Wednesday, 30 November 2011

Facts About Public Sector Pensions

Today marks the largest strike in my memory, and perhaps the largest in a generation, and all on the subject of public sector pensions. I have noted that there is a lot of misinformation from both the Unions and the Government on this issue, so I thought I'd stick my oar in to dispel some myths.

Pension strikers.

Public sector pension schemes are viable in their own right.
This, I'm afraid, is utterly wrong. Public sector pension schemes are operated on what the Government Actuary's Department (GAD) refer to as a 'pay-as-you-go' basis. This basically means that the contributions paid in for current members go straight out of the door to pay for the pensions of people in retirement. The 'pension fund' does not actually exist - only on paper. In the private sector, such arrangements are referred to as Ponzi Schemes, and they are illegal.

Public sector pension schemes are, in effect, insolvent. The only thing that keeps them going is the fact that they are guaranteed by the taxpayer, who is liable for any shortfall. If they were forced to stand up on their own, they'd go bust.

Public sector pension schemes are unaffordable.
Again, this is total bollocks. They are heavily subsidised by the taxpayer, yes - but to say that they are unaffordable is a rather subjective statement. The NHS costs £115billion a year, and the annual benefits bill comes in at around the £190billion mark. We don't consider these unaffordable. The public sector pension schemes are subsidised by the taxpayer to the tune of around £23billion (GAD figures), which is a mere snip in comparison.

The Government could afford to continue paying for the schemes, if it so wished - it would simply have to cut other things instead. This is not an economic decision, it is a political decision.

The changes the Government is making are unfair.
Really? The taxpayer is subsidising these pensions by about £23billion a year, as discussed. That means that the taxes of people on minimum wage are being used to subsidise the very generous pension provision for public sector workers.

This may be a political decision, but that doesn't actually make it wrong. The changes the Government propose will not eliminate the public subsidy to these schemes, they will merely reduce it. In exchange, the scheme members will have to pay a bit more, accept a little less and work a bit longer.

It should be noted that, even after the Government's proposed changes, public sector workers will still have pension provision far in excess of what is generally available in the private sector, and it will still be subsidised by the taxpayer. What is unfair about that?

Public sector workers pay tax too!
Yes, they do. Everyone who has a job pays Income Tax and National Insurance. The point is, though, that a public sector worker's wage is derived entirely from tax revenue, which by definition has come from the private sector. The private sector gets its money through sales and competition, not just with people and organisations in this country, but throughout the world. Exporting goods and services is the exclusive preserve of the private sector, and brings money from other countries into the UK, making us all richer. It is this which is the ultimate source of all tax revenue.

People in the private sector have better pay than those in the public sector.
This used to be true, but isn't any longer. As reported by the BBC, using the Office of National Statistics as its source, on average, those in the public sector earn 7.8% more than those in the private sector. So the old deal of less salary, better benefits is no longer true - the public sector, on average, have better salaries AND better benefits, all funded by... you guessed it, the taxpayer.

We're facing a new age of union militancy.
I don't think so. Union membership is a fraction of what it was in the 70s and 80s, and labour laws are much tougher to make strike action more difficult. I think there are some in the union movement who long for the rabble-rousing days of old, but they're certainly not alone - I find it difficult to imagine that Cameron and Osborne aren't rubbing their hands with glee at this confrontation.

The private sector should have better provision, rather than the public sector having worse!
Yes, they should. But is it really up to the Government to dictate to private employers what remunerative packages they offer their employees?

The level of pension provision in the private sector isn't particularly good, but it is market forces that have driven it that way, combined with a general ignorance of the importance of long term retirement planning. The answer to the discrepancy is not simply to force the private sector to make more provision for retirement. Whenever there is coercion involved, it is effectively a tax, and tax strangles economic growth. Not really what we need to be doing at the moment, is it?

Personally, I can't see the Government's changes as unfair, in light of the generous subsidy and the poor level of provision in the private sector, and I think it's a bit rich of public sector workers to cynically strike to protect their own vested interests at a time when we're all suffering because of the economic conditions. However, having said that, given that the Government's proposals will only trim the public subsidy to the pension schemes in question, one wonders why they are bothering with all the fuss for the sake of a few measly billion quid. Far more effective measures would be:
  •   A 10% pay cut for everyone in the public sector earning more than £100,000 a year. There are around 38,000 people earning £100,000 or more in the public sector. This measure alone would save £3.8billion a year;
  • A recruitment freeze on public sector administration jobs for the next 5 years. Loss of staff through gradual turnover would make for a far more sleeker organisation, and is much better than top-down re-organisations. That's why it's favoured in the private sector.
Just a few thoughts.

Monday, 28 November 2011

The Tram Racist

This video has popped up on the Internet today:

For those of you who don't have video means, or simply can't be arsed to play it, it depicts a woman making some quite unpleasant remarks to her fellow passengers about the colour of their skin, and how, because of that, they have no right to be in the UK.

What has astonished me is not the senseless bigotry displayed by this misguided woman, but that many people seem surprised by it.


I mean, seriously? You've not seen this coming from about ten miles off?

To be quite honest, with the immigration this country has seen over the last twenty years or so, I'm surprised it's not kicked off sooner.

That doesn't mean to say that I condone what this woman has to say. I most certainly do not. She is a despicable bigot of the worst kind. However, her reaction doesn't surprise me in the slightest. Immigration and the political cult of multiculturalism has permanently changed this country, and people in some communities have witnessed a pace of change which has been unbelieveable. They have seen different communities spring up alongside and amongst them within a matter of years. They are confused by it, and they don't understand it. And so, in a natural human way, they fear it. And some are now starting to lash out, blindly, irresponsibly, and indiscriminately.

That doesn't mean her reaction is right. It isn't. Just because she is afraid of people with a different colour skin to hers, because they behave slightly differently, or because they have a different accent, doesn't mean that they have no right to be in this country. For my part, I'd accept a hard-working immigrant over a lazy white Briton any day of the week. It's not immigrants I despise - it's the misplaced sense of entitlement that permeates our entire culture. But I can't say that I'm surprised by her reaction, and indeed, it certainly isn't unique. I have found similar attitudes in many different people, driven by the same fear. The politically-correct multicultural brigade would like to pretend that these reactions don't happen, that people don't think like this. But every now and again, reality rears it's ugly head, and reminds us.

The sad thing about this, is that it was predicted.

'As I look ahead, I am filled with foreboding. Like the Roman, I seem to see "the River Tiber foaming with much blood".'
- Enoch Powell

Tell me he was wrong. I dare you.

Tuesday, 22 November 2011

State Funding of Politics

Oh, for Christ's sake...

Apparently, we should now all pay 50p every year to political parties in exchange for putting a donation cap of £10,000 in place, because without unions/non-dom lords chucking them massive wads of cash, our poor old politicians won't be able to afford those duck houses.

How about, FUCK YOU? How about eat my shit, you dick-brained cunts? Maybe I don't want my bloody money going to fund any sodding political party, because you're all as bad as each other - a bunch of social democrat, champagne socialist, authoritarian WANK STAINS, who can't run a bath, let alone a fucking Government?

Here's my proposal for the reform of party funding:
1. The only people who are allowed to donate to political parties are registered, UK-resident & UK-domiciled voters. That's it. No unions, no non-dom lords, no companies, no lobbying organisations. Just voters - the only ones who should have a say in a democracy;
2. A maximum annual donation per voter of £10,000 - and that applies across the board, so you can't donate £10,000 to three parties. That's it. Who in their right minds would want to give £10,000 to a bunch of lying, thieving, incompetent fuckwits anyway?

The effects of these policies? Well, first of all, policies would cease to be at the behest of the major party funders, be it unions, Lords, criminals, lobbyists, or whoever else donates to these shysters. Good. I'm sick of their bloody vested interests. They make me sick.

Second, it would actually make the political parties work hard. To get members who are prepared to fund them. It'd require actually talking to and engaging with the electorate, and finding out how they want their country to be run, rather than just bombarding them with a marketing campaign hoping for their rubber-stamp approval every five years.


Dear Government. This is mine. You can't have it. Fuck you.

Tuesday, 8 November 2011

The €uro Has Failed

Capitalism is a truly wonderful system. Across Europe, it is now forcing political leaders to accept reality. The markets continue to punish Greece, Portugal and Ireland for their debts, and now they are punishing Italy. The single currency project has failed utterly. Sovereign nations are not sovereign if they cannot control their own currencies. They are reduced to the status of corporate bodies. And corporate bodies can become insolvent and go bankrupt.

I was talking to a leading fund manager on Thursday. He told me the following:

'Italian 10-year bond yields have passed 6%. No nation has ever come back from 6% without needing some form of assistance. If they reach 7%, that's normally the point at which you call in the IMF. And if that happens to Italy, we are screwed. Italy is the 3rd largest bond market in the world - it's worth €1.3trillion. Nobody - not even Germany - has that kind of money. If that happens, Italy will default on it's debt - causing massive write-downs across the global banking industry. It will simply mean the complete collapse of the financial system as we know it.'

We may be utterly fucked.

Italian 10-year bond yields are now 6.7% and climbing. Yet even now, there is a way out of this mess. In fact, there are two.

Scenario 1 - United States of Europe
The Eurozone countries agree to form a permanent fiscal (and implicitly political) union, which amounts to Germany agreeing to massive transfers of wealth to the peripheral economies in perpetuii. Even then, the might of the German economy will still not be enough. With the condition that Italy is in, the ECB would have to also slash interest rates embark on an immediate campaign of Quantitative Easing (money-printing) to cover the debts that even Germany can't pay off. The entire USE would have to de-value and suffer inflation to make themselves more competitive to grow their way out of recession.

The problem with this is Germany. The Germans seem loathe to work until they're nearly 70 so the Greeks can retire at 68. Furthermore, Germany is fundamentally opposed to the idea of printing money. The last time a German nation undertook such an exercise was the Weimar Republic. And we all know how well that ended. The markets would prefer this option, but it seems unlikely.

Scenario 2 - Breakup of the Eurozone
Quite simply, the countries which are struggling - Greece, Ireland, Portugal, Italy - maybe Spain as well - leave the Eurozone and adopt their own currencies. First, these currencies would be fixed at 1:1 with the €uro, at least until they'd managed to get new hard currency into circulation. This would take about a month. This would be followed by a smooth but pretty rapid de-coupling from the €uro, pegging at 90%, then 80% and so on until their currency was freely floating. This would be accompanied by reductions in interest rates and expansive QE programmes.

In all seriousness, we're probably looking at a combination of the two - some peripheral economies will probably leave, and France and Germany will probably cleave together. One thing is becoming increasingly clear, however - the markets will not tolerate inaction. Something has to be done, and quickly - otherwise the Masters of Europe risk falling over a cliff, and taking the global financial system with them.

Monday, 7 November 2011

I Disagree with #OccupyLSX

Last week, I blogged on how I agreed with the #OccupyLSX crowd on one particular point - their arguments for the democratic reform of the City of London Corporation. I stand by that. They are good ideas - the City does have too many vested interests in the political system, and that should be addressed. Not because it's the City that has them, but because they're vested interests in the first place.

That said, I find myself in increasing disagreement with what else they have to say, and what others have to say about them.

Ed Miliband, for example, has said that the protesters outside St. Paul's Cathedral are 'danger signals' symptomatic of wider public sentiment aligned against capitalism. In the same article, the BBC describe the protesters as protesting against 'corporate greed'.


I was down in London a few days ago, and had a brief stop outside St. Paul's Cathedral. What struck me the most was two big banners outside the encampment, one reading: 'INSISTENCE ON SOCIALISM' and the other reading: 'CAPITALISM IS CRISIS'. No mention of corporate greed.

I didn't get a chance to talk to any of the protesters - it was raining and fairly late in the evening, and it appeared that most of them had gone home. Or perhaps they were in Starbucks. They'd left their tents, mind you. Empty. But I digress. I didn't get a chance to talk to them, but some excellent folk from the Commentator did.

Let's get this straight. They are not protesting against corporate greed. They are protesting against capitalism - the most successful economic system in human history, which has lifted millions of people out of poverty throughout the world.

I've spoken to a fair few people about the protests, from various positions along the political spectrum. The general consensus appears to be, far from the protesters' assertions, that they are not representative of them. Nobody I've spoken seriously wants to abandon capitalism, on account of it actually being quite good at alleviating poverty. Perhaps the #OccupyLSX crowd should think about the benefits it has brought them:
  • The phones they text on;
  • The web servers they host their website on;
  • The coffee they drink;
  • The tents they don't sleep in;
  • The clothes they wear;
  • The tobacco they smoke;
  • The e-mail & messaging services they use.
All arising as a result of capitalism.

I'll be the first to admit, capitalism is not a perfect system. It encourages the pursuit of wealth for it's own sake. The acquisition of wealth is not inherently a virtue, but neither is it inherently a sin. Being rich does not automatically make you a bad person. Yet the #OccupyLSX protesters try to frame it as such. Indeed, as Ken Costa remarked in the Telegraph, there is a moral imperative to create wealth via the capitalist system, for the precise reason that doing so alleviates poverty.

Yet the behaviour of banks in particular over the last few years can be described as anything but moral. And why is this? Simple. Morality requires both incentive and hazard. The system we currently have provides incentive: bankers are easily able to become very rich. What they lack is hazard. Hazard manages risk. It prevents them from being stupid risk-takers. It forces them to deal with the consequences of their actions.

When you implicitly guarantee to nationalise a company if they get into trouble, you take away the hazard.

When you allow the market to be dominated by a cartel of massive organisations, you take away the hazard.

When you inhibit new entrants and therefore new competition through burdonsome regulation, you take away the hazard.

These are all symptoms of socialism. The #OccupyLSX crowd have correctly identified the symptoms, but ascribed them to the precise opposite condition which we are suffering. They have recognised that the building is on fire, but they propose to put it out with petrol. We don't need less capitalism to counter the ills of our society - we need more.

Friday, 4 November 2011

Remember, Remember, the 5th of November...

Remember, remember, the 5th of November,
The Gunpowder Treason and Plot.
I see no reason why the Gunpowder Treason
Should ever be forgot.

Bonfire Night approaches. The preservation of British liberty from destruction at the hands of a religious terrorist will have its anniversary.

Because, of course, 406 years ago, Parliament was the only semblance of elected democracy in Western Europe, and was the only guardian we had against the tyranny, oppression and inquisition threatened by the European Catholic empires.

Is it not now ironic that Parliament has now become an institution of the status quo, servile to wretched European hegemony, which seeks to dominate the entire continent at the expense of democracy? Is it not ironic that protesters don the visage of Fawkes, to protest against the failed institutions - the greedy City, the colluding Bank of England, and the corrupt Parliament?

Fawkes, an agent of a foreign power, attempted to destroy our safeguard against tyranny to usher in an age of terror and oppression. And now, the safeguard he sought to destroy, and the institutions that ally themselves with it, have become masks of the tyranny they once guarded against.

The Guy Fawkes mask is now used by protesters around the world.

The guardians have become the oppressors. It is only fitting that the terrorist becomes the liberator.

Wednesday, 2 November 2011

Why the Robin Hood Tax is Nonsense

So, I see that the Archbishop of Canterbury agrees with the idea of a 'Robin Hood Tax' on inter-bank financial transactions. He argues that it would be one way of advancing the 'moral agenda' of the #OccupyLSX crowd outside St. Paul's Cathedral.

Dr Rowan Williams, Archbishop of Canterbury

In theory, this 'Robin Hood Tax' sounds like a good idea. A small tax on large transactions resulting in large revenue for the Government to plough into good causes. However, the Archbishop is incorrect, for the following reasons:
  1. We now have a global economy, where different nations (and by association, tax regimes) have to compete with each other in order to secure the residency of big companies which generate tax revenues. If we introduced such a tax without it being on a global scale, many larger, more flighty banks would probably decide to re-locate their Headquarters to somewhere without such a transaction tax. Zurich, New York and Hong Kong immediately spring to mind. Increasing taxes in this way could actually reduce, not increase revenue;
  2. Even if the levying of such a tax were to be successful and not result in any capital or commercial flight from the country to competitor tax regimes, surely the supporters of this idea (the good Archbishop included) are not so naive as to think that the cost of it will not simply be passed on to customers? A company's only loyalty is to it's shareholders, and they will not accept to reduction in profits. The people who will end up paying this tax are people with current accounts, savings and mortgages;
  3. Off on a slight tangent, why is it called a 'Robin Hood Tax'? Ah, because it takes from the rich and gives to the poor. But, it actually doesn't, does it? It takes from the poor (by proxy) and gives it to the Government. Robin Hood did not advocate taxes - indeed, he was defined by his campaign against the Sheriff of Nottingham's punitive taxation regime, taking the revenue and giving it back to the people who raised it in the first place. Robin Hood was an anti-tax advocate;
  4. Why is paying a tax 'moral'? What is moral about the Government taking money off people under threat of violence, and how does kow-towing to such extortion make it righteous or good? Did Jesus advocate that money be ploughed into Government to account for our moral shortfall? No. Charity is only charity if it is freely given. Tax is taken under threat of violence, and therefore any nobility in handing the money over is lost;
  5. And finally, who is the Government to decide what is or is not a 'good cause'? While I do not discount their worth to some people, I do not actually want to give money to some charities. I do not personally value the work they do, ergo I fail to see why I should fund them. Some charities, of course, I do value, and I give generously to them. But that is my choice, as it should be. Money given to charities by the Government is not my choice. But it is my money.

Levying yet another tax to feed the ever-hungry State which will actually reduce revenues by driving business abroad and will ultimately be borne by consumers rather than corporations is not a solution to our problems.