Wednesday, May 6, 2009

The Wrong Way to Fill a Black Hole

I see today that there is to be another taxation Black Hole. Let us hope that in filling it Terry will look to those who are most able to pay in order to fill it. I fear he won’t because of the sacred cow of not raising the 20% tax rate and the fear that the wealthy, being mobile, will leave. Has he not noticed that the most mobile in our society, who are leaving because they simply can’t afford to live here, are those young professionals – from trainee accountants to nurses – not yet on the housing ladder, that we desperately need. Low and middle earners are suffering from 20 means 20 on top of the burden of GST on essentials, and I know several who are planning to leave. Of course the zero/ten policy could be re-examined, but that seems also to have sacred cow status.

This brings me to the plan to freeze public servants’ pay. It always seems to be a popular measure because of the conception of public servants as highly paid fat cats pushing bits of paper around. The reality is that the bulk of them are teachers, doctors nurses, paramedics etc. who are increasingly in short supply. You may be told that there is no shortage of teachers, but whereas this may true in the primary sector, it is becoming increasingly difficult to recruit specialist secondary teachers. Posts are sometimes filled with applicants that are not ideal. This recruitment difficulty is exacerbated by the fact that pensions for new appointees are worse than in the UK, and conditions of working, especially in terms of lunch duties are worse than in the UK. It seems to me that Terry is being opportunistic in suggesting the pay freeze, and has not really thought through the consequences. There is no real need for the measure at the present time, as 2% has been allowed in departmental budgets. He is exploiting fears of unemployment and the fact that many in the finance sector are suffering pay freezes. Does this mean that when those in the finance sector are receiving whopping rises those in the public sector will too. You can bet your bottom dollar that they won’t. In times of inflation, public sector workers are expected to suffer lower than inflation pay rises in order to take the heat out of the economy. It seems only fair that now the economy needs thawing out, their income levels should be maintained in real terms. Perhaps there is a case for giving flat rate increases, as the lowest paid actually put all their income back into the economy ; the argument Terry uses for opposing this is that the lowest paid in the public sector are better off than those in the private sector. Is it reasonable to justify his actions by those of bad employers who pay starvation wages?

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