          • Anonymous

            Clearly I’ve wondered into a parrallel universe. Jaime and Peter agreeing on something!

            Seems you’re both not a million miles apart in your ideas of what seems fair and reasonable ;)

          • jaime taurosangastre candelas

            @ Tom,

            unusual, isn’t it?  However, I’m sure regular readers will put this down as an aberration, and that like a stopped clock, I am correct twice a day…

            I think that, if such a party existed, Peter and I would both vote for the “Realist Party”, but that in this case, we both arrive at the same conclusion because fair pensions are really only a matter of fairness.  There’s nothing worse than the thought of people in the sunset of their lives scrimping and being worried about heat and food, no matter how much they have helped the rest of us in their prime.  Equally, children in the sunrise of their lives but unable to influence the grown ups should be offered all of the opportunities of our society fairly.  It’s all the bits in between when we are working adults capable and and responsible that we may differ upon.

            Lula was the first I know of to advance such a “living pension” idea, in 2002, but I certainly grant to Peter the phrase “living pension”.

          • Anonymous

            Hi Jaime,
            Clearly I’ll leave the discusion on this to you both.

            I feel unqualified to make a contribution because I’m in a private companies final salary scheme, but where I contribute 11% to their 16%.

            Big numbers. Clearly unsustainable.

            It’s closed to new starters, but kept alive because all our management were in it already.

            On top of that I have a private scheme, though that’s now ticking along since 2009 on a minumum contribution.

            Excessive. Probably, but if I didn’t save it where I can’t get my hands on it, I’d only fritter it away.

            However, it’s also the luxury of getting paid well above the median level,and not being attracted to the ostentenious displays of wealth I see from people often paid quite a lot less.

            So for the public sector I have sympathy for the majority who simply don’t have a surplus income, but none for MPs (also public sector) who seem clearly capable of applying different rules to themselves.

            A lot of heat could be taken out  of the current negotiations if the same rules being proposed for the majority were willingly applied to the tiny minority trying to make those rules up in the first place.

            But then my ideas of leadership are more influenced by Xenophon, than Gordon Gecko.

          • http://twitter.com/Newsbot9 Newsbot9

             Nothing of the sort will happen, Hugh. Public pensions are simply being raided for the deficit.

            And pensions already ARE a “risk”. A gamble that keeping the cash under your bed because you won’t live to the average isn’t a good idea, because even with a “good” pension, most people won’t see the amount they put in ever again.

        • alex williams

          Absolutely agree. As a teacher I think we need ot move to an average salary scheme and also see a salary cap on the public sector pension, somewhere between 30 and 35K. Many people retire with absolutely criminal pensions because they were high earners while working. They have not paid for them and so i can’t see how they can be justified. As you say the public sector pension should be a model pension, providing people security in old age without spilling over into an overly luxurious lifestyle. if people want that they can contribute a bigger proportion of their salary. 

        • http://twitter.com/Newsbot9 Newsbot9

          Ah right, so,  what? Cut the rate of pensions so that people can never breach that? I’m sure the Tories LOVE your suggestion.

          • Peter Barnard

            @ Newsbot,
             
            I think that you are missing – or haven’t read – the point that I made in my first reply to Bill Esterson MP : although “good pensions” for all, whether in the public or private sector, is a laudable aim, the macro figures need looking at.
             
            Just 3.4 million employees out of 19.1 million employees in the private sector have employer-sponsored pensions (Source : Pensions Trends 2011, Ch 8)
             
            Employer contributions in the public sector are about 15 per cent of wages. This 15 per cent is collected from taxpayers.
             
            Employers in the private sector can only make contributions if they collect the money from sales so that means that private-sector employers would either have to collect about 15 per cent (about £150 billion)* from sales, ie from customers (and put their prices up by possibly eight per cent or so), or reduce dividend payout by the same £150 billion, or a combination of the two. There is no other source for the money.
             
            As I remark, in my local CLP there are retired public sector employees who take up to six holidays a year. Now, you tell me why I (or anyone) should pay taxes so that retired people – basically sitting on their backsides – can have the life of Riley? I have absolutely no objection to paying taxes so that retired folk can live out the rest of their days in some dignity, without having to worry about paying the bills for essentials but I certainly don’t count six to twelve weeks holiday a year as an essential of life, especially in retirement.
             
            The same goes for private sector employees – those who are lucky enough to have the defined benefit package, that is. The employers’ contributions to their pensions schemes have been collected from the customers – hidden in the price.
             
            Pensions based on final salaries are untenable, both in the public and private sector. And, for the Tories who go on about Mr Brown’s “tax grab”, I’ll repeat once more :
             
            Stephen Yeo, partner at pensions consultants Watson Wyatt, was quoted in the FT (2 April 2007) :
             
            “I don’t think it (the so-called “tax grab”) is even in the top three of reasons. The rise of guaranteed benefits, poor investment returns, of which this was a small contributory factor, and unanticipated increases in longevity are the top three. This might come next, and no one can argue that it was helpful. But it was imposed at a time when funds were in good surpluses, even when you factored everything else in.”
             
            Mr Yeo was an adviser to David Willetts when the latter was Conservative pension spokesman. I think it may be safely assumed that Mr Yeo was no apologist for Gordon Brown.
             
            On the same page, FT commentator Nicholas Timmins notes that “employers had been taking long contributions holidays, in part because the Treasury in 1986 (yep : 1986) had started taxing what it judged to be over-large surpluses. And companies had been using those surpluses, not as a cushion against the future, but to fund generous early retirement packages as a way to ease company restructurings in the 1990s.”
             

      • http://twitter.com/Newsbot9 Newsbot9

         Bah Humbug – The problem is that unless you’re in a very good financial position, you can’t afford to pay into a pension which will only give you back what you pay in if you live longer than the average.

        It’s speculation on your lifespan, not a “pension” as was once understood to be the case.

        And if you FORCE me to lose money for something I will VERY likely never benefit from AT ALL (inherited strong tendency to heart attacks), then I’ll have to cut back on food. Given I’m already struggling, it’s likely I’d end up either jobless, with a major stress disorder or plain dead from said tendency.

  • Anonymous

    I enjoyed your article too Bill, and definitely agree with title/premise…..

    Jo

  • Anonymous

    ‘We should be making sure that private sector pensions are also improved.’

    Perhaps you could explain how? Not Bankers Bonuses by the way, they’ve been spent already.

    Maybe if a certain G Brown had not raided pension schemes things would be better.

    • Peter Barnard

      @ geedee0520,

      Y’know, geedee, when I read comments like this, I am reminded of the old saying, “If brains were made of gunpowder, you wouldn’t have enough to blow your f*****g hat off.”

      • Anonymous

        Classic!

        I’ve asked the same question you did (in less words) now I’ve read your post.

        Still waiting for a reply …..

        (Thanks for the sneering arrogance by the way)

        • Ian

          well the problems started when Thatcher allowed companies sitting on huge surpluses in the late 80′s to take holidays and paying pension cash to shareholders not employees.

          if you have a pension system based on the stock market then we saw three massive dips since 1997 – Hi tech bubble crash, 9/11 & credit crunch. Why not for profit run mutual fund when instead of giving £20BN in pension tax breaks use some of this money  fed into that fund for private employees to build up  away from the perils of the stock market ?

          This fund then can buy safe government equities bring a steady rate of return and making future pensions the backbone of the investment into the country ?

          • Peter Barnard

            @ Ian (R, I guess?)

            “… the problems started when Thatcher allowed companies …”

            That’s not quite the whole story, Ian. Nigel lawson was concerned that surpluses in (private sector) occupational pensions funds could or would “leak” away to unintended purposes, and he restricted pensions funds surpluses to + five per cent.

            This had consequences … pensions holidays and early retirements rather than redundancies …

    • Dave Postles

      FWIW, the ruling by Judge Jed Rakoff against the accord between the SEC and Citigroup suggests that regulators will be required to prosecute banks for fraudulence, not negligence, in the mis-selling of derivatives with punitive damages, not some token fine.  It will be interesting to see the ramifications.  I wonder if Dave Hartnett is following the judgement.  I wonder if we could get a judicial review of HMRC’s actions in this regard, rather than just relying on the Treasury Select Committee.  Those receiving bonuses might like to bear in mind clawback provisions in the future.

    • http://twitter.com/Newsbot9 Newsbot9

       Really? Because the problem wasn’t that. The problem was that Thatcher allowed companies to stop paying into pension schemes for years. And then, suddenly, they were underfunded. And had to close.

      FANCY THAT!

  • GuyM

    It’s nothing to do with the financial crisis.

    Public sector pensions rely on private sector taxpayers too much and public sector workers own contributions too little.

    Why you think I should be happy to be paying exhorbitant amounts of tax to fund for dinner ladies pensions is beyond me. No thanks, I’m selfish like the Unions and public sector workesr so I’d prefer that 3% went on keeping interest rates down so I can save hundreds on my mortgage.

  • Anonymous

    The Banks lent money under vast pressure from the US government to give decent mortgages to very poor people. And that’s how it should be too.
    The national debt and the national deficit increased, after a couple of years of prudence, majestically between 1997 and 2010. And that is right – property is theft.
    The National Health and Education now take up a vast tranche of our spending. There are no pilgrims. Every single person in both organisations is either a teacher in front of a class or else a nurse or doctor bravely coping in an understaffed ward. The number of civil servants in the MoD does not exceed the number of soldiers. There is no interest to be paid on the national debt either.
    That is why the strike is right and everyone ought to join our movement.

  • Anonymous

    “This is not an argument between the public and private sector. We should be making sure that private sector pensions are also improved. There should be a fair deal for all workers across the board.”

    So Gordon Brown was wrong to tax private pensions  ?  Lets have an article telling us how much it has cost?

    No?

    Hypocrisy..

    • jaime taurosangastre candelas

      By conventional estimate, £5 billion a year since 1998, and ongoing.  About £400 a year in pension income for the 33 million affected contributors and pensioners.  I can’t quite remember the consultation period before that particular move was enacted, but I’m sure it was thorough, otherwise your distinctly partisan charge of hypocrisy would have some foundation.  I’m sure that the move was not announced with no notice from the despatch box during a budget speech.

      It’s a very good thing that the effect of such a policy was not to kill off private sector pensions.

      • madasafish

        There was no consultation. Period.

        And your “It’s a very good thing that the effect of such a policy was not to kill off private sector pensions” is just ignorant and wrong.

        Read this //www.thisismoney.co.uk/money/news/article-1608722/Browns-tax-raid-on-pensions.html

        and then recant please.

      • Peter Barnard

        @ Jaime T,

        “By conventional estimate …”

        Never mind (i) “conventional estimates,” (ii) what the Mail and the Telegraph say, and (iii) what people would like to believe, where are the actual figures on the public record, eg HMRC, answer by a Treasury minister in Parliament?

        In any case, the £5 billion a year is dwarfed by the estimated £19.7 billion cost of tax relief to the privileged one-third (paid for by the remaining two-thirds) who are members of registered pensions schemes : estimates by HMRC, Table 7.9 – on the public record.

        • jaime taurosangastre candelas

          @ Peter B,

          By definition, as these pensions are handled by multiple private companies, you are not going to get a Ministerial statement or official public record.

          the initial estimate from the Pensions Policy Institute in 1998 was £2.5Bn, later uprated in 2001 to £5.1Bn per year.  The Institute of Actuaries originally benchmarked the cost at £5Bn per year, and following a release of Treasury Papers in 2006 uprated that to £100-150Bn since 1998, a per year cost of £12.3Bn at the lower end.  The Institute of Economic Affairs in 2006 concurred with a valuation of £100Bn.  The difference in valuation from £100-150Bn is accounted for by a change in accounting rules to allow pension companies to either reinvest all returns (driving the lower cost of £100Bn) or to return some to shareholders as dividends that came into effect in 1999 – clearly different companies took different decisions.

          I have used £5Bn per year, as a middle figure from £2.5Bn to £12.3Bn.  Not the Daily Mail.

          • Peter Barnard

            @ Jaime,

            In other words, there is no reliable number.

            I actually forgot to add that Labour reduced the main rate of Corporation Tax from 33 per cent in 1997 to 28 per cent on leaving office.

            Given that private sector corporate profits were running at around £300 billion a year for each of the years 2007-2010 inclusive (Source : Blue Book, 2011), I would have thought that these companies would have been able to find the alleged £5 billion per annum out of the tax that they saved.

            After all, don’t chief executives say that their employees are their most valuable resource? They don’t seem to be able to put their money where their mouth is ….

          • jaime taurosangastre candelas

            Fair point, Peter, but what you are in effect saying is that private companies should dig a little deeper to make up for a Government tax change (whether it is £2.5, £5, or £12.3Bn is neither here nor there, it is all less than 5% of the total profits).

            Why isn’t it as fair for public sector employers to dig a little deeper to make up for increased contributions from their employees (which are very widely here on LL and elsewhere classed as “tax”)?  Let’s not forget that public sector budgets are paid for from tax revenues* that are mostly generated by the private sector.

            * no need to go into a circular argument about the nature of money, credit, and whether taxes retire debt or raise finance.

          • http://twitter.com/Newsbot9 Newsbot9

            It’s like any resource, Peter, something to /use up/.

      • http://twitter.com/Newsbot9 Newsbot9

        So, a tiny fraction of the raid on Pensions which the Tories masterminded under Thatcher (allowing pension schemes to be become underfunded) and the current plans to use public pensions as piggy banks for the debt.

        I’m sure YOU pay into your nice public pension. Hypocrite.

        • jaime taurosangastre candelas

          I don’t know which laws were changed to allow companies to do this, but I’m fairly certain that companies and not Government took those sorts of pension payment decisions.  It’s a bit over the top to describe that as a pension raid masterminded by the tories.

          I do contribute to my NHS pension, in my case at 7.5% which is set by my pay falling into the Tier 3 band.  My employer contributes at 14% of my pay.  The combined contribution totals are about £16,000 a year, which is extraordinarily generous.  I don’t top it up, as I have other better uses for the money.  I’m not sure what is hypocritical about that, NHS pension amounts and rates of contributions are matters of public record.

    • http://twitter.com/Newsbot9 Newsbot9

      Nope. And the taxation needs to be stepped up. Higher rate pension tax relief needs to go.

      • Anonymous

        Typical socialist reply. Don’t encourage people to save, the state will provide.

        Fortunately people  with views like yours are unlikely to hold power. If they do, they will discover as Dennis Healey did, the law of diminishing returns works.

        And what happened to D Healey? He ended up bust with the IMF bailing him out.

        Those who have not studied history tend up repeating past mistakes.

        See Gordon Brown on almost everything he did  - or said..

  • alex williams

    Circular argument since the punlic sector workers contributions will also come out of the tax revenue. The question is how much you actually want to pay public sector workers including pensions. I tell you what, if the issue is about the pension, how about you give all public sector workers a 10% increase then insist that they increase their pension contributions by 9.1%. Then they will contributing to their own sustainable pension. Wow have I just solved this whole problem, why hasn’t the government thought of this?
    :cough:

    • http://twitter.com/Newsbot9 Newsbot9

       Why not pay them the same as the equivalently-*qualified* private workers and let them do their own pensions? Oh right, because that would be something like a 80% across the board rise in wages.

      • Andy Tinkler

        None of us has detailed knowledge of all public sector and private sector jobs, so equivalences drawn between skills and workloads required for positions in different sectors are bound to be influenced by our own personal experiences.  Yours must be very comprehensive, to have led you to the 80% conclusion, and would make fascinating reading.

  • http://twitter.com/Newsbot9 Newsbot9

    Great, then you can pay for the hospital and morgue bills. Which will be more.

  • http://twitter.com/Newsbot9 Newsbot9

     The concept of a job for everyone is one in an age before automation has risen, in the first place…

  • jaime taurosangastre candelas

    @ Madasafish,

    I was being a little sarcastic.  From what I understand, the change in tax rules has resulted in the near total death of final salary schemes in the public sector, not killed off private sector pensions entirely.  I don’t have a private pension scheme myself, but choose other investments.

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