The Real Income Scandal

Sir Fred’s Pension

A £650,000 a year pension for ruining a bank is clearly a scandal. In perspective, it is about 100 times what an old age pensioner gets. As Gordon Brown says, we are all entitled to be angry.

But what can be done about it? There is, the lawyers tell us, very little chance of any legal challenge succeeding. In reality, talk of legal action – or even M/s Harman’s act of parliament – is really a diversion.

The Real Scandal

The real scandal is that Sir Fred is not alone. Dozens, maybe hundreds (nobody knows how many) in the last ten years, have received similar awards. Indeed, we now learn that some (including at least one from the Royal Bank of Scotland) have been awarded much larger pay-offs.

To receive a large pension, you need a large ‘pension pot’. In Sir Fred’s case, this is said to be something over £16 million. In other words, without this, it would have cost the taxpayer (you and me) £ millions less to bail out the Royal Bank of Scotland.

£10 million, £20 million, £30 million ‘pension pots’ have been accumulated, significantly from tax free contributions. The first step in action to be taken is to impose, by legislation, a wealth tax which includes pension pots.

Wealth Tax on Pension Pots

In would not be at all unreasonable to levy a tax rate of 40% on that part of the pot which is assessed to provide a pension above £100,000 a year. In Sir Fred’s case, this would mean a one-off payment of around £4.5 million.

However, this would still leave him, and his like, with annual pensions of around £500,000. – still grossly over generous when an old age pensioner receives little more than £6,000 a year.

Higher Rates of Tax

These scandalous payments draw attention to the real issue – that the UK is a grossly unequal society. Because everyone is now aware of this, the government should act immediately.

Higher rates of tax (the existing top rate is 40%) on all incomes, including pensions, should be introduced along the following lines.

Incomes over:

£80,000 45%

£120,000 50%

£150,000 55%

£200,000 60%

£250,000 70%

These rates are not unduly punitive. I, and I suspect many readers, would support higher rates.

However, the above would make it possible to take a million of the lower paid out of tax brackets – a significant first step towards a more equal society.

And, as I have argued in earlier Blogs, more income for the poor would help towards economic recovery.