The Labour Government

[Chippy_boy]

There was an inquiry into the child abuse and grooming issue three years ago, so it is hardly ‘mind blowing’ to question why we needed another inquiry, hence an audit to establish whether one was needed or not.

Casey’s issue with the previous inquiry was that its recommendations where largely ignored, hence the need revisit the issue via a second inquiry.

Link to the executive summary of the previous inquiry.

Executive Summary

The Independent Inquiry into Child Sexual Abuse (IICSA), led by Prof. Alexis Jay, is investigating the extent to which institutions in England and Wales failed to protect children from sexual abuse.

www.iicsa.org.uk

Predictable.

 

[Chippy_boy]

The total expected cost has been calculated by discounting the sums due to be paid to Mauritius over the duration of the treaty, using the standard Social Time Preference Rate (STPR) as set-out in the Treasury’s Green Book. This public sector discount rate adjusts for social time preference, defined as the value society attaches to present as opposed to future consumption, and has been used in the UK since 2003. Due to the long-term nature of the treaty, the discount rate has a significant impact on the expected cost. We have applied the declining long-term real STPR as follows: 3.5% (0-30 years); 3% (31-75 years) and 2.5% (76+ years).

The average annual cost has been calculated by applying the Office for Budgetary Responsibility forecast GDP Deflator to the future payments described above.

Now it's not what I call "just basic accounting" and I can't be bothered getting my head round STPR, but it looks like Starmer's advisors knew what they were doing and he wasn't lying. Plus the deal was done largely by the Tories, and Labour inherited a "close to final treaty".

I seriously doubt the figures they provide are correct. Starmers £101m per year average over 99 years is broadly correct, BUT that is the already discounted for inflation amount, i.e. 99 x 10.1 = £10bn.

I suspect what they've done is apply the discount for inflation again on the already discounted costs. That does get you to his £3.4bn, but it would be wrong if that's what they've done. You can't do the discounting twice. I cannot see how you can get to £50bn gross to an NPV of £3bn without cooking the books.

And yes, it's basic accounting. Took me 5 minutes on a spreadsheet, literally, albeit I applied 3% thoughout, but I doubt it makes much difference. I'll update my spreadsheet when I get a moment later. I might also add that using a different discount rate from the assumed inflation rate is dubious accounting practice.

IFRS 13 — Fair Value Measurement

Emphasises consistency between inputs in present value techniques.

Appendix B9–B12:

> “Discount rate used should be consistent with the assumptions inherent in the cash flows.”

 

[Chippy_boy]

They certainly were rubbish when Frosty sold the country down the river with the appalling Brexit deal. I’d like to think they can only improve from that.

In what way was it appalling? It's way better than I ever dreamed we'd get. Tarrif free access to the EU markets was never a realistic proposition but with hardball negotiation, we got it.

How might you have expected it (unrealistically imo) to be any better exactly?

 

[bluethrunthru]

They have spent days denying it then they let Eagle make a speech

 

[Vic]

Nope. The figures he gave are wrong. His £101m per year average over 99 years is correct, BUT that is the already discounted for inflation amount, i.e. 99 x 10.1 = £10bn.

What he's then done I think is apply the discount for inflation again. That gets you to his £3.4bn, but it's wrong. You can't do the discounting twice.

And yes, it's basic accounting. Took me 5 minutes on a spreadsheet, literally, albeit I applied 3% thoughout but it makes very little difference.

It's not Starmer who's come up with the figures. I might not understand Social Time Preference Rate but should I take your word for it against some Treasury wonk whose job it is?

 

[Vic]

In what way was it appalling? It's way better than I ever dreamed we'd get. Tarrif free access to the EU markets was never a realistic proposition but with hardball negotiation, we got it.

How might you have expected it (unrealistically imo) to be any better exactly?

I wanted what was promised. To be in a free trade zone from Iceland to the Russian border.

 

[west didsblue]

In what way was it appalling? It's way better than I ever dreamed we'd get. Tarrif free access to the EU markets was never a realistic proposition but with hardball negotiation, we got it.

How might you have expected it (unrealistically imo) to be any better exactly?

Ask literally anyone that imports and exports to/from the EU. At best it’s just a pain the arse but at worst it restricts trade due to the non-tariff barriers. We should have done a Norway or Switzerland type deal as promised by the Brexiteers, but the Brexit ultras who controlled the Tories didn’t want anything to do with the single market, and Johnson just wanted a deal whatever the fuck it was so he could boast about it. At least the current government is making progress in fixing a few of the problems. Anyway I can’t be arsed getting into another Brexit discussion so that’s all I’m going to say.

 

[Chippy_boy]

It's not Starmer who's come up with the figures. I might not understand Social Time Preference Rate but should I take your word for it against some Treasury wonk whose job it is?

Depends if they got it right (seriously).

Using the contractual figures and an assumed annual inflation rate of 3% you get to £50bn in cash payable.

It stretches the bounds of credibility to discount that to £3.4bn. And here's the issue: According to International Accounting Standards, the discount rate you apply to calculate the NPV must be consistent with the inflation rate you use. That is so that businesses - or governments - cannot artificially show reduced liabilities.

IAS 36 — Impairment of Assets

Para 30–31: Requires that cash flows and discount rates must be consistent in terms of inflation.

IFRS 13 — Fair Value Measurement

Emphasises consistency between inputs in present value techniques.

Appendix B9–B12:

> “Discount rate used should be consistent with the assumptions inherent in the cash flows.”

The upshot here is that the NPV should not materially vary depending upon the rates assumed. A higher assumed inflation rate results in a higher cash amount, which is then discounted at a higher rate. Or a lower assumed inflation rate results in a lower total cash amount discounted at a lower rate. So either way the NPV remains constant and represents a fair value of the liability. That works out at £10bn.

If they are using (say) an assumed inflation rate of 2% per annum and discounting at average say 3%, then that is likely cooking the books.

 

[west didsblue]

It's not Starmer who's come up with the figures. I might not understand Social Time Preference Rate but should I take your word for it against some Treasury wonk whose job it is?

I made it £3.6bn total using STPR figures from the green book. That ignores inflation.

 

[Chippy_boy]

I made it £3.6bn total using STPR figures from the green book. That ignores inflation.

Precisely! Add in inflation at the same rates and you get £10bn.

You cannot discount future values at 3.5%, 3.0%, 2 5% to allow for the costs of inflation and then use 0% for your inflation rate! That just artificially under-represents the liability.

ChatGPT interpretation:

If the government discounted real cash flows using nominal discount rates, it would be an accounting error and arguably fiscally deceptive. It would significantly understate the true cost of long-term commitments and fail to meet both IFRS and UK Treasury standards.

 

[Chippy_boy]

Anyways, moot point on the NPV of the Chagos deal. IMO we're idiots for agreeing to give them any money at all.

 

[Vic]

Anyways, moot point on the NPV of the Chagos deal. IMO we're idiots for agreeing to give them any money at all.

Anyway, however you crunch the numbers it was the Tories' deal...

https://www.libdemvoice.org/conservative-hypocrisy-over-the-chagos-islands-76255.html

 

[Chippy_boy]

Anyway, however you crunch the numbers it was the Tories' deal...

https://www.libdemvoice.org/conservative-hypocrisy-over-the-chagos-islands-76255.html

I don't care Vic. I'm not a Tory supporter, and haven't been for donkeys years.

A shit deal is a shit deal. And the Tories didn't sign it, btw. Unless you think Labour are just Tory puppets without a voice of their own?

No, I didn't think so.

And REALLY??? Jack Wilkin is a LibDem supporter and a PhD student at the University of Exeter??? Deary me.

 

[Hertzblue]

Anyway, however you crunch the numbers it was the Tories' deal...

https://www.libdemvoice.org/conservative-hypocrisy-over-the-chagos-islands-76255.html

So they could ditch the Tory Rwanda deal - because it suited them, but not this one ..... because it does suit them .

 

[Chippy_boy]

So they could ditch the Tory Rwanda deal - because it suited them, but not this one ..... because it does suit them .

Precisely.

It's really amusing the justification gymnastics that goes on on here. Terrible deal - all the Tories' fault. Great result (e.g. net migration halved by the last government's changes) - Labour brilliance.

 

[The Future’s Blue!]

You know what’s bad, that the first year under this government, that has had so many shots in the foot, is still massively better than what we’ve had in the last decade, or so.

Tories, Brexit Party (Reform), have both caused self-arm, undermining working people, yet people still want to turn to them to look after your future?

Absolute barm-pots!!!

 

[The Future’s Blue!]

Precisely.

It's really amusing the justification gymnastics that goes on on here. Terrible deal - all the Tories' fault. Great result (e.g. net migration halved by the last government's changes) - Labour brilliance

Tory or Reform?

I’m guessing, Reform.

 

[Chippy_boy]

Tory or Reform?

I’m guessing, Reform.

Anything but Labour or the Greens.

 

[Chippy_boy]

You know what’s bad, that the first year under this government, that has had so many shots in the foot, is still massively better than what we’ve had in the last decade, or so.

Tories, Brexit Party (Reform), have both caused self-arm, undermining working people, yet people still want to turn to them to look after your future?

Absolute barm-pots!!!

Just tell me how much you think the financial crash of 2008, Brexit, COVID and the war in Ukraine and ensuing huge inflation, have been contributing factors?

Don't give me any diversionary bollocks. I just want to hear you be honest, or lie. Over to you. How much?

 

[Vic]

So they could ditch the Tory Rwanda deal - because it suited them, but not this one ..... because it does suit them .

One was the wrong thing to do, one was the right thing to do.

This morality stuff isn't that hard.