Saturday, 29 August 2015
Satyajit Das spouts nonsense in the Sydney Morning Herald.
In this article in the Sydney Morning Herald he claims we face a monster problem which (to quote) is as follows: “Citizens demanded and governments allowed the build-up of retirement and healthcare entitlements as well as public services to win or maintain office. The commitments were rarely fully funded by taxes or other provisions.”
Well I have terrible news for him: in the UK and several other European countries the state pension isn't “funded” AT ALL. Never mind not “fully funded”: to repeat, several state pension schemes are not funded AT ALL. And worse still, nor is the state health care system. That is, both schemes are what’s called “pay as you go”. I.e., this year’s pensions and healthcare costs are paid out of this years tax.
Also both systems in the UK are supposed to be funded out of a payroll tax called "National Insurance". But no one is too bothered about whether NI fully covers the cost of the NHS and the state pension. That is, if part of the cost of the UK's National Health Service and state pension comes from other taxes, who cares? Why does that matter? So there are two senses in which those two systems are "unfunded" or not fully funded. Horrors.
But that system basically works. Of course there are constant arguments over how generous the state pension should be and how much we should spend on the NHS. But basically, to repeat, the system works.
Moreover, the NHS is clearly more efficient than the US largely private health care system.
Even more ridiculous is the claim by Satyajit Das that: “The 2008 global financial crisis was a warning of the unstable nature of these arrangements.” (“These arrangements” being not fully funded health and pension systems).
So the financial crises in the UK was caused by the unfunded NHS and state pension system? My guess is that about 99% of the population will tell you the crisis was down to irresponsible behavior by banks and that the crisis had precisely nothing to do with the NHS or the unfunded (shock horror) state pension scheme. And my guess is that 99% of the population are right.