Attack on pensions is not about affordability, fairness, efficiency or savings

The justification for the attack on public sector pensions is rapidly being unravelled, writes Michael Burke.

The justification for the attack on public sector pensions is rapidly being unravelled. The chart below has had a good airing and even made it onto the BBC’s main news programme last night.


The government has repeatedly claimed that the pension entitlements are “unaffordable”. The chart shows that – under current arrangements – the cost of pensions has already peaked at 1.9% of GDP and that they will fall to 1.4% of GDP over the next 40 years.

Ministers Francis Maude and Justine Greening have attempted to supplement this point with the claim that the costs will rise ‘as we are all living longer’. But this factor is already included in the Hutton (pdf) calculations of falling costs, as rising life expectancy is included in the calculation (clearly noted in the chart).

When pressed Ministers tend to change tack and argue that the public sector pension arrangements are unfair – because about two-thirds of the private sector now have no pension. As Mark Serwotka suggests, this is pure ‘race to the bottom’ stuff, where the benchmark for all services providing human comfort and dignity is the lowest common denominator.

The reason that so many private pension schemes have been curbed or closed is that companies were allowed to make contributions ‘holidays’ when the stock market was rising, and the pension assets collapsed a when the stock market crashed. So much for the inherently greater efficiency of the private sector.

It is also claimed that there is a need for greater ‘savings’ in terms of reduced government expenditure on public sector pensions.

But Hutton made no attempt to cost the effect on other parts of the welfare bill from a reduction in pension entitlements, nor any impact on health spending arising from greater pensioner poverty, nor on the impact on final demand in the economy from the reduction in incomes and the consequent reduction in taxation revenues that result.

Therefore all ministerial claims on this area are entirely lacking in any evidence to support them.

The real reason for the attack on public sector pensions is actually set out in the terms of reference that Hutton accepted from the government.

In the very first point of the terms of reference Hutton must 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.”

The ‘greater plurarity of provision of public services’ is Treasury-speak for privatisation; therefore the very first objective of the review is to ensure private firms can take over the functions of the public sector services – and that they can do so without the costly inconvenience of providing pensions.

The attack on pensions is not about affordability, fairness, efficiency or savings. It is part of the drive to lower wages and deferred wages to increase the profits of the private sector.

40 Responses to “Attack on pensions is not about affordability, fairness, efficiency or savings”

  1. Knut Cayce

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  2. CllrJuderobinson

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  3. Clive Burgess

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  4. Jane Crofts

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  5. pcs south west

    RT @leftfootfwd: Attack on pensions is not about affordability, fairness, efficiency or savings //t.co/UxBd2wR

  6. Caroline McAllister

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  7. Michael

    Attack on pensions is not about affordability, fairness, efficiency or savings – //tinyurl.com/6jz67j6

  8. Liza Harding

    Attack on pensions is not about affordability, fairness, efficiency or savings – //tinyurl.com/6jz67j6

  9. steve turner

    Attack on pensions is not about affordability, fairness, efficiency or savings – //tinyurl.com/6jz67j6

  10. Malcolm Evison

    RT @leftfootfwd: Attack on pensions is not about affordability, fairness, efficiency or savings //t.co/tLTsR9w

  11. Caer

    RT @TheRightArticle
    Attack on pensions is not about affordability, fairness, efficiency or savings – //t.co/ONlhQyo

  12. Alien_Hybrid

    RT @TheRightArticle
    Attack on pensions is not about affordability, fairness, efficiency or savings – //t.co/ONlhQyo

  13. Eric Wood

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  14. Richie Stewart

    A bit of truth behind the myths of Public Sector Pensions //bit.ly/mlcX30

  15. DrKMJ

    RT @leftfootfwd: Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  16. Darren Winstone

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  17. Tony Mitchell

    It was not so many years back that the private pensions sector was trying to persuade public sector workers to leave their pension schemes and take out a ‘much better’ private pension. This was eventually stopped and firms had to pay compensation for miss selling.

  18. Paul McGlynn

    RT @leftfootfwd: Attack on pensions is not about affordability, fairness, efficiency or savings //t.co/SkJzzPl

  19. Sue

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  20. Allan Heron

    That chart does not show the “cost” of pensions – it shows the amount of pensions estimated to be paid out in each year. It’s effectively a cash flow statement.

    In a funded scheme, the aim is to make sure that the existing fund and ongoing contributions are in a position to make those payments as and when they fall due. The cost to do that will be something different from what is shown in this graph.

    The chart would be a valid estimate of year on year cost if the schemes in question were unfunded and benefits had to be paid out of government spending but this is not the case for most of the schemes in question.

    As such, there’s an element of comparing apples and oranges which is happening on both sides of this debate. If public service schemes should continue to be funded (which I think they should be) then the cost should be expressed as a % of earnings needed to be able to fund the payments as shown in the graph. I have no idea what this figure would be, but it would be a more accurate reflection of cost.

  21. neilrfoster

    .@menburke explains why attacks on public sector pensions is not about savings but preparing for privatisation. //t.co/H9ttNGY

  22. Watching You

    Attack on pensions is not about affordability, fairness, efficiency or savings: //bit.ly/iw11Ha writes Michael Burke

  23. UNISONNews

    RT @leftfootfwd: Pension attack not about affordability, fairness, efficiency //bit.ly/iw11Ha #publicsectorpensions #pcs #UNISON #STUC

  24. Leon Wolfson

    Allan; If costs remain the same or lower, then given the economy will expand (well, after the Tories are thrown out, anyway) then the percentage of earnings will fall.

    Unless, of course, we allow unearned wealth to accumulate even more rapidly at the top of society. I’d suggest that your focus on “earnings” is misguided, in that respect.

  25. Mike Finn

    Short and clear account of attack on pensions (from Left Foot Forward): //bit.ly/ipx1dy

  26. Matt Tancock

    Attack on pensions is not about affordability, fairness, efficiency or savings //bit.ly/mO8uJD

  27. Simon Landau

    In the end this dispute will end in a negotiated settlement. Pension scheme disputes are particularly suited to negotiation as there are ample opportunities in the detail for both teams to claim victories. So maybe we should focus on the political fall-out of this dispute. Yet again Cameron suffers a blow to his credibility because of a failure to master his brief. Yet again Francis Maude and Danny Alexander demonstrate they are not safe to let outside. Meanwhile Ed Miliband has squandered no political capital in keeping his powder dry on support for strike action (NUT, PCSA and ATL do not pay political levy after all. And Mary Boustead has become the unlikely new star of the airwaves.

  28. Ed's Talking Balls

    ‘Ed Miliband has squandered no political capital’

    I wasn’t aware he had any to squander in the first place!

  29. Look Left – Up to 10 million face starvation in Horn of Africa | Left Foot Forward

    […] Left Foot Forward, Michael Burke took on the government’s economic reasons for slashing public sector pensions, reasons that are […]

  30. Danny Alexander repeats the 'big lie' that pension reform needed to stop spiralling costs | Left Foot Forward

    […] this is pure piffle. As Michael Burke wrote on Left Foot Forward earlier this month: “The justification for the attack on public sector […]

  31. nick

    RT @leftfootfwd: Attack on pensions is not about affordability, fairness, efficiency or savings //t.co/wi5lMfTa

  32. James Weston

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  33. Noel Douglas

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  34. letsnotbecynical

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  35. TeresaMary

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  36. UNISON GWAS

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  37. Louise Norton

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  38. David

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  39. Becky Baines

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

  40. Jeremy Adams

    The Tory attacks on public sector pensions are not about affordability, fairness, efficiency or savings: //t.co/u6rXtOqJ #BBCqt

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