Things which are not surprising at all and are not really proof of anything one way or another

The TPA are wailing on about the council pensions timebomb again:

The TaxPayers’ Alliance (TPA) can today reveal for the first time a substantial rise in the number of former council staff drawing pensions compared to the number in work and paying into the Local Government Pension Scheme (LGPS).

That's excellent news, it means that in future, there will be fewer ex-council employees claiming pensions than are claiming now. So these pensions will become more affordable for the taxpayer.

Previous TPA research has found that the equivalent of £1 of every £5 of Council Tax goes on pensions...

So what? Pensions are just a kind of deferred salary. If it turned out that councils were spending nearly all their income on salaries, that is in itself neither good nor bad; it all depends on what its employees are doing. If they're all teachers, coppers, lollipop ladies, dustbin men, social workers etc, then great. If they're all five-a-day climate change awareness group directors on six-figure salaries, then hiss boo.

And given the level of pension they are promised compared to their salaries, we would expect councils to be spending about a quarter as much on pensions or pension contributions as they do on salaries. So this "£1 in every £5" figure is also meaningless; as we'd have to know how much of the other £4 goes on salaries and much more importantly than that, what the council's employees are actually doing.
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Dan Hannan asks

What will William Hague's audit [of the costs and benefits of EU membership] show? That depends partly on who conducts it, obviously...

That's the problem, isn't it? I try to be as objective as possible as most things and I am quite convinced that the disadvantages of full EU membership outweigh the advantages. So if I did the audit, the result would probably support this. And people would say "Ah yes, but you're against EU membership, you were going to say that anyway."

You can be part of a free market in Europe without being a full member of the customs union. It's true that you then 'have no say' over how the regulations of the single market are set, but this doesn't bother the Swiss, whose exports to the EU, in per capita terms, are 450 per cent of ours.

He's used that 450 per cent figure before to say "Look how successful the Swiss are outside the EU, they export far more to the EU than we do; therefore we should leave as we'd export more to the EU than now!" but the statistic is arrant nonsense and doesn't support any such conclusion.

The point is, the smaller the unit (i.e. a country) you are looking at, the higher are imports and exports as a share of that unit's GDP. If Eastbourne became an independent state, we'd find that its imports and exports from "rest of EU" would be far higher as a share of Eastbourne's GDP, or per capita for Eastbourne residents than they are for Switzerland.

That is not an argument for the newly created state of Eastbourne to leave the EU and more than it is to create that state in the first place.

Reader's Letter Of The Day

From today's Evening Standard (page 61):

I am a public sector worker and have worked and paid tax for all but 10 months in 36 years. I object to my tax going towards people who refuse to work or towards child benefits for families earning far more than me. If my pension has to suffer under cuts I want the right to refuse to pay for such undeserving recipients.

Claire Harding

It's a great template, isn't it? See also:

I have been out of work for 10 months. I object to tax going towards people who have a cushy public sector job or towards child benefits for families earning far more than that. If my dole money has to suffer under cuts I want the right to refuse to pay for such undeserving recipients.

Wayne Slob

or

I am a high paid earner in the private sector and have worked and paid tax for all but 10 months in 36 years. I object to my tax going towards people who refuse to work or towards public sector non-jobs. If my child benefit has to suffer under cuts I want the right to refuse to pay for such undeserving recipients.

Disgruntled of Tunbridge Wells

etc.

They own land! Give them money!

Today's instalment is a game of two halves up in Manchester:

Council chiefs have unveiled radical plans to help the housing crisis... £25m of pension cash is to be used to build new homes. Bosses have identified five sites on which it aims to build nearly 250 properties for sale or rent as part of a pilot scheme. The Greater Manchester Pension Fund will pay for the construction costs and the programme could be rolled-out over 10 years if it proves successful....

Fair enough. That's peanuts against a population of a half a million, but it's a start. The council can grant itself planning permission for free (no doubt they'll end up buying expensive land which already has planning, from the council chief's brother-in-law, separate topic), so it's good money for them/their pension fund (not even local councils can mess this up), more houses built, jobs for people, might even get prices down a tiny bit etc.

... As part its plans, Manchester council also wants to create a mortgage guarantee scheme to help people get on the property ladder by underwriting up to 20 per cent of their loan.

Why?

Doesn't that just wipe out all the financial advantages of building more houses in the first place? Building them is risk free profits for the council; once they are built, they get their money straight back from the purchaser's mortgage bank, and like I say, it's good news for people locally, whether that's jobs or housing.

But if you lend out the pension fund to merely try and keep prices high, that's a very risky investment for the pension fund and makes things worse for young people. The best thing that could happen to young people is for lending criteria to become much stricter, like in the good old days.

This is NOT satire (2)

Mitesh B Karia was out and about taking photographs of public sector strikers today, this one has that je ne sais quoi...

Fun Online Polls: Idiot commenters and public sector strikes

Thanks to everybody who took part in last week's Fun Online Poll and left comments (none of them idiotic, I'm happy to say), results as follows:

What's the best way of responding to idiot commenters who post personal insults?

Ignore them, but allow their comments to stand - 34%
Delete their comments - 26%
Respond to their insults politely - 24%
Insult them back - 9%
Other, please specify - 6%

So there's no hard and fast rule. It seems to me that a simple warning or two and then subsequently deleting all comments from the idiot(s) concerned seems reasonable. Engaging in tit-for-tat insults is fun but pointless, and from bitter experience, trying to engage these idiots in serious debate is pointless as well, although they sometimes provide raw material for future posts :-)
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Public sector pensions, ho hum, big topic. All things considered, I'm with the government on this one. Public sector pensions aren't the biggest problem facing us - the UK government spends five times as much on corporate welfare - but it's still a problem that will have to be addressed sooner rather than later.

What particularly annoys me is that the government has gone out of its way to explain that only public sector employees currently paid £15,000 or more will have to make the additional 3% contributions (3% is nowhere near enough, but it's a start) but the trade unions keep saying exactly the opposite, that these changes will hit 'low paid hard working public servants especially women' etc etc, I suppose that's their version of the Poor Widow Bogey.

Perhaps this summary is accurate, i.e. that the £15,000 is annualised, so if you work half-hours and are paid more than £7,500, you'll have to pay 3% more for the privilege of your gold-plated, final salary, index linked pension, I don't know. If true, all that does is reduce the number of public sector employees not required to make the additional contributions, fair enough, if you ask me.

So that's this week's Fun Online Poll, do you think today's strike was justified? It's a straight 'yes' or 'no' this week.

Vote here or use the widget in the sidebar.

Francis Maude Does Maths

From The Sun:

BRITAIN'S biggest public sector union last night voted for a crazy crippling strike over pension changes — sparking fears of a new Winter of Discontent.

But less than a QUARTER of Unison members — including nurses, social workers, paramedics and teaching assistants — backed the mass walkout on November 30. Of 1.1 million people balloted, only 29 per cent actually voted — backing the strike by 245,358 to 70,253...

Cabinet Office Minister Francis Maude said the figures showed "extremely limited support". He added: "The new generous settlement is beyond the dreams of most private employees. I urge the trade unions to devote their energy to reaching agreement and not to unnecessary and damaging strike action."

To summarise:
Total turnout: 29%
'Yes' votes out of all votes cast: 78%
Percentage of all eligible voters who voted 'Yes': 22.3%.
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Let's compare this with the General Election Result 2010:

To summarise:
Total turnout: 65.1%
Tory votes out of all votes cast: 36.1%
Percentage of all eligible voters who voted Tory: 23.5%
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As it happens, I agree with Mr Maude that a lot of public sector pensions are far too generous - and the more senior the post, the greedier they get, with MPs like Mr Maude among the greediest. I do not support the strikers (although I accept that they have the right to strike if they so wish). But if I were Mr Maude, I wouldn't go round reminding people that his government has "extremely limited support"

Another one which they lifted from UKIP's 2010 pensions manifesto...

We said:

12.1 As background, it is useful to compare the relative figures for private and public sector state provision...
• The Government are deliberately understating the liabilities of unfunded Public Sector pensions schemes. As at March 2005, the government estimated the liabilities (the ‘discounted net present value’) of accrued public sector pensions - which in future cash terms will amount to around £3,762 billion - at £530 bn. Using more realistic assumptions, Neil Record calculated the liabilities to be £1,025 billion, which is now widely accepted as the best estimate...

12.3 There also needs to be proper accounting for public sector pensions liabilities. Although this will not ‘solve’ the issue, it will at least highlight it. A reasonable suggestion is that public sector pension schemes liabilities be calculated under normal accounting standards and accounted for as such in public sector accounts. This would prevent a future government hiding the cost of current promises.

They did:

Landmark documents published today show that the government’s liabilities for public service pensions are more than £1.13 trillion.

The figures, which also show Private Finance Initiative liabilities of more than £40bn, are included in the first set of Whole of Government Accounts, published by Chancellor George Osborne and the Office for Budget Responsibility’s first report on the sustainability of the public finances.

Fun Statistic To Start The Week

From The Telegraph*

Retired civil servants drawing gold-plated taxpayer funded pensions now outnumber those employed in the civil service for the first time.

Official figures show there are now 17,000 more people drawing civil service pensions than are currently employed as civil servants.

The civil service pension bill has risen 30 per cent in just four years, and now costs the taxpayer £7.4 billion – a situation described by pensions experts as "unsustainable".

The escalating costs derive from substantial final salary pensions, retired people living longer, and the number of civil servants taking the option of early retirement.

Retired teachers could outnumber those in the classroom within the next three years, according to analysis of official accounts.

* Spotter's Badge: MBK.

Ah well. At least the caricaturists aren't on strike...

UK government gets something right for once - shock.

From the BBC:

The government is to say for the first time that it plans to link the public sector retirement age to the state pension age, which is to rise to 66. Chief Secretary to the Treasury Danny Alexander is also due to confirm public sector pensions will be based on workers' average salaries...

He is expected to say most public sector workers - bar the army, police and fire service - will see their retirement age linked to the state pension age. But he will also say low paid public sector workers on less than £15,000 will not face any increase in pension contributions and those earning less than £18,000 will have their contributions capped at 1.5%...

And so on an so forth, nothing radical but the sort of thing which has long been blindingly obvious to everybody else.

Most of the time I'm pointing out what the UK government has got horribly wrong, so I suppose it's only fair to mention those rare occasions when it get something right. Normal service will be resumed in five minutes, no doubt.

Why don't we see future public sector pensions as ASSETS?

From Citywire:

The current discount rate used by the Treasury to determine unfunded public sector pension liabilities is 3.5%. This puts liabilities at £750 billion. However some pension experts have called for a rate of 1% that would raise the liability to around £1.3 trillion, they claim this is the real liability taxpayers face from public sector pensions.

Clearly, some public sector pensions are merely deferred salary, because in Olden Times public sector workers were paid less than in the private sector but were accruing better pensions, but that's all in the past - from here on in, we are looking at a straight transfer of cash from private sector taxpayers to retired public sector workers in exchange for absolutely no additional work in future.

The accepted figure for the net present value of all accrued pension rights is about £1,000 billion, for sake of argument we can call this annual pension payments of £40 billion to infinity, discounted at a rate of 4 per cent.

So private sector taxpayers see that as a £1,000 billion liability, but remember the Golden Rule - for every financial liability there is a corresponding financial asset (and vice versa); so public sector workers past and present have a financial asset worth approx. £1,000 as well and the two net off nicely to £nil. (For arcane reasons, such assets/liabilities, being akin to 'rents' depress people's net future wealth, but hey).
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On the other hand, we have something called 'land' which people tend to see as 'an asset' rather than 'a liability', but if we follow the analogy, we see that land is not really an asset at all...

Land has little or no intrinsic value, but is bought and sold for the net present value of future rental income which is generated by the location (whether paid in cash or consumed by an owner-occupier is neither here nor - the value is the same).

That stream of payments is exactly like a financial asset, and the net present value of the payments to the lucky recipients is equal and opposite to the net present value of the payments which people will have to make in future (or forego, in the case of an owner-occupier who could otherwise sell his house for cash and live off the interest).

Applying the same discount rate of 4% to a known total land value (i.e. after deducting the cost/value of the bricks and mortar) of about £2,250 billion gives us annual rental income which will be collected privately in future of £90 billion per annum (or £150 billion gross, net of Council Tax, Business Rates, SDLT of about £60 billion per annum etc).

To finish off the analogy - public sector pension payments are in return for no future work by the recipients and can be seen as 'rents'; ground rents are by definition 'rents' and are paid in exchange for absolutely no work done by the recipients in future (location rental values are created by people who live in an area, not the owners of land - if the vendor sells up and moves away, he will contribute nothing to rental values in that area in future - although clearly a lot of people are in both camps).

Something else that pensions and land rents have in common is that the capital value is only 'hope' or 'expectation' value: you might drop dead the day after you retire, in which case your pension was worth next to nothing; and they might build a motorway or sewage works behind your back garden, in which case you have no comeback against the person who sold you the house (provided he disclosed everything he could be reasonably expected to know).
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Or to put it another way, why do people get so upset about the £1,000 billion public sector pension bill (and I am one of these people) but gleefully ignore the £2,250 rental bill, both of which will have to be paid by 'everybody else' for all eternity? Will they both not act as a huge great drag on the economy?

And if you are going to go this far, why not chuck in the £400-billion plus per annum collected in taxes on incomes and capitalise that up to £10,000 billion-plus? How about tapping into the rental income (which is massively depressed by income tax) and use the proceeds to reduce or eliminate taxes on incomes?

They could just buy a big chair...

At the end of an article about changes to teachers' pensions:

Teachers at the conference also challenged the idea of having to work beyond the age of 65.

"Can you imagine being a reception teacher and trying to get on and off those little chairs at 68? I think not," said history teacher, Alice Robinson.

It's good to see that they read each other's press releases

There's an article in the FT explaining that Lord Hutton is going to lift more ideas from UKIP's pensions manifesto and curtail the generosity of public sector pension schemes a bit (lower salary increases, higher contributions and career-average rather than final-salary etc) all good stuff, but what troubles me is Hutton recycling the old canard:

... it is in no one’s interest for large numbers of staff to opt out and end up on means-tested benefits.

1) So what? If means-tested old age benefits cost the taxpayer less than final salary pension schemes, that's not an issue.

2) As it happens, IDS took another leaf from UKIP's book and proposed merging the State Pension and the Pensions Credit into a flat-rate Citizen's Pension of £140 a week anyway, so in theory there won't be any means-tested benefits*.

Whether public sector employees should get their public sector pension in addition to the £140 is a separate debate (I would argue not, of course).

* Means-testing (being a brutal form of taxation) is as much anathema to me as 'contributory benefits' (which is an excuse for higher taxes while you're working), and in any event the two are more-or-less opposites so we can rule them out. This leaves us with the sensible middle-ground of universal flat-rate benefits (we can argue about the rate in £ per week, whereby £nil is an option worth considering, if only for the fun of ruling it out again).

Another good idea they pinched off my 'blog

From The Budapest Times:

Fidesz [the ruling party] initiated an unprecedented effort last Tuesday to strip the Constitutional Court – the nation’s final authority on legislative questions – of a number of powers. Parliamentary caucus leader János Lázár submitted the Constitutional Court Amendment after the court struck down several laws as unconstitutional, including a 98 per cent tax on public-sector severance-pay packages worth more than HUF 2 million (EUR 7,275).

The point is that public employees' terms and conditions are a matter of private law. If their contract says they'll get a pension of £x or a redundancy payment of £y, then the government can't wriggle out of it very easily.

However, taxation is a matter of public law. The government can set tax rates as it likes. This is subject to something called 'judicial review' (a UK court acting as a 'constitutional court') but the burden of proof is quite high.

Which is the background to my suggestion number 2 back in October 2009:

2. We (still) have a schedular tax system in the UK, and different types of income are taxed at different rates. Although I favour a flat tax system that taxes all income of whatever type - corporate or personal - at a single rate with as few exemptions and tax breaks as possible (not only is that more economically efficient, at least it's honest) but for people like this I'm prepared to make an exception.

So I'll introduce a sixty per cent higher rate tax on any salary, pension or redundancy payment paid by the taxpayer above the amount of £35,000 per year, which will claw back most of the cost, as well as encouraging more to move to the private sector where the flat tax rate will be thirty per cent and hopefully falling.

That's probably a lot simpler than renegotiating loads of individual employment contracts and getting bogged down in private law disputes. The tax system is up to legislation and is not open to legal challenges (well, no doubt somebody will go for judicial review but they can f*** off).

Meanwhile, on Planet Zog...

According to the Daily Mail, 'middle class' means you're the sort of person who contributes more than £50,000 a year to his or her pension scheme.

FFS, £50,000 is more than 95% of people earn every year, let alone have as disposable income and even the article admits that it will only affect 100,000 people.

Actually, this is just the finishing touches to a cunning wheeze introduced by Labour to clobber civil servants in final salary schemes, as follows:

1. Let's say somebody's current salary is £50,000 and his notional pension pot is worth £500,000 (calculated actuarially)*.

2. If he gets a £10,000 pay rise, the value of his pot goes up to £600,000, so the notional contribution is £100,000.

3. He therefore gets taxed on the notional contribution of £100,000 minus the new upper limit of £50,000 x 40% = £20,000 tax to pay.

4. So by going from a salary of £50,000 to £60,000 such a person would be £14,000 worse off in the first year. He keeps 60% of the £10,000 pay rise after tax and has another £20,000 to pay.

This all sounds rather splendid to me as it discourages civil servants from taking pay rises of more than £5,000 a year (or whatever the figure is). The Daily Mail just don't seem to get it though.

And yes, there will be some collateral damage with higher paid people in private sector final salary schemes, that's just tough. I suppose a good way of using all or part of that £4 billion 'saving' would be to get rid of the 50% top tax rate and all the other nastiness that happens when your income goes over £100,000.

* UPDATE: Rational Anarchist left some more precise calculations in the comments, which tie in with some 'research' quote in yesterday's FT. The actuarial value of the pot appears to be calculated as salary x X/60 x 16, where 'X' is the number of years service, for example:

i. Salary at start of year £96,000, years service 30, so notional pot = £768,000 (A).

ii. Salary at end of year £105,000, years service 31, so notional pot = £868,000 (B)

iii. The notional pot brought forward is increased by 2.5% inflation = £787,200, which is deducted from new notional pot B to give a notional contribution of £80,800.

iv. The 'tax free' figure of £50,000 is deducted from this to give a taxable amount of £30,800.

v. The FT said that this would be taxed at 40% = £12,320 (although the additional income tax in this case would actually be slightly higher than that because above £100,000 gross you start losing the tax-free personal allowance).

Blogger Government

MW recently asked me if I had sorted out my financial services policy as Financial Services Minister in his Government. Here is my first draft for comment. Lola.

The Bloggers Government: Financial Services Policy

1. Basic Principles.

The State has no business in business and money. It has a small responsibility conferred on it by the electorate to carry out some work as insurer of last resort and lender of last resort.

All EU directives will be ignored and the rest repealed.

The central principles behind these proposals is responsibility. Caveat Emptor and Professional Responsibility will be guiding principles.

2. Central Banking

The role of the Bank of England as central bank is abolished. It will set rates of interest with reference to its own demands for the Official Currency.

3. Interest rates

Will be set by the money markets, not the central bank.

4. Money

The legal tender laws are abolished.

The Pound Sterling will continue to exist and be offered by the Bank of England as the Official Currency. It will be the official currency of government. Its rate of exchange will float. It will be backed by adequate bullion reserves. It will be kept honest by competing domestic money and the absence of an official exchange rate.

5. Financial Regulation

a) All the existing regulatory regimes are abolished.

b) All deposit protection schemes are abolished

(All statutory deposit protection schemes will be abolished, but in the event of insolvency or breach of capital ratios by any licensed deposit taker, depositors (as defined) will be given priority of repayment, and any agreements as to security between bondholders and the deposit taker will be subjected to claims of depositors. Debt for equity swaps will be the preferred method of recapitalising banks.)

c) All compensation schemes are abolished.

6. Banking

Deposits into banks will be the property of the depositor.

The freedom to issue money will be returned to the people and by association, banks, to use if they wish.

It is expected that 100% secure bank deposits will be backed by 100% reserves of bullion. It is also expected that Banks will offer accounts with higher rates of interest that are not 100% reserved. Customers will be made aware of this and will be able to choose the level of risk and reward with which they are comfortable.

Banks will be encouraged to seek commercial insurance for depositor protection. We anticipate that market forces will compel banks to do this.

Limited liability will not be available to the owners or senior managers of any bank that seeks to do business in the UK.

7. Insurers

All the current reporting requirements will be abolished. It is anticipated that accounting standards will rise since auditing accountants will have 100% responsibility for their work and will not be able to escape professional responsibility. The State will require professional institutions to undertake that auditors have sufficient resources to underwrite this responsibility.

Auditors will be personally liable for any losses suffered by third-party investors up to a maximum of the amount by which the company's net assets were overstated." (e.g. as should have been the case with E&Y/Equitable Life). This same discipline applies to all auditors of all financial businesses, for example banks, intermediaries, fund managers etc etc.

8. Specialist and International Institutions engaged in financial engineering.

All regulation is abolished, but the shield of limited liability will unavailable to such institutions.

9. Retail Intermediaries

Intermediaries will have two categories, independent and other. Independent intermediaries will be the clients agent, other will not. It is anticipated that market forces and competition and self interest will drive the establishment of representative institutions to promote and regulate these categories.

10. Disclosure

The single regulation that will remain is that of full disclosure of costs and charges, rates of interest – both APR and flat rates and any other factors that deduct money from client money or are taken.

It is anticipated that the various industry grouping will set up their own bodies to regulate this as it will be in their self interest to do so.

11. Pensions

All final Salary pensions will be phased out. The sole means of pension saving will be in money purchase schemes. This will ensure that members are not ripped off by arbitrary actuarial calculations when moving jobs (a big friction in the labour market) and that real savings are made to fund pensions, which will provide more proper capital for investment. At the same time the tax relief on schemes will reinstated recognising that pensions are deferred pay, meaning that benefits when taken will be taxed as earned income. Contribution levels will be set at a maximum annual of 25% of NAE (or 100% of Citizen's Pension - see MW on LVT). There will be no minimum retirement age.

12. Collective Investment Schemes (unit trusts, OEICs, Investment Trusts, ETF's etc)

Rules and Regulations will remain roughly as they are but repsonsibility will be transferred from the State to self regulation. All compulsory compensation schemes will be abolished (moral hazard) but it is expected that good companies will combine together to provide some mutually protective accreditation which will include investor protection - commercially funded. ISA's and PEPs and EIS's and all that stuff will all be scrapped. But since the dividend tax credit will be reinstated (and CGT has been replaced by LVT) this will not matter. Investor decisions will not be distorted by tax considerations.

Fun Online Polls: Public Sector Pensions

Via Belle Gerens, via Tim W , publicservice.co.uk is running a Fun Online Poll: "Should public sector workers have to pay more to maintain the value of their pensions?"

As of now, "Yes" is ahead with 67% of the votes.

UKIP's Pension Reform Proposals

Trusty Statcounter tells me it's time to highlight a new policy in the sidebar, so this week, let's have a look at UKIP's pension proposals. The full pdf document is here (worth a read if you are interested); and the summary (lifted straight from the website) is as follows:

* To end discriminatory and over complex means testing on pensions, UKIP would roll all existing State pensions, Pensions Credit, the Winter Fuel Allowance into a flat-rate non-means tested, non-contributory and non-taxable “Citizen’s Pension” of £130 per week for all pensioners aged 65 and over.

* In order to better target the value of the tax reliefs for pension contributions on low and average earners, to reduce the annual limit for tax-relievable pension contributions to £10,000 gross from £235,000 now and reinstating the dividend tax credit at 20%.

* To allow more flexibility in the use of the final value of a pension fund.

* To scrap the statutory Pension Protection Fund and the National Pensions Savings Scheme as they are costly and counter-productive, and encourage industry wide funds to reduce administration costs.

* To bring the generosity of unfunded public sector final salary pensions back into line with typical pension provision in the private sector to avoid potential liabilities of £1,000 billion.

* To leave the EU to avoid massive liabilities in supporting unfunded EU pensions that would wreck the UK economy (UK has c.74% of GDP invested in pensions, Germany just 5.8%, France 5.6%, Italy 3%).

Roue le Jour raises an interesting topic

Here

Mark, I've suggested before (only partially tongue in cheek) that what the state is really doing is propping up wages by taking surplus labour out of the market. White collar workers are employed and blue collar workers are put on benefits. Surely the numbers are now so large that putting even some of them back on the market would collapse wages?

OK. Big picture. There are 32 million 'workers' in this country, including 4 million superfluous public sector and at least 2 million in private sector dealing with all the compliance crap. That gives us 26 million productive workers (including productive public sector workers) sharing a tax bill of £600 billion per annum (with a shed-load of borrowing on top!) = average tax bill/burden of £23,000 each.

So what happens if we simplify/scrap all the regulations and quangos, getting the total tax bill down to £450 billion (thirty per cent of GDP, as a benchmark) as a bare minimum - and that's including a Citizen's Income-style welfare system? Let's assume that half of those non-productive workers find productive jobs, so there'd be 29 million productive workers sharing a tax bill of £450 billion = average tax bill/burden of £16,000 each.

NB, those figures of £23,000 and £16,000 are total figures. Maybe half is 'below the line', so the average person is aware of it (income tax, Employee's NIC and Council Tax) and half is 'above the line' (VAT, corporation tax, Employer's NIC, Business Rates).

Absolute worst case, the wages pot paid out as salaries to the 26 million now has to be shared between 29 million, giving an 11% fall in salaries, but even if workers only got a third of the per-worker tax saving, they'd be no worse off. But with dynamic effects and everything (taxes are borne by the least mobile factors of production, i.e. land and ordinary labour), and remembering that there is a long-run equilibrium with other Western European countries, workers would still end up rather better off (before housing costs).

Further; with lower wages and taxes (and liberalised planning laws, this is key to the whole thing) the UK would become more attractive to inward investment and house prices would fall as well (to maintain the long run price-earnings ratio, as well as the impact of new supply. Let's replace Council Tax, Business Rates, Stamp Duty, Inheritance Tax etc. with Land Value Tax to keep a lid on house prices while we're at it; receipts from which could be used to cut income taxes even further).

What's not to like?

"Taxpayer hit with £5.4bn pension bill"

From The London Lite:

The taxpayer's bill for town hall pensions soared by £400million to £5.4billion last year.

The cost of the local government pension scheme raised fears that town halls may be forced to raise council tax or sack teachers, social workers and other frontline staff to balance their books. Councils paid in an extra eight per cent to the scheme in 2008/09 compared with £5 billion in 2007/08...

Ministers are proposing top earners in local government pay contributions of 10 per cent of their salary. The Tories are planning a cap of £50,000 a year on public-sector pensions. A Communities Department spokesman said: "The Government is looking at ways of ensuring higher earners at councils make a more significant contribution towards their pension."

When I first read that, I had intended to do a pithy and punchy post pointing out there is a third option - cut the generosity of their pension schemes (or cut their salaries to compensate) but I realised that I actually know too much about this stuff...

First, who counts as a local government employee, and how many local government employees are there?

From directgov: "More than two million people are employed by local authorities. These include school teachers, social services, the police, firefighters and many other office and manual workers. Education is the largest locally provided service." The DCLG say "In England ... local authorities employed about 1.8 million full-time employees (FTE) staff"*

So let's call it two million in England. £5.4 billion divided by 2 million = £2,700 each, about ten per cent of salaries. Pensions guru Neil Record reckons that the true cost is closer to one-third of current salaries, so that's discrepancy number one. It's well and good Labour and the Tories wittering on about increasing contributions slightly to ten per cent, thirty per cent would be closer to the mark (which we gleefully adopted as a bench-mark into our UKIP Pensions manifesto, but that's another story).

Next, We all know that local councils spend far too much on righteous crap, so how many of those two million are actually "frontline staff"? The fag packet says that there are ten million school-age kids, so with a pupil-teacher ratio of 20:1, we'd expect there to be 500,000 teachers. According to this, there are 734,000 full-time equivalent teachers/teaching assistants in England (as against 505,000 in 1997, natch). "Social services" is a bit of a rag-bag (not quite benefits administrators, not quite teachers, not quite police/probation, not quite NHS, but I'm sure a lot of them are doing useful stuff) so let's go with the figure of 134,000 for England (in 2004) from here. There are 167,000 coppers in the UK (in 2006) from here, x 5/6 for England = 139,000. I can't track down number for firemen, but this says there are 18,200 'retained' (i.e. part-time firemen/people on call) so let's call it 10,000 full-timers, tops.

OK. I make that a grand total of just over a million. Let's stick on another half a million for admin staff, street sweepers, traffic wardens, planning departments etc, which gives us scope to cut up to half a million local government jobs. Starting with the Chief Executives on £200,000 of course, I'm not malicious.

Moving on, there are other state employees that we need, like armed forces (200,000), prison service (20,000) and state employees that do 'useful stuff' like nurses/doctors (500,000), porters, cleaners, cooks, immigration officers, coastguards, university lecturers etc. That might get us to two-and-a-half million or three million useful public sector workers (I'd prefer to fund NHS and education with vouchers, but I wouldn't expect the number of actual teachers, nurses or doctors to change that much).

So whatever number you factor in for admin, back-up staff, quangos, Whitehall etc, how the f*** do you end up with 8.2 million working in "Education, health and public admin" from Table 5.2 here, up by 184,000 over the last year? Sure that's the figure for the UK and not England, there are a hundred thousand people working in the private health and education sectors.

But this is where I run out of ideas and abandon all hope of being pithy or punchy. Is it just me who wonders about this, or am I mad and the rest of you know what the other five or six million are doing but aren't telling me? Is there a f***ing special department where all they do is invent new jobs? Have they forgotten where the off-switch is? Not that the Tories seem to have a clue either.

The TPA make valiant attempts to list all the non-jobs, but methinks that even they have missed the point. They arrive at an annual cost of £0.5 billion when it must be more like £100 or £200 billion. What we need is 'zero-based budgeting', which means basically sacking everybody and re-instating the couple of million that we really need, rather than trying to weed out the superfluous ones.

* Their summary of various facts and figures is pretty good, although it can't seem to make up its mind whether Council Tax makes up less than a fifth or a quarter of local government revenues.