Saturday, July 02, 2011

Has government got its sums wrong? Or is it fiddling pension figures for a reason?

THOUSANDS of teachers and civil servants took strike action and marched in the streets of many British towns and cities on Thursday, in a powerful protest action against Con Dem plans to cut public service pensions. In Birmingham, Southampton, the London borough of Camden and some other places they were joined by local authority workers who are also in struggle and want unions to unite in action.

At least 20,000 people took part in a lively march through central London, and there were more demonstrations around the country.

Mention of Labour leader Ed Milliband, who said the strike was a "mistake", brought booing at a huge union rally in Central Hall, Westminster, only slightly less than the contempt and anger directed at Con Dem ministers. (By contrast there was a standing ovation later for veteran Tony Benn making an appearance, as well as enthusiastic applause for left-winger John McDonnell MP).

Young and old teachers were among those who denounced a policy which proposes to double their pension contribution, and make them work on till they are 68, in an already stressful environment, before receiving a reduced pension. Young teachers pointed out that the increased contribution would be on top of repaying student loans which they had needed so as to gain their qualifications for the profession, and asked how they would be able to afford to remain in teaching.

There were cheers for the speakers who made the commonly heard points that it was not teachers or other public sector workers who engendered the banking crisis, nor had they been paid the giant City bonuses for which the taxpayer had picked up the tab. Nor had these workers taken the decision that Britain - still incidentally the world's fifth richest power -can afford to renew its Trident missile programme, or take part in so many foreign wars.

But there was another important point raised in Thursday's meeting, that directly concerns the reasons for cutting pensions, and relates it to the government's overall strategic aim.

Here we might take a look at an article published the day before the the demonstrations, and entitled Pension scare tactics don't add up, by Martin Cloake ( Jun 29th 2011)

'Ahead of what are expected to be massive strikes tomorrow against changes to public sector pensions, much of the media has been running with the line that those pensions cost every family in Britain £1,000 a year. But this does not stack up – and nor do the government's other arguments.
The fact is that public sector pensions are more efficient than private sector pensions. A group of leading economists said in a letter to The Guardian on 10 March that: "The net cost of paying public sector pensions in 2009/10 was a little under £4 billion. The cost of providing tax relief to the one per cent of those earning more than £150,000 is more than twice as much."

'The letter also pointed out that: "The total cost of providing tax relief to all higher rate taxpayers, on their private pensions, is more than five times as much." Richard Murphy of Tax Research UK says that in 2007/08 alone, private pension funds received subsidy of £37.6bn and paid out just £35bn.'

Making two other points that trade union speakers also referred to on Thursday, Martin Cloake writes that:
'... changes already agreed by public sector unions have already reduced the value of public sector pensions by 10%. The National Audit Office says this will "stabilise costs in the long-term around their current level of GDP".

'The Government asked Lord Hutton to look into the pensions issue, and in his report he went further. He said that public sector pension contributions would go down from 1.9% of GDP to 1.4% by 2060. And that's before any of the changes he proposed would kick in'.

He continues:
It's here that the Government's assertion that public sector pensions are "unaffordable" begins to unravel. The Public Accounts Committee (PAC) said it expects the costs of pension payments to stabilise over the next 50 years, saving taxpayers an estimated £67bn...

. The Institute of Fiscal Studies (IFS) observed that: "Affordability is not a very good argument for making these schemes less generous."

The other big buzz phrase accusation is that these schemes are "gold plated". Here's what the Government-commissioned Hutton report said on the subject. "The Commission firmly rejected the claim that current public service pensions are 'gold plated'."

The TUC's Nigel Stanley points out that: "In the big four national schemes the majority of pensions paid are less than £5,600 a year. In the Local Government Scheme half get less than £3,000." And what is happening to those pensions is not a reform, he says, but a cut.

'The Government's decision to change the basis upon which pensions are uprated from the Retail Prices Index to the Consumer Prices Index means that the value of the schemes workers have been paying into has been reduced by 15p in the pound. Combine this with the negotiated changes and it's 25p in the pound. That's why there is so much anger.

'The IFS's Carl Emmerson made this point in the debate over public sector pensions, saying "if we want to afford them, we can". That's the key issue. The economic justifications don't stack up because the truth is that this is a politically motivated attack on public service designed to further the small-state agenda.'

This was the third point made by someone at the Central Hall rally (along with the point that it is not public sector pensions that are too high, but private sector provisions for workers, as distinct from directors, that are too low). The Con Dem government is intent on pursuing further privatisation of everything it can, and getting rid of as many workers (and their union rights). But the CBI and other employers' spokespersons, the risk-taking, wealth-creating private sector about which the Tories keep telling us, say they cannot afford to take on these commitments. They want everything on the cheap.

As Martin Cloake says:

'In March, Peter Wilby pointed out in the New Statesman that public sector pensions are "the biggest barrier to further privatisation and outsourcing of public services". The private sector that is so keen to move in does not like pensions – two in every three private sector workers get no help at all.

'Bizzarely, that is itself being used as a justification for attacking the pensions of public sector workers – a levelling down argument if ever there was one. For public sector workers, the pension changes come on top of a pay freeze, rising inflation and the prospect of heavy job losses.

The deal public sector workers enter into is that they do often difficult jobs for less money than they might, in return for a decent pension. These changes will put people off public service – which is what the Coalition wants, despite all the Big Society blarney. Although that phrase seems to have been dropped.

'In spite of the attempts to present the union position as unpopular, many people recognise the value public sector workers provide. And they also question what the cost of not providing pensions will be – because retired people with limited financial resources draw on state resources too.

'Polls bear this out. A Populus poll earlier this week found 48% agreed that public sector workers were right to strike on this issue, with 16% undecided. And 43% agreed they were suffering an unfair decline in living standards. That poll and another by YouGov revealed strong support for the right to strike.

'That's why the Government and its supporters in the media are trying to spin stories such as this morning's '£1,000 cost to every household' one. You could use a similarly vague formula to make any area of expenditure look as bad or good as you like. It's entirely meaningless. Encouragingly, this nonsense is proving to be unconvincing.

Instead, it's opening up debate on what we really mean by value, and raising the question of what kind of a society we want to live in and where the priorities of a Government should be. Tomorrow's strike, which will include some unions taking action for the first time, will send a powerful message.

As someone recalled at the Central Hall rally, it was a press baron called Robert Maxwell who earned opprobrium years ago for having raided pension funds to shore up his business empire. That was before the time of many at the rally, and since then we have learned that more than one employer found ways to get away with it. Maxwell ended his life in disgrace, disappearing over the side of his boat, the Ghislaine surrounded by all sorts of revelations and rumours.

Now we evidently have a ruling class and a government setting up a smokescreen of falsified figures to confuse the public and slander socially useful workers, so it can rip off their pensions and boost profit. Who will push this lot over the side?

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