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Home » Democracy & Governance

Public Sector Pensions

Submitted by on 26 Jul 2011 – 11:35

 

Mark SerwotkaMark Serwotka, General Secretary of the Public and Commercial Services Union (PCS)

Shortly before parliament broke for the summer, the UK’s chief secretary to the Treasury Danny Alexander claimed our talks over public sector pensions had been “constructive” and had made “progress”. The truth is rather different.

Despite our continued opposition, the UK government intends to impose its three key principles that it has consistently refused to compromise on during the negotiations: increasing employee contributions; raising the retirement age and linking it with the state pension; and devaluing pensions through changing inflation indexation.

None of these measures are necessary and, taken together, they represent a deeply unfair raid on the retirement plans of hundreds of thousands of public servants.

We know from the various studies by experts such as the National Audit Office and the Institute for Fiscal Studies, that the costs of public sector pensions are falling as a proportion of national income in the long term. That is an inescapable fact, which even Lord Hutton’s so-called ‘independent’ report acknowledges and government ministers now accept – though it took some doing. Actually, it took half a million civil servants, teachers and lecturers striking on 30 June to force a public debate that exposed their misleading claims.

On the first of the core principles, the increase in contributions to raise £2.8 billion is unnecessary because, as we know from the now-famous graph showing costs falling over time, the schemes are sustainable. In fact not a penny of the money raised will go into pension schemes, it will go straight to the Treasury to help George Osborne pay off the budget deficit; a deficit, it’s worth reminding ourselves, caused by greed and recklessness in the financial sector, not by the modest pay and pensions of benefits advisors, courts clerks, coastguards, or any other public servant.

Second, again given costs are falling and the calculations for this have already accounted for projected demographic changes, the increase in retirement age is also unnecessary. Yes people are living longer, but this should be something to celebrate, not an excuse to force people to work until they drop.

Third, the switch from using RPI to CPI to index pensions – slipped through in last year’s budget without any consultation or negotiation – is a massive devaluation of people’s pension pots. And not just for those in receipt of a pension now, but also for the growing number of new entrants to the civil service who have joined since 2007, the year the changes we agreed with the previous government took effect, who are already in a career average scheme that gets uprated every year.

This is not an insignificant point. Back in 2005/06, when Lord Hutton was just John Hutton and was in the cabinet that agreed the reforms with us, we accepted the equality arguments about career averaging, and the new civil service career average scheme is a good one with a decent accrual rate. The one proposed by this government is much worse and that is why we oppose it – not, as ministers have suggested, because we are implacably opposed to career average schemes, or reforms in general.

All of these issues are important and worthy of honest debate. But the government has preferred the shrill tones adopted by the prime minister just days before our strike, when he claimed the system was “in danger of going broke”. All fiction, all designed to close down debate and rational discussion.

So while ministers seek to artificially divide public servants from their colleagues, friends and family in the private sector, we welcome the debate about pensions.

We are happy to discuss the fact that the public sector workers we represent can, on average, look forward to an occupational pension of around £80 a week. When added to the basic state pension of £102, this gives them a ‘gold-plated’ income in retirement just £4 above the official weekly pensioner poverty line of £178.

We are happy to talk about the scandal of the entirely avoidable collapse of private sector pensions and how the long term costs of this are being borne by the taxpayer through means-tested benefits, and higher health and social care costs. It is shameful that government ministers use the gap between public and private sector provision as justification, when public sector workers and other taxpayers did not force private employers to rob their staff of a decent pension.

And now the discredited ‘affordability’ claim has been replaced by the ‘fairness’ argument, we are happy to question how fair it is that the average FTSE 100 director’s pension is worth £3.4 million, while chief executives average £5.6 million, and that these schemes suck up most of the £37.6 billion in tax relief that private sector pensions get every year from the taxpayer.

Ministers have been rumbled trying to mislead the public into thinking public sector pensions were a timebomb waiting to explode and bring our economy to its knees. So we are right to oppose these plans. And, at the time of writing, the indications are that more unions will be on board with industrial action this autumn if the government continues to ignore the facts and threaten everything for which public servants have ever worked.