Monday, February 11, 2008

Inflationary egos

John Redwood calls for the government to stop causing inflation.
The government is worried about the persistent inflation rate in this country, at a time when we really need to cut interest rates to stimulate the economy and take some of the pressure off borrowers.

It has the answer to the problem under its own influence, as much of the high inflation rate is coming from public sector taxes and prices. Today we hear of the campaign to resist the 2p extra tax the government is proposing this April on petrol and diesel. This follows a totally unnecessary extra 2p on fuel last autumn.

These increases are vengeful against motorists and hauliers. The government’s tax take on fuel has soared anyway, thanks to the big increases in market prices which gives the government more revenue automatically from the ad valorem tax. If the government still believes fuel burn by travellers is the only part of the carbon dioxide problem it wishes to curb, it should recognise just how far its taxes and the Middle East oil situation have jacked prices up. People now need to be given time to adapt, to buy their more fuel efficient vehicles and scrap the older ones. They cannot afford to change their vehicles because the government is squeezing them too much, and they cannot afford the sky high train fares either.

Unfortunately the government is utterly desperate: it has totally run out of money and public sector borrowing is well over half a trillion pounds and that doesn't include most of the PFI or public sector pension liabilities, which are kept off the books (although it was Gordon who forced private companies to declare pension liabilities onto their profit/loss acounts, a move that simultaneously fucked numerous companies' share price and the pension market).

The wheels are falling off and the Gobblin' King knows it...

6 comments:

thud said...

It's all gone horribly wrong!

Sir Henry Morgan said...

They might care to stop causing crime and criminals too.

Every time the bastards create a new law, then by definition they create more crime and more criminals. Thus upping crime and crime rates.

Then because crime and crime rates are up, they then then create more laws to bring crime and crime rates down ... er ... hang on a minute ...

John B said...

Point of order: public sector pensions are accounted for under FRS17. There's been some suggestion that the government's choice of discount rate understates liabilities, but even if true this would mean undercounting of c.20% (i.e. under any sane interpretation, over 3/4 of public sector pensions are on balance sheet). When the government adopts IFRS next year, the same will be true for PFI (IIRC they're preparing transitional IFRS accounts this year, so anyone who wishes to check how much difference this makes can easily do so).

Budgie said...

john b attempts to confuse with jargon. He says "under any sane interpretation, over 3/4 of public sector pensions are on balance sheet". Drivel.

Public sector pensions may be "properly accounted for" in the sense of stating liabilities truthfully or requiring correct contributions, but they are (generally) NOT FUNDED.

This is the crucial difference: private sector pensions are derived from an existing saved pot of gold; but public sector pensions are paid out of current taxation. The first encourages prudence (don't laugh) and wealth (capital) creation, the second squanders current income.

John B said...

"The first encourages prudence (don't laugh) and wealth (capital) creation, the second squanders current income."

hmm. you realise that "saving" and "squandering current income" are definitionally the same thing, don't you?

Budgie said...

john b says: "hmm. you realise that "saving" and "squandering current income" are definitionally the same thing, don't you?"

You still don't get it do you? If the population of the UK had fully funded pensions we would be a very wealthy country indeed.

Most public sector pensioners are paid from current earnings forcibly acquired by taxation. This is not just grossly inefficient and unfair, it is subsistence economics - a vicious circle.

It is like a shopkeeper paying himself out of his takings rather than out of his profit. As a society we end up eating what should be saved (savings being used as capital to increase productivity and hence wealth - a virtuous circle).