LibLink | Danny Alexander: Make no mistake: we will reform public sector pensions

Chief Secretary to the Treasury Danny Alexander writes in the Telegraph today on public sector pensions reform, calling the Government’s offer “by far the best that is likely to be on the table for years to come”:

This debate is often polarised between two extremes. There are some trade unions who seem to believe that pensions for public service workers should not change. Then there are those equally misguided voices who seem to think that the public services should be the front-runner in a race to the bottom.

Between these two, I believe there is an indisputable case for reforming public sector pensions. They must be affordable, not just now but in the decades to come; and reform must be sustainable and correct the huge unfairness on the taxpayer and on low-earning public sector workers that exists under the current arrangements; reform must ensure that those in the public sector continue to receive among the best, if not the best, pensions available.

We have been in constructive, positive and frank discussions with the TUC about these issues. There is a commitment on behalf of both sides to see these talks through.

However, he warns of a minority of unions “hell-bent on premature strike action before these discussions are even complete. They are misrepresenting the Government’s position and feeding their members scare stories.”

For Danny’s summary of the current position, his appeal for Labour collaboration, and his message to union members, read on.

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53 Comments

  • Dave Orbison 17th Jun '11 - 10:49am

    This is so depressing. When will the Govt stop villifying the public sector? They have a right to protect their rights – they did not cause the financial crisis yet they are being punished for the greed of failed bankers.

  • Nick (not Clegg) 17th Jun '11 - 10:57am

    Why is the proposed industrial action”premature”?

    Our much maligned public sector workers already know that this Tory-led government is determined to make them work longer, pay more and receive less. So what can they hope to achieve from prolonging these so-called “constructive, positive and frank discussions”?

    They are absolutely right to be angry and to express that anger by means of industrial act tion now, before the government’s proposals are implemented. Liberal Democrats should be supporting them in this

  • It’s all so depressing seeing a Liberal member of parliament using typical Conservative anti-union tactics like this – the public sector bad, private sector good type approach – pre-empting negotiations and saying that’s it there wont be anything else, and if you dare to protest the settlement will be worse. Yet another sad day for true caring Liberals.

  • The last government attacked private sector pensions, this government is attacking public sector pensions. Either the pensions have to be made less generous or the public sector has to shrink considerably, the pensions liabilities are running away from demographics. When my generation reaches pension age, what will we do to supplement our diminished pensions, public or private? The government has to do some work to regulate the financial sector to an extent where people have enough trust to make their own provision.

  • “This is so depressing. When will the Govt stop villifying the public sector? They have a right to protect their rights – they did not cause the financial crisis yet they are being punished for the greed of failed bankers.”

    What’s so depressing is that you don’t understand that this is nothing to do with the current deficit, bankers and al the rest. This is to do with demographics.

    Public sector pensions are paid for partly by the workforce, but the balance is made up out of general taxation. As the pensioner population gets older, the number of people paying tax to support each pensioner decreases, meaning that each taxpayer has to pay more.

    So – the options are:

    – do nothing, and accept that the tax bill for the working population will continue to rise, to
    – do some combination of raising the contirbutions of those expecting to collect their pensions, reducing the benfit they receive in retirement, and delaying the uptake of those benefits

    Option 1 seems to be that favoured by the more militant Union leaders, whereas I expect mose people realise that Option 2 is inevitable and its far better to be in control of how that takes place by engaging positively with the Government over the changes that need to be made.

    I’ve seen the Option 2 approach work in my own employer very effectively, and seen the changes actively sold by trades union negotiators, so it can be done.

  • Tabman, Alistair, the problem is not with recognising the need for change. It is undeniable that retirement ages should be reconsidered in light of aging, but healthy, populations (although why different rules for the Police?) and that contributions may have to increase. The issue is the high handed, authoritarian dictats coming from government, and from Francis Maude and Danny Alexander in particular, that there will be no negotiation and union rights will be curbed if there are strikes in protest. This is not how you negotiate with your workforce. This is how you alienate them. The does not seem to be any interest in engagement from the government, only an attempt to reduce workers rights and further disempower unions. Typical right wing Tory agenda and it’s appalling that the Lib Dems are complicit in this.

  • g – were what you saying the case, then that would be problematic. I suggest you go away and read what Danny Alexander actually wrote. He says nothing of the sort. What he is saying, is that (as we both agree) pension reform is inevitable, and it is far better that Trades Unions engage positively in that process, as he acknowledges most are doing.

    What he is saying is that if a minority of Unions stick their head in the sand and resist all changes, by the time it comes to their members’ pension settlements, the die will have been cast by the settlements already in place, and the room for manouvre will be tiny.

    This is, to put it bluntly, a statement of the bleedin’ obvious.

    What is depressing is that a small minority of Union leaders who, for their own political and personnel ends, are intent on using misinformation to forment discontent. If they want to use tese tactics then it is essential that the Government (for the ultimate benefit of their workers and pensioners) makes it clear what the outcome of this action will be.

  • Note to Danny Alexander re: your appearance of BBC Breakfast this morning.

    Please do not keep saying you are asking public sector workers to pay more for their pensions. You are telling us, not asking us. We were ‘asked’ to take a pay freeze – some people didn’t want to but you made them take it anyway. You told us to take a pay freeze and you are telling us to pay more for our pensions. Asking us implies we have the choice to decline.

    You are using orwellian double speak. Stop patronising us and call a spade a spade. Is this what what meant by ‘new politics’?

  • g, when my pension contributions were almost doubled, and when I was TUPEd out of a final salary scheme, I don’t recall a silver tongued management devil being able to persuade me that it was in my interests to lose out. Why should Alexander sugarcoat it? I expect the unions to defend their members, that is their job in life, but I also expect the government to run the country in a way that does not store up problems for later. Unfortunately Labour stored up a lot of problems over the years.

  • Tabman, Danny Alexander concludes “our offer is by far the best that is likely to be on the table for years to come.”. That is an ultimatum, not negotiation.

  • 1) Increase the taxpayer subsidy
    2) Increase the beneficiary contributions
    3) Reduce the future demand on the schemes e.g. fewer recipients, later pension age, a cap on the amount that can be drawn
    4) Reject all changes and accept that the scheme will fail

    Option 1 is asking those in the private sector, many on poor salaries as with poorer pensions to fix a problem the public sector won’t take responsibility for themselves.

    Options 2 and 3 are being opposed by the militant unions.
    @andrew tennant

    re: your options.
    Unions are not rejecting these in isolation. You are suggesting (options 2 and 3) that either beneficiaries pay more or the age is increased. If only we were being asked for one of these.

    pay more – maybe we could begrudgingly accept this (just as we did with a two year pay freeze, we didn’t like it but we took it on the chin)
    receive less – maybe
    work longer – maybe
    pay more + receive less + work longer – No.

    re: militant unions.
    it is too easy to brand Unions as militant. Actually I belong to ATL (Association of Teachers and Lecturers) who have voted for strike action. This is the first ATL strike action ever (in over a century) This is not just some ‘militant’ Union striking at the job of a hat.

    re: beneficiairies.
    Perhaps we are talking semantics here but whilst it is self evident that the public sector workers are the primary benefeciaries of these pensions they do not exclusively benefit. Making the public sector an attractive proposition for people of high calibre benefits all of society. Take such incentives away and the public sector workers themselves will not be the only ones who lose out.

  • g – then its incumbent on the Union bosses to explain what the better offer will be, why it is better, how it will work, and negotiate to get it. I haven’t heard them do so yet.

  • Muxloe:

    “pay more – maybe we could begrudgingly accept this (just as we did with a two year pay freeze, we didn’t like it but we took it on the chin)
    receive less – maybe
    work longer – maybe
    pay more + receive less + work longer – No.”

    Muxloe – go and look at Graph 5 in tis article: http://www.gad.gov.uk/Documents/Demography/Population%20Trends/Population_Trends_118.pdf

    When the universal pension system was set up there were around 6 workers per pensioner. Today it is 3.5; it is projected to fall to 2.

    The private sector has (largely) grapsed this nettle – it is not realistic to expect to retire at 60 on a final-salary pension with reduced contributions given these demographics, and all of the above will be inevitable.

    Get used to it, get over it, and move on.

  • @tabman
    Get used to it, get over it, and move on.

    Chances are I will move on. Its not just about money . I work in a South London school it is simply impossible to work in this environment until I’m 66. To me it feels like a death sentence. I’m already investigating career changes. I’m an outstanding teacher. (not being immodest – as observed by my school management and OFSTED) it will be societies loss as well.

  • Liberal Neil 17th Jun '11 - 1:28pm

    I would love to be able to opt in to a pension scheme like the one the Government is proposing.

    It would mean that my own payments in would halve while my pension would end up being much higher.

    The current public sector pension schemes wered esigned at a time when salaries in the public sector were lower overall, the pay structure was flatter and people didn’t live nearly as longer.

    Each of these factors has changed significantly and each has changed in a way that makes the schemes less sustainable.

    As they now stand they also give the most benefit, and the highest subsidy, to those on the highest salaries.

    I have no problem contributing through my taxes so that public sector workers at the lower end of the pay scale get a reasonable pension but I am very unhappy that my taxes are going to provide pensions to many people whose pensions will be higher than I ever earn.

  • Liberal Neil 17th Jun '11 - 1:32pm

    @muxloe ‘it will be societies loss as well.’

    I take it you’re not an English teacher then? 😉

    Seriously though – asking public sector workers to work as long as those of us in the private sector should not mean that they have to do exactly the same job. One of the advantages of basing the pension on a career average rather than final salary basis means more flexibility in this regard and less pressure to keep climbing the career ladder. We need to allow people to move to more suitable roles towards the end of their careers.

  • Why are so many posters so willing to perpetuate the myth that the Teacher’s Pension Scheme is unsustainable? When according to the National Audit Office, after the 2007 changes, the TPS is ‘sustainable’ and ‘reasonable’ – Whilst this maybe an ‘inconvenient truth’…it is the truth nonetheless.

  • @muxloe has a fair point though. I presume that the police etc. not being kept to the same retirement age is because the physicality of the job makes it more difficult. In that case, why aren’t teachers included here too? How many 66 or 67 year olds would be able to keep up with, say, a class of 30 5-year-olds five days a week? Will someone at that age be able to understand teenagers, or be able – again – to have the physical presence in the classroom? I’ve been in schools a lot over the last year or so, and what’s surprised me is the difference in height between my generation and this – I felt small aged 37 and 5’11”!

  • On a different point, Lord Hutton said that there shouldn’t be a “race to the bottom” with pensions. Personally, I see that happening.

    Public sector pensions should be the best available – in effect, the government saying “this is what we think is an appropriate pension.” Private sector pensions will never match that, but this is balanced by – generally – higher wages and the ability then to contribute more to your pension scheme. If the government reduces the benefits to what’s being proposed, then I can see private sector employers where there is still a final salary scheme – either active or only for existing members – taking the opportunity to reduce benefits further. Once enough have done that, there’ll be the calls again that “public sector pensions are ‘gold plated'” and we’ll be back to square one.

    There also needs to be a much wider look at retirement ages. It might be OK, generally, for a librarian or office worker to continue to 65, 70 or even beyond, given the general lack of physicality in those jobs, but would it be appropriate for an employer to allow someone who is physically fit enough but maybe not so able to to a job like a binman or a street sweeper? There needs to be more flexibility to allow employers and employees to negotiate a retirement date which is suitable for both sides and recognises the needs of both sides.

  • @Liberal Neil

    get your red marker out! No I don’t teach English.

  • @Tabman
    “it is not realistic to expect to retire at 60 on a final-salary pension with reduced contributions given these demographics”

    No-one is asking to reduce contributions. As I’ve already stated … Asking for higher contributions – maybe this is possible. Asking us to work longer – maybe this is possible. Reducing our pensions – maybe. Asking for all three in combination is too much.

    This is not just about paying for future pensions it is an effort to increase revenue in order to deal with the current deficit. The government needs to think of more imaginative ways to do this than taking a pop at easy targets.

    I don’t dispute that change may be needed in relation to pensions but this is too much of an assault. Introduce these changes to those entering into the public sector. Invest in pensions funds for the future rather than paying out of the exchequer. Have a more equitable system of taxation. There’s more than one way to skin a cat.

  • I haven’t always agreed with the coalition but this time I really do. The private sector has had to get used to the end of Final Salary pensions, my pension is not even index linked. Public sector workers seem to believe that it is acceptable to have a two tier set of pensioners those who have and those who haven’t and those who haven’t having to contribute to those who have.

  • Incidentally, I don’t remember the public sector Unions that bankroll Labour MPs complaining when Gordon Brown raided public sector pensions as Chancellor.

  • As the government clearly aren’t negotiating, and the unions do not accept the proposed “deal” – what else would you suggest the unions do? Just give in?
    This is about privatisation. The firms that want to take on public sector work aren’t too keen on TUPE. They can cut costs by cutting the wages and benefits of the workforce, and these are the first shots in that battle. I never thought I would hear LDs coming out with this kind of class war “overpaid workers in the public sector” nonsense. But I suppose if he’s writing in the Telegraph, it’s appropriate.

  • Emsworthian 17th Jun '11 - 6:52pm

    Much of our support came from teachers and public sector workers. Not anymore I suspect.
    It’s amazing how Tory the Lib Dems sound nowadays. Dave’s done a great conversion job.

  • Emsworthian – why is it ‘Tory’ to want to reform public sector pensions? It’s clear that because people are living longer and we’ll have fewer people of working age paying taxes we have to do something.

  • They must be affordable, not just now but in the decades to come.

    Hutton’s report (see the graph on page 10 or the passage on pages 63 to 65) clearly shows that the cost of paying the benefits of public sector pensioners – measured as a % of GDP – is projected to hit a peak this year and then continue to fall for the next 50 years. The cost in 2060 is expected to be lower than it was 10 years ago.

    Danny and your Tories friends may well wish to reform pensions for a host of reasons but the argument that they are not affordable for decades to come is simply misleading. If their are other reasons then by all means present them but it is disingenuous to imply that current arrangements won’t be affordable in the future.

    http://www.hm-treasury.gov.uk/d/hutton_pensionsinterim_071010.pdf
    4.27 The analysis shows that total benefit payments are expected to peak at 1.9 per cent of GDP in 2010-11 and remain at about 1.8 per cent of GDP for the following decade before falling to around 1.4 per cent of GDP by 2059-60. Net of employee contributions, benefit payments peak at about 1.5 per cent of GDP in 2010-11, before falling to below 1.1 per cent by 2059-60.

  • Elmsworthian wrote
    “It’s amazing how Tory the Lib Dems sound nowadays. Dave’s done a great conversion job”

    I think that should read ‘Dave and Nick’ but your absolutely correct of course, when I see what has happened recently to the Party I could cry.

  • “total benefit payments are expected to peak at 1.9 per cent of GDP in 2010-11 and remain at about 1.8 per cent of GDP for the following decade before falling to around 1.4 per cent of GDP by 2059-60. Net of employee contributions, benefit payments peak at about 1.5 per cent of GDP in 2010-11, before falling to below 1.1 per cent by 2059-60.”

    1.5% of GDP.

    Sounds remarkably like the amount that 2-3 years ago Nick Clegg wanted to save by making painless cuts in public spending – the “vast bulk” of it to be handed out in tax cuts.

    Forgive me if I take Lib Dem lectures about things being so bad there’s no alternative with a cellar-full of salt.

  • Don Lawrence 18th Jun '11 - 8:07am

    So the Chief bag-carrier to the DPM has now had another piece of news given to him by George to give to a grateful nation. I wonder if Danny will ever realise that he is being given all the bad news to give out. Every government has to give out some bad news, but doesn’t he realise that he is being used as a convenient fool by the tories. No doubt he is being told it is in the National Interest, but when will he come to understand that the Tories use it to mean “in the Conservative Party’s interest”?

  • Don Lawrence – Got it in one! Tory dictat delivered by Lib Dem scapegoat!

    When are the Lib Dems in the coalition going to realise that all the so-called “good news” (if there is any) will be delivered by Tories – bad news will be delivered by Lib Dems?

    Delivered in the manner in which this has been, we are being “ordered” – fait accompli – no argument. That does not bode well for our party.

    One of the major problems is that there can be no negotiation. When something as important as this is delivered in this manner, this is a sure-fire way of getting people’s backs up!

    Does this not remind you of Maggie Thatcher’s’ TINA – There Is No Alternative?

    I had no choice or option of objection and no right of negotiation when my public sector pension (TPS) was frozen for two years. I have yet to see any difference in my pension which indicates that there has been any change in terms of “linking pensions to salaries” – the double-lock or triple-lock advocated by the party is not taking effect yet. If not now, when? I am still waiting! Promises, promises!

  • Don Lawrence & Rebekah – it’s traditional for the Chief Secretary to the Treasury to be given all the bad stuff. That’s basically the whole point of their job.

  • The New Labour government attacked public sector pensions as well as private.

    I was in the Post Office and our final salary scheme ended in 2008 and the normal
    retirement age raised from 60 to 65.

    Brother Barber was the architect of this ‘agreement’ so i am surprised the government
    haven’t reminded him of this.

    There is a way through the current problems but government spokespeople aren’t handling
    it properly and some union leaders are hell bent on a confrontation for political reasons.

  • Nick (not Clegg) 18th Jun '11 - 11:23am

    Spot on, Don Lawrence, you beat me to it.

    And what a cringe-making performance it was. I did not know whether to laugh or cry when the presenter on last night’s Sky News review of this a.m.’s papers criticised DA’s performance and a Tory MP defended him with the patronising words “He wasn’t that bad” (or words to that effect).

  • As Dave Warren points out, there were changes to some pension schemes in 2008, and there were also strikes over the issue. The LGPS pension scheme changed in 2008, some people’s contributions increased, there were changes to lump sums and minimum retirement ages went up.

    The coalition would do well to point this out during the current round of public pension negotiations, agreements can be reached.

  • Don Lawrence 18th Jun '11 - 12:43pm

    @Sam

    “Don Lawrence & Rebekah – it’s traditional for the Chief Secretary to the Treasury to be given all the bad stuff. That’s basically the whole point of their job.”

    You know, I thought we went into coalition to change things for the better. Has anyone told Danny?

  • Mike Barnes 18th Jun '11 - 1:01pm

    “If we want a liberal democracy then we have to decrease public sector advantages over other, less well off workers and pensioners.”

    That sounds like a conservative thing to say not really liberal. Why not increase advantages for everybody else? No no, let’s have a race to the bottom instead , everybody loses out in the end. Great stuff.

  • Nick (not Clegg) 18th Jun '11 - 1:43pm

    @ Sam,
    The Tories played a blinder in the coalition negotiations and subsequent share out of Cabinet positiions: lumbering LibDems with the main “bad news” jobs. So Vince Cable got the job of delivering bad news on tuition fees and DA has inherited “Chief Stooge in the Treasury” from Laws.

    Remind me, who was the LibDems’ chief negotiator in the coalition negotiations? Was it Danny Alexander? What a star!

  • Don Lawrence – Well some would argue that we are changing things for the better. Increasing the tax threshold for the lowest earners, pupil premium, strong targets on the environment and the green investment bank. I dare say making tuition fees more accessible as well.

    But of course all this is done being the smallest party in a government facing the worst economic conditions in decades.

    Nick (not Clegg) – well which jobs would you have prefered? There would have been bad news to spreads in pretty much all of them. On tuition fees I hardly think the reason we’ve suffered so much is because Vince Cable was Business Secretary. It’s probably more to do with the fact that we publically signed pledges not to increase fees and we had a manifesto policy of abolishing fees altogether. This meant lots of students voted for us solely for that reason.

  • Vince Cable warns unions strike laws will be tightened if industrial action goes ahead.
    Danny Alexander leads on tough public service pension reforms.
    Where are the Lib Dems when you need them? Whoops – sorry, are they Lid Dems?
    When will they learn that Cameron has stitched them up – pushing them to the front ?!

  • Nick (not Clegg) 18th Jun '11 - 4:52pm

    Sam,
    Which jobs would I have preferred? I would not have accepted any of them. I voted against the coalition at last year’s Birmingham Conference. I believed then, and I believe now, that the coalition agreement was a Trojan Horse. Having said that, I still think it was particularly foolish to accept the two jobs I have mentioned; your comment that i’ts traditional for the Chief Secretary to (or should that be Sucker in?) The Treasury to be given all the bad stuff tends to underline that point. And if you are going to accept the job which involves handling the bad stuff, then make sure that you place it in a safe pair of hands. Sorry, but I don’t think Danny is up to it

    On tuition fees, what really screwed us was the fact that Cable was trapped into being the author of the proposals: so that honouring the pledge by voting against them (or even using the escape clause in the coalition agreement and abstainig) became untenable. It was an inept piece of negotiation by our team in the coalition negotiators (or a brilliant one by the Tory team) which placed our MPs in the position of having to choose between their commitment to their electors or their commitment to their new “Honourable Friends”. Sadly, most of them made the wrong choice.

  • Don Lawrence 18th Jun '11 - 5:10pm

    Sam,

    If you look closely at what the Tories let us have from the negotiations, they were almost all long term, forget about them later things (climate change targets, AV referendum etc) and those we gave were give now, forever things like tuition fees, party’s reputation for honesty, indeed the party’s entire future. Some may be prepared to sacrifice the future of the Lib Dems for at least a generation in return for their personal place in the limelight, and a few baubles to provide a figleaf of a social concience to a Tory party. I am not.

  • Don Lawrence 18th Jun '11 - 5:24pm

    Oh yes and as for the Green Investment Bank. I will bet its board of directors is crammed full of Lib Dem leaning people from the financial sector, and not a single typical Tory type! Not. Then see how much use it is.

    HQ and main Admin offices – London or Edinburgh: What about North Norfolk, Eastleigh, Cheadle, Sheffield, or Westmorland and Lonsdale? No it has to be the old centres of financial power. Why? Because we want the old centers to remin powerful?

    Never trust a Tory bearing gifts.

  • This is tired old Tory divide and conquer being swallowed by ‘our’ MPs – ie: get the private sector workers to seek ‘fairness’ for themselves by supporting the driving down of public sector pensions rather than seeing the private sector’s raised up (if indeed they are as far adrift of the public sector as the Mail, and Danny Alexander, insist).

    Still, Danny will no doubt find out all about public sector pensions after the next election (and I may even leave the party in order to help contribute to the SNP campaign up there!) – or are MPs somehow exmpted yet again from the privations they reserve for the rest of us?

  • Peter Chivall 25th Jun '11 - 5:43pm

    I agree wholeheartedly with the comments about Danny Alexander. When you look at the reality of the (independently audited) changes to public sector pensions following the 2008 settlement, it’s obvious that Danny Alexander’s statements do not relate to the truth. Looked at from the outside, he seems a weak appointment who has ‘gone native’ at the Treasury. At the same time, Alexander’s statements and the pensions policy of the Government bear all the hallmarks of Frances Maud at the Cabinet Office, whose enthusiastic project is the dismantling of the Civil Service and other institutions of the state back to the other side of Samuel Pepys.
    None of your contributors have mentioned that there are three quite different schemes here: the Civil Service Pension scheme which used to be totally free – in effect an untaxed addition to salary for the ‘established’ Civil Servants who were eligible – and was unfunded, i.e. it simply paid out from the Exchequer to pensioners of the scheme. the Teachers’ Pension scheme, which is also unfunded, but is contributory with payments into the account by serving teachers (about 9%) and employers (about 15%).
    The third is the Local Government Pension Scheme which is both contributory and funded.

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