The myth of "unaffordable" public sector pensions

Forcing workers to pay more is a political choice, not an economic necessity.

The biggest strike for a generation has begun, with around 30 unions, including, for the first time in its history, the National Association of Head Teachers, and two million public sector workers walking out in protest at the government's reforms to public sector pensions. According to the Department for Education, around 58 per cent of England's 21,700 state schools will be closed, with a further 13 per cent partially shut.

With most polls showing a small majority against the strike and others showing support evenly split between the strikers and the government, the battle for public opinion has only just begun. Indeed, the most notable poll finding of recent days (courtesy of TNS-BMRB) is that just 4 per cent of private sector workers claim to know a lot about why the strike is happening. Despite the increasingly sharp rhetoric from both sides, the truth is that today's "day of action" may change little.

But there's no doubt that Osborne's new, tougher austerity programme has upped the stakes. As I reported yesterday, the Office for Budget Responsibility predicts that no fewer than 710,000 public sector jobs will be cut by 2017, 310,000 more than previously forecast. In addition, Osborne's plan to cap pay rises at 1 per cent means that some workers will have suffer an average 16 per cent pay cut over the next five years. If public sector workers can't go on strike in these circumstances, when can they?

For now, here are two myths that deserve to be rebutted again. The first is that public sector pensions, in their current form, are "unaffordable". David Cameron, for instance, has frequently claimed that the system is "broke". But as the graph below from the government-commissioned Hutton Report shows, public sector pension payments peaked at 1.9 per cent of GDP in 2010-11 and will gradually fall over the next fifty years to 1.4 per cent in 2059-60. The government's plan to ask employees to work longer and pay more is a political choice, not an economic necessity.

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As the Public Accounts Committee observed: "Officials appeared to define affordability on the basis of public perception rather than judgement on the cost in relation to either GDP or total public spending." In other words, the public have been misled and ministers are determined to keep misleading them.

The second is that inadequate pension provision in the private sector is a reason to reduce pension provision in the public sector. The Daily Mail et al repeatedly point out that two-thirds of private sector employees do not have a company pension, compared to just 12 per cent of public sector workers. But this is an argument for improving provision in the private sector, not for driving it down in the public sector. Ministers must not fire the starting gun on a race to the bottom. Indeed, many pensionless private sector workers depend on their partner's public sector pension to ensure a basic standard of living in old age.

We can debate the merits of industrial action as a form of protest. But with public sector workers facing a triple crunch - higher contributions, a tougher inflation index and lower benefits - it's hardly surprising that they feel compelled to defend their rights. Even before any of the Hutton reforms are introduced, George Osborne's decision to uprate benefits in line with CPI, rather than the RPI, has already reduced the value of some pensions by 15 per cent.

Strip away the government's rhetoric ("unaffordable", "untenable") and the truth is that ministers are forcing workers to take another pay cut, forcing them to pick up the tab for a crisis that they did not cause. The public might be on the side of ministers, for now at least, but the facts are on the side of the unions.

George Eaton is political editor of the New Statesman.

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The Home Office made Theresa May. But it could still destroy her

Even politicians who leave the Home Office a success may find themselves dogged by it. 

Good morning. When Theresa May left the Home Office for the last time, she told civil servants that there would always be a little bit of the Home Office inside her.

She meant in terms of its enduring effect on her, but today is a reminder of its enduring ability to do damage on her reputation in the present day.

The case of Jamal al-Harith, released from Guantanamo Bay under David Blunkett but handed a £1m compensation payout under Theresa May, who last week died in a suicide bomb attack on Iraqi forces in Mosul, where he was fighting on behalf of Isis. 

For all Blunkett left in the wake of a scandal, his handling of the department was seen to be effective and his reputation was enhanced, rather than diminished, by his tenure. May's reputation as a "safe pair of hands" in the country, as "one of us" on immigration as far as the Conservative right is concerned and her credibility as not just another headbanger on stop and search all come from her long tenure at the Home Office. 

The event was the cue for the Mail to engage in its preferred sport of Blair-bashing. It’s all his fault for the payout – which in addition to buying al-Harith a house may also have fattened the pockets of IS – and the release. Not so fast, replied Blair in a punchy statement: didn’t you campaign for him to be released, and wasn’t the payout approved by your old pal Theresa May? (I paraphrase slightly.)

That resulted in a difficult Q&A for Downing Street’s spokesman yesterday, which HuffPo’s Paul Waugh has posted in full here. As it was May’s old department which has the job of keeping tabs on domestic terror threats the row rebounds onto her. 

Blair is right to say that every government has to “balance proper concern for civil liberties with desire to protect our security”. And it would be an act of spectacular revisionism to declare that Blair’s government was overly concerned with civil liberty rather than internal security.

Whether al-Harith should never have been freed or, as his family believe, was picked up by mistake before being radicalised in prison is an open question. Certainly the journey from wrongly-incarcerated fellow traveller to hardened terrorist is one that we’ve seen before in Northern Ireland and may have occurred here.

Regardless, the presumption of innocence is an important one but it means that occasionally, that means that someone goes on to commit crimes again. (The case of Ian Stewart, convicted of murdering the author Helen Bailey yesterday, and who may have murdered his first wife Diane Stewart as well, is another example of this.)

Nonetheless, May won’t have got that right every time. Her tenure at the Home Office, so crucial to her reputation as a “safe pair of hands”, may yet be weaponised by a clever rival, whether from inside or outside the Conservative Party. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.