Public and Commercial Services Union

Date: 29 June 2010             Ref: BB.64/10

Emergency budget attacks our pay, pensions and services

This briefing gives branches a summary of how the Budget will affect members, and updates members on how the union is responding.

The Emergency Budget on 22 June starkly set out the Coalition Government’s agenda for cutting the deficit. It’s five year strategy set out spending reductions of £32 billion and net tax increases of £8 billion per year.

The main features of the Budget are:

• £11 billion cuts to welfare
• VAT increased to 20%
• Child Benefit frozen for three years
• Two year pay freeze for public sector workers
• Cut corporation tax from 28% to 24% over four years
• Reduce National Insurance contributions from employers

Alongside this, there are stealth cuts to future welfare benefits, tax credits and public sector pensions as they will now only be uprated by the CPI measure of inflation rather than RPI.

The costs clearly show that cuts to welfare and public sector pay are being used to fund tax breaks to big business.

The main tax increase to cut the deficit, VAT, is a highly regressive tax which disproportionately hurts the poorest. The Institute for Fiscal Studies stated that the “overall impact of [the Budget] measures was regressive”. This means they hit the poorest hardest.

The Budget further targets our jobs, pay and pensions – and the vital services we provide.

Civil Service cuts

Pay

With inflation currently at around 5%, a pay freeze is in fact a 5% pay cut. The two year pay freeze is an attack on public sector workers living standards.

The pay freeze is for all staff earning more than £21,000. For those earning less than that, they will receive a £250 increase. For someone earning £20,000 that is a pay rise of just 1.25% - so it is a real terms pay cut.

Under the proposals, existing pay deals will be respected. Members covered by a pay deal for 2010-11, will have a two year pay freeze from 2011-12 to 2012-13. All other members’ pay will be frozen from 2010-11 to 2011-12.

Pensions

The Budget proposed that public sector pensions will in future be uprated in line with the CPI measure of inflation which does not account for housing costs. It is generally lower than RPI and is therefore a stealth cut to our pensions. The union will be challenging this proposal.

The Budget also announced that an independent commission chaired by John Hutton, former Work and Pensions Secretary, will undertake a fundamental structural review of public service pension provision by Budget 2011, and consider the case for short-term savings in the Spending Review period by September 2010.

Further information on the changes to public sector pensions indexation

Cuts to services

It was confirmed in the Budget that departmental spending (outside of health and overseas aid) will see “average real cuts to their budgets of around 25 per cent over the four years”.

The Budget document contained no detailed analysis of how this could be implemented in each department.

However, on top of the announcements already made (e.g. the abolition of BECTA, QCDA and the GTC) some new announcements were made:

• Regional Development Agencies will be abolished through the Public Bodies Bill.
• The Health in Pregnancy Grant and Sure Start Maternity Grant will be abolished

There will also be asset sales (aka privatisation) of the HS1 rail link, student loans portfolio and other areas will be considered including the Royal Mail, Tote, NATS and the Dartford Crossing.

Welfare

The most drastic cuts in the Budget affect welfare. The headline announcements are:

• Freezing Child Benefit for three years
• Linking benefit increases to CPI instead of RPI
• Cutting tax credits for middle-income households
• Capping housing benefit
• Cutting £1.4 billion from Disability Living Allowance
• Cutting Jobseekers Allowance for the long-term unemployed

The Budget therefore redistributes wealth from some of the most vulnerable people in society to big business.

There is an alternative

David Cameron and Nick Clegg have written to public sector workers asking for ideas about getting more for less.

The ‘Spending Challenge’ is clearly a gimmick, and the union has responded by posting advice to members on the website, and issuing a press release.

In reality, the Coalition Government is no doubt hoping to set workers in one part of the public sector against workers in another, and 'back office' against 'front line'.

The economic crisis was caused by the banking sector, not by the public sector.

We need to tell Mr Cameron and his deputy that cuts are not necessary and they’re fundamentally unfair.

What happens next?

• The NEC has called on the TUC to organise a major demonstration against the cuts
• The National Campaign Liaison Group will meet on 7 July to discuss our campaigns and report on how the cuts are affecting groups
• The July NEC will consider motions passed at ADC 2010, including motion A1 which called for the launch of a new national campaign in defence of civil and public services, and generate joint union campaigns against cuts

Branches are urged to:

• Feed information through to Group Officers on how the cuts proposals are being implemented within departments and workplaces
• Distribute the ‘PCS alternative to cuts’ flyer to members, which set out the NEC’s position on the cuts. Branches should have received a bulk mailing of these flyers.
    Our alternative to spending cuts flyer
• Direct any members tempted to respond to the Cameron / Clegg ‘Spending Challenge’ initiative to the advice on the PCS website
• Continue to forge links with other local trades unions and trades councils
• Keep up to date with information on the proposed cuts that is available on the site.
• Continue to use the local media and social networking to highlight the unfairness of this budget and promote the alternative
• Recruit your colleagues to the union – there’s never been a more important time to join PCS.

Further information: Update on the changes to public sector pensions indexation

Hugh Lanning
Deputy General Secretary

Janice Godrich
President