Another fine mess, Darling
“You wanted to see me, prime minister?”
“Ah, Gus, do come in. Rather awkward. Something we didn’t think of in the Chancellor’s pension proposals — I always said Alistair didn’t have the intellectual firepower to take my job.”
Sir Gus O’Donnell sighed. “But prime minister, that’s why you appointed him.” “Yes, well never mind that now. This is about your pay increase as Head of the Civil Service. I’m afraid that we’ll have to limit you to two percent. I’m sure you’ll understand.”
“Of course, prime minister. I already get 285,000 pounds, and we all have to make sacrifices.”
“Yes, well, yours may be more than most. Two percent is 5,900 pounds, and you’ve already earned two-thirds of your final salary because you’ve been here since God was a boy — oh, sorry, that’s what they call you, GOD, isn’t it?
“Just my little joke, and to think they say I don’t do jokes. There’s been a tremendous fuss about 50 percent income tax, but that’s not the half of it.
“Now as I understand the new pension proposals anyone earning over 150,000 pounds is being penalized. It seems that if you’re in a final salary pension scheme, you’ll have to pay income tax on the capital value of any pay rise.”
“I’m not quite with you, prime minister.”
“Then you’re not as smart as I thought you were, Gus. Let me spell it out. Your 5,900 pounds entitles you to an extra 3,933 pounds when you retire in October 2012, on top of the 190,000 pounds a year you’ve already accrued.
“It’s not quite in the Fred Goodwin league, but the cost of buying 3,933 pounds a year, inflation-proofed, for a healthy 60-year-old is about 100,000 pounds. After Darling’s Budget, you’d have to pay tax on that gain as if it were a payment in kind.”
“So you’re saying that a pay rise of 5,900 pounds brings me an extra income tax liability of 50,000 pounds? That’s outrageous.”
“I’m pleased the penny is starting to drop. We can always make a rule for ministers, civil servants and high court judges — after all, we’ve done that before — but I don’t care to think what the Daily Mail would make of that.”
“But prime minister, the Finance Bill hasn’t even got to Committee yet.”
“Precisely, Gus. And while we’re about it, we might do something to apply the same rules to the self-employed as those already in company pension schemes. Even I find that one hard to swallow, and it’s inviting a Judicial Review. Now get onto those idiots at the Treasury, and tell them not to be so stupid, or they’ll be hearing from me.”