Michael Johnson: The government has surrendered to the unions on public sector pensions

Michael Johnson is Pensions expert and Research Fellow at the Centre for Policy Studies. He was author of 'The 100 billion negotiations'.

Yesterday’s concessions by the Coalition, in respect of the public sector pensions negotiations, verge on an unconditional surrender to the unions, perhaps on a scale unprecedented in the history of public sector labour negotiations. The price will be paid by those who are not at the negotiating table; the private sector and the young. The latter could be summed up as simply an extension of the on-going perpetration of generational injustice.

By agreeing to exclude those within ten years of retirement from any deal, as well as increasing the pensions accrual rate, the Coalition has wiped out, for the next ten years, any scope for meaningful cost savings. The only remaining benefit, within that timeframe, will be additional employee contributions, a mere trickle when compared to the burgeoning cost of meeting pensions in payment. 

Today, the cashflow gap (between contributions and pensions in payment) is forecast ^[1] to be £9.7 billion in 2014-15, up from £4.5 billion for 2010-11. At best, additional employee contributions will reduce this by £1.8 billion in 2014-15, so the cashflow gap will still increase to nearly £8 billion (and rising thereafter).