It breaks my heart seeing older people who should have a decent retirement working minimum wage jobs running checkouts and sweeping up at McDonalds just to make ends meet.

Oh – I agree. Capitalism itself is the problem here for the private sector. But unless we want totalitarianism, a society that accepts global capitalism (as all parties in ours does) has to accept that will happen. I think. The solution is a rejection of capitalism without an oppressive state – something no party offers.

The problem is that resentment will build amongst the majority of low-paid workers who do not get the benefits that the public sector does as their wages are squeezed (justified no doubt by the negative-rate RPI) and there is still no compulsion for employers to provide contributions to a guaranteed final income pension scheme. The public sector just shrugging their shoulders and telling low paid private sector employees “tough luck, mate” is not going to help one bit.

I think the public sector does at least need to accept that perks such as retiring at 60 need to be reformed. When life expectancy was in the late 60′s that was a reasonable and just age. Now it is in the 80′s it just seems wasteful.

@35
Mike K pretty much sums it all up. Your beef should be with the private sector bosses demarcating most of the trough to themselves, not the public sector workers who aren’t in any better position than their private-sector counterparts.

We do need to distinguish between long and short term effects but yes, I’d say that you’re probably right in the short term.

On basic rate income tax though I have a feeling that changing the personal allowance could lead to rises in revenue in the longer term. For there are at least a couple of million people (figure from the budget itself) who are in the tax/benefit trap and facing marginal tax rates/benefit withdrawal rates of over 60%. That (gut feel, not empirical evidence) looks like the right hand side of the curve to me.

Do you have any links for that?

Surely the main evidence which would support the idea that we are on the ‘left hand side’ of the Laffer Curve (i.e. that raising taxes creates extra government revenue, rather than reducing it) is that when in the past couple of years taxes have been reduced, revenue has fallen (e.g. income tax cut to 20p, VAT cut to 15%) and where taxes have risen, revenue has increased (e.g. abolition of the 10p rate on income tax). The Conservatives argued for reducing inheritance tax, but they predicted a fall in revenue as a result of this.

In other words, it seems reasonable to conclude (at the very least) that basic rate income tax, VAT and inheritance tax are all ‘on the left hand side’ of the Laffer Curve (supposing such a thing actually exists).

Those who think that the private sector can provide services more efficiently must surely agree…

That isn’t true. Private sector pay at or below the national average hasn’t risen any faster than public sector pay. The figures are distorted by the high board level pay. The average admin person in the private sector really doesn’t earn any more than in the public, but still has to pay more to finance their pension, is highly unlikely to ever be able to retire at 60 and these days cannot event get access to a final salary scheme, unlike their public sector counterparts.

Comparing senior private sector management pay & conditions with average public sector ones is comparing apples and oranges.

If we’re doomed to repeat positive and negative financial cycles for the next couple of decades, I think it’d be dreadfully unfair to give public sector workers the thin end of the wedge during both the positive and negative parts of the cycle.

“The terms of my pension are shit and yours should be the same. Can I suggest that a paradigm shift here? Public sector pensions should not be reduced, private sector pensions should be increased. Just because your pension shit doesn’t mean that everyones pension must be shit.”

The difference is that the guaranteed public sector pension comes from public funds, but my private pension come from my own earnings (woth perhaps a bit of an employer contribution), but with no guarantee. Do you know how I can get a public sector equivalent that is guaranteed and at no extra cost to me than the amount I pay now? Id love to know.

The terms of my pension are shit and yours should be the same. Can I suggest that a paradigm shift here? Public sector pensions should not be reduced, private sector pensions should be increased. Just because your pension shit doesn’t mean that everyones pension must be shit.

Here is anton vowel on that public vs private sector pay issue.

http://tinyurl.com/dgoy6q

Speak for yourself. I noticed on Budget Day 2007, so did Vince Cable and so, for that matter, did the tax expert at the BBC. Even George bloody Osborne noticed – look at the Hansard. The year following that was the year I learned to hate Labour. The publicity exercise they pulled off was magnificent – I mean, literally no-one listened to us, in the House, in the media or in the blogosphere, people I spoke to about it simply refused to believe that it was true. And the papers were stuffed full of commentators either totally ignoring the issue or claiming that it wasn’t really a problem. It was disgraceful.

“I mean, are the cream of the punditocracy really arguing that the trouble with this country is that all those hospital porters, teachers, nurses and disabled slackers are poncing off the backbreaking grind of over-worked tax lawyers, advertising gurus, big name television presenters and financial directors?”

I think there is something in what you say. However, the resentment on the public sector goes deeper than this. It is shop workers, cleaners, call centre workers etc who are seeing a pay freeze and a paltry stakeholder pension who are getting really pissed off with the continued rise in public sector pay and guaranteed pensions. The growth in the state affects the least well-off in the private sector far more than it does the wealthy.

Consequently, the money raised starts to decline. In addition , highly trained scientists and engineers become tempted to work overseas. Someone who has higher degrees from the top 4-5 universities is chartered and has 7-10 years experience can easily obtain work overseas. Perhaps one of the reasons for our decline in engineering and technology is that from the 1940-1980s some of our best technical people worked overseas , largely in the USA.

What the Left has not addressed is the large increase in bureaucras, administrators and froms of employment ( see guardian advert s) which do not acually increase the quality of public services. The MOD has spent £1.2B on refurbishments yet there are insufficient helicopters and armoured vehicles in Afghanistan. The Regional Development Agencies and many humanities courses in the ex-polys could be closed down without adversely impacting on the quality of public services. A £1 spent at Imperial College does far more for the UK than £1 spent at Thames Valley University!
The Left needs to consider value for money when considering public expenditure. It is time that government detailed all those who are employed by the state: their job description, pay, pension, sick leave enitlement, days taken sick, holidays , any other perks. Government has to prove every single person employed by the state provides value for money.

Public sector pensions wil have to be scaled back.

15.bluepillnation. The crisis in the USA housing market started when organisations such as ACORN forced banks to lend money to people who had no income and no jobs under threat of class actions. In the UK , Northern Rock , RBS and HBOS caused the problems in the banking sector, not Lloyds, HSBC , Barclays and Standard Chartered . Lloyds were criticised for the conservative lending policies a few years ago. Northern Rock was based in the Labour stronghld of NE England and RBS and HBOS were Scottish banks whom Brown and Salmond favoured . Brown took banking regulation away from The Bank of England much to the fury of Eddie George. Brown destroyed baning regulation and then from 2002 , spent far more money than was coming into the government coffers.

There could be massive cut backs in non-essential government employees but Brown would not do this as it impact would on Labour Party supporters.

Or do we just look at it as a single feature that applies to all? If so that doesn’t seem at all logical to me – one size never fits all.

This is what I like to call argument by free association. Repeating a list of things that you don’t like and that have something (maybe) to do with the Laffer Curve is not exactly my idea of a refutation. And there was nothing laissez-faire about the Bush administration – hint: there’s nothing remotely laissez-faire about increasing the size and scope of government and bailing out big business with taxpayers’ money.

19: The biggest problem with this is that no one knows what the point where tax revenues are maximised actually is.

I agree with you, of course, but this is not exactly a point against the concept of a Laffer Curve, it just shows that we don’t know what exactly what it looks like at this moment in time. Which means that all we can do is look at the evidence, scanty as it may be, and nothing I’ve read suggests that we’re on the left hand side.

It’s a lot more than that. Each and every tax will top out at a different rate. There are also thoughts that the same taxes will top out diferently in different societies.

For the first, for example, we tax returns to capital lessthan we do returns to labour. For we acknoweldge that capital is both more mobile than labour and also potentially it can be consumed rather than invested. Thus the elasticity of supply is different. For the second it’s not exactly a wild surmise that those making up a small more communitarian state like Sweden will happily pay higher rates than a larger less communitatrian one like the UK. It’s a surmise, yes, but not a wild one.