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The Government is Attacking Union Members' Pensions

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When unions come together each September for the annual congress of the TUC, it is traditional for right of centre newspapers to predict a new winter of discontent. But the point about strikes in the UK is just how unusual they have become, both historically and in comparison to other similar countries.

So the decision taken by public sector unions to hold a day of action, including strikes, in defence of public sector pensions on November 30th is extremely significant. As TUC General Secretary Brendan Barber says, this will be the biggest union action for a generation.

While talks with ministers will continue, it takes two to negotiate. The government has yet to move on any of the big issues in play, and unless they change their attitude the 14 unions who have already balloted or are now committed to a ballot are likely to be joined by others.

Union members are angry because the government is making multiple attacks on their pensions at a time when they are already facing a pay freeze, high inflation and job cuts. Ministers argue that public sector pensions are unreformed, unaffordable and unsustainable. None of these arguments stack-up.

Unions regularly negotiate changes in pensions. An agreement with the previous government reduced the cost of pensions by 10 per cent and included ways to protect tax-payers from the costs of any unexpected increase in longevity.

Without any negotiation this government stripped a further 15 per cent out of the value of pensions when they moved to indexing pensions by the CPI inflation measure. This is generally lower than the RPI measure that ministers still use when it suits them, such as working out train fares.

Together these changes reduced the cost of pensions by 25 per cent.

Even before the CPI switch, the cost of public service pension payments in the future was predicted to be flat as a proportion of GDP for decades to come. With CPI indexing the cost falls as the graph, taken from the Hutton review, shows. And this is before any of the other changes the government are now seeking to make.

In fact the most pressing issue has nothing to do with the structure or long term affordability of pensions. The government wants to impose an arbitrary increase in member contributions of three per cent of salary starting next April. None of this will go as extra money into the pensions system. It will instead be used to pay off a deficit that public sector workers did nothing to create. It is an unfair stealth tax to be paid purely by public sector workers.

The government and right-wing think tanks continue to try to stir up private sector workers by comparing their pensions to those in the public sector. But two out of three private sector workers get no employer help towards a pension. Levelling down would mean leaving only a third of public sector staff with any pension at all.

We are already being told to negotiate before a strike. But the government wants talks to conclude by the end of October. To meet tough legal requirements, unions need to start the ballot process almost immediately to strike lawfully by the end of November.

In practice most strike ballots result in further negotiations and a settlement. There is still time to reach agreement on pensions and avoid action on November 30th.

Unions are on the dance floor, and the next dance is the tango. We do not yet know whether we have a partner.

Around the Web

TUC: unions warn of strikes over 'reckless' cuts - Telegraph