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As you may be aware, I am of the view that Lloyd George was the creator of the biggest Ponzi scheme in history when he came out with the "cheap votes" budget of 1909 -- promising pensions to all and sundry, to be financed on a "pay as you go" basis. In other words, the workers of today fund the workers of yesterday -- a fine scheme so long as there are more workers today than there are workers of yesterday. Hence the Ponzi nature of the whole thing.
One of the few things that Brown got right in his now-quite-clearly disastrous reign as Chancellor was to note that there was a pensions time bomb and that something needed to be done about it. Unfortunately, one thing that he did not do was really do anything about it. In fact he actually increased the tax on pensions rather than removed it -- another income generator that people would have to pay for tomorrow.
But even Brown as Chancellor didn't actually sit down and say "hey, I've got a good idea. Let's boost the government coffers by taking stuff OUT of the funded sector and putting it INTO the pay-as-you-go sector"! No, even Brown wouldn't on one side of his face say that we were facing a pensions time bomb, and then with the other side of his face make that bomb a bit bigger.
But that is precisely what Alistair Darling has done.
You may recall that in December it was spotted that there was a £7bn pension shortfall in the Royal Mail pension scheme. In February the trustees' chairman, Jane Newell, said that the fund's deficit might be "significantly larger" than that. She noted that "at present, a winding-up the plan would not even be able to provide as much as 50% of members' benefits".
Now, the extent to which pension trustees can fuck up pension plans is partly the fault of the trustees, partly the fault of Gordon Brown (see change on taxation relief circa 1999) and partly the fault of Margaret Thatcher (see change in rules of how you had to reduce payments if your surplus went above 105% -- an insane misunderstanding of volatility if ever I saw it). But that's kind of by-the-by here. What is brilliant in its breathtaking chutzpah is what the government has done to "solve" this problem.
The rescue plan for the pension scheme (and perhaps we can now see why Brown is soooo determined to push ahead with the part-privatization) will actually BOOST the government's books by £24bn.
How can this be, you might ask? Are we in the land of Catch-22 Major Major economics, or just plain Alice In Wonderland economics?
The answer is simple. We, the taxpayer, are getting shafted to the tune of £10bn on the Royal Mail pension scheme, but while the £24bn in assets of the scheme will be transferred across to pay down government debt immediately, the £34bn liabilities will be booked in the same way as all government pensions -- i.e., on a pay-as-you-go basis that don't appear on the books as government debt at all.
It would have been legal and, indeed, desirable, to maintain the scheme as a funded scheme, with an attempt to get the books back into balance. However, this wouldn't give the government books an immediate cash injection at a time when Alistair Darling is in desperate need of such an injection.
And, so, at the stroke of a pen (unless the Labour rebels manage to kybosh the part-privatization scheme), the government will accumulate an extra £34bn in long-term debt (known in the land of this administration as "Not My Problem debt") and extra £24bn in short-term assets. By way of comparison, Lloyd George said in 1909 that to finance the pensions he would need to raise £16 million, but that this would also pay for eight new dreadnoughts. One might also note that the 1909 bill wasn't the freat vote winner that the Liberals hoped. In 1910 they saw their majority wiped out, gaining virtually the same number of seats as the Unionists (275 to 273).
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I have been tinkering with my playing style ever-so-slightly in an attempt to discover new ways to run bad. You will be pleased to know that I have been entirely successful in this aim.
_________________________
One of the few things that Brown got right in his now-quite-clearly disastrous reign as Chancellor was to note that there was a pensions time bomb and that something needed to be done about it. Unfortunately, one thing that he did not do was really do anything about it. In fact he actually increased the tax on pensions rather than removed it -- another income generator that people would have to pay for tomorrow.
But even Brown as Chancellor didn't actually sit down and say "hey, I've got a good idea. Let's boost the government coffers by taking stuff OUT of the funded sector and putting it INTO the pay-as-you-go sector"! No, even Brown wouldn't on one side of his face say that we were facing a pensions time bomb, and then with the other side of his face make that bomb a bit bigger.
But that is precisely what Alistair Darling has done.
You may recall that in December it was spotted that there was a £7bn pension shortfall in the Royal Mail pension scheme. In February the trustees' chairman, Jane Newell, said that the fund's deficit might be "significantly larger" than that. She noted that "at present, a winding-up the plan would not even be able to provide as much as 50% of members' benefits".
Now, the extent to which pension trustees can fuck up pension plans is partly the fault of the trustees, partly the fault of Gordon Brown (see change on taxation relief circa 1999) and partly the fault of Margaret Thatcher (see change in rules of how you had to reduce payments if your surplus went above 105% -- an insane misunderstanding of volatility if ever I saw it). But that's kind of by-the-by here. What is brilliant in its breathtaking chutzpah is what the government has done to "solve" this problem.
The rescue plan for the pension scheme (and perhaps we can now see why Brown is soooo determined to push ahead with the part-privatization) will actually BOOST the government's books by £24bn.
How can this be, you might ask? Are we in the land of Catch-22 Major Major economics, or just plain Alice In Wonderland economics?
The answer is simple. We, the taxpayer, are getting shafted to the tune of £10bn on the Royal Mail pension scheme, but while the £24bn in assets of the scheme will be transferred across to pay down government debt immediately, the £34bn liabilities will be booked in the same way as all government pensions -- i.e., on a pay-as-you-go basis that don't appear on the books as government debt at all.
It would have been legal and, indeed, desirable, to maintain the scheme as a funded scheme, with an attempt to get the books back into balance. However, this wouldn't give the government books an immediate cash injection at a time when Alistair Darling is in desperate need of such an injection.
And, so, at the stroke of a pen (unless the Labour rebels manage to kybosh the part-privatization scheme), the government will accumulate an extra £34bn in long-term debt (known in the land of this administration as "Not My Problem debt") and extra £24bn in short-term assets. By way of comparison, Lloyd George said in 1909 that to finance the pensions he would need to raise £16 million, but that this would also pay for eight new dreadnoughts. One might also note that the 1909 bill wasn't the freat vote winner that the Liberals hoped. In 1910 they saw their majority wiped out, gaining virtually the same number of seats as the Unionists (275 to 273).
_________________________
I have been tinkering with my playing style ever-so-slightly in an attempt to discover new ways to run bad. You will be pleased to know that I have been entirely successful in this aim.
_________________________
