Public Sector Pensions – The view from the north

The Government's efforts to reform public sector pensions were always going to be controversial, as almost every proposal to change the way pensions operate have been, fundamentally wrapped up as they are in the sensitive issue of people's security in retirement. But the current government's latest efforts to reform public service pensions have courted more controversy than usual. Using his speech last Friday to the Institute for Public Policy Research, the Lib Dem Chief Secretary to the Treasury, Danny Alexander took on the thorny issue, announcing a number of controversial reforms to public service pensions which would see a number of public sector workers facing the need to increase their pension contributions and some having to work for longer. In a provocative statement, the Minister said : "there are those trades Unions who seem to believe that pensions for public service workers should not change, irrespective of the huge economic, demographic and social changes going on around them." And sure enough the day after the speech, in an interview with the Guardian, Dave Prentis, General Secretary of the public sector union, UNISON warned of strikes to come on a scale not seen since the 1926 general strike. But whilst reforms to public sector pensions are controversial for much of the country, developments will be monitored particularly closely across northern England given its disproportional reliance on the public sector to support its economy. As Ian Brinkley, Director of Socio-economic Programmes at the Work Foundation clearly explains : "Much of Northern Britain has a higher share of jobs in the public sector and over the past decade has been more dependent on public sector job growth than in the South." The Northerner has collected the views of key organisations and individuals across the region with an interest in the reforms and the subsequent union response. From business Speaking to the Northerner, Sarah Green, Regional Director for the Confederation of British Industry in the North East argued: "Public sector pensions must be fair for employees and fair for taxpayers. That means they must be affordable, and it's been widely acknowledged that contributions paid to these schemes do not equal the value of benefits being promised. As we've highlighted, this gap is £10 billion a year, and growing. "Businesses in the North East are concerned about the growing liabilities of public sector pensions. Many of them have already brought their pension costs under control, by reforming their own provision in the last few years. Further changes to public sector pensions will ensure they are properly funded for both current and future generations." From unions Simon Elliott, Northern Region Secretary of the Public and Commercial Service Union who's members will next week go on strike told us: "If there is a so-called over reliance on the public sector in the North, the Tories are directly responsible for it. The last Conservative government laid waste to manufacturing in this region last time they were in office. This led to increased unemployment and casualisation, which means a greater demand for public services and public sector jobs. There are more socially deprived boroughs in the North East than anywhere else in the country. Middlesbrough for example came bottom in a BBC study of 341 towns' ability to recover from the recession. "If the economy in the north is to recover, the last thing we need is even more people driven into poverty by this pensions robbery. Let's be clear - the average civil service pension is £6,500 per year, which is hardly gold-plated. Staff across the public sector are understandably angry about proposals to increase pensions contributions and make them work until they drop. The government is deliberately misleading when it claims that public sector pensions are unsustainable. According to the National Audit Office, both teachers and civil servants pensions schemes are affordable on current contributions. "Trade union members are therefore outraged that proposed increases in contributions will be going straight into the Treasury coffers and not into pension schemes. This is especially the case when they know that there is an alternative to the government's cuts programme. The people that caused the recession in the first place, bankers and financial speculators, are getting away scot free, and continue to award themselves obscene bonuses. "There will be huge support for the strike on 30 June from members of Civil Service and teaching unions in the North. Industrial action is likely to be increased through the summer and autumn as more and more unions take a stand against these unfair and damaging proposals." From the Government In the face of strike action next Thursday, the Government sought to highlight that less than 20% of PCS members are supporting strike. A spokesperson for the Cabinet Office told this blog: "What the 15 June ballot result shows is that among PCS members there is extremely limited support for the kind of strike action their leaders want. There was a very low turnout for this ballot and less than 20% of their members are supporting this unnecessary industrial action. This is not surprising given that talks with the TUC about public sector pensions are continuing; there is no justification for any Civil Servant going on strikes while discussions are continuing. "There is cross party consensus that public sector pensions need to be made fairer and more sustainable. That is what former Minister John Hutton's report recommended and that is what we are trying to achieve. "Public sector pensions will remain among the very best, providing a guaranteed pension level for all employees. Today very few private sector employers still offer guaranteed pension levels. But people today are living much longer. So Lord Hutton recommended that people should work for longer before drawing their pension. And we're asking employees to pay more towards the cost of their pension. This makes for a fairer balance between what employees pay and what other taxpayers have to pay. "We continue to hope that industrial action will not take place, but in the unfortunate event that it does we can assure the public now that all services have highly developed and rigorous contingency plans". From the Opposition Labour's Shadow Chief Secretary to the Treasury, Angela Eagle, MP for the Merseyside seat of Wallasey meanwhile is critical of the way the Government has handled the whole issue. Speaking to the Northerner she says: "We said at the time that it was published that Lord Hutton's report on public sector pensions is a significant and very challenging report about the long-term affordability of public sector pensions. But Ministers have badly mishandled the issue. Rather than sitting down with employees to reach agreement, they announced their proposals without even waiting for John Hutton's detailed report on the issue. "Both sides should now get the round the table and sort this out as quickly as possible. By contrast, Labour took tough decisions on public sector pensions to put them on a sustainable and affordable basis and to cap the taxpayers' liability – saving £1 billion a year. And we also introduced new schemes with higher pension ages for new members (from 60 to 65) and introduced caps to limit employer costs. But we did so through a partnership with those in the public sector who participated in negotiations with us where a fair outcome was reached." What do you think? Is the Government right to press ahead with it's reforms to public sector pensions? How should Trade Union's respond? Is the North too reliant on public sector employment? Ed Jacobs is a political consultant at the Leeds-based Public Affairs Company and writes regularly for the centre-left political and policy blog, Left Foot Forward .