The Tax Man Cometh

I saw this headline on the BBC news website:

http://www.bbc.co.uk/news/uk-scotland-south-scotland-35502939

It seems - and we know this because of a freedom of information request from the BBC - that Dumfries & Galloway Council:

<< has achieved nearly £100m in cumulative savings by allowing hundreds of staff to retire early.
In the past five years nearly 700 employees have taken early retirement or voluntary severance.>>

(A brief aside: if you've ever wondered why the costs of running a local council just keep on rising, you might want to ponder this: every time new legislation appears affecting local councils, whether it's from Holyrood or Westminster or the EU, someone has to do the job of making sure the council complies with the legislation. That means a salary which is expensive. And it's not always costed in the legislation. And that includes freedom of information requests).

Well, b*gger me, I thought, Dumgal have done well. The council tax payers will be pleased at these savings. Then I wondered: hang about, who's paying the pensions of the people who have been allowed to retire early?

Now, economics is not my thing. You don't employ a teacher of French and Russian to work out sums, certainly not hard sums like this. But maybe I can bring a wee bit of common sense to the problem.

People don't necessarily live longer just because they retire early. We've all known people who 'went' a mere six months after they got the retirement package. And quite a few who didn't even make it to the retirement package. But those who survive to enjoy retirement have to get their money from somewhere.

And that's where you and I come in. Usually when asked where money comes from people say: the government. Let me be the first to tell you: the government has no money. We - you and I, the tax payers of this fine nation - we have the money. Government is, if you like, our dependent.

I speak with some authority here. I am the tax man's best friend: worked from age 15 to age 60, paid tax on PAYE, my only concession being my membership of a 'professional association' - and I even had to fight for that for two years. Now that I have retired (not early, I might add), I still pay tax. Last year, I paid tax on my state and occupational pensions that was equivalent to my state pension. That must just about cover my £200 winter fuel allowance and the free bus pass I rarely use.

I once told someone that I had paid for my state pension through tax and national insurance for 45 years. He was quite scathing: 'It's not a bank, you know. You don't pay in and then expect to draw out in old age.' I'll tell you what I told him: 'Why not?' The argument seems to be that people who have retired depend on those who are working to pay their state pensions, and they in turn will depend on the next generation to pay their pensions. There is a flaw in this argument, which I'm sure you've spotted: if councils, which in some areas of Scotland are the major employers, reduce the number of jobs - and why else would they be 'shedding' staff? - there will be fewer people earning in future to pay anyone's pension.

Then there are the occupational pensions. Paid into by employers and employees over long periods of time. A few years ago, it sounded like those of us who worked in the public sector were getting something for nothing. We were, it seemed, costing 'the government' a lot of money. This, according to the (Tory) Chancellor could not continue. When I heard this, I did a wee bit of investigating and discovered that, not only was my public sector pension fund not costing anybody a penny, except the employees and employers who had paid into it, but in fact it had produced a surplus in 11 of the previous 12 years. I also found out that the government, which has no money of its own (see above), has been raiding pension funds for decades. Gordon Brown did it when he was Chancellor and I have every reason to believe the current occupant of the post will be doing the same to pay off the huge debt the Tories have managed to build up in just 6 years. If he doesn't, it won't be out of principle but because the stock market crash of 2008 has reduced the amount of money worth stealing. Sorry, I mean 'redistributing.'

All in all, I suspect that what Dumgal has done - and they are not alone among local councils - is pass the financial problem on to someone else. And that someone is you and me as tax payers - and the next few generations. Not the government. Given their track record, I wouldn't trust them to organise a 'menoj.'