We’re all in it together–especially the public sector

Strike!

On Wednesday, most of Britain’s public sector employees will be going on strike in what the BBC News continually refers to as “the biggest strike in a generation”. The buildup to this has been long and full of posturing from both sides; each has presented reams of ‘evidence’ to ‘prove’ that the other side is factually mistaken, morally wrong, or just plain selfish. Over the last few weeks, I’ve heard so many conflicting arguments made with so much confidence that, unless you’re easily swayed by demagogues such as union leaders or secretaries of state, you have to acknowledge that this is probably a more complex issue than either side is making it out to be.

Or is it? To boil it down to the essentials we’ve been hearing, it’s about pensions. Unions insist that their members will be working longer and paying more to receive less when they retire. Initially, government spokesmen took the tack of agreeing that this was so, but claiming it was necessary to reduce public sector spending, as the ‘overblown’ state sector was a huge contributor to the country’s unsustainable debt. By a strange coincidence, this happily fitted in with the Conservative Party’s longstanding policy to shrink the public sector; indeed, this is another in a long line of Conservative bugbears that have conveniently been judged to contribute to the dastardly deficit, and must therefore be cut.

So up until recently, it was more of a moral judgement than anything else. Both sides agreed that the proposed reforms would make pensions worse. One said this was regrettable but necessary; the other said it was unjustified and avoidable. Both sides have invoked Lord Hutton’s recent report on the state of public sector pensions, a massive 215 page document apparently capable of supporting any argument providing one takes a choice quote from it out of context.

As the wrangling’s been going on, however, it’s got more vicious, and often more surreal. Yesterday, Education Secretary Michael Gove popped up at a convenient press conference to assert that the unions were full of militant hardliners itching for a fight with the Conservatives, an increasingly popular government stance that’s been echoed by every opponent of the strikes.

Lib Dem puppet and Tory stooge Danny Alexander popped up to inform strikers that “a better deal” was on the table (for “better” read “still not as good as what we want to take away from you”) and issue the threat that if the strikes went ahead, he’d take it away again. It was like that bit in The Empire Strikes Back where Darth Vader sternly tells Lando Calrissian, “I have altered the deal. Pray I don’t alter it any further.” At least it was probably like that in Alexander’s mind; to everyone else, he came across like a 10 year old schoolyard bully.

Earlier, Alexander’s boss Francis Maude came up with the frankly bizarre idea that the strikers should content themselves with stopping work for 15 minutes instead of striking for a whole day; because obviously, the main aim of striking should be to cause nobody any inconvenience at all.

All of this smacks of a government floundering in panic at the prospect of some very bad PR, which the strikes would surely be. The various union leaders have generally come across as a little more reasoned, but they have a longstanding spectre of 70s militancy to overcome. The government’s current “militants spoiling for a fight” caricature is designed to play on this; if you think a one day strike is inconvenient, try one that lasts for weeks, as they frequently did over more trivial issues in the 70s.

But this isn’t a trivial issue. We’re talking about millions of people having their conditions of employment altered, to their detriment and without their consent. And as a direct result (and probably an intended one), it’s become a highly divisive issue between those who work in the public sector and those who work in the private sector, which misses the point that everyone’s getting worse off. A reduction in public sector pensions can be used to justify further squeezing of what’s left of the private sector’s, which can in turn be used to justify a further reduction of the public sector’s and so ad infinitum, in what’s being described with irritating frequency as a “race to the bottom”.

A prevailing view among many unsympathetic to the strikers (usually from the private sector) is that “my pension’s terrible, so I don’t see why I as a taxpayer have to pay for you to have a good one”. Leaving aside the fundamental anti-tax “I’m all right Jack” attitude, this still misses the point. What these people should be saying is that, if their pensions are terrible, something should be done about that. If the strikers succeed in getting the government to relent, there might be a chance of that (albeit a slim one). Ironically, it was Gordon Brown’s tax credit raid on private sector pensions that largely left them so much worse off; one more reason why I’m as disillusioned with the Labour Party as I am with either of the others.

Then there’s the view (taken by Call Me Dave Cameron) that the strikes are irresponsible because they’ll cause inconvenience. Well, of course they will! What on earth would be the point of striking if nobody noticed? As pointed out above, this is ONE DAY. And for those who say that the long strikes of the 70s happened under Labour, I’d point you to the 1980s Miners’ strike as evidence that the Conservatives have no better record on industrial relations.

Of course, the trouble with that is that the NUM’s defeat effectively broke the power of the unions (much to Mrs Thatcher’s delight), as a direct result of which so many in the private sector have had so much stripped away from them with no one left to represent their rights. It is probably true to say that the unions had too much power in the 70s and 80s; the problem is that, as their ideological opposite, the Conservatives left them with too little power to be of any use (in the private sector at least) in protecting the rights of workers. With this government poised to do away with the EU Working Time Directive, charge £1000 for unfair dismissal tribunals whether won or lost, reduce the consultancy period for involuntary redundancies and extend probationary periods to make it easier for firms to sack employees without consequence, the irony is that the private sector could really do with good representation right about now. Though I doubt the Conservatives and their friends the “wealth creators” would agree.

In fact, Call Me Dave has said that the strikes will cost the economy £500million, a figure so suspiciously round as to have probably been plucked from midair (or the fevered imagination of George Osborne). It’s hard to know whether this is true or not; certainly the strikes will cost the country something. But somehow our failing economy managed to accommodate two extra days of unproductivity to celebrate some irrelevant royals getting married this year, and will somehow manage to accommodate yet another for the Golden Jubilee next year. You don’t have to be anti-monarchist to think that the working rights of doctors, teachers and firemen are a more important issue than that.

But it’s not just doctors, teachers and firemen; the popular view of the public sector is that it’s massively overstaffed with midlevel bureaucrats who have no real function. On this, I’m really not qualified to say, without doing a lot of research. But I can say, having been an administrator myself, that it’s unlikely the public services could function without at least some of those. Notice the objections to Andrew Lansley’s proposed NHS reforms from doctors insisting they don’t have the time or the training to perform administrative functions. And given that the number of public sector redundancies has just been projected at 500,000 (another suspiciously round number) over the next year, if there is any deadwood it can surely be stripped away as part of that process without having to cut the pensions of those who are left.

In fact, if the public sector is as full of lazy, sick-day taking, workshy, useless bureaucrats as the more extreme right-wingers claim, how can they then go on to say that the strikes are going to cause so much inconvenience? For that matter, how can those critics in one breath say that the strikers are selfish, and in the next moan about having to pay them out of their taxes?

No, the caricatures are running riot on both sides, oversimplifying an actually fairly complex issue. Pensions (and finance generally) are a very nuanced and complicated topic, and I’ve seen debaters on both sides of the argument pull out some very convincing looking statistics and internet links that nonetheless flatly contradict each other. Bear in mind that, whatever you think of Hutton’s report, it took him and a large panel several years to properly examine the issue. That’s why – unlike some armchair internet warriors – I’m not under the impression that I’m infallibly correct in my views.

But they are my views, and like so many political issues, people’s stances on this issue tend to be shaped by personal ethics as much as reasoned argument. I try and balance both, and on this matter have come to the conclusion (informed by both) that I’m behind the strikers. Yes, negotiations are still ongoing (as Ed Miliband told us six times over when the last strike happened). But the details of the government’s new offer have yet to be supplied to the unions, and these ‘negotiations’ have now been going on for over a year. They may not have formally broken down, but I think a year’s worth of wrangling with no satisfactory result comes to the same thing, doesn’t it?

Of course, that’s not to say that there isn’t scope for reform of public sector pensions. It’s just that, curiously, the reform seems to be targeting the lower earners rather than those like, say, Eric Pickles (estimated pension £43,000 a year, index-linked) or the Permanent Secretary of the Treasury (not sure of the exact figure, but it’s more than the Prime Minister). And don’t forget they’re (unbelievably) still entitled to their state pension on top of this. Why not start by targeting the public sector’s massive pension inequality (which is what pushes the much-quoted average pension up anyway) rather than hitting those in the middle and at the bottom? That could make a start at saving money, surely.

And to all those persisting in demonising teachers, who seem to be the most conspicuous part of this strike – if you think they’re bad now (and they’re not, mostly) how do you think they’re going to get any better if you cut the incentive to do the job? So you have to take one day off work to care for your child rather than rely on state education as a free childcare service? Pardon me if I don’t feel too sympathetic. You may be losing a day’s holiday, but you’re still getting paid, which is more than the striking teachers are.

And just before you bring up the short working days and long holidays teachers get, do you honestly believe that the job consist of nothing more than manning a classroom in the school day? A decent teacher has to get in early, work late (usually at home, into the evening) and may well spend those long holidays researching the next term’s lesson plans and teaching. Or marking exams to get a better understanding of how to teach the qualifications. I think, if you do the sums, you’ll find that teachers aren’t having the great time you think they are. In fact, in my experience, a lot of them have so much stress it’s a wonder they don’t have nervous breakdowns. You think it’s hard doing a Powerpoint presentation to a hostile boardroom? Try doing something similar with 20 belligerent sixteen year olds all day every day, and see how stressful those board meetings seem after that.

Anyway, teacher-based rant over – for now. I will acknowledge that both sides of this debate are over simplifying it, but thus far no political party (even the suspiciously silent Labour) is helping at all. The cynic in me says that the strikes will almost certainly not win the cause of retaining the current pension arrangements, and also does run the risk of the government taking the excuse to further cut down workers’ rights to strike. But even if the strikers don’t win, they are, like the Occupy movement, sending a message – a message that there are other ways to pay for the country’s problems rather than stripping everyone’s rights to nothing. It’s a message that politicians would do well to heed, if only to win back the increasingly large proportion of the electorate who, right now, wouldn’t vote for a single one of them.

13 thoughts on “We’re all in it together–especially the public sector”

  1. Small factual point first: Danny Alexander is Chief Secretary to the Treasury, which means that technically his boss is George Osborne and not Francis Maude

    Maude is Minister for the Cabinet Office which is not a Cabinet post whereas Chief Secretary is, and so Danny actually outranks him.

    [longer reply about the details of the government’s offer in a moment]

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    1. Oops, didn’t realise that! I suppose I’m suffering from a general impression that Lib Dem ministers are always junior to Conservative ones. Thanks for the correction.

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  2. You’re right that there’s a lot of propaganda around. If I may, I’ll put the Coalition’s side.

    Okay, it might help to read the details of what the government is actually offering, which you can see here

    http://www.hm-treasury.gov.uk/tax_pensions_index.htm

    or there’s this online reader thingie for the report that was presented to Parliament here

    http://issuu.com/hmtreasury/docs/pensions_publicservice_021111?mode=window&backgroundColor=%23222222

    or a pdf that at least is legible

    http://cdn.hm-treasury.gov.uk/pensions_publicservice_021111.pdf

    I really don’t understand how the (unions’) assertion that this offer hasn’t been made can stand up. It’s been presented to Parliament; it’s hard to be more public about what’s on the table than that.

    So here are some questions:

    First, will this hit the worst off most?

    Anyone earning less than £15,000 will receive exactly the same benefits as the present scheme.

    Anyone within ten years of retiring will receive exactly the same benefits as the present scheme.

    Second, are public sector workers are being asked to work longer to get less?

    People earning average earnings have a choice: either to work up to five years longer (to 65 instead of 60) and receive an improved pension, or to retire at 60 as before and receive a slightly worse one.

    Third, do the well paid get off scott free?

    Most of the savings (yes shockingly there are savings involved in this plan) are delivered by the cost cap, that is limiting the upper value of pensions. Given that the final value of the pension is directly related to earnings (although the revision is to link it to career average earnings, not final salary) then clearly it is the higher earners not the lower earners who are going to hit the ceiling and have their benefits curbed.

    And yes, that also applies to Eric Pickles (who, like all Coalition ministers, took a 5% salary cut on joining the cabinet and that salary is frozen for five years. It’s not that they can’t get by but that is a harsher deal than almost any other public sector employee except for the ones who’ve lost their jobs).

    The unions’ strike ballots all predate the government’s revised 2 November offer, so it’s difficult to claim that they have a mandate to strike against this. Now, you could say that that is sly practice by the government, changing the terms and saying that the unions ought to ballot again. Or you could say that they responded to the strike threat by recognising the unions’ concerns and coming back with an improved offer. Like they were actually negotiating. Take your pick.

    This isn’t an exercise in trying to convert you; I don’t expect to, and I applaud your principled support for the public sector workers. I should just like there to be a bit of the government line here so people can be helped to make their own minds up.

    Cheers

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  3. Thanks Richard.
    I do appreciate that this should be about more than blind partisanism, despite my general support for the strikers, and I also acknowledge that it’s a far more complex issue than most (on either side) are saying. It’s good to hear a government viewpoint that isn’t reduced to the usual simplicities of “it’ll cost us this much” or “it’s irresponsible” or “they’re spoiling for a fight”.

    I actually did have a go at reading the Hutton report to give myself a better understanding of the issues, but for a non-economist it’s a fairly baffling document. I did spot various sentences that had been randomly cherry-picked by those on both sides of the argument though!

    I would respectfully disagree on the morals of the stance; if you do work in the public sector for most of your life (hardly guaranteed any more, I know), you would hope to end up with a final salary of more than £15,000 when you retire. I’m sure there are some who do, but I imagine most have the aspiration to end up better paid, and consequently worse off pension-wise than they would be at this point.

    I am glad that those ten years off from retirement have been exempted from the changes, and think that’s a good step forward. But what about people – and I know a few – who’ve been working in the public sector for fifteen years but still may be twenty years from retirement? Again, I’m mostly thinking of teachers here; I know a few of a similar age to me who would definitely be considerably worse off even under the revised scheme. And the ones I know, even after many years in the job, are just as committed and passionate as they were when they started – good teachers, in other words. I don’t think it’s necessarily selfish for them to want to retain the conditions they started with, especially after one round of public pension reform four years ago. How about – if they want to compromise – letting everyone currently employed in the public sector keep their existing arrangements, and only applying the new terms to any new employees? Wouldn’t save as much, I know, but that way nobody going into the public sector could say they thought it was a better deal. Assuming we ever have the money/need for new hires in the public sector, of course…

    I can also see the point of raising the retirement age, though I believe it’s also the case that, on top of this, pension contributions go up by 3% or so, meaning there are increased contributions on top of an extended working life. And while I appreciate the problem of a generally longer lived population, surely this also causes problems for young people just starting in work, if the oldsters aren’t getting out of their way so much any more?

    Of course, the 2007 reforms raise the interesting question of how long the proposed reforms would last. If reforms can be changed again after four years, you can see the perspective that even a good deal is a continuation of the chipping away, and that if you want it to stop, you have to make a stand and say “we will go no further”. I suppose it is possible that future reforms might actually improve the deal, but historically that looks pretty unlikely.

    I was aware that ministers had taken a pay cut and a freeze, though I must confess I wasn’t aware it was that substantial. Again, a step in the right direction, but I wonder how many other top earners in the public sector haven’t done this – those who don’t depend on popularity for re-election for example. I must look up the deal that Gus O’Donnell has one of these days…

    However, I do share your scepticism about the unions’ claim that they haven’t seen the details of the new offer, particularly when some say they actually have. As you point out, it’s in the public domain; that looks to me like another case of propaganda from the union side of things. And I’m glad you pointed out the two ways of interpreting the goivernment’s new, post-ballot offer – I try to be even handed and I agree that this too is a matter of interpretation.

    As I said, I try to avoid partisanship if I catch myself blindly following any agenda, but I honestly think there are other budget shifts that could avoid these cuts. The question of course being, which ones? Like my viewpoint on the whole pension issue, it’s largely a case of personal ethics. I’d start with cancelling Trident, which I know the Lib Dems are very much in favour of. It’s a bit rich of us to be lecturing Iran on acquiring nuclear weapons when we retain an outdated, overkill Cold War arsenal just to please the US defence industry while they lobby directly into the MoD for us never to get rid of it!

    Anyway, thanks for such a measured response – sorry if my response to your response is a bit of an unstructured ramble!

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  4. Hi Simon

    I agree with Richard (surprise!), but two other quick points about the general political situation and how the Coalition is actually protecting the poorest first: benefits are rising by the full amount according to the set formula (despite it being the highest tic of inflation, and despite both Tories and Ed’s Labour briefing the press that they should be fiddled down instead); pensions are to rise – and not talking about the public sector additional ones, where the lowest-paid are specially protected, but the we’re-literally-all-in-this-together state pension – by the highest of three different measures, every year. If you want to see a difference by the Lib Dems in government, do you really think either would have happened under the Tories (and we can see by the record what happened under Labour)?

    Public sector incomes went up sharply when the economy was booming, but then it turned out most of that boom was fake. When the money’s more than run out, the government’s actually redistributing to the poorest. And if the public sector workers in the middle have to pay a bit more, when everyone else is having to do so at the same time, why not? And if not, where does the money come from when everyone else’s incomes – and so tax take – are shrinking? And, yes, redistributing from high and middle earners to the poorest is probably the Lib Dems hurting their own core voters, which is bad news electorally. But not morally. The fact is that the poorest (both in work and out of it) have their pensions and benefits either protected or rising in real terms, and nobody else have.

    PS And obviously Trident would pay for a fair bit, but at least Lib Dems have managed to stop the UK buying a new one until the next Parliament, so that’s a big saving for the time being – either Tory or Labour would have spent the money already, and so had to cut a lot more elsewhere.

    But, hey, it’s easier to say “puppets and stooges” than look at the facts…

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    1. Ouch! Yes, when I read it back I realised I’d been a little blindly partisan there myself! Though I must say, I still don’t have a high opinion of Danny Alexander whatever his affiliation. Having said that, I have a bit of a stern policy when I’m writing that I almost never amend pieces – they should stay as they were when I wrote them, mistakes, unjustified insults and all. Revision in view of later factors I sometimes acknowledge in a later postscript (like on the Misfits episode 1 piece).

      As to your other points, I do broadly see what you’re getting at, but still think that “facts” in these cases seem open to multiple interpretations. It’s also been said that the main cause of the rise in public sector spending is actually the increase in the size of the public sector (which was indeed down to Labour). Since the Coalition are getting rid of 500,000 public sector workers over the next year out of a total of some 2.6 million, virtually 20% of the sector as a whole, these dramatic savings seem somewhat less urgent than you suggest.

      And not all incomes are shrinking; but it’s increasingly problematic to get a decent share of tax from the personal and corporateones that rise, as so many are mired in offshore tax havens, neither contributing in taxation nor in general spending to the economy. The Tories’ “wealth creator” friends would be better described as “wealth hoarders”, as they amass more and more of a finite supply of money then let it sit there and accumulate while never doing anything with it. Oh, they may buy the occasional Ferrari, but that’s not really likely to help the British economy.

      I do acknowledge (unlike the ridiculously tribal Labour party) that there are steps being made in the right direction (such as the state pension increase you mention). But where I differ from you – and Barry, for that matter – is that I think the bad far outweighs the good, and that so many of the “urgent savings” seem so suspiciously similar to longstanding hard right Conservative policies as to make one extremely distrustful of the Coalition as a whole.

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      1. Out of interest, where do you get 2.6 million people employed in the public sector?

        Because I understand the figure to be closer to 6.3 million people, and that the 500 thousand reduction takes us back, roughly, to the level of public sector employment in 2002, before Mr Brown started buying votes with jobs. Er, pouring on the public sector spending.

        http://www.econstats.com/uk/uk_pse___.htm

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      2. I got the figure from one of those Guardian ‘fact check’ type reports, although I’m aware that the Guardian has an agenda of its own and is equally capable of twisting the truth. As I’m sure we all remember from Humphrey’s machinations in Yes, Prime Minister, the size of the public sector very much depends on how you classify the workers nominally within it.

        I did try your link, but I’m not sure where in all those unclearly labelled figures one can derive a total! But I’m always open to correction – though a deluge of figures can often be used to obfuscate a policy that, at its core, still has a moral element they don’t address.

        And I’m no fan of Brown either, but weren’t a lot of those extra jobs a result of the Future Jobs Fund? Another case of trying to do the right thing but doing it in the wrong way.

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      3. The Future Jobs Fund was (supposed to be) a scheme to subsidise minimum-wage jobs in the private sector for (mostly) young people who had been on JSA for more than 10 months.

        (How this differs from Cap’n Clegg’s “Youth Contract” scheme remains to be seen.)

        It was announced in the April 2009 budget for implementation from April 2010.

        We cancelled it so by-and-large it never happened.

        Brown’s public sector job creation scheme was, however, nothing to do with it.

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      4. Ah, I see. I do agree about Brown’s ‘vote-buying’ tactic, btw, hindsight is increasingly telling us how useless Labour were! I had read (again in the Guardian, I think) that the Future Jobs Funds was for both private and public sector jobs, whereas the new Youth Contract is solely for private sector ones. Whichever is the case, since the Future Jobs Fund never really came to fruition, you’re obviously right on that one!

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  5. By the way, Alex and Richard, do either of you know if Osborne’s just-announced extension of the public sector pay freeze, then capping it at 1% thereafter, will also be applied to ministers? And what about MPs generally, aren’t they still getting quite large rises if they’re not ministers?

    Not that I expect such savings to make up much of a budget shortfall, but it’s a principle thing – if we’re all in it together!

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  6. Thoughtful as ever.

    I think the only major factor you’ve missed is that a number of public sector pension reforms went through in 2007-08, turning them from final salary pension schemes to career average – the final salary schemes for civil servants (can’t speak for teachers or emergency services) were closed to new entrants then. And all that was done by the then government as a negotiated settlement with the unions.

    Speaking as someone with a personal stake in the issue, I agree that it’s a highly complex issue. Given the aging population I really don’t have any problem with the retirement age being raised (though there may be problems caused at the time of the age raise due to less jobs being available for those entering the labour market), it’s the second change in terms and conditions in relatively quick succession that I’ve got a problem with, and one that can’t help but come across as ideologically driven.

    A few months ago we had a seminar organised in work with independent experts and academics – the conclusion drawn overall was that the real problem isn’t the public sector pensions, it’s the appalling state of private sector pensions and how they’ve been allowed to fall into such a state over the past two decades. Many people either can’t afford to take one out or find it too difficult to decide, hence there may be a hell of a strain on the state pension in future years. It’s also fairly ironic that the propaganda war’s been selling private sector workers on the idea of the public sector as being selfish when, to an extent, those not making provision for retirement may end up being equally as selfish in ending up as what they see as a burden on the taxpayer.

    I appreciate the government view may have some merit, but from my position is does come across as ideologically driven and, coupled with the pay announcements in the budget today, unnecessarily antagonistic.

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    1. Yes, I didn’t mention the 2007 reforms until I started debating with Alex and Richard!

      But thanks Jon, you’ve just said far more succinctly what I rambled over many thousands of words to say 🙂

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