Hutton should read his pensions report again before leaping to Cameron’s rescue

Lord John Hutton claims his report was about “sustainablility” but the word is only used once in the report - and yet now he’s spinning for Tories.

John Hutton: The former Rt Hon member for Defence-Industry-in-Furness

Government ministers have been on the ropes over pension reforms ever since the public sector strikes. Their claim that pensions were ‘unaffordable’ was widely discredited, even by the usually supine BBC. Memorably, The Today Programme’s Evan Davies told both Francis Maude and Justine Greening he had searched the Hutton Report and the word ‘unaffordable’ did not appear.

As a result, government ministers were obliged to change tack and argue instead that the public sector pensions were ‘unfair’ for those in the private sector who have little or no pension – as if the employer pensions’ contribution holidays, negative stock market returns and widespread scheme closures were the model to be emulated.

But who is this riding in over the horizon to rescue the government? None other than ex-New Labour minister John Hutton himself. The author of the Tory attack on public sector pensions denies his evidence demonstrates that the pensions are indeed affordable.

He refers to his own now-famous fan chart which shows public sector pension costs falling from 1.9% of GDP currently to 1.4% of GDP in 50 years’ time as being “taken out of context”.

How was this key projection arrived at? That’s set out in the report itself:

“[We] asked the Government Actuary’s Department (GAD) to project future public service pensions expenditure. It projected benefit payments to fall gradually to around 1.4 per cent of GDP in 2059-60, after peaking at 1.9 per cent of gross domestic product (GDP) in 2010-11.”

What assumptions were the GAD working with? As itemised in the note to the graph, a key set of variables are included. In Annex C to the interim report these are detailed.

Productivity is assumed to rise at the same rate as in prior years, the public sector workforce is expected to shrink over a number of years and suffer a pay freeze, then grow later and life expectancy is projected to continue its steady increase. The Retail Prices Index is assumed to grow faster than the Consumer Prices Index, as it always has.

But Hutton has changed the terms of the debate.

He argues now that the pensions’ costs are ‘sustainable’ but whether they are ‘affordable’ is a political judgement:

“That completely misreads the entire report. I was trying to talk about sustainability. That can be measured as total cost proportion of GDP. Affordability is a different judgement, a political judgement.

“The economics, looking at the future costs of pensions is not. That’s objective. The thing that is wrong is for people to say that because there is this one table showing predicting it to fall over 50 years.”

Taking a leaf out of Evan Davies’s book, I too searched the Report (pdf) for the word unsustainable. The word appears only once, on page 77. And this is in the theoretical case employee contributions are kept low requiring employers to contribute more, which could lead to a scheme being ‘unsustainable’.

Since this is the opposite of what is happening, with employees contributing much more, the theoretical example is irrelevant to current circumstances.

He also, quite misleadingly, says it is the cap and share system (significant rises in benefits to be capped and employees to make a greater contribution towards them) which produces the fall in pension costs as a proportion of GDP. But this is not true.

As his own Interim Report (pdf) shows, the effect of the scheme proposed has only a very small effect in reducing costs, because it is unlikely to affect very many pensioners:

Hutton-Pensions-Report-Interim-report-page-147-Chart-C6
The reality is that Hutton has made a ‘political judgement’. It is the same as the Tories. This is that public sector pensions must be reduced not because of costs – that is already happening.

They must be reduced because they are a cost to any businesses seeking to take control of newly-privatised functions of the public sector, as set out in the first point of Hutton’s Terms of Reference, which states the Commission is to have regard to:

“…the growing disparity between public service and private sector pension provision, in the context of the overall reward package – including the impact on labour market mobility between public and private sectors and pensions as a barrier to greater plurality of provision of public services.”

27 Responses to “Hutton should read his pensions report again before leaping to Cameron’s rescue”

  1. Mehdi Hasan

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  2. Michael

    Hutton should read his pensions report again before leaping to Cameron’s rescue l Left Foot Forward – http://j.mp/nxADHK

  3. Watching You

    Hutton should read his pensions report again before leaping to Cameron’s rescue l Left Foot Forward – http://j.mp/nxADHK

  4. Paul Trembath

    Hutton should read his pensions report again before leaping to Cameron’s rescue l Left Foot Forward – http://j.mp/nxADHK

  5. Andy S

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  6. NC

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  7. Gill Goodswen

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  8. arimaraka

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  9. Mark C

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  10. michael burke

    MT @leftfootfwd: Hutton tries to rise to Tories' rescue on pensions -,and fails http://t.co/XSv0uFVU

  11. AntennaRed

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  12. Tony Burke

    Hutton – what an arse! Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/gCJTskyh

  13. Tony Burke

    Hutton – a complete ass***e in my book. Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/gCJTskyh

  14. Alex Braithwaite

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/jC1hkcst

  15. Pete Williams

    Hutton should read his pensions report again before leaping to Cameron’s rescue: http://t.co/9rcBA5gj writes Michael Burke

  16. Unite the union

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  17. sarah guerra

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  18. Karen Webb

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  19. Andrew Fisher

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  20. Peter F

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  21. Katie Whittam

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  22. Andy

    RT @leftfootfwd: Hutton should read his pensions report again before leaping to Cameron’s rescue http://t.co/IXsAEL1u

  23. Robert CP

    lets all agree on one thing – public sector pensions are affordable: http://t.co/4A16hw6Q

  24. E Azicate

    lets all agree on one thing – public sector pensions are affordable: http://t.co/4A16hw6Q

  25. Simon Graham

    “@leftfootfwd: lets all agree on one thing – public sector pensions are affordable: http://t.co/BThkpeUs” #nov30 #NASUWT

  26. Alex Hern

    @vincegraff @owenjones84 It's in this piece: http://t.co/jW45iq6x http://t.co/z4yuURQJ

  27. UNISON Redbridge LG

    For more LGPS deficit size, whether this is a problem and whether reforms will help see http://t.co/O6Gslpe9 & http://t.co/N3jP9P3y

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