Tuesday, 12 April 2016

What I want to know about senior politicians finances.

Gosh hasn’t there been a lot of good oxygen wasted over Cameron senior and junior’s finances! The organ grinder inside the Westminster bubble continues to make the monkeys dance for their supper!

According to the BBC Cameron’s tax payments have increased only once since he became Prime Minister, from tax year ending 2011 and tax year ending 2012 his total taxable income rose from £157k to £200k – this coincides with his Mother giving him £200k. The rest of it seems pretty tame, apparently he sold all his shares on becoming PM so there wouldn’t be any conflicts of interest, which is all jolly good, oh and he owns a house worth £2m in Notting Hill.

Looking at this through a FIRE’y lens the question I would like to ask is “how much do you keep?” Why hasn’t his tax bill been increasing – what exactly does he spend his money on? Downing St is free, the work of being a MP / PM is covered through expenses and I think he’s kept pretty busy generally in his current role, so not much free time to indulge expensive hobbies. In fact what could he spend his money on? Watches, suits, rare stamps? Maybe he gives it all to his wife and children… that would be a bigger political question… but as he has to appear whiter than white on these issues I can’t see that being the case – where does the cash go?

The PM earns just over £143k, equating to c£6k pcm (assuming 13% pension contribution, post normal taxes and no student loans!), I would think he spends virtually nothing, but say he somehow spends half, that’s £36k a year post tax to be saved.

Coming back full circle we know he owns no shares, so all he’s getting is bank interest, which we all know is paltry – if he gets a preferential “Eton old boys” special rate of 3% he’s paying just over £400 in tax each year on that. So he’s actually a victim of the Bank of England’s financial repression and the restrictions and intense scrutiny of being PM. Taking into account inflation and the report that he is also, apparently, thinking of sending one of his children to public school he’s going to be in a much worse financial position having been PM that if he’d kept his head down in the private sector. I know, I know, poor little Dave, however will he cope?!

To me it’s an interesting thought exercise as it demonstrates how pathetic interest rates are, how seven years of 0.5% interest rates has caused so much pain for older people without the benefit of a decent financial education relying on more limited savings. At the same time these rates are “artificially” impacting assessments for investments being at such historic lows. We’re then pushed to hunt for yield, particularly shares, post dividend and SDLT tax rates changes – potentially building a bubbly problem for the future.

Finally just think about the level to which we hold our public officials – that they can’t invest in anything, that they have to be seen to be so far beyond reproach that they damage their financial health in doing so. This leads to perverse and underhand reactions like Duck Pond man and mucky moat guy. Yes, they should be focussing on public service, not self-enrichment, but I also agree with the argument that MP’s should have wider experience and shouldn’t just be party drones. Imagine the monster that would be created if you put together all the elements of a perfect politician from the media responses and party political focus groups, even Frankenstein would say things have gone too far. If that means a combination of greater disclosure and allowing them to own some shares and know what’s it’s like to be impacted by the decisions they are making instead of relying on statistics of the population, then it’s probably worth letting them buy a few index funds – it might even lighten the load on the tax payer stumping up for their pensions…

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