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17 June 2011

The coalition gears up for a fight on public sector pensions

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

By George Eaton

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.”

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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.