The coalition gears up for a fight on public sector pensions

Danny Alexander defends plans to make workers work longer and pay more.

Unbowed by the threat of mass strike action, the government is continuing its drive to reform public sector pensions. Danny Alexander has been on the airwaves this morning defending plans to raise the retirement age from 60 to 66 in 2020 and to increase workers' contributions by an average of 3.2 per cent. In an article for the Telegraph, the Chief Secretary to the Treasury writes: "It is unjustifiable that the taxpayer should work longer and pay more tax so that public sector workers can retire earlier and get more than them."

However, in an attempt to sweeten the pill, Alexander has announced that those earning less than £15,000 a year will not face any contribution increases while those earning under £18,000 will have the increase capped at 1.5 per cent. In addition, the increase will be phased in over three years from next April, taking into account the two-year public sector pay freeze.

But the risk remains that many average earners, already facing the steepest fall in living standards since the 1920s, will quit their pensions rather than pay more. As Unison general secretary Dave Prentis remarked: "[T]hose on above £18,000 a year who will see their contributions increase by much more than 50 per cent. These days £18,000 is not a huge amount and this will affect lots of public sector workers, including nurses and social workers." Yet given that the cost to the taxpayer is due to rise from £4bn a year at present to £9bn a year by 2015, ministers believe that they are on the right side of the argument.

In the meantime, the debate over whether the government should tighten existing anti-strike laws continues. Unlike Boris Johnson, who has called for the introduction of a 50 per cent threshold for strikes, ministers currently believe that there is no need to change the law, although in his Telegraph article Alexander pointedly notes that: "Only one in five members of the Public and Commercial Services (PCS) union voted on Wednesday for strike action - the vast majority realise that such a step is unjustifiable."

But it's another Lib Dem, employment minister Ed Davey, who has offered the clearest argument yet against new anti-union legislation. In a speech at the National Liberal Club he warned that changing the law would be "antagonistic and inflammatory", adding that it would "play into the hands of the militants" and undermine moderate union leaders.

All the same, Davey went on to remark that "it's also not as Boris Johnson would have you believe, that the Lib Dems are lily-livered. If there's a case for taking action, we'll take action." Everyone, it seems, wants to keep all options on the table.

George Eaton is political editor of the New Statesman.

Getty Images.
Show Hide image

Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.