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 Brexit deal and all the other things Liam Fox finds “easiest in human history”

The international trade secretary is an experienced man. 

On the day of a report warning a no deal Brexit could result in prices rises, blocked ports and legal chaos, international trade secretary Liam Fox emerged to reassure the nation. 

He told BBC Radio 4: "If you think about it, the free trade agreement that we will have to come to with the European Union should be one of the easiest in human history.” 

Since his colleague, Brexit secretary David Davis, described Brexit negotiations as more complicated than the moon landings, this suggests we are truly lucky in the calibre of our top negotiating team. 

Just for clarification, here is the full Davis-Fox definition of easy:

Super easy: Tudor divorce

All Henry VIII had to do was break away from the Catholic Church, kickstart the Reformation, fuel religious wars in Europe, and he was married to his second wife. And his third, fourth, fifth and sixth. Plus the Henry VIII clauses are really handy for bypassing parliament in 2017.

Easy: Tea Act 1773

American colonialists were buying smuggled tea, when they could have bought East India tea instead. Luckily, the British Prime Minister Lord North, found a way to deal with the problem in a single bill. Sorted.

Bit tricky: Appeasement

So what if Neville Chamberlain had never been on an airplane before? It's hardly a moon landing. And he got peace in our time. Although he was forced to resign in 1940. Not quite as easy as he thought. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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