The Unions will continue to fight for fairer public sector pension reform

When over half a million public sector workers walked out on strike at the end of last month over the issue of pensions, it seemed we were set for a summer standoff between the government and the unions that might dominate the political landscape for the foreseeable future. Of course the phone-hacking scandal and the subsequent fallout have shunted such a confrontation towards the side-lines but from there the battle goes on and the last fortnight has seen several interesting developments.


IPSA will decide on MPs pay and pensions but public sector workers are already suffering

On Tuesday the government announced they were now considering altering the proposed rises in pension contributions for those workers earning between £15,000 and £21,000 so that the maximum increase would be just 0.6%, whereas previously that figure had been up at 1.5%. The upper limit on this band of workers has also been increased to £21,000, up from the £18,000 it originally stood at. However to offset this, the government is suggesting that those public sector workers earning the very highest wages may now face increased contributions of up to 6%, one percentage point up on the previous proposals of 5%.

It is unlikely that many unions are going to be suitable appeased by these latest set of proposals with several already warning that further strike action will follow if no further concessions are offered. Whilst these latest changes undoubtedly offer up a system which protects those on the lowest incomes the most, the government has yet to offer up a convincing narrative that explains why such punitive increases are necessary when Lord Hutton’s report has public expenditure on pension as a percentage of GDP falling by about 0.5% over the next couple of decades.

Their position has also been weakened by the suggestion that MPs aren’t exactly practising what they preach. When the argument was raging over the strikes a few weeks back, it was put to several members of the coalition that if they were serious about reforming pensions they had better be setting the example by hiking up their own pension contributions first. Despite assuring us that they would indeed be graciously taking the hit it now appears that MPs are baulking at the idea of having to empty their own pockets yet further to cover the cost of their retirement, with Sir George Young announcing that the details on how much MPs pay will now be passed over to the Independent Parliamentary Standards Authority.

The main gripe that MPs have is that many of them already pay 11.9% of their income towards their pension and are now being asked to front up a further 6% on top of that. Taken in isolation this seems grossly unfair but then one remembers that whilst not every public sector worker currently pays as higher rate as 11.9%, many of them do and there was little sympathy towards them from the government when they dared to protest last month.

The unions that went out on strike last month were buoyed by polls that showed that public opinion was split fairly evenly down the middle over their actions. If we come round to a second wave of strike action in the autumn and MPs are still carping over the conditions of their own pensions then the unions will start to feel confident that the public will look upon their cause more sympathetically still.

Their cause would of course have further momentum if Ed Miliband offered greater clarity to the Labour Party’s position on the issue of pension reform. Whilst union leaders were quick to vent their fury at Ed’s refusal to come out in support for their strike action, most would concede that it was tactically the safest strategy for him to employ. Rather than condoning strikes, Miliband implored union leaders several times over, to get round the negotiating table and find an amicable solution. Whilst Ed may not have had a seat at that negotiating table himself, as Labour leader he needs to more clearly define how best he believes we should proceed over the ticking time bomb that is pension reform.

Meanwhile the union leaders have indeed been working away at that negotiating table and as well as the proposed changes to contributions mentioned earlier, they have also now secured promises from the government that schemes will now be considered on a case-by-case basis as the coalition at last wakes up to the reality that working conditions across the public sector do tend to vary. However central questions such as whether rises in contributions really need be so steep, and whether retirement ages should go up unilaterally across the board, still need addressing. The unions will continue to probe away at the government for answers on such issues. It’s time the Labour party did so too.


Posted on July 26, 2011, in Coalition Government, Comment, Parliamentary Business and tagged , , , , , , . Bookmark the permalink. Leave a comment.

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