Friday, October 22, 2010

The Spending Review and public sector pensions

In all the media coverage of the Spending Review there has been little on the extra 3% of pension contributions implied that public sector workers will have to bear.

I did a highly unscientific piece of research. By putting the words SPENDING REVIEW PUBLIC SECTOR PENSION into Google News Search I got 834 results, whereas SPENDING REVIEW got 23051. Does that mean that less than 4% of news articles do not mention the new 3% “pensions levy”? Perhaps. I found one mention in yesterday’s 10 page Spending Review special in the Financial Times. It is perhaps inevitable that the media coverage should focus on the broad macroeconomic impact and the implications for public services and those who rely on them.

The pension levy is not a surprise. In Ireland they have had introduced one as part of the austerity programme. (Their levy rates go from 5% to 9.6%.) Lord Hutton’s interim report on public sector pensions passed the issue of employee contributions over to George Osborne rather than deferring it to his final report on structure and entitlements.

Nevertheless, the pension levy is significant. It will ease a small part of the frontline impact of the real spending cuts being applied across the public sector outside schools, overseas aid and (arguably) the NHS.

The impact will be felt by public sector workers – many of whom face a two year pay freeze.

How will the trade unions respond? The UNISON press release on “For CSR read Cuts Strange Recovery” omitted all mention of the pension levy. Maybe the public services union realises that public sector pensions is not an issue that will win hearts and minds. Perhaps UNISON did not spot the rather unclear references in the speech and report.

I think this issue will gain profile in the Spring when the government acts on the Hutton Report. By then the imminent local government pension scheme valuations may have pushed public sector pensions further up the news agenda.

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