Nobody Does It To Get Rich

FRIDAY, MAY 08, 2009

Nobody Does It To Get Rich

Houghton Hall - built on the proceeds of Robert Walpole's efforts not to get rich in public service

On this day of trough name and shame, Tyler has heard many MPs saying "I can assure you - nobody comes into politics to get rich... we become MPs to serve the public".

Set aside that last point, and resist the temptation to scream "I most certainly don't want you servicing me!" What are the facts about them getting rich?

As things stand, MPs get a salary of £63,291 pa. But in addition, they can claim £100 grand pa to employ other members of their family to watch porn films (the so-called "staffing allowance"), £22 grand pa for "incidental expenses", £24 grand pa for "additional costs", £10 grand pa for "communication", 20p per mile for riding a bike, and various other tens of thousands for sundries.

Not forgetting, of course, membership of the most generous final salary pension scheme in Britain.

Tot it all up, and you're looking at a package well north of £200 grand pa.

So how does that stack up against the rest of the population?

According to the latest official ONS stats (the 2008 Annual Survey of Hours and Earnings), the median gross pay for full-time workers is £25 grand pa. Most workers get no additional allowances, and no pension to speak of.

So relative to the median, MPs get something like ten times as much.

What about relative to higher earners?

Across the whole economy, top decile full-time earnings are £50 grand pa (ie only 10% of workers get more than £50 grand pa).

So MPs do considerably better even than our top 10% of earners (most of whom will not get anything like the same additional allowances and pension).

The ONS don't publish the data on earnings above the top decile, but a combination of data from the IFS and Tyler's trusty fag packet says that MPs are actually in the top 2-3% of the income distribution.

They may not have become MPs to get rich, but once they've made it, they seem to do just fine.

Stuck In The 70s Groove

Even their scriptwriter wouldn't have called the bungling baddie Mr WoolAss

So the Bank of England is pumping up the money supply by another £50bn - despite the fact that monetary growth is already kereering along at 18% pa (M4), and the money supply has ballooned by an eye-watering one-third in the last two years.

The City is certainly pleased. Loose money has finally triggered a stock market mini-boom - up 25% from its March lows - and bank profits are roaring ahead (some are even ahead after further bad debt provisions).

No wonder the City's economists are falling over themselves to say that the Bank is doing the right thing: those boys can see light at the end of the tunnel, and it takes the shape of some further serious wedging, bonuswise.

Unfortunately, for the rest of us, the light at the end of the tunnel is the Inflation Express, which is hurtling towards us like a giant hurtling thing.

It's all so horribly familiar.

Consider 1975. During that year, the stock market had a fantastic run, rising by 140%. City bonuses would have been perfectly tolerable. But real Britain was sinking fast, with only months to go before the IMF were called in.

And just like now, the Bank of England was stoking monetary growth in an attempt to combat recession. Indeed, despite the fact that inflation soared to 25%during the year, interest rates actually went down.

Policy makers were agreed that it was more important to head off recession than to head off inflation (they hadn't yet understood that was not a choice actually open to them - see this paper for how their monetary policy thinking soon changed).

True, right now, we're nowhere near 25% inflation. But even in the pit of the worst recession since the 30s, prices are still rising by 3% pa (CPI) - well over the official target - food inflation is in double digits, and Mrs T's kitchen man tells us there are some chunky price increases in the pipeline for anything foreign (let alone poncy and foreign).

Note too, that the inflation outlook is considerably worsened by the fact that we're not alone. Yesterday, the European Central Bank announced it was to fire up the printing presses (aka Quantitative Easing), and the US Federal Reserve hasalready printed a shedload (here's an excellent podcast by legendary US monetary economist Allan Meltzer explaining precisely how this inevitably ends in inflation).

So we really are back in the 70s groove. It's as depressing as BBC4's repeats of the New Avengers - and at least one of them went on to become the leader we all now crave.