A Tax on All Your Pensions

Amid all the fracas about public sector pensions, we've forgotten what happened to those in the private sector in Gordon Brown's first budget.

We had a simple approach before then. For money taken as income, you were taxed twice: once as income and once as you spent it. Pensions were taxed the same way: once as income when the pensioner was paid, and once when they spent it. In Gordon Brown's first budget, he obviously decided that saving for a pension was bad behaviour to be discouraged, so he made it that pensions had extra tax: each year as the investment to finance the pension built a value, and then again when it was paid as annuity, and again as it was spent.

Now, clearly the £5bn per year which was taken from future (private sector) pensioners to be spent by government isn't wholly responsible for the ending of defined benefit private sector pensions. There was also some ghastly regulation during boom times, so that instead of building a war chest against future bust times, the funds were encouraged (and in many cases compelled) to take pension holidays, meaning that the displaced money would be subject to corporation tax. And there was no war chest when the bust came.

We are now clearly in a mess. Most private sector employees are now in defined contribution schemes, which means that the individual her/himself is directly exposed to market vaguaries. And then, what's more, there are siren calls to put even more tax on people who are saving for pensions by subjecting their contributions to some degree of tax (and, in a clever use of language, this is called "removing the higher rate relief" rather than "taxing the money you are saving, and which will be taxed again when you withdraw it").

This is why I feel little sympathy with the public sector workers: the expansion in public sector employment which has partly led to the current shortfall was itself financed by the raid on my pension. So far from the slogan being "My pension is my pay", the slogan should be "My pay is your pension".

A very European coup

I'm not a fan of Nigel Farage. I find his constant indignation tiresome, and he must find it very tiring to be cross all the time. But yesterday I was pointed in the direction of this little clip of him in action in the European Parliament a bit over a week ago, addressing a point which has been worrying me as well: the fact that both Greece and Italy have had a change of government without elections---not just a change of party leader as we have in GB, but a change in government direction and policy as well. He was, as usual, being quite rude to and about people in the room with him, but his central point "What gives you the right to dictate to the Greek and Italian people" is still valid.

The debt problems of Greece and Italy have been well rehearsed, along with the risks and consequences of default/haircut. When they had their own currencies, the consequence would have been devaluation, meaning that they had to export more goods for the same amount of imports---in essence, they would have to work their way out of debt. Without the possibility of devaluing the debt and therefore passing it on to the population at large, the full debt remains with the government, and the risk of default is that much higher, hence the high interest rates on sovereign debt yadda yadda yadda.


But none of this alters the fact that in two EU member states an elected government has been replaced by an unelected one. This happens at gunpoint elsewhere in the world: the change of government is called a coup, and the new government is called a junta. But in Eurozone land, it is glossed over with the phrase "this is not the time for elections". Which brings me from Nigel Farage to Tony Benn and his five democratic questions which must be asked of these governments:

1. what power do you have;
2. where did you get it;
3. in whose interests do you exercise it;
4. to whom are you accountable;
5. and, how can we get rid of you?

Anyone who cannot answer the last of those questions does not live in a democratic system"

Hello

This is where I will post my thoughts on stuff which is happening. It will not contain personal stuff about my private life - more just a stream of consciousness, probably touching on stuff which is annoying me.