Once upon a time, the LIBERAL Government of Mr Squiffy and Mr Lloyd George introduced a PEOPLE'S BUDGIE that would raise tax from the rich in order to provide welfare for the unemployed, insurance for the sick and a PENSION for the elderly. And everyone lived happily ever after.
Nowadays, the Labour would say this was all just a FAIRY TALE.
Which is why, when they got into government, the COMPLETELY ILLIBERAL government of Lord Blairimort and Mr Frown decided to do a smash and grab raid on everyone's pension fund!
Now, to be FAIR, the Conservatories had just left them with a rather huge black hole. Their Chancellor, Fatty Clarke (the one who ISN'T the safety elephant), had borrowed squillions to try and set the economy straight after Mr Balloon and Norma Lamont had wrecked it on Black Wednesday. Mr Frown's first job was to… well actually it was to nick the Liberal Democrat policy he had campaigned against and make the Bank of England INDEPENDENT, but his SECOND job was to try and pay that big loan back before someone sent the boys round.
So Mr Frown went out and got lots of money in lots of ways: he raised a WINDFALL TAX on the utilities, he sold off the 3-G telephone licences at vastly inflated prices and he abolished a little known squiggle in the tax laws called ADVANCED CORPORATION TAX, replacing it with companies having to pay most of their tax up to fifteen months earlier.
(Companies paying their tax early is like Mr Frown getting one free wodge of cash. Before the change you get a steady stream of cash in; after the change you get the same steady stream of cash in because companies still have the essentially the same tax to pay. But DURING the change you gather forward all the tax that you would have got in that fifteen months. Suppose the people you work for decided to switch from paying you at the end of the month to paying you at the start of the month: one month you would get paid on the last day, and then get paid again on the next day – so it would be like having two months' salary at once, but only for the month of the change. Well Mr Frown did the same thing, so he could use the extra money to reduce the national debt.)
What used to happen was this: if a company had enough money to pay a DIVIDEND to the shareholders then – said the Tax Man – it's got enough money to pay some tax to me too.
For every £1 that the company paid in dividend, they also had to pay 25p to the tax man. This is what was called Advanced Corporation Tax or ACT, sort of a payment on account, or a deposit. And when the company's final tax bill came around they could deduct the ACT that they had already paid.
BUT the people GETTING the dividend also had to pay tax on the money that they received, and they could ALSO deduct the ACT (or the bit of it that related to their shares) that had been paid.
Now, the SHARP EYED will have spotted that this is a GOOD TRICK: the government got ONE lot of ACT tax paid, but it counted as being the tax paid by TWO different lots of people. And in fact, people who did not have to pay tax could actually claim the ACT back from the government as an overpayment of the tax they didn't owe.
In particular this applied to PENSION FUNDS – with no tax to pay they used to get an extra 25% on every dividend they received. And most of the money that a pension fund gets IS dividends, as the pension money of the people in the fund is all invested into stocks and shares (and government bonds too).
So Mr Frown's little trick with grabbing cash early, had the added benefit of saving him all those ACT refunds to pensions. But unfortunately, that also meant that all the pension schemes' investment income was suddenly one fifth less.
(Imagine how YOU would cope if you suddenly lost a fifth of your salary. It would be like working all week and not getting paid for MONDAY!)
And then ANOTHER of Mr Frown's little tricks – remember that he sold off those 3-G licences for oodles? – the technology firms paid SO MUCH money for those licences that it was one of the things that finally broke the back of the dot com bubble. Which crashed the share market. Which made all those pension funds that had invested in shares worth an awful lot less.
(And then, new regulations came in that made them invest less in the stock market and more in the government bonds which meant that they could not follow the share market recovery back up, either!)
These days, the government tells us we cannot expect a FREE RIDE when it comes time to give up our day jobs.
If you are WISE, then you should already be setting up those lucrative city directorships, speaking tours of America or book and newspaper deals for your memoirs to make sure you have something to fall back on.
Of course, not all of us can have Lord Blairimort there to fix these things up for us after he has had us sacked. We cannot ALL be pioneers of the New Labour revolution. Some of us might have to think about putting a few pennies aside.
Sadly, all the GOOD PEOPLE who were doing the right thing and saving for retirement have ended up being mightily [BAD WORDED] by the government. From a great height.
Far be it for anyone to say: "I told you so!" But it turns out that the Civil Service DID tell Mr Frown so, and they can prove it. And now, thanks to the Freedom of Information Act, so can the Times Newspaper.
Predictably, the Conservatories called for an inquiry to say how BAD Mr Frown had been in spite of having no actual pension policy of their own.
This meant their pension spokesperson came a bit UNSTUCK on the Newsnight Show when pressed:
"So, if this was such a mistake, would you restore the old rules for pensions?" asked Mr Paxo.
"Well, look, er, if Mr Frown hadn't already spent the, er, money, we could give it back but he has so, er…"
"But would you RESTORE the old rules for pensions?"
"Well, er, Mr Boy George Oboe will write his, er, budgie after getting into power…" (and presumably after someone has taught him how to ADD UP!)
"I'll take that as a 'no' then," said Mr Paxo.
A hint for the Conservatories: if Mr Boy George Oboe thinks that he can leave off writing his budgie until after he has been elected, then his is NOT GOING TO GET ELECTED, is he!
Meanwhile, the row took another turn for the worse when the Treasury's wonky spin machine tried to claim that the CBI, or Collection of Barmy Ingrates, had lobbied them to make the change.
Lord Airhead Turner – who had been in charge of the CBI at the time – reacted angrily:
"Oh no we didn't!" he said!
This is very IRONIC, because when Lord Airhead retired from the CBI, Mr Frown fixed him up with a nice little pension scheme in the form of writing a report into how to fix everybody's pension scheme.
In short, Lord Airhead's advice for people who want to retire is: YOU CAN'T!
Mr Frown defended his decision saying it was all for the good of the economy.
"The benefits of a strong economy for pensioners," said Mr Frown, "include getting hand outs from me, rather than having any of that nasty money that they worked so hard to save in the first place."
He went on to blame the pension crisis on the dot com crash (oops, see above!); companies taking pension holidays when the Conservatories were in charge; and people living longer.
Well, of course even in the 1980s there were strict rules about companies skipping a year of funding for their pension scheme and the rules all said that they could only do it if the actuaries said that there was plenty of money in the pot already. Which of course there WAS before the actuaries' predictions were skewed up by Mr Frown having it away with a fifth of the pension funds' income and the stock market slicing up the value of their investments.
And it is good to know that Mr Frown blames people for surviving into old age. Does he REALLY mean he would rather they lived a BIT LESS??!! Well, fortunately for him, they will presumably start STARVING once their pensions have run out!