Greedy pensioners stop run on the pound

 Well it seems that Labour will provide no shortage of material for this blog which is called "Do they think we are stupid?"

The latest is Labour MP Lucy Powell who claims that Pensioner 's winter fuel payments were axed to 10 million pensioners to stop a run on the pound.

Thank heavens Labour have stopped the economy crashing by stopping these greedy pensioners in their tracks.

So who is Lucy Powell?

She's 49 and has been an MP since 2012 (so since age 37).  She started in Politics in 1997 (aged 22). She went to University so has never worked or had any real world experience.  She has spent all her life in the Westminster bubble.

She studied Chemistry at Oxford University. A quote from her is "University of Oxford Made Me Feel Totally Thick".  I feel like adding to this " so I went into Politics where it's normal to be Totally Thick".

Let's look at Winter Fuel Payments.

Winter fuel payments are worth between £100 and £300.  The average is £200. So assuming all 11.4 Million pensioners get it, then it costs the tax payer £22.8 Billion per year.

Labour have set a criteria that if you receive Pension Credit then you are eligible for the winder fuel payment.  So what is Pension Credit?  If you have not paid enough National Insurance into your state pension then you can potentially claim Pension Credit. 

Who might therefore might get Pension Credit? 

Someone who has never worked,  stay at home parents that missed a number of years of National Insurance contributions,  someone who was self employed and didnt pay their National Insurance, someone who opted out of the state pension (SERPS).  

There's lots of possible reasons why you might be eligible for Pension Credit.

Now if you worked all your life and contributed enough National Insurance then you WOULD NOT BE eligible for Pension Credit.  You would be rolling in it with your £221.20 per week State Pension and therefore would not be entitled to Pension Credit.  With Pension Credit you might also be getting £221.20 per week and would be eligible for the circa £200 winter fuel payment. Well it seems that if you are means tested, because you never worked, you will be better off than someone that worked their whole life and paid into the system.  This sends the message to the current generation that work is not rewarded. 

Anyway, Labour's policy means about 10 Million less pensioners are eligible - net saving £20 Billion.

Meanwhile Labour have awarded 3.5 million public sector workers with pay awards of about 6% - this is about £9.4Billion per year and also an unquantified increased liability on their final salary pensions (my guess a further £5Billion per year).

So Lucy Powell studied Chemistry and therefore must be very knowledgeable about economic matters and would know the impact of paying these Greedy pensioners would cause an inevitable run on the pound.

So what can cause currency run or currency flight?

1/  When investors sell UK assets, investments and move the money into a foreign currency

2/ When banks have bad loans

3/ Excessive government borrowing

So Mr Starmer is saying things like "Things are going to get much worse", "It's going to take 10 years to fix the economy", "Things are far worse than we expected", "We are going to tax those with the broadest shoulders".   

Would any of these statements cause investors to seek safe harbour outside the UK in order to preserve their wealth?  

Would any of these statements cause UK Government Bonds to be considered higher risk on the bond market and therefore increase the cost of Government borrowing?

No. It's clear that pensioners saying we are going to freeze to death spooked that markets and caused investors to sell up and move somewhere warm where they wouldn't need to heat their homes during the cold winter.

So the DWP (Department for Work and Pensions) have decided that they will encourage pensioners to apply for Pension Credit so they might become eligible for the winter fuel payment.  They estimate there are 880,000 pensioners that could be eligible (since they probably dont know about pension credit). 

Let's guess that these 880,000 pensions are getting 80% of their £221.20 so now the DWP will make up the shortfall of the £44.24 per week.  This means the £20 Billion Labour saving has just reduced by £2Bn and there would be a further £176Million winter fuel payments to be made.  The DWP estimate is £2.8 Bn in Pension Credit is not being claimed - not far from my guess - this will erode the Labour savings.

Although I think it's great that Labour are trying to save tax payers money but it's not acceptable that they are taking money off the most vulnerable in society and giving it to well paid public sector employees.

The £20Bn "black hole" that labour claim to have found is actually from their own making. The tax payers alliance did the analysis and found that where public sector employee salaries have fallen behind, their pension entitlement has more than compensated.  Goverments need to look at overall remuneration package not just salary.

[In slang a monkey is £500.  A Rachel is £20Bn]

If Labour were screaming and shouting about the £2.4 TRILLION black hole in public sector/civil servant FINAL SALARY PENSIONS then I might have some sympathy for them.  But no. They are beneficiaries of this so remain silent and proceed to blame the greedy pensioners in  order that they can keep their greedy pensions.

Finally Lucy Powell said "But we have faced this huge additional black hole for this current financial year, borrowing higher than anybody understood." 

This isnt a surprise to anybody that there's additional government borrowing.

This is really simple maths.  Government spending is 45.6% of GDP. Labour are planning to spend more so that number will rise. Also they are scaring business so business confidence will fall and GDP will fall - making the number rise more.  

However TAX revenues are 33.3% of GDP.

It's not difficult to see that Government (whichever bunch of idiots are running the country) are spending way more than they are taking in tax revenues.  So you either raise taxes (which doesnt work much beyond 36% - people stop working, move money abroad, move businesses abroad etc) or you stop spending tax payers money (yeah right - Labour arent going to do that) or you grow GDP (in which don't say things like the economy is a mess if you want to grow business confidence) or finally you borrow money to plug the difference between spending and income (this should be a short term measure during recessions - not the norm).

Billionaires are already leaving the UK to live elsewhere.  The Henley Private Wealth Migration has calculated 128,000 millionaires are set to leave the UK in 2024 to avoid punitive Labour taxes.

Greedy pensioners will be the tip of the iceberg when the wealthy exodus happens.

The top 1% of earners  pay 30% of all tax receipts.  If 20% of these decide to move abroad that's a big hit - to the tune of £45Bn.  Forget about the supposed £20Bn black hole which Labour "discovered".

COVID has made remote working possible for many people.  My calculations are someone earning £50k is better off living abroad as a digital nomad than paying tax in the UK. It's no longer the preserve of the super rich. 

Good luck Rachel balancing your budget. 

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Post article comment 4th Oct 2024

Well Rachel has managed to find a Rachel (£20Bn) to spend on carbon capture.  To put that in context, the flagship Labour policy of GB Energy is £8Bn.  Given the size of the "Blackholes" - where have they managed to magic up this £20Bn for carbon capture?  

It also raises questions on who owns this carbon capture?  Is this government owned and therefore a hidden subsidy of carbon emitters?  Is this money that the government is giving away free to carbon emitters in which case they should be taxed to fund this? 

On a different topic, I accept there is climate change and appears to be global warming.  This appears to be man made.  However I would question whether this is caused by carbon emissions or other things are case/contributor such as pumping trillions of litres of water out of the ground (water is a greenhouse gas), deforestation etc.  To put it in context - humans have pumped enough water out of the ground in the last 20 years to raise sea levels by 3cm. Is the human race sure that carbon is the problem or should we be looking at other things to reduce the risk of extinction.  With my risk management hat on, it looks a high risk strategy for the future of the human race (indeed planet earth) to focus solely on carbon as the problem.