Category Archives: Economics

Working on into old age

None of us can claim to be experts on any subject (although many do). However, I do claim that I know enough about working on into old age to be able to make a few comments from experience. After all, I have yet properly to retire at 75 although I do take things rather more gently than I did when I was younger.

This all started when Dr Alf posted a blog.  It is called “Older, healthier and working: Britons say no to retirement.”  Here is an extract:

There are still lots of taboos and sensitivities about older people but it’s necessary to face up to the economic and social realities.
The percentage of the older “indigenous population” in many countries will grow alarmingly over coming decades. Apart from shifting the older people overseas, like Germany for example, the only way that the balance of younger people will be preserved will be with continued large scale immigration.
Because of UK Government policy under the previous Labour Government, many retiring peoples’ pension pots are much smaller than envisioned. More widely, Western governments have struggled with the political complexities of adjusting pension policies to reflect the changing domographics.
So older people, will typically have smaller savings and pensions, so they are faced with real decisions:
  • Turn to their family?
  • Turn to the state?
  • Turn to themselves?
Of course, as the article describes, there are many older people who will be delighted to continue working, given the chance, but this fails to address the vast majority. Surely, the vast majority will be not have the skills, competence, stamina, and health to continue working?
Let me turn this around to an open question:
How should Government policy change to give older people a greater chance of working in their later years, addressing issues of skills, competence, stamina and health?

The first thing to say is that “older people” is too vague.  People (of all ages) vary enormously from the very willing and fully able to those who would rather not (thank you very much) and those who would love to but just can’t. Thus we have two variable to consider – and every “older person” sits in a place which may not be unique but is pretty much their own.

So how can a government deal with this degree of variation? Well, it can’t. I hope you agree with that statement – especially those of you who already know that I have serious doubts about government being able properly to deal with anything very much. However, it can remove a few of the obstacles and maybe add in a few incentives. Here are the few things that I would suggest could be done.

  • Remove NI contributions (employee and employer) on all employees over retirement age
  • Double the tax threshold for people who are over retirement age and who work for twelve or more hours per week but continue to include their state pensions into their taxable income.
  • ensure that employers have the right to lay off all those over retirement age without giving any reason but with a minimum of either four week’s notice or a payment equal to the amount earned in the previous four week period.

Before raising your hands in horror, think of the advantages. This will encourage employers to take on old people and encourage old people to work, if only part time. Isn’t that the object of the exercise?

It does nothing for those who are over retirement age but self-employed (as I am) but then, we don’t need to be encouraged. We just get on with it.

A pot mess called the UK

It really is time that we completely rethought the way in which the UK is governed. Yes, I know this is a recurring theme in my blogs and other writing but that is because it is something we need and need quickly – and it is very difficult to see how to set about it. All efforts so far have failed. Why? Here are a few suggestions:

  • Nobody believes it is needed
  • Nobody believes it is possible
  • Nobody is really prepared to think about what should be done
  • Nobody is really willing to work our how “what should be done” can be put into doable practice
  • Nobody cares

Have I left anything out? What other reasons are there for a country to be:

  • running on empty
  • shuffling what we have to those that don’t need it at the expense of those that do
  • failing to earn a living in the modern global economy (although there are some really good examples of private enterprise bucking the trend who tend to be forgotten)
  • driving the real wealth producers (entrepreneurs, that is) abroad
  • ending up with a rotten health service
  • ending up with poor education for our children
  • reducing the freedoms we enjoy
  • reducing tolerance to those who are “different”
  • creating a society in which people no longer want to take responsibility for themselves
  • creating a society in which the people no longer trust the police, the politicians or anyone else on whose services we rely

What a mess.

Austerity – or what?

There are plenty of arguments as to the way forward for the economy. They fall into a number of broad groups such as fiscal and monetary and names of great men crop up from Adam Smith to John Maynard Keynes (why does one always have to resist the temptation to type “Milton Keynes”) but, and this is just as I see it from my Devonian hideaway, none of these address the unique situation in which the developed western economies find themselves today. Many situations in the past have crept up and found us completely unprepared to deal with them. Often we did not properly understand the cause let alone have any idea of how to cure the problem and them with hindsight, we look back and we are amazed at how incompetent were the reactions. Let me offer two example of what I mean and then we’ll return to this business of “austerity”. 

First the Black Death. Here in the UK we had plenty of warning that a plague was advancing – sometimes slowly and sometimes in leaps and bounds – across mainland Europe towards us. We did nothing to stop it arriving. How could we? We did not even know what it was let alone how it was carried across from country to country. It changed everything for years following the event. 

You could say that the Black Death was outside our control but what about the Great War? How come we ended up with a line of trenches which divided mainland Europe and took the lives of millions – to what end? Yes, war is the failure of diplomacy and as sure as hell is hell diplomacy was found wanting. Even after that war, serious mistakes were made – mistakes which laid the foundation stones for the second world war. Looking back now we can see with stark clarity what mistakes were made: before the great war, during the great war and between the wars. Diplomacy failing, failing and failing again. 

Now, another personal view, the problem is debt – national debt and personal debt – at levels that we never, ever seen before. The position is new and yet all the old economic ideas are being trotted out with one group believing one economic system will provide the solution and another group looking at another economic system for salvation. And none of them will work. If war is the failure of diplomacy, the level of debt we have today is the failure of economics. You could say that every boom and every bust has been a failure of economics in that each time there have been warning signs which have been ignored or, more probably, went by unnoticed. 

Common to the Black Death, the Great War and the economic situation today is that we do not know how it happened and we do not know how to put it right. 

Like every one else, I have little to offer. In any event, my essentially rural and small community experiences mean I am hopelessly unqualified to make suggestions for urban UK. Since, however, ignorance is no great bar to most commentators in the media generally (including the blogosphere) I have decided to ignore my ignorance and make a small suggestion. 

At the macro scale, government can do nothing. If it tries it will have to increase its debt and we shall end up with a Great War equivalent of the Somme where so many died to no purpose. On the micro scale, however, communities can do a great deal. 

Take housing – something we all agree is needed. Within any community there are tradesmen, there are people with skills and no jobs, there are people with no skills and no jobs, there are people with a bit of spare cash, there are properties that are empty and need work to make them habitable, there are people who need a home and there is a small unit of government – a Parish or Town Council. If the best that every one of these small units can do is to organise just one house refurbishment per annum then that adds up to a total of about 10,000 ‘new’ homes every year. No problems with the need for expensive new infrastructure, no need for a new school or another hospital or a new sewage system, water main, etc. 

All it needs is to relax a few regulations, give these councils a bit more power and start looking at them as organisers and mentors rather than rulers – creating a company to buy, refurbish and let property into which local people may invest: invest in something that they can see and from which they can make a profit. Yes, you can use the power of persuasion at a local level but not at a national one but even then, if you cannot get local people to come up with the funds it could well be because what you are suggesting is not sensible. Wouldn’t it be good if we could with-hold taxes when we feel that what the government is doing is just not sensible. 

You can use the same argument for all sorts of aspects of life. It could be that the proper engines of “growth” are these Town and Parish Councils and not central government, bankers or big business after all. 

Worth a bit of thought or is it just a crazy idea?

The economic mess we’re in

There are times when I feel incredibly depressed about the financial future here in the UK. At a guess I read as much as most people who blog about politics and probably understand as much as many do but there are some things that I feel I share with virtually nobody else. Let me try to explain.

Ask most people why we are in the economic mess in which we find ourselves and they have no answer at all. A few will blame the government (any government, not just the one in power today), some will blame the unions or the work-shy or the immigrants or something but there are a few reasons that you rarely hear – and I have never read an article which puts these together as I intend to do. Please remember, I am no economist: what I am saying is based on my own personal experiences as a businessman (including a few bad tumbles) and Dickens – the author who, more than any other, realised the depths to which humanity could sink.

Here are the factors I consider responsible. To start with – say in 1900 – we had an empire which enabled us to grow rich, basically on the back of what was little better than slave labour, and we liked the lifestyle this generated. Then someone thought it would be a good idea if, out of taxes that this wealth could afford, we looked after the really old and made their lives a bit better. So we gave a few shillings a week to men of over 70 (which, based on average life expectancy, would equate to over 110 now). Then we decided it would be nice to offer free education, free health and a host of other goodies that we really couldn’t afford but we didn’t mind – we (here I mean all of us, the people of the UK) just nodded complacently as the governments (all of them) borrowed more and more to give us more and more so that we would give them our votes in return. And we (here I still mean us, the people) also borrowed more and more. The government encouraged us to do that: the more we borrowed the more we bought the more there was for our people to make – then.

But the bubbles burst, one by one. The people who we had used as slave labour to enable us to become rich decided they wanted a slice of the action. Not only did they start to want us to pay them properly they rubbed our noses in it by making the stuff that we used to make (and which we continued to buy because we continued to borrow). Double whammy, no more cheap labour and half our jobs up the spout but we carried on living the life as if nothing had happened.

Then we hit the buffers as the national debt rose and rose. Look at the graph and you should be horrified.

Follow this link to see where this came from and further facts and figures. 

No government has been able to stop the growth and even Jim Callaghan knew we had gone too far. Back in the 1970’s he said. “We used to think you could spend your way out of recession and increase employment by boosting government spending” and, “I tell you that option no longer exists. And so far as it ever did exist, it only worked on each occasion by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.”

Even then we happily allowed public spending to go on increasing. The above graph is almost the same as a graph showing public spending indicating that all the benefits and free education, free health, welfare this and welfare that have been paid for out of borrowed money.

One of the MP’s for whom I have a good real of respect is Douglas Carswell. “Greece might be the first Western country to discover that you cannot keep running up debts to pay for a lifestyle you did not earn.” he said, “She will not be the last. The laws of mathematics are universal.”

He is, of course, right. This government has done all it can to cut the national debt – but that “all” means that it will be double what it is today before 2020. Put it quite simply, the UK has borrowed so much, there is no way it can be paid back.

Where does that leave us? Well, in the mire – obviously – and there we will stay until we understand that we cannot afford to live this lifestyle and, horrible though the consequences may be, we cannot afford to go on supporting people out of benefits the way we do today.

Back to Dickens and, of course, Mr Micawber.