Leader: Stop playing politics with public-sector pensions

Ministers must negotiate with the unions in good faith.

Few now remember it, but there was a time when David Cameron sought co-operation, not confron­tation, with the trade unions. He became the first Conservative leader in more than a decade to meet the general secretary of the Trades Union Congress and appointed a union emissary, the former Labour MEP Richard Balfe, who spoke glowingly of the unions as "great, voluntary organisations". But that was in 2008, when Mr Cameron was still committed to Labour's spending plans. Now, as a result of his government's austerity programme - specifically its proposed reforms to public-sector pensions - Britain is facing the greatest threat of industrial action since the 1980s.

The decision by the Chief Secretary to the Treasury, Danny Alexander, to announce unilaterally an increase in the public-sector retirement age to 66 and an average 3.2 per cent increase in pension contributions makes the mass strike by teachers and civil servants on 30 June likely to be just the start of the unrest. The willingness of the government to pre-empt the outcome of its negotiations with the trade unions suggests that the talks are little more than a political front.

There is a strong case, as the unions acknowledge, for reforming public-sector pensions. Britain, like every other developed country, is facing an unprecedented demographic challenge. Average life expectancy in the UK, which stood at 72 in the 1970s, now stands at 80. By 2034, 23 per cent of the population will be aged 65 and above, up from the present 16 per cent. Consequently, ministers plan to increase the state pension age from 65 to 66 by 2020. It is unrealistic to expect the public-sector pension age to remain frozen at 60. But such proposals should be negotiated in good faith - something that ministers have consistently failed to do.

In his speech on 20 June, Mr Alexander promised that workers earning less than £15,000 a year would not face any increase in contributions and that those earning under £18,000 would have their additional payments capped at 1.5 per cent. Still, many low- and middle-income earners will suffer a real-terms wage cut as a result. At a time when workers are already enduring a two-year pay freeze, the unions are right not to accept a further cut in living standards. The government's decision to uprate benefits in line with the Consumer Prices Index, rather than the Retail Prices Index, has already reduced the value of some pensions by 15 per cent.

Ministers claim that the cost of public-sector pensions is expected to soar, but the evidence suggests that this is not the case. The report by the former Labour cabinet minister John Hutton for the coalition states that payments will "fall gradually to around 1.4 per cent of gross domestic product in 2059-2060, after peaking at 1.9 per cent of GDP in 2010-2011". As Mark Serwotka, general secretary of the Public and Commercial Services Union, argues in his interview with Mehdi Hasan on page 36, the government's plan to increase contributions is an act of "naked deficit reduction".

The government's attempt to set public- and private-sector workers against each other should be rejected. Two-thirds of private-sector employees are not enrolled in a workplace pension scheme, 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. Many pensionless private-sector workers depend on their partner's public-sector pension to ensure a basic standard of living in old age.

And yet, despite the government's obstinacy, union leaders should be wary of declaring what the Unison general secretary, Dave Prentis, has hyperbolically suggested will be the biggest programme of action since the 1926 General Strike. The Chancellor, George Osborne, hopes to exploit the strikes to distract attention from his failing economic strategy and the unions must avoid alienating otherwise sympathetic voters. In return, ministers must prove that they are willing to treat the unions with a respect that so far has been lacking.

This article first appeared in the 27 June 2011 issue of the New Statesman, The food issue