Next week Britain will see the biggest withdrawal of labour in decades, with more people staying away from work even than during the general strike. On Wednesday up to two and half million public sector workers may well stop work to join a day of action against government proposals to change their pension arrangements. There is bound to be widespread disruption to public services. The Prime Minister says the strike is “irresponsible”. Is he right or are public servants justified in going on strike?
The root of the problem is that the government says taxpayers can no longer afford the pensions which public sector workers have not only enjoyed in the past but which many of them regard as theirs by right. The government argues that the affordability of pensions is a pressing and unavoidable issue for everyone, whether in the public or private sectors. Quite simply, because we are all living longer we are all drawing pensions for longer and this means the pension bill is getting bigger. Somehow it has to be paid for.
Most private sector companies have responded to this demographic change by radically altering the pension provisions they offer to their employees. Some companies have got out of pensions altogether. Most of those companies which continue to offer pension packages have axed (for new entrants) what are called final salary pension schemes, which guarantee a pension whose value is related to the final salary an employee is earning when he or she retires. Some have changed this so that the pension is related to average rather than final earnings, but most have abandoned the salary relationship altogether.
Instead they offer schemes that set up a fund into which both employers and employees contribute. At retirement these funds buy a pension for the person concerned. But in general such pensions are less desirable than final salary pensions. For one thing, their value is not predictable because it depends on market conditions prevailing at the time. And, for another, they tend to provide less income than final salary pensions.
Public sector pensions are, for the most part, final salary pensions. The government proposes that this should go on being the case and so, on this ground alone, it says, public sector workers will continue to enjoy a benefit increasingly denied to workers in the private sector. But it wants to reduce the cost to taxpayers who foot the bill for this advantage by changing the terms of final salary pensions in the public sector.
The unions object to the government’s proposals on several grounds. First, they say that the benefit of final salary pensions should not be regarded as a perk unjustifiably enjoyed only by public sector workers. In general, they claim, workers in the public sector earn less then people in the private sector, so their pension advantage merely goes some way to make up for their earning less during their working lives. The government denies that wage differentials between the two sectors are what the unions claim they are.
The unions also argue that it is misleading to suggest that it is taxpayers who have to foot the bill at least for a large proportion of their members. While many public sector workers, such as those in the health service and in education, have their pensions paid out of general taxation, local government workers have a fund they have paid into (just like private sector workers) – in fact the biggest pension fund in Britain, valued at about £140bn. That fund may not be big enough to cover all the pension liabilities of local government workers, but in this it is in no different a position from most private company pensions which are also in deficit.
In short, the unions argue that their members are being asked to pay more and to work longer to get a pension that will be less valuable.
Negotiations between the government and the unions have been dragging on for months. Recently the government made concessions, including protecting the pension rights of those due to retire in the next ten years. David Cameron said of the new proposals: “What is on offer is an extremely reasonable deal: low and middle-income earners getting a larger pension at retirement than they do now, all existing accrued rights being fully protected, and any worker within 10 years of retirement seeing no change in either the age they can retire or the amount they can receive.”
The concessions have not been enough, however, to persuade the unions to cut a deal and call off the strike. It’s expected that two in three schools will close next Wednesday, that many nurses and physiotherapists in the NHS will walk out, that most local government services will close down and that there will be chaos, even gridlock, at airports where it is estimated that border control queues could cause delays of twelve hours to people trying to enter the country. The government has claimed the one-day strike could cost the economy £500m, though some economists have dismissed this figure as “economic nonsense”.
Labour has argued that any strike is a failure and that negotiations should continue in order to try and avert it. But most commentators think it is now too late for that, though negotiations may well resume afterwards. Meanwhile, the party has refused either to back the strike or condemn it outright, leading the government to accuse it of being in the pocket of the unions.
Some Tory MPs are arguing that the strike is happening only because trade union laws remain, in their opinion, too lax. In particular they argue that the rules on strike ballots need tightening. Although it is the case that the three main unions to ballot their members secured a three-to-one majority in favour of strike action, the turnouts were low: around 30% or less of those eligible to vote. Some Tory MPs are suggesting that the law should be changed either to introduce a higher turnout threshold in order for a strike to be legal, or even to require that 50% of those eligible to vote must cast a vote in favour of a strike for it to be legal.
In the meantime this strike will go ahead. The government wants to settle the pensions issue by the end of the year. But if it can’t secure an agreement, this strike may not be the last. Paul Kenny, the general secretary of the GMB union said on Thursday: “It’s ‘Alice in Wonderland’ stuff to think November 30 will happen and people will stop work and take part in rallies and then go home and say, ‘That’s all right – now we will give in’.”
Next week’s strike may, then, be the biggest withdrawal of labour since the general strike of 1926 (albeit for one day only), but it may not be the last.
What’s your view? Let us know
- Do you think next week’s strike is irresponsible, as the Prime Minister claims, or justifiable, as the unions argue?
- Is it right in principle that the government should be seeking to change the terms of public sector pensions?
- Do you think there is basic unfairness between public and private sector pensions or do you think the advantage that public sector workers enjoy over workers in the private sector, in terms of final salary pensions, is justified by differences in their levels of pay while they are working?
- Do you think the modified offer the government has made to the unions is reasonable or not? Whatever you think of the pension issue itself, do you think it is reasonable or not for the unions to be calling a day of action next week?
- What do you make of Labour’s attitude to the strike?
- And do you think strike laws should be changed in the way some Tory MPs are proposing?
