Whatever the rightwing attack dogs say, the cost of public sector pensions are due to fall as a proportion of GDP.
As soon as the TUC voted to undertake industrial action in defence of public sector pensions on November 30th, the right-wing ideologues were doing the rounds of TV studios.
Attack dogs like Mark Littlewood, Director-General of the Institute for Economic Affairs, laid out their central argument, which is that, both in terms of short-term deficit reduction and long-term debt maintenance, public sector pensions are unsustainable.
You are likely to hear that a lot over the next few months. However, it is worth repeating again and again and again that it is not true. As reported by Stephen Henderson on Left Foot Forward in July:
“The Office of Budget Responsibility’s July 2011 Fiscal Sustainability report (pdf) looks long into the future (2060) and guesses at the likely proportions of GDP that might arise as the population becomes more elderly.
“The assumptions are based on current policies, not government proposals. Confirming earlier findings in the Hutton Report (pdf), they clearly predict the cost of public pensions will fall from 2% of GDP to 1.8% in 2030 and 1.4% in 2060 – without any of the current Hutton proposals.”
And, as written by Michael Burke earlier that month:
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.
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).
Burke went on to argue:
“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.”
Whatever is being disputed here, it is not about affordability. As the right-wing noise machine roars into life, remember that fact.
87 Responses to “Don’t buy the right-wing spin: Public sector pension costs set to fall”
Ash
Michael Burke lost a lot of credibility in my eyes when he wrote this piece of nonsense (linked to by LFF) back in March:
http://socialisteconomicbulletin.blogspot.com/2011/03/hutton-report-is-attack-on-all-workers.html
I’m still waiting for a reply to the comment I left on that page at the time.
Fair’s fair though: his argument here doesn’t rest on any dodgy maths, and he’s right to draw attention to those terms of reference as revealing what the pension cuts are really about.
Andy Bean
RT @leftfootfwd: Don't buy the right-wing spin: Public sector pension costs set to fall http://t.co/Y82Kh0ko
Chris Rowan
Public sector pension costs against GDP to fall even if Hutton report not implemented http://t.co/wsBCUf12 . Don't swallow right-wing spin
Shamik Das
Don't buy the right-wing spin: Public sector pension costs set to fall: http://t.co/VBil5YMn writes @danielelton #pensions #TUC
Mark Littlewood
I’m not sure which clip/statement from me you’re referring to, but to be clear, my case for radical publuic sector reform is as follows:
1. The present settlement is crushingly expensive. Projections of the bill falling as a % of GDP don’t rebut this point. It may be that I’m spending 5% of my personal income on cigarettes today but that this is set to fall to 4% by 2020. It could well be the case that I’m still spending too much on cigarettes – and that I’m spending much more, in real cash terms, on cigarettes by the end of the decade than I am today. If I’m also in chronic debt, it may also be the case that my cigarette spending needs to fall more substantially in order to get my personal finances under control.
2. There are two arguments from a point of view of equity. One is that given the relatively generous levels of remuneration in the public sector compared to the private sector and the fact that public sector pay has increased so generously (in stark contrast to the productivity of the public sector), it seems unreasonable to expect the private sector to foot such an enormous bill. Without reform – and even, indeed, with some reform – relatively low paid people in the private sector, with thinner pension coverage, will be paying for the relatively generous pensions of public sector workers who have already had the benefit of higher earnings over their careers as well as earlier retirement. The other case is inter-generational. As a consequence of public sector pensions not being properly funded, my 5 year old nephew is going to pay for the pensions of doctors and teachers who have served me rather than him. It’s unsurprising we have reached this situation in many ways – the under-18s and unborn can’t vote, so shuffling present bills onto them is an attractive option for those of us who are on the electoral register.