Thursday, 7 July 2011

Public sector pensions: unaffordable? untenable?


Is there anyone who hasn't listened to Cabinet Office Minister Francis Maude's mauling on the Today programme last week? (it really heats up at about 8 minutes in)

As well as being evasive about what was up for negotiation, it was clear that either Maude hadn't read the Hutton report or was willfully trying to misrepresent it by saying pensions were getting more costly, and that Hutton had said public sector pensions were 'untenable'.

Later in the day, other Ministers took to the airwaves and suggested that the Hutton report's projected falling costs was based on certain assumed changes that the unions were opposing, including the change in the inflation measure for indexation from RPI to CPI.

It's therefore worth looking at the National Audit Office report, published in December 2010 (in between Hutton's interim and final reports) and does not take into account the indexation change, nor does it make any assumptions in the size of the workforce. It shows reforms agreed between the unions and the then Labour government in 2007-08 "reduces costs to taxpayers by 14 per cent".

It also says, "long-term costs are projected to stabilise around their current levels as a proportion of GDP". So even without these disputed areas (which the government obviously aims to force through) the costs are still not rising, but stable.

The 07-08 agreement is also "transferring from taxpayers to employees additional costs arising if pensioners live longer", which means savings are being provided by public service employees in form of increased contributions or reduced future pension.

The 07-08 deal raised the pension age to 65 for new starters, introduced a career average scheme into the civil service pension scheme, and introduced 'cap and share' arrangements so that unexpected rises would be borne by employees. Labour Cabinet minister at the time, Alan Johnson MP, said it was a "fair and reasonable" deal.

And so to the Labour Party and Ed Miliband, who was very clear (some might say repetitive) in his opposition to the strikes. However, in a briefing to Labour MPs 'PLP brief: Strikes and public sector pensions- 28 June 2011, From the Leader of the Opposition' Ed sets out Labour's position more fully (over 7 pages) yet no more clearly.

In it he says (p.1) "we support serious and long term reform of public sector pensions" and says "John Hutton's report should provide the starting point". But despite repetitively saying that "negotiations are ongoing", the document does acknowledge:
  • "Even before John Hutton's final report was published, the government slapped a 3% surcharge on pension payments for millions of public sector workers" (now 3.2% according to Danny Alexander's speech to IPPR on 17 June); and
  • "Lord Huton argued that public sector pensions in the UK are affordable in the long run"
  • "[The government is] switching the indexation of public sector pensions to CPI from RPI"
The above seems to counter Ed Miliband's line that negotiations are ongoing, and even the document hints at this by saying "If the government wants, they could have proper discussions. If that happens, there's no need for these strikes". This strongly implies proper discussions are not happening, undermining Ed's insistence that it's wrong to strike when negotiations are ongoing. Even Francis Maude was virtually forced into a confession of the sham nature of the talks under scrutiny from Evan Davis and Mark Serwotka (Radio 4 Today).

Unions met with the government again this week (for the first time since 30 June), but little movement seems to have been achieved, according to this Reuters report.

It is important that both the media and the Labour opposition begins to cut through the spin and misrepresentations and hold the government to account on this issue. It is even more bizarre for the Labour Party since, by tacitly supporting further changes, they are saying their own 2007-08 deal was ineffective, despite the National Audit Office proving the contrary.

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