It seems the British politicians have been enjoying a rather brilliant swizz, until it was exposed by the British press at the weekend. In a nutshell British MPs have been buying second homes, doing them up at the expense of the taxpayer and then selling them on for a tidy profit and telling the taxman it was their primary residence.
Writing in Moneyweek, John Stepek argues this is just another example of everything that is wrong with the current system and in his opinion it all comes down to two little words – moral hazard. You can read his thoughts here
Stepek believes that moral hazard doesn’t just apply to MPs who get carried away with expense claims but is at the root of the whole financial crisis and the subsequent belief that politicians will do whatever it takes to prop up the banks. But the real issue is that this hasn’t solved the problem, Irish banks will dump their toxic assets on the taxpayer via NAMA while continuing to return to the taxpayer for more and more money as the economy continues to fail and bad debts mount.
As an aside, Stepek also refers to a newsletter issued by US fund manager, Jeremy Grantham, who asks what we could have spent the money on instead and concludes “really useful, high return infrastructure and energy conservation and oil and coal replacement projects” would have provided a real bargain for society.
