Hutton seeks to make public sector workers pay more for less

7 October 2010

Plans unveiled today for further reform of public sector pensions will force staff to pay more for less when cuts to pensions are unnecessary, PCS says.

The union has previously said it rejects the premise for the review, led by former Labour minister John Hutton, which is that public sector pensions are overly expensive and need to be cut back. The interim report appears to support many of PCS’s assertions - particularly on the low or modest level of public sector pensions and their future affordability.

The civil service pension scheme has undergone several reforms over the years, most recently in 2007 when it changed to become a career average scheme for new entrants. Following this, the National Audit Office judged the scheme to be affordable and sustainable.

Hutton’s report acknowledges that the overall cost of ‘unfunded’ public sector pensions, including the civil service scheme, is expected to fall from 1.9% of GDP in 2010/11 to 1.4% of GDP by 2060.

The affordability of public sector pensions is illustrated by the fact that the cost of tax relief on pension contributions each year is much greater than the net cost of public sector pensions. One quarter of that tax relief - almost £10 billion a year - goes to the 1% of the population who are paid more than £150,000 a year.

Hutton also states he has rejected a “race to the bottom” approach. The union has consistently stated that the gap between public and private sector schemes is the fault of private employers retreating from providing decent pensions over the years.

As part of the Council of Civil Service Unions, and alongside the TUC, PCS made a detailed submission to Hutton, which stated that any review must be in the context of the current pay freeze, massive job cuts expected as a result of the spending review, planned cuts to redundancy terms, and traditionally low levels of pay and pensions for the majority of members.

The union also pointed out that the change announced in the budget in June to use the CPI measure of inflation instead of RPI for uprating pensions has already wiped billions of pounds off the value of public sector schemes.

Trade unions representing public and private sector workers should come together as soon as possible to discuss the most effective way to fight Hutton’s proposals, PCS says.

PCS general secretary Mark Serwotka said: “We agreed a fair scheme in 2007, after threatening joint industrial action with the other unions. We do not accept the need for further review, which clearly forms part of the government’s wider assault on the low-paid, the public sector and the welfare state.

“When the cost of providing tax relief on pension contributions for the wealthy far outstrips the cost of public sector pensions, it is grossly unfair to attack public servants whose future benefits have been independently judged as affordable.

“These plans are being drawn up on behalf of a cabinet of millionaires and seek to make working people pay for an economic crisis they didn’t cause.”


 

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