British government DEFAULT
It is distressing to witness yet another piece of financial chicanery by the British government, which now proposes to substitute the Consumer Prices Index for the Retail Prices Index as the “index-linking” mechanism for a number of private occupational pension schemes.
The effect, according to experts, will be to reduce the real value of such pensions by about ten per cent over a member’s lifetime in retirement. What a sorry swindle.
It is one thing when the government breaches contracts to which it is itself a party, but to interfere in other people’s voluntary contracts seems to be carrying things a bit far. One might also ask: whatever happened to the Rule of Law?
In the course of my career as a Professor of Finance and Accounting, I came to the conclusion that the two most important qualities in finance were competence and honesty.
I recently wrote about British government project disasters in an IEA book entitled They Meant Well. I remarked that in England we have always been suspicious of grandiose state projects, and rather surprised if they don’t end in abject failure. So much for competence.
Nobody who has observed the post-war financial scene would dare suggest that British governments have been honest. For example, according to the Retail Prices Index, the pound has lost more than 96 per cent of its purchasing power since June 1947, when it started. Over the period, this represents a rate of currency debasement of about 5 per cent a year.
The good news is: I don’t propose to reduce my own personal estimate of the British government’s credit rating. It was already standing at the lowest possible level.