Best Of

Morning all

Musing on tax and pension matters after my debate with MaxPB and others yesterday evening, I'm left with two thoughts.

The sense of being "over taxed" is compounded by the failure to raise thresholds. This "fiscal drag" or "stealth tax" instigated by the high-tax Conservative Government and now initated by its Labour successor has dragged so many more people into the higher tax bracket in the sense more of their income is now taxed at the 40% rate.

When I argued for a new 50% higher rate, apart from the usual howl of outrage, one or two failed to read the next bit which was to bring the thresholds to where they would have been allowing for annual RPI so the rates would rise so many middle to high income earners wouldm probably be better off from a simple 25p basic rate and 50p higher rate if the threshold from the former to the latter was set much higher than now.

The second point was about pensions - again, the usual wailing and gnashing of teeth about "public sector pensions" which are complex and by no means all the same - a Teacher's Pension is not a Local Government Officer's pension which in turn is not a Police pension or a civil servant pension.

In the Local Government Scheme (LPGS), there are swingeing penalties if you leave to take your benefits early - up to 25% if you go five years before your retirement. The problem is those staff are a) not likely to progress further andf b) are simply place-sitting preventing younger (and possibly more productive) staff from moving up and progressing. This needs to be re-thought within LPGS and elsewhere.

There are options for flexible retirement within LPGS whereby you can work fewer hours and start taking some of your pension and we might need to think about how we employ those 60 or above not only in terms of NI contribution but in terms of flexible hours and pension/salary provision.

We come back to the central question of how to being the public finances closer to balance in terms of reducing borrowing and the deficit. The debate can't be simply abandoned to the "supply side reform" proponents whose sole mantra is "tax cuts and spending cuts". We are well past it being either/or - it has to be tax rises AND spending cuts but getting the balance right between the two isn't easy. Osborne went for £5 of cuts for every £1 of tax rises but that was a different time and it may well be a more even apportion is apposite.

25% reduction for starting a DB pension 5 years early isn't really a "penalty" though is it ? It's a rough approximation of the extra net present value of the income stream. If you took £1m to an insurance company at age 55 and said "How much less annuity will you give me if it starts today rather than in 5 years time", I'm sure it would be in the region of 25%

‘I tried to warn them, but no one listened’ – one man’s crusade against HS2
...
[Big snip]
...
Fast forward to today and the cost of HS2 has reached as high as £100bn from an initial budget of £38bn (by 2009 prices), despite cancellation of the entire northern section to Manchester.

Earlier this year, MPs on the Public Accounts Committee (PAC) concluded it was a “casebook example of how not to run a project” and a risk to the UK’s reputation.

It goes further, though. Whistleblowers have come out in force alleging senior officials engaged in a massive fraud by downplaying cost forecasts to ensure Whitehall cash kept flowing in.
https://www.cityam.com/i-tried-to-warn-them-but-no-one-listened-one-mans-crusade-against-hs2/

Lord Framlingham's opposition to HS2, with walk-on parts for several ministers and prime ministers.

HS2 is the UK’s infrastructure disease writ large. Something that the UK rail network would obviously benefit from & where any reasonable cost / benefit estimate would easily justify its cost was allowed to turn into an enormous white elephant that eventually collapsed under the weight of the expense loaded on it by vested interests.

This report from Stonehaven is worth reading on just why UK building projects end up so very expensive: https://www.stonehavenglobal.com/making_britain_build_again

Short version: endless legal costs bundled on the front end, which not only drive up costs directly but also indirectly via the inevitable inflation in costs which occurs due to the legal delays, which (for national infrastructure) inevitably means going back to the Treasury for more £, which leads to further delays & cost-cutting which ends up only making projects even more expensive in the long term. HS2 is all of this, cubed.

Morning all

Musing on tax and pension matters after my debate with MaxPB and others yesterday evening, I'm left with two thoughts.

The sense of being "over taxed" is compounded by the failure to raise thresholds. This "fiscal drag" or "stealth tax" instigated by the high-tax Conservative Government and now initated by its Labour successor has dragged so many more people into the higher tax bracket in the sense more of their income is now taxed at the 40% rate.

When I argued for a new 50% higher rate, apart from the usual howl of outrage, one or two failed to read the next bit which was to bring the thresholds to where they would have been allowing for annual RPI so the rates would rise so many middle to high income earners wouldm probably be better off from a simple 25p basic rate and 50p higher rate if the threshold from the former to the latter was set much higher than now.

The second point was about pensions - again, the usual wailing and gnashing of teeth about "public sector pensions" which are complex and by no means all the same - a Teacher's Pension is not a Local Government Officer's pension which in turn is not a Police pension or a civil servant pension.

In the Local Government Scheme (LPGS), there are swingeing penalties if you leave to take your benefits early - up to 25% if you go five years before your retirement. The problem is those staff are a) not likely to progress further andf b) are simply place-sitting preventing younger (and possibly more productive) staff from moving up and progressing. This needs to be re-thought within LPGS and elsewhere.

There are options for flexible retirement within LPGS whereby you can work fewer hours and start taking some of your pension and we might need to think about how we employ those 60 or above not only in terms of NI contribution but in terms of flexible hours and pension/salary provision.

We come back to the central question of how to being the public finances closer to balance in terms of reducing borrowing and the deficit. The debate can't be simply abandoned to the "supply side reform" proponents whose sole mantra is "tax cuts and spending cuts". We are well past it being either/or - it has to be tax rises AND spending cuts but getting the balance right between the two isn't easy. Osborne went for £5 of cuts for every £1 of tax rises but that was a different time and it may well be a more even apportion is apposite.

25% reduction for starting a DB pension 5 years early isn't really a "penalty" though is it ? It's a rough approximation of the extra net present value of the income stream. If you took £1m to an insurance company at age 55 and said "How much less annuity will you give me if it starts today rather than in 5 years time", I'm sure it would be in the region of 25%

I'm sure you're right but that's not how it looks to the member of the scheme where it looks like a penalty and sounds like a penalty but if you have someone who has paid off their mortgage (thanks to low interest rates) and perhaps downsized to a smaller property and taken a nice capital receipt as a result, even the lower figure might be enough for the decision to be made to retire early.

That "paid off mortgage, don't give a stuff" thing isn't new- it was the point of departure for the plots of both The Good Life and Howards' Way. And I can vouch for the extra sang-froid it gives someone in the face of workplace unpleasantness.

It's clearly not helpful for our national lifestyle if people opt out of work in mid middle age. But motivating an employee who has decided they aren't bothered about the money isn't easy, and I'm not sure how many businesses are up to the challenge.

Yes. The Good Life started with the Goods having paid off their mortgage on a large house in Surbiton's premier road on a single income before Tom's 40th birthday. Try doing that now!

No kids, mind. And probably joined the company aged 17, no university and worked his way up. (Good friends with one of the higher ups, too, so a helping hand?)

Yes, Tom Good and Jerry Leadbetter both joined the company at the same time as draughtsmen. Jerry worked his way up - Tom didn't. It didn't really occur to him that he was supposed to and he suddenly found all his colleagues were 20 years younger than him.

There are few better social histories than British sitcoms. See also "Whatever Happened to the Likely Lads", "I Never Knew You Cared", etc.

More evidence - striking evidence - that Iran is not some unshiftable Islamic monolith

“In February, a senior Iranian cleric, Mohammad Abolghassem Doulabi, revealed that 50,000 out of 75,000 mosques nationwide had been closed due to a significant decline in attendance.

“Doulabi,, an intermediary between President Ebrahim Raisi's administration and the country's seminaries, expressed concern over the fall and its implications for a state founded on Islamic principles”

https://www.iranintl.com/en/202312124517

I suspect at least half of Iranians would throw off the mullahs tomorrow, given the chance. Unfortunately you probably cannot bomb your way to this outcome via the Israeli military

As a serious enquiry, what could be in its place 5-10 years after the Mullahs were thrown off in Iran?

That's a serious enquiry - which other country would be the historical prototype?

I'm struggling to see something positive, though perhaps less negative is the best we can hope for. Is some distant analogue of post-Ottoman Turkey possible (constructed by whom?) ? Or will it turn into another Syria / Libya?

I'm reminded of my favourite Terry Waite quote (pataphrased):

'When all is done, there needs to exist a door through which you can leave together."

Hot take (from my mate who's an Iranian exile so make of that what you will):

My Question: What do ordinary Iranians think of it all
His Answer: They just want to get rid of the mullahs

Q: Do they care that it's Israel doing the getting rid of
A: No, in fact on X Iranians are tagging IGRC targets for the IDF and then the IDF attacks those targets [!!!!!!]

Q: What is the concern, if any
A: We are worried about the infrastructure

While that might be true do these exiles really think that the majority of Iranians who remain in the country will vote for a reformer government that will step back from hard-line Islamism? Seems a bit naïve.

The answer is who knows? because the religious authorities vet all candidates before allowing them to stand. So we have no idea how well supported a genuinely more liberal candidate would be, because the Mullahs don't risk them being on the ballot paper.

Is though? The Arab spring shows that the silent majority in these countries wants the Islamic rule.

Not sure that’s true of Egypt, for a start; and certainly not sure that’s true of Iran

Notably, both countries have grand imperial histories stretching back way before Islam - so they have alternatives views of themselves. They have been great yet NOT Islamic in the past

This is not the case for Saudi, Yemen, Oman etc

While I hate to agree with you (on principle), this is an excellent point. Having a national identity matters.

I had an excellently witty guide on a recent trip to Egypt. He was about 50, smart, highly educated. Father of two daughters (and v proud of them)

We spent a few days together and talked a lot about Egyptian politics and he was quite frank about Egypt’s horrendous problem - mainly socialism in the past and islamism and over-population now

Then he showed me one of their gleaming new museums and he made the emphatic point “this is our past, long before Islam….”

He was proud of Egypt in a way that Chinese people are proud of China in a form that has zero to do with communism

I think the most likely scenario for Farage appearing on Strictly is after he is hoofed out of Reform UK, or if the party disintegrates or fractures around him. Without that, I think his ambition will rule his actions whilst he assesses he has a chance of a serious political role.

Given his Merrie Englande image, it should perhaps be Morris Dancing.

BTW They may have lost another Councillor up @Taz 's way, one Michael David Ramage. As has been remarked elsewhere - is someone taking the P ?

The guy is not listed as being in the RefUK group on the Council website, and as an ex-Member of the relevant Ref UK facebook group, but does seem to know a fair but about construction - especially bus stations (that's a complement - he knows his stuff in this area, and is taking a real interest):

"Rushworth MP won't help people he considers are Reform Party members or Reform supporters or Reform Activists. So having alleged I am a Reform activist (I'm probably more socialist than him) he won't help me.... (case summary).

Alleged?

I think the most likely scenario for Farage appearing on Strictly is after he is hoofed out of Reform UK, or if the party disintegrates or fractures around him. Without that, I think his ambition will rule his actions whilst he assesses he has a chance of a serious political role.

Given his Merrie Englande image, it should perhaps be Morris Dancing.

BTW They may have lost another Councillor up @Taz 's way, one Michael David Ramage. As has been remarked elsewhere - is someone taking the P ?

The guy is not listed as being in the RefUK group on the Council website, and as an ex-Member of the relevant Ref UK facebook group, but does seem to know a fair but about construction - especially bus stations (that's a complement - he knows his stuff in this area, and is taking a real interest):

"Rushworth MP won't help people he considers are Reform Party members or Reform supporters or Reform Activists. So having alleged I am a Reform activist (I'm probably more socialist than him) he won't help me.... (case summary).

Alleged?

Possibly although the council webpage does have his party as Reform.

It’s interesting how people seem to be really scrutinising Reform here but yesterday Labour lost its majority on a council in Cheshire with two councillors switching to independent and rather critical about Labour too.

Barely a murmur,

At this point, Reform are beating the Conservatives and Labour almost everywhere, and the minor parties/independents.

They’ll have reached 1,000 councillors, even before next May.

Hmmm... the political ghosts of the New Party, Doctor Death´s SDP, Dick Taverne´s SDP, Change UK and many others all say hello. While I agree the Tories are very sick and deserve obliteration, the positive narrative for the Faragistas is pretty thin. Not convinced that the next three years will bring the far right home. The party isn´t a party and there is little beyond the Mosleyiste glamour of NF that keeps them together,

But sometimes parties do break through. It's rare but it's not an impossibility. Labour did. The SNP did in Scotland.

Yes, you can argue 'special case' for both of them; one down to WWI / Liberal splits / changing electorate, the other to the Scottish parliament, PR and both UK and Scottish Labour being vulnerable in UKLab's 3rd term. But other special cases will occur too.

Are we in one now? Both historic dominant parties are led by weak leaders who don't get, or can't do, the basics. One is a bureaucrat; one is an easily-distracted internet-focused activist. Both parties are unpopular and have reputations tied down with failures and a lack of vision. So yes, this is an opportunity.

Sure, there have been such opportunities in the past too - 1981 and 2019 both being cases in point - but while they didn't ultimately break the mould that wasn't a preordained outcome in either instance.

And the political environment is different from the past, particularly in terms of media but also a declining former First World. We only have to look at other countries further down the same road to know it's possible here too. We are not much different to other OECD countries. Effective populists can take on the old mainstream more easily.

Of course Reform have weaknesses, most obviously in their over-reliance on Farage, and Farage's own lack of dedication to the task. But while that does matter it won't necessarily be fatal, depending on how annoyed the electorate is come 2028/29 and what the alternatives are. I certainly think it unlikely the Reform bubble will burst any time this year.

Quite seriouly, on the Israel-Iran "28th small disagreement", I think Netanyahu, like Trump, is perhaps overemphasising the short term - he is nearly as old as Trump and will not have to bear the consequences, whilst keeping himself out the of the orbit of the corruption investigation he faces.

There a rhetoric around of needing Iran never to have nuclear weapons (eg Trump), and 'fix this once and for all', but istm that this will no more ensure a peaceful Middle East than did Operation Peace for Galilee in 1982 (invasion of Lebanon) ensured a peaceful northern region of Israel - especially at it was launched out of the blue whilst a dialogue process was ongoing.

And there are two things I think are pretty-much guaranteed:

1 - A further half century of hostility to Israel.
2 - Countries in the region, especially but not limited to Iran, will consider a nuclear deterrent to be essential. Just as Trump's demolition of the international order will very likely result in nuclear proliferation; the Victorian age is not coming back.

They might imo get 15 years of peace.

An important factor is that Iran is a Shia country, and it isn't an Arab country, which means you'll get a lot of "thoughts and prayers" type of reactions among Sunni Arabs.

The governing elites in the Gulf States are probably more scared than Israel, of a nuclear-armed Iran & they'll be quietly cheering the bombing campaign. A complete destruction of Iran's nuclear capability would make it less likely that countries like Saudi would pursue the Bomb.

Three observations.

1 - We have had an Iran-Saudi proxy war for a long time (is 1979 a fair time to date the rivalry's re-emergence?), at various levels, as they struggle for whom will be regionally dominant.

2 - The Oct 7 attacks on Israel came at a time when Israel-Saudi relations had been improving for a long time, and Israel had recent agreements with various Arab nations in the Gulf.

3 - IMO long-term peace may be about reversing an instability dynamic of Arab vs Persian vs Israel, where one blows up positive moves between the other two in search off loss to "us". I have no idea what that could look like, but I don't think knocking out Iran is a good option for longer term resolution; it may be a shorter term gain for Saudi and Israel.

Are there lessons to be learnt from the rebuilding of Axis countries after WW2, however distant ?

Morming all,
A bit of early morning polling as we have been starved over the weekend and the gap is closing a bit again (in a MoE way).....

YouGov (15 to 16 Jun)

Ref 27 (-2)
Lab 24 (+1)
Con 17 (=)
LD 15 (=)
Grn 10 (=)

Interesting that Labour has been consistently gaining in the polls since they did the WFA U-turn.

It was a good political decision to do the U-turn.

A good political decision, a bad decision for the country's long term future. Unfortunately, giving people money they don't need is always going to be more popular than investing for the long term or putting our fiscal house in order. This is how countries fail, death by a thousand refusals to take difficult decisions. To be fair to the government, they did try. This one is on the voters, and the populists who are indulging them.

We say we want politicians to put country over party but when it happens they get slagged off for being "shit at politics".

If a Labour chancellor had

1) merged Income Tax and NI
2) new rate specifically for pensioners, so lower rate tax pensioners don’t get hit
3) but those on higher rate get to pay the combined tax
4) all non-pension old age benefits go in a blender and come out taxable.
5) while you are at it, overall tax rates are up a bit.

That could have been sold as “more money for ordinary pensioners. Pensioners on £50k+ pay more.”

Overall, I think that would have pleased the party, taken the edge off “cuts” and raised more money. While probably losing less votes.

Morming all,
A bit of early morning polling as we have been starved over the weekend and the gap is closing a bit again (in a MoE way).....

YouGov (15 to 16 Jun)

Ref 27 (-2)
Lab 24 (+1)
Con 17 (=)
LD 15 (=)
Grn 10 (=)

That Tory-LD gap is being a bit stubborn.

Its not really changed since the Tory drop off immediately after the LEs. In fact very little has changed at all since that

We all know Electoral Calculus is essentially useless given the multi-party nature of politics currently.

The actual changes since July 2024 (allowing for rounding) are:

Reform +13
Labour -10
Conservative -7
LD +3
Green +3

We also know polling for the various local "Independents" is suspect so we don't know what's happening in places like East London or the Leicester and Birmingham seats where they polled well last year.

The "trend" in local council by-elections (with usual bucketfuls of salt) has been to see BOTH Labour and Conservative lose significant vote share and that's reflected in the 17-point combined fall in the national opinion polls.

Next year we'll have an intriguing round of local elections in London as well as for some of the new Shadow authorities but that's a lifetime away.

Theres some fun to be had comparing council by election ward results versus the ward by ward 2024 estimates and some of the current ward by ward estimates. It does show the somewhat unsurprising news that Lab and Con are struggling to find the gas pedal (and that Reform are doing well everywhere but especially in redder walled areas)

The interesting question for me for 2029 is: which seats - if any - will Reform win from the Liberal Democrats?

Because Reform is highly likely to top the polls, with Conservative and Labour vote shares down sharply, while the LDs are probably going to be up a couple of points.

Outside of Scotland, the Conservatives are the main opposition in almost every LibDem seat. In which of these could enough votes transfer to Reform to threaten the LDs?

Newton Abbott

That's going to be extremely close at the next election: I'd reckon both the LDs and Reform will be on around 35%.

The party is well placed to win against Reform in a head to head, because it’ll get tactical transfers.

According to Mark Pack Lib Dems have won 75% of council byelections since the locals, where they and Reform were the top 2. The other 25% were former Labour seats where LDs came up into 2nd.

Labour and Tories have won 0% of head to heads with Reform since 1 May.