The lack of proper negotiation led to the action that was taken by public sector workers today.

I found it quite infuriating to hear less than honest words spoken in the House today.

Below is an email sent from an MP to a PCS member last week.  Highlighted in red are some key points:

Thank you for your email about the strikes next week. I have to be in Westminster next Wednesday, however my position is clear and this is what I am saying to anyone who contacts me.

The government must bear much of the responsibility for what is happening now because it jumped the gun and has, in effect, imposed a 3% tax on public sector workers, before John Hutton published his final report on public sector pensions, and then refused to negotiate on this crucial issue. This surcharge has nothing to do with the sustainability of public sector pensions and will hit public sector workers on low incomes hard.

It increasingly seems that the government is happy to see a disruptive strike. According to the Daily Telegraph, David Cameron has privately said that he is ‘delighted’ that the unions have walked into his ‘trap’. This is no way to approach the long term needs of the country and workers who believed they had a deal on their pensions when they set out on a public service career.. The constant mantra about “gold plated” pensions is quite frankly insulting. The average pension paid to pensioner members is around £7,800 per year, while the median payment is around £5,600. Half of women public service pensioners get less than £4,000 a year.

If more people opt out of occupational schemes because they cannot afford to pay this increase, it could end up costing the tax payer more in the future as more people rely on means tested benefits. The imposition of a 3% surcharge for all employees is not only unfair in the short term but also risks the sustainability of public sector pension schemes in the long term.

The government announced a three pence in the pound increase in contributions in the October Spending Review, long before Lord Hutton had published his final report. The 3 pence in the pound increase has nothing to do with the wider reform agenda outlined by Hutton. It is a measure which is simply geared towards paying down the deficit by squeezing public sector workers. The increase was imposed without any negotiation with public sector unions. This increase amounts to a 3p in the pound increase in tax for public sector workers, at a time when they are already facing a pay freeze, higher inflation partly driven by the government’s VAT increase, not to mention the biggest squeeze in living standards in a generation.

I know that people who rely on services don’t want to see a strike: from parents who will have to take a day off work to those who rely on home help. And public sector workers— nursing assistants, teachers and dinner ladies—also care too much about the people they serve day in day out to consider action as anything other than a last resort.

Rather than telling hundreds of thousands of low paid, part-time working men and women who are set to be much worse off that they should not strike, David Cameron should be taking responsibility and trying to negotiate a deal that’s fair to public sector workers and taxpayers alike. That is what I want to see and that is why I support the action that union members are taking..

My recent series of posts on pensions only skim the surface of why so many ordinary people decided to take strike action today.

UK pensioner poverty is among the worst in Europe – only Cyprus, Latvia and Estonia abandon their pensioners to a greater degree.  France spends over twice as much on pensions as the UK, Germany two-thirds more.

It is simply not true to say that the UK cannot afford better pensions when nearly every other European country does better by their pensioners.  The truth is that the value of the state pension has gone from being worth 25% of average male earnings to just 15%.

The basic state pension is currently £202 a week, worth only 57% of the government’s official weekly pensioner poverty level of £178.  Two and a half million pensioners in the UK live below that level.  Even before the above inflation energy price rises this year. 3.5 million pensioners lived in fuel poverty.

Many pensioners therefore rely on means-tested benefits like the pension credit, council tax benefit and housing benefit.  However, because of the stigma attached to claiming, over a million pensioners entitled to pension credit do not claim it.

Research by the Left Economics Advisory Panel estimates that the cost of means-tested benefits is £13bn per year.  This state of spending would not be necessary if private sector employers provided their staff in the same way as the public sector.  However, the proposed cuts to public sector pensions would mean that more and more public sector workers will be eligible for these benefits too.

The state pension age is currently proposed to rise from 65 to 66 by 2020, 67 in 2034 and to 68 by 2044.  We believe this is deeply regressive and will have a disproportionate impact on the poorest people.

Although the average person is living longer, there are massive inequalities in life expectancy: men and women in the wealthiest areas live 10 years longer, on average, than those from the poorest areas.  The wealthiest can often afford to take early retirement too, whereas the poorest often already have to continue working beyond the state retirement age.  Just because we are living longer, it does not necessarily mane we are fit to work for longer: 40& of people aged 65-74 have a disability of illness that limits their quality of life.

Pensioner poverty also intensifies the prejudices that exist over people’s working lives.  Women, disabled and ethnic minority pensioners are far more likely to be in poverty because they are discriminated against by employers.

Over several years, governments have allowed companies to abandon their pension duties to their staff, allowed the state pension to fall further and further behind living standards, and today’s government is now attacking public sector pensions too.

We don’t want equality of misery, but fair pensions for all: public, private and state pensions.

The collapse of private sector pensions is one of the greatest outrages of our time.  Just over a decade ago nearly half of all private sector workers were in a workplace pension scheme; today it is only a third.  The cost of that decline will be borne by the taxpayer through increased eligibility for means-tested benefits such as pension credit, housing benefit and council tax benefit; greater health and social care costs; and an increase in our already shocking levels of pensioner poverty.

However, while pensions have been ripped away from ordinary workers, the directors of large companies continue to net very generous pensions averaging £175,000 per year in retirement.  These generous fat cat schemes at the top lapped up the bulk of the £37.6bn in tax relief that private sector pensions get every year.

The only reason why companies have dumped pension schemes is to give more money to senior management and more profits for shareholders.  Corporate profits have expanded from 13% of GDP in the mid-197s to 21% today, and executive pay has risen several times the rate of the average worker.

In the 1990s, according to Inland Revenue figures, corporate Britain saved itself £18bn through pension holidays, while employees continued to contribute.  As the stock market declined many pension funds went into deficit – employers cut pensions rather than repay the monies avoided.

This graph shows the proportion of private sector workers in defined benefit schemes (red line) compared with corporate profit margins (grey line).  What the graph shows is that in the last 13 years the level of corporate profits has remained relatively constant, yet companies have closed defined benefit schemes at an alarming rate.

The number of private sector employees in defined benefit schemes had fallen from 34% in 1997 to 11% last year.  At the same time the proportion of workers in any occupational scheme has fallen from 46% to 34%.  Despite all the talk of corporate social responsibility, fewer and fewer companies show any responsibility to their own staff.

For the 11% of private sector workers still in a defined benefit scheme the average pension is £5.860 – about the same as the £5,600 average public sector pension, which demonstrates that is that is not a ‘gold-plated’ amount.  In fact it is less than half the income of a full-time worker on national minimum wage.

It has been estimated that changing pension indexation from RPI to CPI in the private sector would save employers £100 billion over the lifetime of existing schemes.  This would be a direct transfer or wealth from employees to shareholders.

Women in the private sector are likely to be in a far worse state than men – not just because of the earnings gap – but because many of the jobs done by women in the private sector (especially retail, catering and cleaning roles) come with no pension provision at all.

The media is full of scare stories about the escalating and unaffordable costs of pensions, and that people are living too long.  The reality is that employers are failing to pay their share – and that is unfair.

In 2012 the National Employee Savings Trust (NEST) will be established for workers with no occupational scheme.  However, NEST will take more from employees than employers and will not provide a decent pension.  The main beneficiaries will be the private pension industry.

Attempts to pit private sector workers against public sector workers are divide and rule.  The responsibility for the removal of pensions for private sector workers lies with employers and shareholders.

Private sector pensions are also heavily subsidised by the taxpayer.  Research by Richard Murphy shows that private sector pension schemes received £37.6bn in tax reliefs in 2007/8 – that same year they paid out pensions worth only £35bn.  As Murphy states, “Pension fund performance over the last decade has been a history of almost perpetual loss making despite the enormous subsidies.”  A quarter of that pensions tax relief goes to the richest 1%.

The pensions of public sector workers have come under intense scrutiny in recent months, with ministers and the media describing them as ‘gold-plated’ and ‘unaffordable’. Currently public sector workers are being told they must pay more and work longer for a lower pension – but is this necessary?

Last year the government asked Lord Hutton to lead an independent commission into public sector pensions. His report showed that their cost is falling over the long-term as the graph above demonstrates; falling from 1.9% of GDP today to a little under 1.4% by 2060.

The graph above does assume the government’s change to pensions’ indexation from the RPI inflation measure to the CPI measure.  This could reduce the value of the pensions by over 20% over the course of an average retirement.

However, a report into public sector pensions by the National Audit Office, published in December 2010, does not take into account the indexation change, nor does it make any assumptions about the size of the workforce.  It shows reforms agreed between the unions and the government in 2007-08 “reduces costs to the taxpayers by 14%” and “long-term costs are projected to stabilise around their current levels as a proportion of GDP”.  So even without these assumptions the costs are still not rising, but stable.

The Hutton report also “firmly rejected the claim that current public service pensions are “gold plated” …the median payment is around £5,600″.  This equates to just over £100 per week in retirement.  For a woman worker in local government the average pension is just £2,000.

Despite these facts taken from the government’s own commissioned report, ministers have continued to misrepresent public sector pensions and are simultaneously attacking the age at which they retire, how much they pay, and how much they get at the end.

This attack on public sector workers’ pension rights coincides with a pay freeze and, for many, their job being under threat too.  A significant minority of workers have said they will opt-out of schemes if they are forced to pay more for a smaller pension.  Opting out will mean a larger burden on the taxpayer in extra means-tested benefits.

It is only four years since public sector pensions were significantly re-negotiated with the previous government in a deal that meant for new starters the retirement age rose to 65, and future costs capped.  The pensions deal in 2007 was assessed in December 2010 by the National Audit Office, which found it “on course to deliver the saving and stabilise pension costs”, and will save £67bn for taxpayers.

The strike on 30th June gave the issue of public sector pensions increased profile in the media and exposed the government spin about affordability.  The government now says it’s about fairness but its proposals will lead to an inequality of misery: unfair to all.

In effect the coalition government is imposing a tax on public sector workers to pay for the mess made by the banks:  George Osborne said as much in parliament, “from the perspective of filling the hoe in public finances, we will seek changes that deliver an additional £1.8bn of savings per year in the cost of public sector pensions”.

There is also an ulterior motive in cutting pensions, as it will make public services more attractive for privatisation.  The CBI boss John Cridland has said public sector pensions are “a brake on competition and make it harder for those in the private sector to bid for public service contracts”.

As the next chapter demonstrates, private companies have withdrawn providing fair pensions to their employees, and they do not want fair pensions for public sector workers transferred to them.

Trade unions representing millions of workers are fighting this attack through legal action, political campaigning and industrial action.

Starting from today I will be publishing the contents of the pamphlet in instalments.

Introduction: a crisis of fairness

There is an economic crisis in the UK, but it was not caused by excessive public spending or the ‘gold-plated’ pensions and pay of public sector workers.  It was caused by a recession triggered by the banking collapse of 2007.  Now there is another crisis: a crisis of fairness in which those who caused the economic mess are forcing everyone else in society to pay for it.  It is clear whose side Cameron’s cabinet of millionaires is on.

Trade unions represent people in the public, private and voluntary sectors.  Our members will often experience each through their working lives – as will their partners, friends and family.  Good occupational pension schemes are important wherever you work.

Most pensioners are reliant on the basic state pension for the majority of income in retirement, but it pays below the government’s own poverty line.

Disgracefully today there are 2.5 million pensioners living in poverty in the UK.  Only on in three private sector is now a member of an employer-sponsored pension scheme, public-sector pensions are under threat, and the state pension is now worth just 15% of average male earnings.

On the other hand a quarter of all tax relief on pensions, amounting to more than £10bn annually, goes to the richest 1% in the country.  We hear about gold plated public sector pensions, yet the real gilded pensions are to be found in the boardrooms of private companies that have abandoned provision for their workforces.

There is a crisis of pensions in the UK but it’s not that we’re living too long or that pensions are unaffordable; it’s a crisis of fairness.  In retirement, as in working life, we are highly unequal.  UK pensioner poverty is among the worst in Europe – only Cyprus, Latvia and Estonia abandon their pensioners to a greater degree.

Action is needed to secure decent state pensions as the foundation for pensioner income and decent employer-sponsored pension provision for all workers in all employment sectors.

Yesterday was extremely busy and involved me getting up at the crack of dawn, which is unheard of for me.  The Public and Commercial Services (PCS) union took joint industrial action with three teachers unions (National Union of Teachers (NUT), University and College Union (UCU) and Association of Teacher and Lecturers (ATL)).  These unions are trying to persuade the government that changes to public sector pensions and the sweeping cuts to the public sector are unnecessary and avoidable.  The one day strike could have been avoided if the government had engaged in meaningful negotiations and given ground on some of the key issues on the proposed changes to pensions.  Pension contributions of public sector workers are set to double or triple and the proposed age for claiming the pension could rise from 60 to 65 and eventually 68.

Yesterday saw picket lines outside schools and Civil Service establishments.  My workplace had picket lines outside each entrance and as I am on the PCS branch committee I was there, camera in hand.

PCS and Unite (who have a large membership in government pension schemes)  have recently signed an agreement to take part in joint campaigning.  Unite were unable to ballot their members in the time frame so they were unable to take part in the joint industrial action although  they were  able to show their support and help out in other ways.     There are a large number of Unite members at my workplace, a considerable number of them stopped their cars on the way into work so that they could talk the people on the picket lines.  This caused further disruption by causing the traffic to queue at times.

At lunch time the Unite members marched out of work to join the trade unionists who had been taking strike action and members of the public for a short march.  This was followed by a lunch time rally, which was so well attended that people spilled out from the main hall into adjoining rooms.  The rally was addressed by speakers from each of the unions including Gail Cartmail, Assistant General Secretary of Unite.  Gail exposed many myths that are pedalled by the media about public sector pensions and public sector cuts, after each exposé she got the room chanting “Its a big fat lie“.

The day was a huge success both locally and nationally.  The estimated turn out for my branch was 88% of members, with around 500 people taking part in the march

More information on the myths about the public sector can be found here.

For more of this weeks PhotoHunt pictures check out tnchick.

MYTH #5. It is unfair that public sector workers benefit from “gold plated” pensions

REALITY. The private sector is the real culprit for unfairness

What are the Facts?

The real inequality exists in the private sector, where highly paid executives receive the real gold-plated pensions. The TUC’s 2008 Pensions Watch study of 346 directors from 102 of the UK’s top companies found that they are set to earn a yearly pension of £201,700³. This is 25 times the average workplace pension that ordinary workers receive (£8,100). The study also revealed that the most senior directors of these firms had average pension funds of £5.2m, with an annual pension forecast of £333,400. In reality, most directors of the UKs largest private sector companies can look forward to retiring on a full pension at age 60, accrued on generous terms in a final salary scheme.

Index – Media myths about civil and public services.

MYTH # 4. Most public sector workers retire at 60 on two thirds of their final salary

REALITY: The majority of workers joining public sector pension schemes will retire and claim their pension at the age of 65.

What are the Facts?

Many reports about pensions would lead you to believe that most public sector workers retire at the age of 60 on two-thirds salary, but in fact this only applies to the very few people who work in public service for forty years or more. The pension age for many public sector workers has always been 65 and this now applies to most new joiners.

The average pension in Local Government is around just £4,000 per year, and just £2,000 for women while in the Civil Service the average is £6,500. The average pension for a female NHS worker is £5,000 but the median pension for women is much less. In fact half of all women pensioners who have worked in the NHS get a pension of less than £3,500 per year.

Index – Media myths about civil and public services.

MYTH # 3. The discrepancy between private and public sector pensions needs to be tackled by punishing the public sector

REALITY. We should level up pensions – not level them down

What are the Facts?

Many justify attacks on public sector pensions by the decline in the number and quality of private sector defined benefit pension schemes.

Around 85% of public sector employees are members of an employer-sponsored pension scheme, most of whom have a Defined Benefit scheme. However, in the private sector 40% of employees are members of an employer-sponsored pension scheme but only 15% of employees are active members of a Defined Benefit scheme.

Private sector employees have been hit hard by the employer retreat from good pensions. But this does not justify punishing public sector workers. Two wrongs do not make a right.

Public sector pensions support lower-paid members of the workforce. Well-paid private sector employees are likely to get a decent pension on top of their pay. The real difference between public and private sectors is among the low and average paid. The attack on public sector pensions may be wrapped up in rhetoric about fat-cat public servants, but it is really an attack on the low paid in the public sector. Only 20% of private sector employees who earn between £100 and £200 a week are members of an employer-sponsored pension scheme whereas 70% of public sector employees in the same pay range are pension scheme members.

The recent economic turmoil has had a huge impact on private sector DB and DC schemes. Savers in DC schemes have seen the value of pension pots plummet, while the private employer sponsors of DB schemes now have to make up the deficits. Unfunded public sector schemes have not been hit by market turbulence. Tax payers have not suddenly had to find funds to make up scheme deficits, and government can plan for the future funding of public sector pensions.

Private sector schemes need to be funded because there can be no guarantee that the sponsoring employer will still be around when staff retire. Public sector employers, ie the state, will exist in perpetuity and, as in other countries such as the USA, we tend to have unfunded pensions for central government functions such as health and the armed forces but funded schemes in local government.

To protect future pensions, private sector schemes (and funded public sector schemes) are regulated to ensure they have sufficient funds to meet their future commitments. But this tends to be on a cautious basis and deal with stock market volatility thus pushing up private sector pension costs. Funded public sector schemes can plot a more stable long term course. All schemes have to deal with issues such as increased life expectancy. The public sector has done this with the cost-sharing agreements backed up with a ceiling on employer costs described above.

As public sector schemes operate on a sustainable basis and employer contributions are capped, there is no financial justification to reduce benefit levels simply because employers have savaged private sector schemes.

Just how generous are public sector pensions?

Five million employees working in the public sector qualify for pensions, including 1.3m in NHS, 1.6m in local government, 600,000 teachers, 600,000 civil servants, 200,000 in the armed forces, 150,000 police officers and 50,000 firefighters.

The mean average public sector pension is £7,000 but the majority of public sector pensioners have pensions of less than £5,000.

The value of the main schemes in the public sector for new entrants are similar to a medium private sector final salary, at around 21% to 24% of salary on average.

Index – Media myths about civil and public services.

MYTH #2. Savings could be made by replacing final salary (defined benefits) schemes by a defined contribution scheme

REALITY. Scrapping defined benefit pensions would mean increased public spending on public sector pensions in the short and medium term

What are the Facts?

David Cameron has proposed replacing defined benefit schemes with defined contribution schemes in order to save costs. In defined contribution (DC) schemes (also known as money purchase schemes) the pension payment depends on the value of the investment in the individual’s pension pot upon retirement. Most public sector pensions are final salary schemes (also known as defined benefits schemes) which guarantee a pension based on the number of years worked for the organisation and the final salary upon leaving.

If new or existing staff were switched to DC schemes, then spending on pensions would increase. This is because most of the cost of paying pensions at any time is covered by using the contributions paid by or on behalf of current employees. If those contributions are instead paid into members’ own DC pots then they could not be used to pay for the pensions of already retired public employees.

In other words tax payers would be paying at the same time for the pensions of those who have already retired and to build up funds to pay pensions in the future for staff currently working – a double whammy.

If the quality of public sector pensions is substantially reduced this could also lead to many retired public employees becoming reliant on means tested benefits. This is because many public sector employees are low paid workers, already on quite low pensions. Increased spending on means test benefits would offset some of any saving on pension contributions in the longer term.

Public Sector Pensions – Definitions

Defined Benefit and Defined Contribution Schemes

A Defined Benefit (DB) scheme (also known as a Final Salary scheme) offers a defined or predetermined level of pension benefit. The benefits are expressed as a fraction of the final salary for every complete year worked for the organisation or as a scheme member of the final salary pension.

In a Defined Contribution (DC) scheme (also known as a Money Purchase Scheme), a pension fund is built up using employee and employer contributions. The pension available at retirement depends on the level of contribution paid, investment returns earned over time and the cost of purchasing the pension at retirement. These things are not known in advance. Therefore the pension it produces cannot be known. The contribution is defined, but not the pension.

Public Sector Pensions – Definitions

Funded and Unfunded Schemes

The terms funded and unfunded do not relate in any way to the contributions made by employees. Public sector scheme members contribute between 3.5% and 11% of their salary annually to their own pensions.

The Local Government Pension Scheme and the Universities Superannuation Scheme are ‘funded’ schemes, in which the funds required to pay future pensions are built up over time. This separate fund allows resources to be planned and managed over time to meet pension liabilities, as occurs with private sector DB schemes. There are around 4.25 million active, deferred and pensioner members of public sector funded schemes

Other public sector schemes such as those for civil servants, health workers, teachers, firefighters and uniformed police officers are ‘unfunded.’ Current pensions for staff are paid directly from central government’s current revenue (made up of contributions paid by civil servants, teachers, fire fighters and uniformed police officers in employment, and their employers). There are over 5.5 million active, deferred and pensioner members of unfunded schemes.

The significance of the difference between funded and unfunded schemes is often misunderstood or misinterpreted. Contributions are calculated and paid in unfunded schemes in much the same way as in funded schemes. The main difference between the two is that while unfunded schemes, in effect, lend contributions directly to the Government and receive a designated rate of interest in return, funded schemes keep control of their contributions and invest them in a range of assets.

When benefits are paid by the unfunded schemes, it is portrayed as public expenditure. In reality it is largely repayment by the Government to schemes of the invested contributions with the money being passed on as benefits to scheme members. Deficits (and surpluses) are identified at scheme valuations in both funded and unfunded schemes and addressed in the same way by adjustment of contributions and/or benefits.

Index – Media myths about civil and public services.