The Downing Street state pension robbery

Downing Street thieves

I wonder if Mr Plod has a good sense of humour. It is a good photoshop. Pic Credit: Paul Downes @CallmeDownsie

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The mantra  that we cannot afford to pay the 3.9 million  50s women   their pensions until they are 65 and soon 66 is based on the premise that there is no money in the National Insurance Fund. The big question is why?

I have already in a previous report for #Backto60  shown that the accounts of the National Insurance Fund are in fact in surplus. But detractors point out that they soon won’t be if the government hands back £77 billion owed to the women.

But what if we have reached  this situation because the government has raided a fund  which is 91 per cent spent on pensions for other benefits. And what if the Treasury deliberately decided to  undermine the fund by avoiding paying any money into it?

This is what I have found out by investigating the history of this fund.

The original fund was set up in 1911 by Lloyd George and did not cover pensions – but helped pay  medical bills for wage earners and provided  unemployment benefit for  some workers. Employers and employees had to make compulsory contributions.

Pensions were introduced for those over 70  in 1908 and were means tested and supervised by local councillors. People could be disqualified from getting a pension if they had been imprisoned for ten years, weren’t of good character and were drunkards. The money came from general taxation. There is a House of Commons library report about the act here.

The real major changes came under the Attlee government which set up the welfare state. The National Insurance Act, 1946 introduced compulsory NI for all working people except married women. It set the pension age at 60 for women and 65 for men. Pensions, unemployment benefit, sickness benefit and a maternity allowance and death grant were paid out of it. There is a useful summary in the National Archives here. But it was run as a ” pay as you go ” scheme with money topped by the Treasury.

It is the attack on these provisions which began under the Thatcher government in the 1980s that has led to the 50s women losing out.

An excellent report by the House of Commons library describes what happened. It is worth quoting parts in full.

“In each year from 1948 to 1989, the National Insurance Fund received a grant from the
Treasury, known as the Treasury (or Consolidated Fund) Supplement. The origins of the
Supplement lay in the Beveridge Report, which envisaged a tripartite scheme of contributions to the Fund, whereby the Treasury would pay one third of the cost of unemployment benefits and one sixth of the cost of pensions and other benefits. In practice, the level of the Supplement tended to be around 18% of contribution income, a level at which it was fixed by the Social Security Act 1973.

“From 1980, the value of the Supplement began to decline, reflecting partly the growing level of contribution income and partly the constraining of spending on benefits by the abolition of earnings linking of the pension and other long-term benefits and earnings-related supplements to unemployment benefit. By 1988 the Fund’s contribution income exceeded its benefit expenditure, leading to a steady growth in the balance of the Fund (from £5.3bn in April 1986 to £10.4bn in April 1989 ).

In this context, the then Secretary of State for Social Security, John Moore, stated in 1989 that:

“The tripartite principle is already effectively a dead letter. The rationale behind it has
gone, and the Supplement has been shrinking steadily as a proportion of the Fund’s
income from about one-third in 1948. It now stands at only 5%. We consider that there
is now no need for it all. The £26bn of expenditure from the Fund is fully covered by
contributory income and the abolition of the Supplement will have absolutely no effect
on that expenditure”
“The Supplement was abolished by the Social Security Act 1989.”

It was a disaster – the fund which then  had  big surplus – went heading into the red – as it was now being raided for the full cost of unemployment and sickness benefit at a time of high unemployment.

So in 1993 the Major government had to partly retract by reintroducing a Treasury supplement because money in the fund had fallen by a staggering 50 per cent  due  to benefit pay outs as well as pensions. Pensioners were robbed.

But  the government fixed the rules so it was much less generous than the  system they bequeathed from Attlee. As the report says :

“There are a number of differences between the Treasury Grant and the Treasury
Supplement. First, the levels of Treasury Grant are set by reference to benefit expenditure rather than to contribution income. Second, and more significantly, whereas the Treasury Supplement was paid annually, irrespective of whether it was actually needed to finance a particular year’s expenditure, the Treasury Grant is paid at the discretion of the Secretary of State.

“The amount of Grant paid to the Fund was limited to a maximum of 20% of forecast
benefit expenditure in 1993-94, and to a maximum of 17% of forecast benefit expenditure in subsequent years.”

The truth of the matter is that the rules were skewed so the Treasury never had to pay out any money.  From 1989 to 2014 if the Treasury had returned to its original support  under  the Major, Blair and Brown governments, the Tory Liberal coalition and Cameron’s government, billions of pounds would be available now to help pay the 50s women. Instead as we know successive governments ruthlessly decided to solve the problem by raising the pension age.

In top of this the government also amended the benefits that would be paid out from the fund – including some new benefits like paternity benefit for example.

Anyone who believes the changes that happened – both the removal of Treasury contribution to the fund and the subsequent rise in the pension age – was a happy coincidence is deluding themselves. You can see here  in an article in the Daily Express what  George Osborne, the former chancellor, told investors at the Global Investment conference in 2013. Scroll down to the video

George-Osborne-speaking-at-the-conference-815768

George Osborne speaking at the 2013 Global Investment Conference

He said: “Tackling entitlement costs and the cost of an ageing society is a real challenge for Western democratic societies and in the UK we’ve brought forward the increase in pension age to 66 in this decade; we’ve brought forward the increase to 67 in the next decade and actually because of some reform taken some years ago the female pension age is increasing to 65 as we speak.”

“These changes, when you’re a finance minister, the savings dwarf almost everything else you do.

“They are absolutely enormous savings and they enable you to go on providing a decent retirement income. So you’re not necessarily reducing the entitlement of people who are retired you’re just increasing the age when that entitlement kicks in. ”

“Of course when these were first put into practice these pensions systems life expectations was dramatically less.

“I’ve found it one of the less controversial things we’ve done and probably saved more money than anything else we’ve done.”

Need I say more. The UK has one of the lowest and least generous state pension in the developed world and it has been bought about by making huge savings against 50s women.

 

Revealed: Thousands of Britain’s top bankers become Euro millionaires while workers pay clipped to 1 per cent

HSBC pic credit BBC

HSBC. Five senior executives due to share £33.4m Pic credit: BBC

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The day  after the general election the House of Commons library released a flood of papers which had been held up because of  purdah rules until after the result was known.

One of the most revealing papers was one on Banking Executives’ Renumeration in the UK. It drew on two sources – Britain’s submission  ( required by EU rules ) to the European Banking Authority and British sources such as company reports and details from the banks themselves about long term incentives for senior executives.

The facts revealed in the annexes to this report confirm what a lot of people have suspected but have not always been able to prove. There is-a widening gulf between the top and the bottom that has been going on during the fiercest period of austerity which has seen real wages for million falling. If John McDonnell, the shadow chancellor, and Jeremy Corbyn, the Labour leader, had access to this information during the election it could have been dynamite.

Two facts are extraordinary. This boom in higher executive pay came under the coalition between 2012 and 2015 when David Cameron and George Osborne were actively pursing wage freezes and minimal wage rises in the public sector.

Second it is the scale of it – it is not a handful of  new bankers becoming Euro millionaires, it is thousands of them.

And for the very, very top executives at five of our biggest retail banks it is untold riches if they meet performance targets.

The wider picture only came out because of a  European Commission directive to collect figures from all 28 EU members on how many bankers are earning over 1 million euro (£884,300 at current rates) a year. At the time the Euro would have been worth less – but even so it is a large sum.

Britain will no longer have to supply this when we leave the EU.

The figures show startling increases in senior staff employed by the banking industry falling into this bracket between 2012 and 2015 across nearly all sectors. Altogether the number of higher earners has risen nearly 300 per cent over this period, from 1272 to 3551.

Among the bigger rises are those in investment banking where the numbers earning this figure and more has risen from 947 to 2146. In asset management the numbers rose from 94 to 415 while those in high street banks rose from 52 to 105.

The average salary among the 2146 top earners in investment banking was 2,021,000 euro or over £1.78 million a year. Among the 415 people in asset management it was even higher at 2,201,000 euro or £1.946 million a year. In retail banking the 105 people averaged a little less at 1,789.000 euro or £1.582 million each a year.

Equally damning is a survey taken from five banks in Britain – HSBC, Barclays, Lloyds, Santander and the state owned RBS.

It looked at the money the five to eight top executives could make. At Lloyds 8 people share £24.9 a million a year between them. The figure for Barclays was £27.1m and at HSBC the top five people shared a whopping £33.4m.

Figures for the state owned RBS are lower at £11.35m while at Santander it was £10.6m.

As already known the chairmen and chief executives also get good pay packets worth millions.

What this says is that the coalition of David Cameron and Nick Clegg were happy to preside over this boom and impose severe austerity, and job cuts to pay for the mess the very same bankers created  by triggering the  crash in 2008.

As the song goes : “It’s the poor what gets the blame, It’s the rich what gets the pleasure, Isn’t it a blooming shame? ”

For not much longer I suspect given the current climate.

I have written about this in Tribune magazine. The House of Commons library report is  here for those who wish to read it

 

 

 

 

The Treasury: Destroying Britain’s world leadership in green technology

cop 21 carbon capture

Carbon capture from Cop21

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There has been much said that Britain doesn’t capitalise on its own innovation – and leaves other countries to do so. Much of the blame is put on companies not wanting to invest – but it is often acknowledged that the state has a role to pump prime innovation.

In green technology Britain is seen to have surrendered the lead it once had on wind farms – with nearly all the technology now being imported.

What has not been really reported is the role of the Treasury in encouraging or discouraging green technology. Until now.

A report by the Commons Public Accounts Committee in the dying days of Parliament shows just how baleful the Treasury has been in destroying Britain’s world prospects coupled with writing off taxpayers money. And the main culprit in the last six years must be George Osborne and to a lesser extent, former Liberal democrat energy secretary, Chris Huhne- despite the Liberal  Democrats green image.

Officially the report was on the abandonment of carbon capture technology. –

The Commons  criticised the handling of decisions by the last coalition and Conservative governments to waste some £168m by cancelling competitions to develop new carbon capture technology before its potential could be realised.

The Mps concluded: “ The UK has now missed opportunities to be at the forefront of a growing global industry” but say this is part of the pattern where the Treasury halts projects for short term financial gain over the last decade.

“The UK may now have lost any competitive advantage to export CCS technology to countries that are seeking options to reduce their own carbon dioxide emissions, which could have created engineering and R&D jobs in this country. This is reminiscent of government decisions in the 1980s not to develop renewables, meaning the UK lost its position as the world leader in emerging technologies such as wind power.

“Neither the Department nor the Treasury evaluated the potential benefits for the UK’s economy of having a globally competitive CCS sector prior to the competition being cancelled.”

What is more damning is how MPs go on to provide a shopping list of failure to support green technology.

“These included cutting feed-in tariffs for solar and onshore wind; scrapping the zero-carbon homes regulation; withdrawing the grandfathering support policy for biomass projects; privatising the Green Investment Bank; and cutting subsidies for low-emission vehicles.”

The original decision to halt the first attempt at carbon capture technology was made by Chris Huhne when he cancelled an experiment at Longannet power station in Scotland. Then George Osborne halted for short term savings a development at Drax coal fired power station in 2015.

Mean while in the rest of the world 20 projects are going ahead. As Mps conclude:

“Halting CCS’s deployment means that the UK will have to pay billions of pounds more to meet its decarbonisation targets, has missed opportunities to be at the forefront of a growing global industry, and has damaged investors’ confidence in working with the government on CCS in the future.”

Given we are supposed to be proudly standing alone -post Brexit – and need to develop new technologies here, this is doubly damaging. But then it seems politicians are more interested in rhetoric than action.

I have written a piece in Tribune on this.

 

Is George Osborne’s Northern Powerhouse about to hit the buffers?

George-Osborne

George getting out in time before the Northern Powerhouse runs into trouble

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My last post on the national repercussions of the Great Western electrification shambles has elicited some very interesting information about why Network Rail got into such a big overspend. (£1.2 billion on a £2.8 billion project)

If the information is accurate – and it seems to be based on some sound sources – it would suggest that George Osborne’s strategy to boost the North through better rail connections is about to come to a grinding halt because it has not been properly costed.

Through Tim Fenton well known for his caustic comments on the media oligarchs on his Zelo Street blog , I have become acquainted with an extraordinary obscure debate about the  safe clearances needed to install overhead electrification.

Ever since the electrification of the West Coast mainline in the 1960s Britain has had narrower clearances than the bigger gauge continental railways. We even had a derogation under the EU. But according to rail expert Roger Ford a serious blunder during the privatisation of the rail engineering which meant all the papers justifying the narrower standards were lost. So we now have no derogation because we lost all the paperwork to justify it.

Why this is important is that the higher clearances will add huge costs to ongoing rail electrification projects in every tunnel and under every bridge on the line. They will have to be higher margins between the top of the train and the wires.and the structures  They will  also have to raise the height of every planned pantograph- to protect people and staff coming into contact with it.

Now it appears that if each situation is given a special risk assessment it might be possible to get round the rules – but that will add to delays and costs and will have to be approved by British regulators – the Office of Rail and Road- even if we have left the EU.

As Roger Ford wrote in his December bulletin: “When all this was reviewed by the relevant British Standards committee it was agreed that, while the previous  2.75m clearance  was not justifiable as a minimum limit in a standard, it might be justifiable subject to a risk assessment.  So, according to Network Rail, electrical clearances below 3.5m are possible – with risk assessment.

” What’s really infuriating about this safety-by-diktat, is that the engineers concerned know that it is irrational and yet they go along with it. To paraphrase Edmund Burke, ‘the only thing necessary for the triumph of bureaucracy over common sense is that good engineers should do nothing.’

Great_Bentley_station_geograph-3890553-by-Ben-Brooksbank

Picture of Great Bentley station by Ben Brooksbank

Now obviously this is going to effect more lines than just the Great Western – and this is where George Osborne’s plans  turn to dust.

Already costs are rising on the Midland main line electrification from Bedford to Nottingham and Sheffield. With a critical National Audit Office report likely it is possible that electrification  will stop dead in its tracks at Kettering and Corby – nowhere near the real North.

And the Trans Pennine electrification – another Osborne  project -might stop altogether.

No wonder George Osborne is now going to be editor of the London Evening Standard – he will want to be well clear of the North. This is just a brilliant example of how our incompetent and overrated political amateurs  don’t properly assess what they are  doing.

And the public are  always the losers – in this case the travelling public.

 

Spending Review: Caveat Emptor- Buyer Beware

George-Osborne1

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Today the Chancellor, George Osborne, launched the autumn spending review.

From the statement you might guess that he has climbed down over welfare spending cuts by abolishing his plan to cut tax credits, climbed down over big cuts to police budgets and acted to save the mental health budget and save the NHS from further cuts. All terribly good news along with more money for defence equipment, the security services, already announced.

But if you look at the figures he still planning  the same  huge level of cuts  but apparently with no pain.

For a start we are going to have no changes to the tax credits – yet there is going to be a change to the new universal credit which will replace a whole series of benefits. So the government will still be cutting the welfare bill by £12 billion. No details yet but it will be sneaked through when the figures are announced much later, hitting another group. And he is proposing to sell 20 per cent of the Department of work and Pensions estate- selling off  Jobcentres and benefit offices.

The NHS is getting more money but will have to make £22 billion of efficiency savings and provide a 7 day a week service. How? No details.

The police may not get their budget cut but the budget is not protected against inflation which is expected to start rising – so there is a hidden cuts inside this announcement.

And  the government claimed it had protected the science budget – but within hours engineers were announcing that a major demonstration project into carbon capture – which could save some coal fired power stations from closure – had been cancelled.

And both the extra money for defence and spending by HM Revenue and Customs – on equipment and tackling tax evasion- is going to be financed by axing thousands of civilian jobs in defence and closing down almost all local tax offices.

And while there is a £600m fund for mental health inside the NHS many voluntary organisations looking after the mentally ill and handicapped will be hit by the huge cut in local government funding.

There is more privatisation on the way – the rest of air traffic control, ordnance Survey and the Land Registry.

So what looks like a series of good announcements are often little more than smoke and mirrors. And in this budget it will depend more than most on the small print hidden in government announcements. Journalists are often fooled into first believing the initial message only to find it starts to unravel over the next few weeks when the policy bites. This is a Caveat Emptor Spending Review- buyer beware.

 

Revealed: The Treasury mandarin who said losing £1bn for the taxpayer was value for money

john kingman, second Permanent secretary at The Treasury Pic Credit: worldellows.yale.edu

john kingman, second Permanent secretary at The Treasury Pic Credit: worldellows.yale.edu

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There has been enormous outrage about the £1bn loss to the taxpayer caused by the sale of the first tranche of Royal Bank of Scotland shares. An article in The Guardian on August 4 reported not only expected criticism from Labour but concern from a banking analyst that the share price of RBS was too low to justify the sale.

What was only briefly mentioned was that the second most powerful mandarin in the Treasury had also given the go ahead. You might expect him to bow and scrape to the Chancellor but actually he has more powers than you might think and he needn’t have followed his instructions.

If an accounting officer believes that a government minister is about to make a decision that will lead to a big loss to the taxpayer he can refuse to approve the action.

These actions are not taken lightly – one of the most recent examples being the refusal by Richard Heaton (soon to become Permanent Secretary at MoJ) who requested one, on value for money grounds, on 26 June over extra funding for the Kids company charity. He was overruled by ministers who have now seen to have made a big mistake as recent coverage reveals.

John Kingman could have done the same thing. He would face being overruled by George Osborne but it would have caused a furore and triggered an eventual Whitehall investigation.

John Kingman Letter Instead as this letter above shows he has positively embraced the sale.

“ I am satisfied that a sale at this time would offer good value for money for the taxpayer and meets all other requirements in accordance with the principles of Managing Public Money,” he wrote to George Osborne.

Really?  Now John Kingman is one of the cleverest mandarins in Whitehall. He hates holidays, lives in Leicester Square and one former colleague describes him in these words: “His arrogance is only marginally ahead of his considerable intelligence, whereas with most ambitious men of his ilk the gap is rather larger.” A profile in 2009 by political editor George Parker in the Financial Times says it all.

He writes “If he can achieve the goal of unwinding the taxpayer’s stake ( in RBS) at a profit, his route to the top of the civil service is clear, even if some question whether he has the patience to manage such a huge, traditional organisation. “

Well at the moment he hasn’t – he has acquiesced in a £1 billion tax loss. And I am not the only one who has noticed this.

The National Audit Office, Parliament’s financial watchdog, which reports on state asset sales, confirmed to me “We are watching the situation”.

They will have to make a report on this. This will lead him to have to appear before the House of Commons public accounts committee to justify why he approved what was done.

No doubt the government would like Parliament to take its time – perhaps not report until the entire sale is over – but that won’t be until 2020.

I say the huge loss to the taxpayer should not go unchallenged for years. Bring it on now!

Distorted and Massaged: How the dole claimant figures show a divided nation

George Osborne at the Despatch Box in Parliament pic credit: video snatch from www.csmonitor

George Osborne at the Despatch Box in Parliament
pic credit: video snatch from http://www.csmonitor

George Osborne’s great claims that the UK is on the road to jobs recovery has already been attacked for producing a mass of new low paid jobs, zero rated contracts and a boom in part-time working.

A closer analysis recently provided by the House of Commons library breaking down unemployment by constituency reveals a rather different disturbing and divided picture. And it officially shows the current claimant count is being massaged by Iain Duncan Smith, the works and pensions secretary, to underestimate the number of dole claimants on benefit.

As I report in Tribune magazine the figures reveal huge differences in the claimant rate between constituencies with up to 25 times more people on the dole in the worst parliamentary seats than the best. It shows that the “recovery” is by no means universal despite the creation of hundreds of thousands of low-paid jobs.

The worst place in the United Kingdom is undoubtedly the Foyle constituency of Mark Durkan, the SDLP MP. Here there are more than 6,600 on benefit representing 13.2 per cent of the population.

The recovery has by passed Foyle – with a drop of just over 5 per cent in claimants in the last year – compared to an average drop of 30 per cent in the UK and more than 45 per cent in Epsom and Ewell, the Surrey seat of Chris Grayling, the Justice Secretary.

The best place in the UK is still fuelled by the Scottish oil boom – the West Aberdeenshire and Kincardine constituency of Liberal Democrat MP, Sir Robert Smith – with just 0.4 per cent on benefit – 221 people claiming benefit with only 30 unemployed for more than a year.

Other unemployment blackspots are Birmingham, Ladywood and Hodge Hill, all over 11 per cent and falling at a lower rate – some 20 per cent -than the national average.  There is a similar picture in Belfast North and West;Bradford East and West, Middlesbrough and Birmingham, Perry Barr.

But there are areas where unemployment claims have disappeared. Among those with benefit claims of 0.7 per cent and less are Stratford-on-Avon, Henley-on-Thames, Mid Sussex, North Dorset, Kenilworth and Southam and North East Hampshire.

But there is also a disturbing picture that has gone unnoticed because of the debacle by works and pensions secretary, Iain Duncan Smith, in launching universal credit. At  the moment it covers about 0.3 per cent of the population.

The Commons library  reveals that currently statistics are not being collected from people on universal credit to find out whether they are in work or unemployed when they claim the benefit.

As it says : “Some new jobseekers are claiming Universal Credit rather than Jobseeker’s Allowance since the commencement of the Universal Credit pathfinder on 29 April 2013. These jobseekers are not included in the claimant count. ”

“…As a result, the claimant count will understate the total number of jobseekers in the constituencies affected.
ONS (Office for National Statistics) intends to include jobseeker Universal Credit claims within the claimant count statistics “as soon as possible”.”

However the ONS website says :  “No timetable is currently available as to when this will occur.”

This affects claimants at 40 jobcentres. The worst example is the Oldham West and Royton seat of Labour MP Michael Meacher where 1240 people are on universal credit.

The number of JSA claimants in his constituency is 1530, down  51 per cent over the last year but if the figures do not include those on universal credit instead – they are bound to be an underestimate of the real number of claimants on the dole.

A similar situation exists in  Wigan, the seat of Lisa Nandy, where 1020 people are claiming Universal Credit and is recording a 46 per cent drop in the number of people claiming  JSA over a year.

Now it would be remarkable if Wigan and Oldham could post  bigger cuts in dole claimants than Epsom and Ewell in Surrey. It is obviously not true.

So I think Mr Osborne better be very careful if he starts talking up the big drop among the unemployed in the North before the next general election based on these massaged statistics. If he does he will be telling the electorate at best only a partial truth and at worst lying through his teeth.