Conservative Home

« Ed Holmes: Time for a more mature debate on public sector pay and pensions | Main | Priti Patel MP: The support trade union leaders have from the people they claim to stand up for is at an all time low »

Alistair Thompson: To end the pension apartheid, the PM must not give an inch

Alistair Thompson Alistair Thompson was Conservative candidate for West Bromwich East at the general election. He also runs Media Intelligence Partners with business partner Nick Wood, the former press secretary to Conservative leaders William Hague and Iain Duncan Smith.

On Wednesday, the unions will attempt to bring the country to its knees because of the Coalition’s plan to reform the public sector’s unsustainable pension system.

The union barons claim that the reforms will wreck the lives of their hard-working and low-earning members, but these claims do not stand up to even the slightest scrutiny - more on this later, and they have very effectively sought to link this issue with the issue of deficit reduction.

So the debate thus far has been woefully inadequate. Serious discussion about the issues have been all but ignored or kicked into the long grass.  

To his credit, Prime Minister David Cameron and his ministers have been robust in defending the reforms, saying that the changes are designed to make public sector pensions affordable for the long term and failure to reform will bankrupt the whole system, a point even many on the Labour benches recognise.

And along with the generous eleventh hour offer that was quickly rejected, ministers have talked tough - even threatening the unions with withdrawing their previous offer. 

Despite the Government’s tough stance, millions of trade union members will down tools on Tuesday night and not go to work until Thursday morning, in what could become a prelude to a new winter of discontent.

But to what end?

This spiteful act has less to do with the issue and more to do with the wider political situation. It will, as leading members of the Coalition have pointed out, damage the economy, which already has the faintest of pulses and bring chaos to schools, airports, government departments and hospitals. 

More importantly it will hit the hundreds of thousands of firms who will lose staff through having to look after their children, or be unable to travel as large sections of the country simply grind to a halt.

But if the strike is designed to win the battle of heart and minds, it is failing. A new poll from ComRes published last night show 47 per cent of the public opposed the strike, while just 38 per cent supported it.   

And of course the strike will add nothing to the real debate about pension reform. 

The truth of which is that in our country today we have a two-tier pension system, a pension apartheid that distinguishes and discriminates between the public and private sector on a breathtaking scale. 

Take for example the number of workers in both sectors entitled to gold-plated defined salary schemes, (final salary schemes). In the public sector over 90 per cent are eligible against just 11 per cent in the private sector.

These pensions are worth an average of 40 per cent of the final salary with less than half of the pension pot coming from worker contributions, the rest being stumped up by you and me. Just look at the figures: annual employee contributions average 6 per cent of salary topped up with employer contributions of 14 per cent. 

And when accountants PriceWaterhouse Coopers estimated what private sector workers on an equivalent wage would need to contribute to their pension pots to enjoy a similar pension, the figure was a staggering 37 per cent of their salary. This is clearly unaffordable and unfair to those low paid workers in the private sector, who are picking up this increasing tab for a benefit that is way beyond their means. 

Then there is the problem of affordability in the long term. Much has been made of the rise in pension costs with an increasing burden falling on taxpayers. This is due to increasing life expectancy and the decline in workers to pensioners ratio.

All of which creates a £1.3 trillion problem for the Government, which will continue to grow at an alarming rate if nothing is done. Making matters worse is the fact that public sector workers now earn on average £3,000 more than the private sector according to recent ONS figures

This does shoot down two of the TUC’s oft repeated claims, firstly that public sector worker earn less than those in the private sector and that their final salary pensions compensate for their low pay. 

Then to cap this off is the difference in retirement ages, with those in the public sector retiring earlier , with most civil servants able to bail out at 60 on a full pension with many in the private sector having to work until 65. 

Yes, pensions are a massive problem in this country, but it’s not as the unions would have you believe because those suffering from Britain’s pension apartheid are not the public sector, but the 14.8 million private sector workers, many of whom have no pension at all.

Over the coming months, I hope that Mr Cameron pushes ahead with these vital reforms and does not give one further inch of ground to the deficit-denying dinosaurs leading the trade union movement. 

If Mr Cameron does this then he will win a renewed respect from many ordinary men and women, the army of low and medium-paid workers who can no longer afford to pay for the generous public sector scheme at a time when their living standards are being squeezed so severely that what really matters to them is, can they pay their bills each month and will they have a job after Christmas?      


You must be logged in using Intense Debate, Wordpress, Twitter or Facebook to comment.