Wednesday, April 04, 2007
MUGGING PENSIONERS - IS IT BAD
On the other hand there is a very good case that what he did was right for the country.
First lets be clear that this money is very small beer compared to the amount lost in the dot.com bubble's burst. About 10%. maybe a little more.
Secondly the big problem with pensions is that people are inconveniently living longer. This should not be a surprise - life expectancy has been going up 1 year for every 4 for a century. I very much doubt if this is going to stop indeed I have written on the approaching conquest of aging before. When that happens the entire pensions industry is bankrupt, or the laws will have to be rewritten to change the contracts retroactively (see above for the ethics of that).
Thirdly a point from John Redwood's blog
The so called pension holidays were mandatory, because the funds were super solvent and tax rules did not permit putting more money into a fund which had a surplus.Longerr lives have been taken care of by higher contributions since the deficits emergedSo at the time he didn't take anyusablee money out of the pensioner's funds.
Fourthly it is accepted that the money he took from there was used to cut corporation tax. Now I may be riding my hobbyhorse again but it seems clear that CT, by taking money from not only wealth creators but disproportionately from the most successful is the most economicaly damaging of all taxes. The Irish example seems to support this.
If so taking money, which was doing comparatively little & putting it into the place where it could do most to produce economic success was a vary good thing for the country. This seems to be an example of somebody who has been a good ruler inpreferencee to being a good man (literaryallusionn to 1066 and all that).
Theoretically Gordon can be blamed for not taking the money to cut CT from some more ethical but more easily annoyed source, like cutting nurses pay (we are talking only about financialprobityy here rather than the normal use of the word ethic in connection to nurses). More credibly he can be criticised for not putting the rules back when the bubble burst - but returning money after it is committed is obviously difficult, in fact I would say getting that through cabinet would have been impossible, particularly in the middle of a bursting economic bubble.
I have previously been trying to read Brown's future from various entrails he has left during his tenure under Blair & have generally been pleased, though I recognise the difficulty of this art. If I am right in my interpretation here this also suggests that brown has better appreciation than I had thought of the value of corporation tax cuts, which is very good news.
Your comment about Serb victims has been published here:
I have updated the article, you may re-read it again (with new information), and then comment again (if you wish).
All the best,
"Useable"? The funds were, according to Redwood 'super soluble', to me that implies they had a surfit of funds for their commitments at the time.
If the funds were in surfit, and an unforseen circumstance; pensioners unexpectedly living longer, a crash in the Stock market or an unexpected tax grab, the surfit might have been drawn on and the contributions would have been resumed.
Now Brown introduced his tax, the Stock market crashed and pensioners are living longer, any two of those might have been dealt with by drawing on the surfit of funds, but all three?
I don't agree that Brown did the right thing, I might have if you simply restricted yourself to saying cutting CT was the right thing to do.
NC: "If so taking money, which was doing comparatively little & putting it into the place where it could do most to produce economic success was a vary good thing for the country."
While the money is in the pension funds it is doing something, it is being invested and gaining returns for the investor. Gordon Brown is the last person, I would suggest who knows the best place to invest pension funds.
I think I made it clear that I was not very happy with Brown's solution but accepted it as a better option. Where would you get the money from & keep your hands clean?
From a reduction in overall government spending. A few examples; the unnecessary and wasteful NHS IT project the 'spine', the unnecessary IT project the Identity card database, even our annual contributions to the European Union thats something like a regular 9 or 10 billion per year now that Blair has given away the rebate, the home office could reasonably be cut in size and still be as bad as it is now, the department of culture media and sport could go, we could save 9bn and God knows how much more by scrapping the Olympics project. I could go on and on.... but will not.
This is a point where theory & practical politics diverge.
These were but a sample of the possible arears where savings could be made, anyone serious about and with a mandate to, cut government spending could easily identify other sutible arears for savings. When government take of GDP is around 40% there is bound to be huge savings, Brown could have made savings, reduced government spending in some arears and cut CGT without raiding the pension funds.
Brown has no interest in reducing the influence of the state. Quite the contrary in fact.