Liebrary: Raising pensions by CPI is the right and fair thing to do, fibs the Government.

The UK government says that raising pensions by the Consumer Price Index (CPI) instead of the Retail Price Index (RPI) is the fair thing to do. This is inspite of the fact that pensioners, who are already struggling financially, will lose a large chunk of their income.

So what would have happened if MPs' pay and perks had been linked to inflation?:

An MP’s allowances in 1975, of £3,200, would have risen by 2007 to £19,367 if RPI inflation had been applied. In fact the actual figure was £90,505.

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Estate agents – a question of trust

Fee dishes the dirt on an unscrupulous estate agent

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Mary Portas reveals her high street rescue plan

Chris and Fee hit on a way for small retailers to survive

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More tax-avoidance loopholes for the ultra-wealthy may provide a boost for Brit-Art manufacturing

“The hands of a healer”, those blessed appendages of gifted individuals whose mere touch can make all sorts of maladies simply go away. Brit-Artists have joined the saints, gurus and fakirs. The malady our arty countrymen can cure by the application of their hands is tax flu. Like alchemists turning lead into gold, they can turn rubbish into multimillion pound objets d'art of tax dodging.

As Britain gradually slips back to “Victorian levels of inequality”, loopholes are being opened for the wealthy to avoid tax by exercising their gracious patronage. It is not from benevolence, but for tax avoidance that they can making donations to charities, the nation, and to eager entrepreneurs looking for startup investment. And, as a welcome relief from the usual government policy of taking from the poor to give to the rich, some of these tax changes take from the rich to give to the extremely rich.

Make no mistake, in spite of their protests the wealthy have been very well served by our tax system. This is evident from the graph produced by the IFS, showing that tax on the wealthy has been slashed by nearly 40% between 1978 and 2011.

It is not just the income tax burden that has been lifted from the rich. Other taxes the rest of us pay have been waived through circuitous bypasses. The Daily Telegraph reported that a third of houses sold for more than £1m dodge paying stamp duty, costing £1billion in lost taxes (i.e. saving the wealthy £1billion in taxes). This wheeze is pulled off by placing ownership of the house into a company. Instead of selling the house, paying 5% stamp duty on the property transfer, you sell the company and pay just 0.5% stamp duty on the equity transfer. And for an annual fee of £30,000, the government sells around 5,400 non-doms the right to avoid tax on overseas income that the rest of us have to pay. These 5,400 each paid an average £1million in tax on their UK income according to the Treasury, a tantalising reflection of the amount they manage to avoid by paying what is to them a paltry £30k protection money to the treasury. All strictly legally.

However, in this time of national crisis, when every tax-pound goes to digging the nation out of its mire of debt, our taxmen have striven to shave back the tax-avoidance privileges from the merely wealthy to benefit only the extraordinarily wealthy.

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Liebrary: Hedge funds consistently deliver higher returns, NOT

As we pointed out in an earlier post, the maths shows that overall bankers' performance is no better than a monkey can do picking stocks at random - effectively like an index tracker. 


An academic study has found that Hedge Funds, who justify massive remuneration to their staff by their superior performance, actually perform only a teensy bit better than the market average. The industry gets away with this fib simply by not including their bad performances in their figures.


If premier league football clubs could rank themselves this way, they would all be champions with 100% wins - because they would not report the times they lost or drew.


Alpha is the posh term for the profit an actively managed fund earns over the index linked market average. Hedge Fund managers justify their vast remuneration by claiming consistent average returns of 3%-5% above the market. And they have managed to fool academics, regulators, and most importantly investors for years. The study shows that average returns are closer to 0.05% per quarter above the market.


Extracts from report:

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Giving private healthcare costs a bypass

KJ and his father weigh up private healthcare over NHS treatment

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HSBC investors: death becomes them

And it could be before their five-year bonds have matured

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Why tackling high pay is in the national interest

By Deborah Hargreaves, Chair of the High Pay Commission

British business is facing a crisis. The public has lost faith in the corporate sector, which it sees as monolithic, money-grabbing and uncaring. Excessive pay for company bosses has added to the malaise. As those on middle and low incomes face a sharp squeeze in their living standards, corporate leaders are awarding themselves 49% pay rises. These bosses see little irony in then lobbying to repeal the 50p top rate of tax paid by those on £150,000 or more. These are the same leaders who are arguing for real-term cuts to the minimum wage, because, after all, aren't we all facing times of unparalleled austerity?

Directors' hypocrisy over pay reinforces the view among the public that businessmen are "in it for themselves". It is worrying that trust in big business has sunk to this extent when there is so much emphasis on the private sector leading us out of the economic crisis. In polling for the High Pay Commission, 79% of those questioned said pay and bonuses were out of control.

Our year-long inquiry has led us to believe that excessive top pay levels are not only corroding trust in business but also damaging society and the economy as a whole. In the last 30 years we have seen rewards channelled upwards. The top 0.1% of earners have pulled away from the rest at a rapid pace. In 1980, for instance, the boss of Barclays was earning 14.5 times average pay at the bank; the current boss, however, is on 75 times the average, representing a 4,899% rise over that 30 years.

During the same period average UK wages have gone up threefold and pay for a senior policeman or schoolteacher has risen sixfold. Of course, leading Barclays today is a different proposition, but the lives of a policeman and headteacher have also changed beyond recognition in that time.

Since the mid-1970s the general workforce's share of GDP has shrunk by 12%. For years, this sleight of hand went unnoticed – we all felt we were getting richer on the back of a rising housing market. But as the economic crisis has started to bite, the fact that company bosses seem to be living in a different world has become increasingly apparent.

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Liebrary: Are public sector pensions ballooning? The government's own figures show this is not true.

A succession of government reports have shown that public sector pensions are not ballooning out of control, as is shown by this summary of government figures produced by the Institute of Fiscal Studies: 

And yet all the main political parties - Conservative, LibDem and Labour - are united in continuing to spout the opposite. 

Even without the shenanigans currently being fought over – raising retirement age; changing inflation link from RPI to CPI; changing from final salary to career average – the cost would stabilise (as shown by the Treasury 2004 forecast). This is inspite of the overall population aging, as is shown by the Office of National Statistics graph below. 

The ONS population pyramid graph shows how the population will age between 2010 and 2035. ONS figures state that the number of retired people in the UK will grow by 28%, from 12.2 million in 2010 to 15.6 million in 2035. 

Inspite of this growth in numbers of pensioners, there is still no explosion in pension costs as a share of national income. This is because national income is expected to grow more than enough to support this. The current proposals being pushed through actually bring the pensioners' share of national income below the current level, inspite of pensioners being a bigger share of the population.

The Hutton proposals will reduce the share of wealth, inspite of the share of pensioners rising. Why?

Pensions are paid for by company profits and tax. Cutting pensions is nothing about affordability, and everything about moving wealth from the poor to the rich. 

And that in a country that is already the most unequal in Europe, according to OECD stats:

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A complex forecast over pension fees

Chris's pension fund manager chum chews over the obscenely large slice he takes from your savings pot

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