View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Business
  2. Economics
30 November 2011updated 26 Sep 2015 9:31pm

Labour’s preferred attack on pensions is going nowhere

The hated 3 per cent charge hidden in last year's spending review is non-negotiable and unions know

By Rafael Behr

Coming as it does the day after George Osborne’s Autumn Statement on the economy, today’s strike by public sector workers feels in many respects like a broad rejection of the government’s entire austerity agenda. That feeling is exaggerated by the Chancellor’s decision yesterday to pay for some of his growth-boosting plans by capping public sector wages. Even if inflation falls back from its current high levels that will feel like a cut. The move will be widely interpreted by strikers as a provocation.

There is, of course, a specific dispute at the heart of today’s action – the government’s proposals to reform public sector pensions. There is also, within that specific dispute, a detail that is often lost in reporting, which is the distinction between reforms set out in the report by Lord Hutton, subsequently watered down in negotiations, and changes introduced in last autumn’s spending review. The Hutton proposals are the basis of the deal that has been offered to — and rejected by — unions. But many public sector workers are just as aggrieved by a mandatory surcharge on their employee pension contributions averaging 3.2 per cent that was in the small print of the spending review. That was seen by many as a pre-emptive attack on pensions rushed through before negotiations on a long-term settlement even got under way.

Labour is keen to emphasise the surcharge for precisely that reason. It was imposed by the Treasury without discussion and looks and feels like a smash-and-grab raid. There is some disappointment at the top of the party that unions have not pushed this point further. But privately unions say they see no point going after the 3 per cent charge as they know this is a battle they cannot win. They are right. I was told recently by a cabinet minister with good knowledge of the pension negotiations with unions that the surcharge is non-negotiable. It isn’t even on the table. That is precisely because it is contained in the spending review. That document has acquired hallowed status in the government – it is the agreement on which the coalition’s whole commitment to fiscal discipline is based. Ministers from both governing parties see it as the measure that, more than anything else, bought the country long-term respite from any pressure from financial markets that have punished other indebted governments in Europe. (Whether or not this is a real danger — or was a danger in autumn last year — is an entirely different point.) The fact is, whatever disputes might arise within the coalition, there is absolute agreement that the spending review is closed and must not be re-opened. It is the emblem of fiscal credibility.

There is also, I suspect, a certain psychological element in play here. Negotiating the spending review was an early test of the coalition’s staying power. It came at a time when many people still thought it implausible that Lib Dems and Tories could realistically stay in government together for long. The fact that it happened at all has created a certain esprit de corps in the quad – the coalition steering committee of David Cameron, Nick Clegg, George Osborne and Danny Alexander. They all know that revisiting the spending review would sabotage the political solidarity that is the glue holding the coalition together.

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

Content from our partners
The promise of prevention
How Labour hopes to make the UK a leader in green energy
Is now the time to rethink health and care for older people? With Age UK

  1. Business
  2. Economics
30 November 2011

Labour’s preferred attack on pensions is going nowhere

The hated 3 per cent charge hidden in last year's spending review is non-negotiable and unions know

By Rafael Behr

Coming as it does the day after George Osborne’s Autumn Statement on the economy, today’s strike by public sector workers feels in many respects like a broad rejection of the government’s entire austerity agenda. That feeling is exaggerated by the Chancellor’s decision yesterday to pay for some of his growth-boosting plans by capping public sector wages. Even if inflation falls back from its current high levels that will feel like a cut. The move will be widely interpreted by strikers as a provocation.

There is, of course, a specific dispute at the heart of today’s action – the government’s proposals to reform public sector pensions. There is also, within that specific dispute, a detail that is often lost in reporting, which is the distinction between reforms set out in the report by Lord Hutton, subsequently watered down in negotiations, and changes introduced in last autumn’s spending review. The Hutton proposals are the basis of the deal that has been offered to — and rejected by — unions. But many public sector workers are just as aggrieved by a mandatory surcharge on their employee pension contributions averaging 3.2 per cent that was in the small print of the spending review. That was seen by many as a pre-emptive attack on pensions rushed through before negotiations on a long-term settlement even got under way.

Labour is keen to emphasise the surcharge for precisely that reason. It was imposed by the Treasury without discussion and looks and feels like a smash-and-grab raid. There is some disappointment at the top of the party that unions have not pushed this point further. But privately unions say they see no point going after the 3 per cent charge as they know this is a battle they cannot win. They are right. I was told recently by a cabinet minister with good knowledge of the pension negotiations with unions that the surcharge is non-negotiable. It isn’t even on the table. That is precisely because it is contained in the spending review. That document has acquired hallowed status in the government – it is the agreement on which the coalition’s whole commitment to fiscal discipline is based. Ministers from both governing parties see it as the measure that, more than anything else, bought the country long-term respite from any pressure from financial markets that have punished other indebted governments in Europe. (Whether or not this is a real danger — or was a danger in autumn last year — is an entirely different point.) The fact is, whatever disputes might arise within the coalition, there is absolute agreement that the spending review is closed and must not be re-opened. It is the emblem of fiscal credibility.

There is also, I suspect, a certain psychological element in play here. Negotiating the spending review was an early test of the coalition’s staying power. It came at a time when many people still thought it implausible that Lib Dems and Tories could realistically stay in government together for long. The fact that it happened at all has created a certain esprit de corps in the quad – the coalition steering committee of David Cameron, Nick Clegg, George Osborne and Danny Alexander. They all know that revisiting the spending review would sabotage the political solidarity that is the glue holding the coalition together.

Content from our partners
The promise of prevention
How Labour hopes to make the UK a leader in green energy
Is now the time to rethink health and care for older people? With Age UK

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU