Don’t treat all data as gospel
Prof. Len Shackleton quoted in The Express
Mark Littlewood writes in The Times
“A prime example arose a few days ago when Angela Rayner, Labour’s deputy leader, suggested that an average earner would have to work for 400 years before they benefited from Jeremy Hunt’s recent abolition of the cap on tax-deductible pensions savings.
“In trying to reverse-engineer how Rayner got to her jaw-dropping figure, it seems likely that she simply failed to account for the magic of compound interest. If we are willing to entertain a world in which life expectancy has increased so dramatically that we can contemplate being in work for four centuries, some rudimentary maths will show how inaccurate her calculations are. A single sum of £1,000 invested today at a real interest rate of about 2 per cent will yield you a pension pot of about £3 million when you retire in the year 2423.
“Presumably, what Rayner was trying to illustrate was that the pensions reform was likely to benefit the more affluent — and this does seem especially true of those on decent salaries in the public sector. However, wittingly or unwittingly, she may have given the impression that high earners are earning so much more than average earners than is really the case.
“It may be a forlorn hope that our politicians are more careful with their words or that experts give more context and fewer forecasts. But if we can’t find some method of agreeing about the facts we face, we will continue to reach poor policy conclusions based on inaccurate data. To get to some better end-points, a lot more work needs doing on understanding where we are starting from.”
Read Mark’s full piece here.