Osborne loses his nerve in the face of Union solidarity

ILW

ruggedtoast wrote: »

Oh really, which countries are they then? Argentina was a famous defaulter, do you mean Argentina; or are you just creating a doom laden scenario of economic apocalypse due to a perverse pleasure it gives you based around some public sector workers not getting a pension in 20 years time as this satisfies your own prejudices?

If the government defaulted en masse on pension contracts we wouldn't have a society that was stable enough to support a credible currency anyway, so the point would be moot.

I hope you're stocking up on beans.

As I said, uncharted territory. Life aint always fair.

I believe Greece has been forced to cut all PS pensions by around 20%.

If the money runs out there is no choice.

dunstonh

If the banks hadn't been bailed out, would the public pensions been targeted for change to this degree?

The public sector pensions have been on the agenda for decades. However, no Govt really had the guts to do anything about it. The last Labour Govt was told in a report that it needed to do something but it caved in (no surprise there).

So, yes, the public sector pension changes would have been seen regardless of the credit crunch and subsequent recession. Indeed, they would have been seen sooner as there would not have been a credit boom to begin with to create the bubble that occurred and hid the problem for so long.

The public sector pensions were once seen as a reward for a working life in public service and getting a low pay during that period. I doubt anyone would have an issue if that was still the case. However, in the Labour years, the public sector was bloated with unnecessary administration jobs, often very well paid (and usually higher than bankers) and public sector pay went up at a faster rate than private sector pay.

So, the public sector lost some of that goodwill that used to exist.

The Unions dont help. For example, a couple of weeks ago on Newsnight, you had a Union representative saying that the private sector pensions cost more than public sector because of tax relief. Unfortunately, no-one picked her up on the point that public sector contributions get the same tax relief (although most public sector works dont realise it).

If you wanted to fund a public sector pension and benefits personally, then it would cost you around 30% of your pay. Most public sector workers pay 6% gross (4.8% after tax basic rate tax relief). A private sector worker would have to pay 30% (24% after tax relief).

If you take a public sector worker on £20k a year, then their pension is costing them £80pm net. The minimum contribution on most personal pensions nowadays is £100pm and is considered to be a low contribution.

There has to be change. Either you reduce the number of public sector workers, reduce their pay or increase their cost of pension provision or reduce the level of benefit.

ILW

dunstonh wrote: »

There has to be change. Either you reduce the number of public sector workers, reduce their pay or increase their cost of pension provision or reduce the level of benefit.

Or they could agree to die a bit earlier, going back to the situation when these contracts were agreed.

ruggedtoast

dunstonh wrote: »

The public sector pensions have been on the agenda for decades. However, no Govt really had the guts to do anything about it. The last Labour Govt was told in a report that it needed to do something but it caved in (no surprise there).

So, yes, the public sector pension changes would have seen change.

The public sector pensions were once seen as a reward for a working life in public service and getting a low pay during that period. I doubt anyone would have an issue if that was still the case. However, in the Labour years, the public sector was bloated with unnecessary administration jobs, often very well paid (and usually higher than bankers) and public sector pay went up at a faster rate than private sector pay.

So, the public sector lost some of that goodwill that used to exist.

The Unions dont help. For example, a couple of weeks ago on Newsnight, you had a Union representative saying that the private sector pensions cost more than public sector because of tax relief. Unfortunately, no-one picked her up on the point that public sector contributions get the same tax relief (although most public sector works dont realise it).

If you wanted to fund a public sector pension and benefits personally, then it would cost you around 30% of your pay. Most public sector workers pay 6% gross (4.8% after tax basic rate tax relief). A private sector worker would have to pay 30% (24% after tax relief).

If you take a public sector worker on £20k a year, then their pension is costing them £80pm net. The minimum contribution on most personal pensions nowadays is £100pm and is considered to be a low contribution.

There has to be change. Either you reduce the number of public sector workers, reduce their pay or increase their cost of pension provision or reduce the level of benefit.

I must say I somewhat lost the capacity to follow this after your bold claim that people working in administration in local government are paid more than bankers.

I presume you mean that people working in admin jobs in local government are paid more than their equivalents working in banks. Which is complete rubbish by the way.

I worked for the Department of Education during to what you probably think was the public sector "boom" years, or in other words a long period of public sector wages stagnating to the point that many people were no longer making a living wage, finally being addressed with some modest rises and much needed thawing of staffing freezes.

Including London weighting if I recall correctly I was earning a bit less than eight quid an hour. A coveted management position paid £21k year. A middle manager with 7 - 12 years service would have made £27k - £30k max.

Every LGPS or LGPA pension I have ever paid into has been match funded by the employer, bringing actual monthly contributions up to more like 20% - 25%.

But lets not let actual facts get in the way of atavistic prejudice shall we.

Killmark

Generali wrote: »

My point is that the taxpayer can't carry the burden because they haven't got the money.

Public sector employees signed a contract and should get what they are entitled to contractually IMO. Unfortunately if the money isn't there they can't have it.

Ok lets extend your logic further, in 2011 £96.5 billion was collected in NI but compare that to the welfare state cost of £190bn.

The money is there, it is how the government chooses to allocate it that matters.

Finally, if they planned to invest future contributions then I wouldn't have a problem with the planned changes, however they wont as it will still go into the general spending pot. As a result it is inevitable that they will renegotiate again, with the very same arguments.

The existing arrangements are sustainable, the majority of new staff are on new and far less generous schemes but the problems will continue and accelerate as the contributions continue to be raided.

Generali

ruggedtoast wrote: »

Are you envisaging a credible scenario where the UK government defaults on pension contracts for several million people?

Yes. That's already happening. Isn't that what the strikes were about?

A default needn't be 100%, it's not all or nothing. The chances of public sector and many private sector employees being given what they've been promised has to be nil as the maths simply don't support it. Read the report that was linked to earlier if you don't believe me:

http://www.iea.org.uk/publications/research/sir-humphreys-legacy-facing-to-the-cost-of-public-sector-pensions

It's a fascinating read and bear in mind this forms part of the argument against what I'm saying apparently.

The interesting bit really are sections 2 & 3. If you can get your head around section 2 then you understand the problem. If you can follow the pretty simple 3 points of contention then you can come to your own conclusion about the size of the problem:

1. Will public sector wages increase more slowly, more quickly or about the same rate as historically?
2. Will life expectancy at retirement continue to rise in a similar way to how is has in the recent past?
3. Will interest rates be lower than the Government assumed when these figures were calculated?

In the 6 years since the report was written, I think those 3 assumptions have been shown to have been made better in this report than by the Government. Whether that will continue is a moot point.

tartanterra

dunstonh wrote: »

The public sector pensions have been on the agenda for decades. However, no Govt really had the guts to do anything about it. The last Labour Govt was told in a report that it needed to do something but it caved in (no surprise there).

So, yes, the public sector pension changes would have been seen regardless of the credit crunch and subsequent recession. Indeed, they would have been seen sooner as there would not have been a credit boom to begin with to create the bubble that occurred and hid the problem for so long.

The public sector pensions were once seen as a reward for a working life in public service and getting a low pay during that period. I doubt anyone would have an issue if that was still the case. However, in the Labour years, the public sector was bloated with unnecessary administration jobs, often very well paid (and usually higher than bankers) and public sector pay went up at a faster rate than private sector pay.

So, the public sector lost some of that goodwill that used to exist.

The Unions dont help. For example, a couple of weeks ago on Newsnight, you had a Union representative saying that the private sector pensions cost more than public sector because of tax relief. Unfortunately, no-one picked her up on the point that public sector contributions get the same tax relief (although most public sector works dont realise it).

If you wanted to fund a public sector pension and benefits personally, then it would cost you around 30% of your pay. Most public sector workers pay 6% gross (4.8% after tax basic rate tax relief). A private sector worker would have to pay 30% (24% after tax relief).

If you take a public sector worker on £20k a year, then their pension is costing them £80pm net. The minimum contribution on most personal pensions nowadays is £100pm and is considered to be a low contribution.

There has to be change. Either you reduce the number of public sector workers, reduce their pay or increase their cost of pension provision or reduce the level of benefit.

Totally agree.

The reasons you state above are also why I believe that Public Sector pensions will be re-visited again over the next 10 years.

The government have taken a "first step", but I think it will continue to chip away until all Public servants are in defined benefit schemes.

Whilst the usual suspects will be up in arms about this, I don't think it is unreasonable. I don't think it is a race to the bottom.
I simply believe that the public sector should reflect the private sector. It's just putting everyone onto a level playing field.

ruggedtoast

Killmark wrote: »

Ok lets extend your logic further, in 2011 £96.5 billion was collected in NI but compare that to the welfare state cost of £190bn.

The money is there, it is how the government chooses to allocate it that matters.

Finally, if they planned to invest future contributions then I wouldn't have a problem with the planned changes, however they wont as it will still go into the general spending pot. As a result it is inevitable that they will renegotiate again, with the very same arguments.

The existing arrangements are sustainable, the majority of new staff are on new and far less generous schemes but the problems will continue and accelerate as the contributions continue to be raided.

They were sustainable two years ago when this was last costed and agreed. Suddenly after two years more of corporate welfare and yet another invasion of a deserty country, they aren't.

The system is in crisis because people have lost faith in what they are being told.

If public sector workers really thought there was no money to pay pensions it would be a different story, but they don't. They think there is a monumental stitch up going on to keep the 1% living in luxury while the 99% toils until they drop.

Its like you've commissioned someone to make pies, then when you go back to get your pies you find they have made one enormous pie for themselves, and handed you one tiny pie. When you complain they shake their head witheringly and tell you that there isn't enough food left to make any more pies and you don't understand basis economics.

People just don't believe it anymore.

ILW

ruggedtoast wrote: »

They think there is a monumental stitch up going on to keep the 1% living in luxury while the 99% toils until they drop.

Would this be the 1% that actually directly or indirectly produce the majority of the tax take that pays the PS pensions and wages?

headoutthesand

I earn £14270 per year after working here for 12 years and now at the top of my pay scale. I don't think I earn more than a banker.

I assume you are talking about the chiefs and not the indians when you say that...?

My work place has not replaced any of the 5 staff who have left/retired in the last 2 years. That is not including the fixed term employees who were not kept on at the end of their contract. In the next 6 months 2 part time members of staff will take advantage of the voluntary exit scheme and we have been told that they also will not be replaced.

The upshot is that the work all these people do still has to be done. I work for the courts and our work is getting busier. The staff left behind are just expected to share all the other work between them. I'm sure if the private sector was like this there would be room for negotiations on a small payrise or bonus to acknowledge that. No such luck in the public sector