« Monbiot on Fisheries | Main | Art Envy »

April 03, 2007

Polly, Polly...

...please, it's not £ 5 billion, it's £ 5 billion a year:

Note how almost the entire press is on song for the "£5bn pensions raid" story, with a single-minded, out-to-kill consistency across every Tory paper. This "stealth raid" happened 10 years ago in public at the dispatch box, and has been industry's excuse for the retreat from company pensions ever since. There is no doubt that the £5bn played its part in the pensions crisis, but it was peanuts compared with £250bn of pension funds lost on the stock market; £5bn is a gnat bite compared with the cost of pension holders' extra longevity.

Because it's £5 billion a year over ten years that's £ 50 billion so far. But it's worse than that. The present value of a share is the discounted value of the future revenue stream (ie, the dividends from it). Assuming a 5% yield (not too far away from the truth) then (and I'm sure that people who actually understand how to discount such income streams properly can do better than my back of the envelope number) whacking £5 billion a year off means a fall in capital value of some £100 billion.

No, that's not peanuts.

The rest of it is us brave progressives fighting valiantly against the forces of the conservative (and Conservative) press. About as valid as her valuation above.

April 3, 2007 | Permalink


TrackBack URL for this entry:

Listed below are links to weblogs that reference Polly, Polly...:


She also says that "76% of newspaper readership belongs to the Right" as if people who buy papers are some kind of slaves who have no free-will to buy another paper.

As Bernard Ingham once said to a course I attended "The first piece of advice I gave to all new ministers was to read The Sun every day. You don't sell that many papers without reflecting the views of the man on the street"

Posted by: Dave | Apr 3, 2007 10:25:10 AM

Why cannot Polly come out and say that she admired the destruction of private pensions and the subsequent expansion of the state? Why don't these statists just say what they mean?

Posted by: Johnathan Pearce | Apr 3, 2007 10:44:36 AM

Further to a comment I made earlier, using this methodology, a switch to a "flat tax" regime, as is often suggested on this site, would see the value of pension funds fall (or 'a raid') by the equivalent of something like £400bn, working on tax relief as it stands being in the order of £20bn.

Tim adds: But my planned abolition of corporation tax will make that back and more.

Posted by: Matthew | Apr 3, 2007 11:45:06 AM

Tim, they tried a zero-percent rate of corp tax on the first £10,000 a few years ago, it was abused to the hilt (and rightly so, our clinets would be annoyed with us if we didn't tell them how to play the system) and shut down again last year (and rightly so).

Remember always, there IS NO TAX ON REINVESTED PROFITS anyway. If a company spends money on marketing, research and development, staff training, new machinery, refurbishment and so on it gets a 100% tax deduction. OK, I admit that tax relief for new machinery is spread over a number of years, but if you make £100 and spend it on investing and expanding the business, YOU DO NOT PAY TAX. (also there are spiteful rules that you don't get tax deductions for certain items of expenditure, this is a highly technical area).

The moral here? It is only mature companies that have ceased expanding that pay significant amounts of tax. And why shouldn't they? What harm does it do? It's a bit like Land Value Tax in that respect. Nobody is going to shut down a mature profitable business just because it pays tax.

Posted by: Mark Wadsworth | Apr 3, 2007 1:44:10 PM

We can't expect Polly to recall those OAPs who were non-taxpayers and used to get their wee bits of dividend tax-free, and thereafter could neither avoid the tax nor claim it back. Rather like the 10% taxpayers who are about to face 20% tax. I think I spy a common factor.

Posted by: dearieme | Apr 3, 2007 2:28:52 PM

Dearime, Nulab have thought of that - that's why they invented Pensions Credit and Tax Credits to generate work for thousands of captive Labour voters in the DWP. And make people fill in stupid forms.

Posted by: Mark Wadsworth | Apr 3, 2007 2:43:03 PM

"Tim adds: But my planned abolition of corporation tax will make that back and more."

Ah, but apparently no-one is taking into account any other Budget meassures, or changes in the economy, or indeed other factors affecting pension funds. So "Worstall's £400bn tax raid on pension funds" it must remain!

Posted by: Matthew | Apr 3, 2007 2:48:03 PM

Mark, you are addressing someone whose experience of one of Nulab's bloody credit schemes ended when they simply denied the existence of a schoolgirl daughter whom they were already hitting with National Insurance and Income Tax on her holiday jobs. Shrieieieiek!

Posted by: dearieme | Apr 3, 2007 3:42:02 PM

Dearime, don't worry, Nulab are going to employ another million people to help people "understand their entitlements"!

Posted by: Mark Wadsworth | Apr 3, 2007 4:11:39 PM

It really is time that we discussed what should be done with these people when they lose office. Chained to stakes at the low tide mark?

Posted by: dearieme | Apr 3, 2007 4:43:34 PM

I wonder whether Polly's pension is defined-benefit or defined-contribution?

Posted by: David Gillies | Apr 3, 2007 4:48:44 PM

And dearieme: I favour boiling in oil, or perhaps flaying, or maybe flaying and then boiling in oil.

Posted by: David Gillies | Apr 3, 2007 4:50:12 PM


I hope it's a DB scheme and the grauniad goes broke!

Two bits of pensions advice
1/ Don't take free advice without checking.
2/ Look at a SIPP and invest in trackers.

Posted by: AntiCitizenOne | Apr 4, 2007 11:55:42 AM