If things are so good why does it feel bad?
The Economics Editor of the Sunday Times recently posited the question: why, after 54 quarters of growth (according to the govt), does it not feel like the good times? In reply, I sent him a short email highlighting just one area of that generates a lot of anxiety - pensions. Despite paying a generous amount into my pension every month, I find my fund growth negligible, and the projected income when I retire (many years hence, it seems). This is partly due to changed rules governing pension firms, which means they no longer seek growth, but attempt purely to iron out risk; it is also due to the Chancellor changing the tax treatment of dividend payments to the tune of £5bn a year.
Somewhat to my surprise, the week following a think-tank released a report indicating that British disposable incomes are declining, for the first time in many years. With an election coming up, you would think that there would be exploration of this, with the opposition attempting to make a hay out of it, but it appears to have sunk without a trace.
So why are our incomes falling (and I stress that we might be earning more, but our disposable income is lower)? There are a number of reasons:
1. The cost of housing is way higher than it should be - the Washington Post recently invited readers to submit to it's annual "New Words" list; the aim is to take an existing word, add or subtract one letter, and come up with a brand new word. My favourite was "Cashtration" - having taken on a mortgage so large one has no free cash for several years...
2. The Labour government is committed to income re-distribution. It is doing this under the guise of "eliminating poverty" - which is a bit spurious as the calculation used to define poverty does not actuall highlight real need. What they are managing to do is take from those who have worked for it, and give it to those who haven't; in the meantime, the real markers of "poverty" - an inability to identify opportunity, a lack of education to take advantage of opportunity, a willingness to let the state look after you - are not being addressed at all.
3. Despite the increasing tax burden, the infrastrucure is clearly crumbling - roads, schools, hospitals, to name the obvious visible elements, but also water mains (Thames Water is proposing to cut water pressure so that it's leaks don't lose as much water, but flats above the 4th floor will not have water...), sewers, rail lines - in fact, you name it, it needs revamping or replacing. This is not a purely British phenomenon, it is prevalent across the developed world - the US has identified trillions of $s of infrastructure spending requirements. So not only do we have an increasingly crummy environment, to alter it is going to require a huge hike in taxes.
4. The residue of the 20th century philosophy of "rights" for everyone, and society being to blame for casuing people to go bad, has yet to be fully corrected. Half-hearted attempts to improve the lot of those at the bottom of the heap have reslted in considerable spending with very little result.
And finally, among all this, we discover that we are responsible for the pensions of numerous MPs and civil servants, the architects of the current mess, who are all able to retire at an age when retirement will still be enjoyable, on pensions that will enable them to enjoy it. Now do you understand why 54 quarters of growth don't make you feel good?
Somewhat to my surprise, the week following a think-tank released a report indicating that British disposable incomes are declining, for the first time in many years. With an election coming up, you would think that there would be exploration of this, with the opposition attempting to make a hay out of it, but it appears to have sunk without a trace.
So why are our incomes falling (and I stress that we might be earning more, but our disposable income is lower)? There are a number of reasons:
1. The cost of housing is way higher than it should be - the Washington Post recently invited readers to submit to it's annual "New Words" list; the aim is to take an existing word, add or subtract one letter, and come up with a brand new word. My favourite was "Cashtration" - having taken on a mortgage so large one has no free cash for several years...
2. The Labour government is committed to income re-distribution. It is doing this under the guise of "eliminating poverty" - which is a bit spurious as the calculation used to define poverty does not actuall highlight real need. What they are managing to do is take from those who have worked for it, and give it to those who haven't; in the meantime, the real markers of "poverty" - an inability to identify opportunity, a lack of education to take advantage of opportunity, a willingness to let the state look after you - are not being addressed at all.
3. Despite the increasing tax burden, the infrastrucure is clearly crumbling - roads, schools, hospitals, to name the obvious visible elements, but also water mains (Thames Water is proposing to cut water pressure so that it's leaks don't lose as much water, but flats above the 4th floor will not have water...), sewers, rail lines - in fact, you name it, it needs revamping or replacing. This is not a purely British phenomenon, it is prevalent across the developed world - the US has identified trillions of $s of infrastructure spending requirements. So not only do we have an increasingly crummy environment, to alter it is going to require a huge hike in taxes.
4. The residue of the 20th century philosophy of "rights" for everyone, and society being to blame for casuing people to go bad, has yet to be fully corrected. Half-hearted attempts to improve the lot of those at the bottom of the heap have reslted in considerable spending with very little result.
And finally, among all this, we discover that we are responsible for the pensions of numerous MPs and civil servants, the architects of the current mess, who are all able to retire at an age when retirement will still be enjoyable, on pensions that will enable them to enjoy it. Now do you understand why 54 quarters of growth don't make you feel good?
posted by Jambutty at 11:07 am
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