SAVE OUR ELDERLY SAVERS SAY MPS
Millions ‘should be compensated for shattered retirement dreams’
Millions of thrifty pensioners who have had their retirement plans shattered by the Bank of England should be given compensation, MPS say today.
A damning report lays bare the crippling impact on the recently retired and savers of the Bank’s decision to pump £325billion into the economy.
Since so-called quantitative easing began three years ago, campaigners have highlighted how older people have become the sacrificial lambs of the Bank’s emergency rescue policy. The aim of QE has been to keep interest rates low to boost economic growth, prevent a wave of mortgage repossessions and pump money into the flagging economy.
But today the Treasury select committee makes it clear that an urgent lifeline must be thrown to those hurt by QE.
It also highlights the plight of savers since the Bank cut the base rate to a historic low of 0.5 per cent in 2009, describing the combination of low interest rates and QE as ‘extremely lax monetary policy’. The report
says: ‘ We recommend that the Government consider whether there are any measures that should be taken to mitigate the redistributional effects of QE.’
It calls on ministers to ‘consult’ on any help, such as compensation, that could be given at the time of the Autumn Statement, expected in November.
MPS also want the Bank to publish its estimate of ‘the overall benefit and loss to pensioners and savers’ from QE.
For the first time, this would put an official – and explosive – figure on just how much money the Bank’s emergency policy has cost millions of Britons.
Last night Dr Ros Altmann, director general of Saga, the old age specialists, said: ‘There is precious little evidence that QE is actually working to boost the economy. But there is plenty of evidence that it is having a dreadful impact on pensions and pension funds.
‘It is causing suffering to savers and pensioners who were in no way responsible for the problem of over-indebtedness and irresponsible lending and borrowing that caused the mess in the first place.’
The QE programme – which has been likened to printing money – started under Labour in 2009 and has continued under the Coalition.
Today’s report highlights how it has had the effect of slashing annuity rates, or ‘incomes for life’.
When a pensioner cashes in his savings for retirement, he is paid an annuity for the rest of his life. In 1990, the average annuity rate for a 65-year-old man was an annual return of 16 per cent of his pension pot. Today it is just six per cent.
Thus a man who cashed in a £100,000 pension pot in 1990 would have got an annual income of £16,000.
A person retiring today, who had diligently saved the same amount, would receive just £6,000 a year, an annual cut of £10,000.
Record numbers of people are currently turning 65. Around 806,000 people will reach the landmark birthday this year.
Annuity rates are calculated on a complex formula which are linked largely to ‘gilts’, the Government bonds the Bank has been buying through its policy of QE, driving up prices.
A gilt pays a fixed income throughout its life. When the price of the gilt rises, it costs more to buy the same income.
As insurance companies depend on gilts to pay annuities to pensioners, it is costing them more, so they are giving less money to pensioners through lower annuity rates.
The annuity is a one-off purchase which cannot be reversed, which means pensioners are locked in at the dire rates until they die.
The National Association of Pension Funds has warned that QE has left people retiring around now ‘out of pocket for the rest of their lives’.
The Treasury committee calls on the Bank, particularly the nine men on its interest- rate setting committee, to ‘ improve upon their efforts’ to explain their controversial policy to the country.
Savers have been paid paltry interest on their nest- eggs, with many accounts paying close to zero, amid fears that the rate will remain at rock bottom for two more years.
It says: ‘The policy of extremely lax monetary policy has not been without criticism. Under this policy, savers receive a far lower return on their savings than under more normal conditions.’
The report quotes the Bank’s deputy governor Paul Tucker as saying he has ‘great sympathy’ for savers, but insisting the economy would have been ‘destroyed’ without the Bank’s action.
Simon Rose, from the campaign group Save Our Savers, said: ‘The Bank seems to have no idea of what their policies actually do, particularly at the poorer end of the society.’
The Bank declined to comment.
GEORGE Osborne’s controversial Budget suffers another blow today as MPS warn that his child benefit cuts will still unfairly penalise one earner couples.
A report from the Tory-led Treasury select committee says a partial U-turn on the removal of the payment to higher-rate taxpayers will add complexity to the system.
It adds that while he has removed the ‘cliffedge’ problem, which would have seen someone getting a small wage rise suddenly lose all their child benefit, the bias remains against single-earner households compared to those where both parents work.
The MPS also raise questions over other contentious measures, including the so-called ‘granny tax’, the ‘charity tax’ and the reduction in the top rate of tax to 45p.
The report comes as a Yougov poll puts Labour 11 points ahead, on 43 per cent to the Tories’ 32 per cent. It also found that the UK Independence Party, with 9 per cent, had pushed the Liberal Democrats, on 8 per cent, into fourth place. An Opinium survey put UKIP on 10 per cent to the Lib Dems’ 9 per cent.
Government sources claimed Mr Osborne drew up the final version of the Budget in unhealthy secrecy because of a series of leaks blamed on the Lib Dems. They suggested that only the coalition ‘quad’ – Mr Cameron, Mr Osborne, Nick Clegg and Danny Alexander – discussed the final details. ‘ People that should have seen the Budget didn’t see it, and the usual mine-sweeping didn’t happen,’ said one source.
There is intense frustration in the Cabinet that the central measure of the Budget – a record tax cut for 25million middle earners as the income tax threshold is increased – has passed almost unnoticed after details leaked out in the days ahead of the statement.
Today’s Treasury committee report adds to the Chancellor’s woes with criticism of the latest version of cuts to child benefit. Tory MPS had threatened a revolt over his original plan to remove child benefit – worth £20.30 a week for the first child and £13.40 each for any more – from families where one parent is a higher-rate taxpayer.
Critics said axing child benefit for couples where one parent earns just over the higher-rate tax threshold, but not when both parents earn just under that sum and have almost double the income, was unfair.
In a partial U-turn announced in the Budget, Mr Osborne said parents earning £42,745 to £60,000 will be able to keep some or all of their child benefit. He said anyone with an income of up to £50,000 would lose nothing, while those earning £50,000 to £60,000 would have the benefit gradually withdrawn.
But MPS are now raising concerns that the tapered removal of the benefit will be costly to administer, and complicate the tax affairs of families whose annual net income is £50,000 to £60,000.
The committee said ‘the Government’s latest proposals for reform of child benefit solve only one of the two main problems identified with its original policy’. It added: ‘They add further complexity.’
The MPS suggested that linking the payment of child benefit – made to women – to their partners’ incomes represented a ‘step backwards for women’s financial emancipation’.
Doubt was cast on the Treasury’s claim that reducing the top rate of income tax from 50p to 45p would be just £100million a year, with MPS saying it was ‘highly uncertain’.
The report also queries the way Mr Osborne presented the ‘granny tax’ – the removal of age-related income tax breaks as the basic rate threshold is raised to £10,000 for all. ‘Although described as a simplification, the phasing out of age-related allowances also represents a revenue increase to the Government of £360million in 2013-14, rising to £1,250million in 2016-17,’ it said.
The committee warned that capping tax relief on donations appeared to be aimed at tax avoidance but may have a ‘detrimental impact’ on ‘charitable giving’.
In another controversy MPS vote today on whether to scrap the ‘pasty tax’ in an amendment to the Finance Bill. The proposal could add 50p to a Cornish pasty.
Tory chairman Baroness Warsi has likened attacks by senior Lib Dems on the Government to a ‘bad episode’ of the TV show Come Dine With Me. She said: ‘I don’t think it’s nice for people to come along, sit at your table, eat your food and then slag you off in the cab home.’
ONE thing that symbolises the European elite’s sense of delusion as they cling to the dream of an unviable single currency is the grandiose decision to build a House Of European History.
At a cost of £44 million, eurocrats have invested in this project, which is intended to promote ‘ an awareness of European identity’.
There is one problem, though. The governments of the EU countries are unable to agree over fundamental aspects of the showcase museum in Brussels.
They have been arguing, for example, over diverging interpretations of events such as World War II — which EU enthusiasts risibly call the ‘European Civil War’.
Farcically, it’s been decided to omit any exhibit on which agreement cannot be reached.
And because of their differing views about World War II, the museum will begin with an EU ‘year zero’ of 1946.
Martin Callanan, the European Conservatives’ group leader in Brussels, has highlighted the madness of such a narcissistic project — particularly when Europe is in a deep economic crisis.
‘The European Parliament should not be in the business of running museums,’ he says. ‘Even in good times, the money would be a waste, but during these hard times it is scandalous.
Disaster
‘Even if we put the exorbitant cost to one side, differing perspectives of European history mean the museum’s content must be confined to postWorld War II.
‘It is hard to see how this will be an objective history museum, rather than a centre for propaganda about the EU.’
And Belgian centre-right MEP Derk Jan Eppink has said: ‘No one wants to be involved in this when people can’t even agree what happened in the last war. It is self-aggrandisement at the expense of taxpayers.’
But then this is just another example of the out- of- control juggernaut of mis-spending of British taxpayers’ money that is happening in Brussels.
Eurocrats continue to pour endless amounts of taxpayers’ money into propping up the collapsing political EU ‘project’.
On a visit to Brussels in recent days, I was shocked to see just how detached from the real world they are, even as disaster unfolds across the Continent.
I heard barely a mention in the European Parliament of the Greek sovereign debt crisis.
There were no debates about the 386 billion euros committed — so far — to save Greece, Ireland and Portugal from bankruptcy or of ways to prevent the debt contagion spreading to Spain, as has happened in the past few days.
And there was no discussion of the devastating official figures that show one in ten in the eurozone is unemployed.
In some countries, youth unemployment is close to a catastrophic 50 per cent and experts largely agree the eurozone has slipped back into the throttling grip of recession.
Yesterday, the International Monetary Fund warned for the first time that Europe’s debt crisis could trigger a break-up of the eurozone.
Yet the European Parliament sails along like a partying cruise liner, utterly oblivious to the disasters ahead.
In Brussels, the foyers are packed with art exhibitions. In the chamber, debates take place on enlarging the EU to take in still more member states.
While the European dream of a strong single currency evaporates, the only thing that seems to concern MEPS is their own self-importance.
The bars and restaurants surrounding the European Parliament are heaving. Money and drink flow freely. Little wonder.
Staff working for the EU pay tax at a rate of 21 per cent (though our MEPS pay British tax rates, so as not to benefit from this racket).
In stark contrast, the waiters who serve trays full of Belgian beer, steak and frites pay 40 per cent tax.
As one veteran remarked of life in the Brussels bubble: ‘There is no recession here.’
Indeed. But what there is — in spades — is vanity.
Behind the main European Parliament complex, I was directed to a newly opened 65,000 sq ft visitor centre called the ‘ Parliamentarium,’ which cost nearly £18 million (the original estimate for it was £14 million).
It is a shrine to excess, packed with expensive technology and featuring welcome messages from every MEP.
It celebrates the creation of the EU with barely a nod to the crisis raging all around. France’s recent history is marked by a picture of the Tour de France, and Germany’s by the famous Berlin address by Barack Obama in 2008.
Interestingly, the image used to represent Britain (which, of course, is not a member of the euro) is much less positive.
We get pictures of the bombings in London in July 2005 and of staff packing boxes at the London arm of Lehman Brothers after its collapse.
This reflects the jaundiced French view that it’s the AngloSaxon capitalist model that is to blame for all the world’s ills.
Sadly, such vanity projects as the House Of European History are visible everywhere — regardless of the crippling debts of individual member states.
Overall, the European Parliament costs £1.69 billion a year to run — an increase of 18 per cent since 2009.
It rents, leases or owns 63 buildings, double the number a decade ago. Tory MEP Geoffrey Van Orden, who heads the New Direction think-tank, says the main reason for the spiralling cost has been the massive increase in Parliament’s bureaucracy.
Grotesque
Since the enlargement of the EU in 2004 (which increased the number of member states from 15 to 25), staff levels have grown from 3,946 to 6,245 — even though there are only four more MEPS than in 2004.
More than 1,000 European Parliament officials earn more than the MEPS — who themselves are very well paid.
By comparison, just 83 staff members of the British House of Commons are paid more than our MPS.
Meanwhile, it has emerged that a TV propaganda channel for the European Parliament, which has only 830 viewers a day, costs £7 million a year to run — largely because most of the shows telecast are translated into 22 languages — including Gaelic, which is spoken by just 80,000 people.
During my visit, it emerged that the head of the EU’S environment agency — a British scientist — has been using public funds for staff training in the Caribbean and Mediterranean.
Jacqueline Mcglade, a marine biologist, also spent £250,000 to decorate its Copenhagen-based headquarters with plants.
Eurocrats are so used to such grotesque expenditure of other people’s money that barely an eyebrow was raised.
Worse, the eurocrats fail to see that they are doing anything wrong.
Every year, £180 million is squandered on dragging the entire eurocracy to France for a handful of sessions in the Strasbourg Parliament building.
This happens for no other reason than to placate the French — whose economy benefits from the millions spent in hotels, bars and restaurants by the travelling EU circus.
In a laudable move, Tory MEP Ashley Fox fought to stop the European Parliament travelling to Strasbourg for a single month — a saving to Europe’s taxpayers of an estimated £15 million.
Privilege
Yet the plan is being challenged in the European Court of Justice — yet another expensive EU institution.
No one is betting against the court ruling in favour of France, and of the waste continuing unchecked.
Of course, the European Parliament is responsible for only a fraction of the EU’S profligacy.
The EU’S entire budget is an obscene £120 billion — with Britain making a net contribution (money we dole out, but do not get back in grants or our historic rebate) of £6.12 billion.
That is £233 for every household in the UK.
Indeed, as research by the MEP Richard Ashworth shows, only Germany pays more, in net terms, for the privilege of being a member of probably the most spendthrift club on earth.
Yet the Brussels establishment still does not recognise the need for the kind of efficiencies being implemented at home by their member states.
Outrageously, the Commission’s budget committee has just demanded an increase in the EU budget of 5 per cent a year for the next seven years.
David Cameron insists that Britain will not pay. But we have heard tough talk over budgets from him before, only for him to cave in, as he did last year over the same issue when he agreed to a 2.9 per cent increase in the budget.
If he finds himself wobbling in negotiations, he should think of the unforgivable act of vanity that is the new House Of European History.
If that doesn’t convince him to stand his ground, then nothing will.
The EU is living in a state of near criminal delusion and waste. History will surely record that its bureaucrats fiddled while the euro dream burned.