So some MPs are revealed as greedy looters. Does this matter?
It depends on what beliefs you already held about them. The scale of current public disenchantment is perhaps best explained by a previously prevailing belief among the politically ignorant that their representatives were persons of integrity.
Having watched the long shabby spectacle of New Labour war-mongering and money-licking, the pandering to the Editor of the Daily Mail, the whole ghastly shower of yes-boys and yes-girls grinning and nodding, I suffered no sudden loss of innocence.
My concern in this post is with the effect of their Expenses system on the muppets’ incentives and behaviour. Specifically, it is about mortgage-milking and behaviour. What things are good for mortgage-milkers?
Rising property prices.
High inflation. The muppets devised themselves a scheme which reimbursed them for nominal mortgage interest. They therefore get for themselves the benefit of the steady erosion of their principal by inflation. The principal is reduced by more than 50% over 20 years, assuming inflation of 2 ½ %.
The Liberal Democrats, who seem too embarrassed to point that out they have come out of this scandal comparatively well, have suggested that gains on the property market should be surrendered. Indeed it would be good to think that those green benches were not packed with greedy property speculators looking forward to the unearned, untaxed, speculative gains which they are hoping to add to what they have already looted from us. These are our legislators and Ministers. They have just given us one disastrous housing price bubble.
Perhaps 2 ½ % inflation really is in the public interest. We would have more confidence in thinking so, if we did not know that so many of our legislators were deriving a handy income stream from it. The Liberal Democrats should also consider the issue of the erosion of principal. Unlike market gains, it is a certain gain – a swing without a roundabout. The solution is to re-imburse real interest only – quite simple to administer (especially compared to the difficulty of chasing after speculative gains!).