UK Politics Thread (Part 5)

Away End - General Chat
905

A few random thoughts on the Old Age Pension, given many people view OAP’s as some form of parasite sitting around contributing fuck all while milking the system for everything they can.

  1. The vast majority of today’s OAP’s will have paid into a defined benefit scheme which means they will be on a fair whack. I did a bit of research and it suggested the average private pension is paying about 15K a year.
    So anyone getting that amount (some will be on more, some will be on less) will be paying approx. £3000 in tax per annum. That means in effect they are funding 25% of their OAP themselves. If you factor in the extortionate tax burden on all of us atm, tax on petrol, VAT, road tax, tax on savings and every other fucking tax then it’s not unreasonable to say that today’s pensioners - who receive a derisory amount in comparison to a lot of other countries - are actually funding around 50% of their own state pension, after they’ve retired. Just because they’re not working anymore doesn’t mean they’re not still paying into the system.

  2. When the number crunchers arrive at a figure as to how much someone has paid in against how much they are taking out do they factor in the 92000 each year who have paid into the system and then snuffed it before they reach pensionable age? I bet they don’t. That number is predicted to rise to 100K by the time the pension age rises to 67. That’s a lot of money that wont be accounted for.

  3. Is it not possible in this day and age to implement a system similar to how work-place pensions operate? You would have your own personal account that your contributions go into and when you retire you buy an annuity with your pot. I don’t see it as being much different to how things work atm, the state pension is a contribution based scheme as things stand.
    This way you get back what you put in. Anyone paying in now, even if they’ve only been paying in a few years, would still qualify for the OAP as it stands. There would have to be some sort of cut-off date for this to come into effect of course.

  4. One of the anomalies of the OAP now is you keep paying in even after you have accumulated your 35 years of contributions, so you can pay in for 50 years and still only get the same amount as someone who has only contributed for 35 years. This is strange when you think about it, maybe bump it up to 40+ years before you get the full amount? It would be hard on some people but something has to give somewhere.

906

Of course they do, that is the attrition number. Moving the retirement age up provides two financial benefits for the plan - the attrition number increases and the mean years of pay out decreases. Equally, they account for the other end, the people who live 35 or so years on the pension plan instead of the expected mean of about 15.

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907

This is the bit I do agree with, sort of. Labour did bring in some windfall taxes but again that Comms issue means it hasn’t registered and in reality it barely scratches the surface.

Overall, my point is if you have a problem, you generally go after the big wins or maximum gains first.

908

It’s a bit different to that, because the money isn’t squirreled away until people retire. It is paid to existing pensioners from all working people at that time. That’s why it is important to have a balanced population.

There is a temptation to see a nation’s finances in the same way as personal finances, but there are fundamental differences. Nations are at all life stages simultaneously. They also don’t die. The way that state pensions are funded are fine, but you have to ensure that the population is refreshed and that everyone who can contribute does.

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909

One advantage of being self-employed, I stopped making NI contributions once my 35 years was up.
PAYE employees have no option but to keep paying.

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910

Thank you for taking the time to respond. If you look at it solely from that perspective I can understand the rhetorical question you concluded with, in answering my own question.
I think everyone, despite their reasoning being different accept that it is not sustainable. But as you alluded to, to address it would be a social choice.
You are probably aware of my opinion, I just think we are setting ourselves up for a downward spiral by continuing to increase our Social expenditure by making it easier for people to get away with surviving off benefits, I also feel that this attitude is passed onto their children, as it is accepted as a given.
What happens when the young who won’t, can’t or don’t contribute retire and do not qualify for a state pension. Instead of under investing they just didn’t invest? Do we just leave them and let these costs just spill over onto more social welfare spending?

Anyhow, along with most things there is not a simple solution.
Out of interest, referring to the paper you wrote, have Canadas pension scheme improved?

912

There was a major reform in 1998 that moved away from the pay-as-you-go model. Contribution rates were increased from 6% to 9.9% (when I was an undergrad they were 3.6%). That was intended to create a surplus that would operate as an investment fund, with a multi-decade target for the percentage of pensions that would be paid from return on investments. That fund is now somewhere around $750 billion, run at arm’s length as an investment house. The pace of that was somewhat slowed by a 2017 reform that increased pensions for most, recognizing that the percentage of the population covered by defined benefit employer plans has been declining steadily.

In essence, we had the same problem that the UK did in the 80s, but more of a runway before the crisis would hit due to population growth. For whatever reason, Canada moved more decisively to address the problem though.

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913

I often wonder if that’s the case, or it’s more the economic groupthink that leads them to be mortally afraid of doing anything to jeopardise the prospects of larger businesses.

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914

Certainly seems to be the case,check politicians shareholdings or investment properties,they make quite sure they don’t shit in their own nests while shitting on everyone else.
Compounded nowadays bt the fact a lot of them have never held a proper job,before politics,anyway!

915

I think everyone is falling into the trap I said - incremental change. Look at the Welfare bill and say the issue is pensions and triple lock. Thats the incremental thinking that has us in a mess. Sort that and something else will increase.

Sure it’s pensions, but it’s broader welfare and disability and the huge rise in mental health cases etc. It’s still public sector final salary pensions (less so these days but still an issue. I know you have to increase salaries to cover this as it’s part of the deal but that would fix it long term).

My point is a root and branch review to save money and target the people who really need it. Knock on effect - some more people have to try to work rather than not.

916

Mental health, depression, anxiety etc are the modern day bad back.
Very easy to feign and difficult to disprove.
Sure, there are many very genuine cases, same as bad backs in times gone by, but it’s anyones guess how many did and do exploit these conditions for financial gain.

917

The point is every government thinks they can save money by targeting fraudulent Welfare claims. In reality it’s a tiny, tiny fraction of the welfare bill.

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918

Estimated £10 billion benefits fraud last year but
benefit fraud prosecutions in the UK have fallen by over 90% since 2017. According to Ministry of Justice figures, there were just 461 benefit fraud convictions and 385 prosecutions the previous year, a steep drop from the 7,840 convictions recorded in 2017..

So did each of those 461 defraud the country of
£22 million pounds each or are a lot of people getting away with it?

919

Shocked by those numbers so had a quick google. The AI summary of this says only 2.2% of the £9.9billion is due to actual fraud, the rest is mistakes by administration or claimants. Still, that needs fixing quickly!

Here’s a link to the report for anyone with the inclination;

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920

You also have to consider the percentage that reflects of the total amount, less than 2.5%. Too much to ignore, but you will blow your brains out trying to squeeze the last 2% or so out of a process - you certainly won’t net enough to alter the fiscal situation of the country. Experience elsewhere suggests that it is far easier to end up with a negative net on enforcement. That may be worth doing to ensure that voters have faith in the system, but it is an expense.

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921

Add to that the rampant tax dodging that goes on across the whole economy…

A couple of years ago I bought an office chair from a small local office equipment business. The owner quoted me £100 for cash. Naively I asked for a vat receipt. He said oh, that will make it £150 then if I have to give you a receipt.

I had work done on my roof last year. A long established local company who actually replaced it thirty years ago. Again there was one price for cash and a higher price if a receipt was required.

Just this year, cash in hand to a plumber for a boiler service and an electrician too. The two price scam is rife and these are not cowboys but people I have been using for years.

The best one was a new extension I had built about 20 years ago. The 50% cash up front price was several thousand cheaper.

Add the tax dodging to the benefit fraud and I dread to think what the overall total might be.

There are approx 15 million on benefits (excluding state pension). Do we really have the staff to check all of those claims are correct/legit?

Tax evasion and undeclared cash work in the informal economy cost the UK Treasury billions of pounds annually. Official assessments from the National Audit Office indicate that small businesses and sole traders are responsible for the vast majority (over 80%) of the total tax evasion gap, resulting in billions lost every year.

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922

This is one thing I haven’t come across in Germany. Many home improvement works are tax deductible as long as there is a VAT receipt. I’m wondering if that leads to a different culture?

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923

I asked my mate Claude about tax reform…

The most authoritative treatment of exactly this question is the Mirrlees Review — a landmark IFS-led analysis chaired by Nobel laureate Sir James Mirrlees. Its recommendations remain the gold standard for economists thinking about UK tax reform. Here’s the consensus picture, drawing on that and more recent thinking:

Core principles

A reformed system should be designed as a whole (in conjunction with the benefits system), seek neutrality — avoiding distortions that treat similar activities differently without good reason — and achieve progressivity as efficiently as possible. Nuffield Foundation

The main reforms recommended

1. Merge Income Tax and National Insurance
Maintaining a separate social insurance contribution serves only to create confusion and complexity. Pinsent Masons Merging employer and employee NICs with Income Tax, adjusting rates for revenue neutrality, would simplify the system significantly. Centax

2. Replace Stamp Duty and Council Tax with a property value tax
Stamp Duty Land Tax is one of the most distortive taxes in the UK. Business Rates don’t encourage efficient use of land, and Council Tax is based on house values from 1991. Centax The proposed fix is to base property taxes on current market values with regular revaluation — this reform alone could increase national income by 1.4%, worth over £20 billion. Nuffield Foundation

3. Broaden the VAT base
The UK applies a zero rate of VAT to far more goods and services than most other countries. Zero and reduced rates are often justified as helping those on low incomes, but this is an expensive and highly inefficient way to do so. Nuffield Foundation The recommended approach is to extend VAT broadly and compensate lower earners through the benefits system instead.

4. Align tax treatment of employment, self-employment, and corporate income
The current system creates large distortions and avoidance incentives by taxing these differently — a particular problem as gig economy and owner-managed business models have grown.

5. Reform capital gains tax
The UK’s CGT rate remains the lowest in the G7 — a key fairness concern. Tax Justice UK The Mirrlees approach would exclude the normal risk-free return to capital from tax, while taxing genuine gains and windfall profits more consistently with income.

Why it hasn’t happened

There is no getting away from the political difficulty associated with some of the proposed changes — but there is also no getting away from the enduring costs of failure to reform. Pinsent Masons Property tax reform in particular is politically toxic because it creates visible losers (asset-rich, cash-poor homeowners) even when the aggregate effect is positive.

Net fiscal cost?

A well-designed overhaul needn’t cost anything — the goal is revenue-neutral restructuring, raising the same money more efficiently and fairly. The costs are transitional (revaluation exercises, IT systems, compensation packages) rather than ongoing. The gains, over time, are measured in reduced deadweight loss, higher growth, and a fairer distribution of the tax burden.

The honest summary: the economics of this reform are well understood and broadly agreed. The obstacle is entirely political.

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924

I never ask for cash payments for work I’m doing, if they decide to offer payment in cash then nice one.
I don’t work on the 2 price system either.
My price is my price, if you don’t like it then phone someone else.

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925

Noone was accusing you :rofl:.