Sometimes I wonder if people in the public sector actually stop and think when they rant on about the tax and national insurance contributions they claim to make as deductions in their pay slip. On taking a closer look its simpler than you might think. lets call our public sector worker Adam. He's a teacher say and earns £400.00 per week pays 20% in tax and national insurance so to keep things simple he ends up with £320 in his pocket and the government by virtue of the deductions retains £80.
Adams friend Bob works on an oil rig in the north sea say, he earns £2000 per week and like Adam has 20% deducted from his salary by his boss who sends the £400 on to the government to pay for Adam. The system is an automated system and the computer places £320 in Adams bank account with the other £80 it pays to heat and light the school and provide all the learning materials ,books pens ,computers, etc; for that week.
The Question we have to answer is who paid for the books Bob or Adam?
Lets ask them.
Bob says "obviously I did, the government bought the books on my behalf so that my son Billy and, get this, Adams daughter Anna both had books to learn with. Not only did I buy the books but I paid Adam to teach his own daughter along with my son".
Adam says "obviously I did the money came directly from my pay packet and it was me who bought the books bob just paid my salary.
The government computer printout states that the books where paid for through general taxation so in effect both bought the books!
During the good times while Bob keeps earning does it really matter who bought the books it seems it is not an issue really.
The following year however the price of oil drops and Bob only earns £1000 per week so the tax revenue his employer sends to the central government computer is now only £200 per week.
The computer engages its artificial intelligence chip has the numbers dont work this week and it prints a letter off to Adam stating that a further deduction of £120 per week will be made for his pension.
This is a lucrative final salary pension of £200 per week for when he retires, however if he wishes to be part of the scheme he must use last years books this year, but in the long run he will far better off than anyone else. adam ticks the I accept box and in his paypacket that week it reads £400 less tax £80 less pension £120 net £200.
Later that day Bob and Adam meet up for a drink and discuss how they both are earning less this year and agree things are tight but we are all in it together its the same for both us.
Who bought the books?
A few years go by and Billy goes to work on the oil rigs just like his dad Bob , now retired, earns £3000 per week the price of oil is up and he will be getting married soon to his childhood sweetheart Anna who just like her dad is a teacher and now earns £600 per week, good times lets roll.
Billy gets deducted 20 % by the automated government computer and his employer sends £600 per week of which £200 is deposited in Adams account for his pension, Anna's payslip reads £600 gross Tax £120 Pension £180 [ for final salary of £300 per week} net £300.
The government computer orders new books as the old ones are worn out at a cost of £80.
Later Bob and Adam meet up for a drink Bob gets the first round from his £20 state pension {billys tax £600 pays £200 Adams pension, £300 Anna's net salary, £180 Anna's pension and £20 Bobs state pension.
So who do you think actually bought both sets of books?
Hands up for Billy !
