Wednesday, December 9, 2009

The economics of coach travel

As I read about the pre-budget report on the coach home, two young smart chaps got on at Canary Wharf and took the seat behind me. Immediately they started talking about their Christmas bonuses, how they had been reduced (so they were only getting a few thousand) and isn't the world an unfair place.

Being a public sector worker, this made me think of my own pay rise this year (1%), my own bonus (the fact I am still in a job unlike some colleagues), and my pay rise for the next two years (capped at 1%) - while my national insurance is going up (there goes the 1% pay rise) and the pension will probably soon be a memory. After all, someone's got to pay for the national debt.

Politics of envy? Perhaps. But it is yet another example of how the wrong people are paying the price for the incompetence of government ministers and senior bankers - who I expect will get rather more than a 1% pay rise. I agree that the public sector is too big, especially at the top levels, but there are a lot of low paid staff as well. While public sector staff are easy targets, one must not forget that nurses, teachers, police, cleaners etc do a low paid job that most of us would rather not do.

My two fellow passengers will be all right. The banks will be busy with their lawyers finding loopholes in the rules to make sure the glasses are still full. And if George Osborne is in Number 11, his first budget will ensure they are not reduced to travelling by coach again.

The report was, of course, yet another missed opportunity. To get out of the recession we need more people spending money, so that businesses can recover, and employ people. More people working means more people paying taxes and less people claiming benefits - thus contributing to reducing the deficit. I'm not an economist but that seems obvious to me.

If on the other hand money is taken away from people, especially the low paid, they will have to scrimp and save even more, thus not spending money, thus businesses continuing to suffer.

To conclude, a not very good day - and we only got rid of our boiler last year!

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