Socialist Worker

Pensions: Hutton and the Tories say ‘work until you drop’

by Viv Smith
Issue No. 2243

The Tories are coming for the pensions of every public sector worker.

They want us to work longer, pay in more and get less out in benefits when we retire.

It is a massive attack that could bring together millions of workers in a united strike that would leave the government’s plans in tatters.

The Tories are waging an ideological war on the very notion that the state has a role to play in the well-being and security of workers once they retire.

They want to reinforce the idea that being a pensioner means accepting poverty.

Newspaper headlines tell us that so-called “gold-plated” pensions are unaffordable and that there is a pensions “black hole”.

These are lies.

The truth is that the Tories want to rob these schemes to help pay off the deficit caused by the bankers and speculators.

Bank of England governor Mervyn King admitted as much recently when he said, “The price of this financial crisis is being borne by people who absolutely did not cause it.”


The Tories are being given cover by Labour ex-minister Lord Hutton. His report, published last week, calls for a series of “reforms” and will be music to Tory ears. But among the falsehoods there is some truth.

For example, there is a projection of how much public sector pensions will cost as a percentage of the Gross Domestic Product (GDP)—the value of all goods and services produced in a country in a given year.

The graph shows that the cost of public sector pensions has already peaked and is actually declining. Between now and 2060 it falls steadily.

By 2060 public sector pensions will cost a mere 1.5 percent of GDP, compared with 1.9 ­percent today.

Statistics from the Office of Budget Responsibility show that increases in age-related expenditure are not due to pensions, but the increasing costs of long-term care and health.

Public sector pensions are not subsidies or handouts, they are deferred wages—workers pay a proportion of their wages each month towards the payout they receive after they retire. And, far from being gold-plated, the average public sector pension is around £5,000 a year.

But Hutton wants workers to pay in far more—an additional 3 percent of their wages each month on top of what they already contribute. Some workers face a doubling of their monthly pensions bill.

With most public sector workers already struggling with the third year of a “pay freeze”, there are fears that many will choose to opt out of pensions all together.

Conned by Conservatives

The government has already slashed the value of private sector pensions by shifting the way in which increases are calculated.

Previously, the RPI measure of inflation was used. This has been switched to CPI—a measure that does not, for example, take into account rising housing costs.

Accountants KPMG estimate that this has reduced private sector pensions by around

£100 billion. Using RPI, a pension worth £10,000 today will be worth £27,043 in 2030.

Under CPI this would drop to £19,517.

Now Hutton wants to swing the axe at the public sector by scrapping final salary schemes, which calculate pensions on the basis of pay at the time of retirement.

The “career average” scheme favoured by Hutton is based on average earnings over a whole career.

Many people earn far less at the beginning of their working lives than they do at the end.

They will lose thousands of pounds if Hutton gets away with his attack.

And, as if that weren’t enough, Hutton echoes government plans to raise the retirement age for public sector workers to 66.

lWe are told we are living longer. But statistics show that for manual workers this is hardly the case.

Male manual workers have seen their life expectancy increase by two years since 1970.

Women cleaners, for example, have not seen their rise at all.

And, far from living life with their feet up, reports show that both men and women are working longer because they cannot afford to retire.

The number of men over 65 in work is at record levels—11.7 percent. The number of women has ballooned to 6.4 percent.

How can this possibly be called “gold‑plated” and “privileged”?

Private sector crisis too

Workers in the private sector face a huge pension crisis too.

Companies are closing down of their final salary schemes at a record rate—17 percent shut their schemes to new and existing members in 2010, up from 7 percent in 2009 and 3 percent in 2008.

Only 21 percent of schemes are open to new joiners now, compared to 88 percent ten years ago.

Workers in all sectors need to unite to fight for a better retirement for all.

The response by trade union leaders to Hutton’s report so far has been to express anger, but also to hold back on calling for strikes.

Unison general secretary Dave Prentis condemned the Hutton report and Tory attacks but would only say, “This brings the threat of industrial action closer.”

This is just not good enough. Union leaders cannot expect workers to wait until the moment that the government robs public sector workers before announcing a counter-attack.

Oxford-educated Baron Hutton of Furness (pictured above) is the Tories’ favourite member of the Labour Party.

He was MP for Barrow and Furness in Cumbria until 2010 and served in the cabinet as a defence minister.

He was a legal adviser to the bosses’ CBI for two years.

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Article information

Tue 15 Mar 2011, 18:46 GMT
Issue No. 2243
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