This week figures showed that banks tripled the profit they made on mortgages in the last year: time to siphon some of that off.
That just doesn’t sound all that sensible. We’re all running around saying that the banks must have more capital to underwrite the risks of their businesses. So we actually want them to be making decent profits so that they have retained profits which then boost their capital bases.
However, the really grand error in today’s column is where Polly manages to completely garble a statistic from the TUC. Now, admittedly, the TUC deliberately ran up the statistic so that it can be garbled but still, incumbent upon one of the nation’s major commentators to ungarble such propaganda, no?
For example, Tory sabres rattle at public-sector pensions, but a TUC report based on Office for National Statistics figures shows that taxpayers contribute 10 times more in pension tax relief to the richest 1% of earners than the state pays to all retired public servants. If Labour made proper use of this killer fact, they would promise instead to abolish all higher-rate income tax pension subsidies, bringing in £6bn – far more than public pensions cost.
Now look at that will you? Seriously, who could possibly believe that public pensions cost less than £6 billion a year? If there are 8 million public sector workers (about rightish) then that’s a cost of £750 a year per worker….and that’s not even looking at the number of retired as opposed to those still in work. As a gross cost that is clearly nonsense.
Plus, of course, the TUC did not in fact say that pension relief to the top 1% is greater than the amount the state pays to all retired public servants. Even they wouldn’t state something so ludicrous.
Here is what they actually do say:
Another way of looking at the cost of unfunded public sector pensions is the net
annual cost — the difference between pensions in payment and the income from
contributions. This is an affordable £4.1 billion or about 0.3 per cent of GDP for
the current year.
So, the £4 billion number is the nett (not gross!) payment from taxpayers to current public sector pensioners. So we have disproved the “than the state pays to all retired public servants.” bit.
There’s more though:
Unfunded schemes have strict rules with employee and employer contributions
made as if the scheme was funded. They are valued using the same FRS17
approach as private sector schemes.
We are not including the State’s (ie, taxpayers’ money) contributions to those unfunded pension schemes. Whatever that number happens to be and I’ve no intention of going looking for it. But it is indeed something: it’ll be some percentage of wages. Employees pay in whatever: 5%, 10%, something, of their wages and then their employer, the State, pays in some other amount, 5%, 10%, whatever.
Whatever that State contribution is it is clearly a cost to the State of providing public sector pensions: just as pension contributions for a private company are a cost to that private company. Again, we disprove the contention.
And yes, there’s even more.
The cost of providing tax relief on pension contributions each year is much
greater than the net cost of public sector pensions. In 2007/8 tax relief cost
£37.6 billion — almost ten times the net cost of unfunded public sector pensions.
Note, please “net cost of unfunded public sector pensions”. And further note please that this is *total* tax relief for all pensions saving.
This tax relief is heavily skewed towards the well off. 60 per cent goes to higher
rate tax payers and a quarter of tax relief — nearly £10 billion a year — goes to the
one per cent of the population who earn more than £150,000.
Ah…..the tax relief going to the top 1% is in fact £10 billion. So that’s 2.5 times, not 10 times then.
Further little snippets:
simple sum tells us that the cost of pensions is only 6 per cent of council income,
Aren’t we higher than £4 billion there already?
The tax system provides relief on contributions made during the savings stage of
building up a pension but charges tax on pensions in payment for those with
And, of course, tax relief upon pensions contributions is not in fact a foregoing of tax. It is a deferment of tax. You get to put your money into a scheme free of tax but assuming your income from a pension goes over a certain limit (as it of course will for all those fat cats) you then pay tax on the income you draw out of your pension pot when you retire.
But the tax raised from pensions is around £10 billion a year,
leaving a net cost of £27 billion.
In fact, it would appear that the fat cats pay back, in time, the amount of tax relief they get. (This is assuming that it is indeed the fat cat pensions that get taxed which seems a reasonable assumption to make.) £10 billion in relief to fat cats, £10 billion in taxes from the biggest pensions….hey, works for me.
The only sensible way to compare pay in the public and private sector is to ask
whether someone doing the same job in the public sector gets more or less than
someone doing the same job in the private sector.
This is not an easy question to answer as jobs are rarely identical, and there are few
Well, doesn’t that just kill the gender pay gap argument?
Worth noting that nowhere in the whole report do they say what are a) the total costs of public sector pensions nor b) what are employer’s (ie, taxpayers’) contributions to either the funded or unfunded pensions pots.
But let us go back to the original statement:
“taxpayers contribute 10 times more in pension tax relief to the richest 1% of earners than the state pays to all retired public servants.”
No, this is grossly untrue, so untrue as to be one of Dizzy’s damned lies rather than a statistic.
“Pension tax relief to the top 1% of earners is 2.5 times the nett cost to the taxpayer of unfunded public sector pension schemes” would be a possibly allowable statement.
If we make the assumption that it is the fat cats who pay taxes on their pensions as they draw them (I’m not sure how heroic an assumption that is but assume that it is true) then the correct statement is:
“The nett subsidy to top 1% pensions is nothing while the nett subsidy to unfunded public sector pensions is £4 billion a year. What the total cost of public sector pensions is, what the total payments by taxpayers to public sector pensions is no one seems to want to tell us.”
Polly’s mangling of that TUC report is so glaringly untrue that I think it’s necessary to ask for a correction, don’t you?