Brown hints at U-turn over public sector pension deal

Published on 29/11/2005 00:11

Key points

• Chancellor appears to be at odds with PM over public sector pension plans

• Government accused of sending out 'mixed messages'

• Private sector workers may end up funding public sector early retirements

Key quote

"The government has made a complete mess of public sector retirement ages. Now we discover that No 10 doesn't even have the basic facts correct." - David Willetts, shadow trade and industry secretary

Story in full

GORDON Brown fuelled fresh doubts that a deal allowing public sector workers to retire at 60 could be unpicked yesterday, when he suggested that "a lot of work" remained to be done on state employees' pensions.

The Chancellor's remarks to a business audience put him at odds with Tony Blair, who has insisted he will not rip up the agreement made with unions. But they also highlight Mr Brown's eagerness to prove that he is just as bold a reformer as the Prime Minister.

The deal, brokered by the Trade and Industry Secretary, Alan Johnson, a former union leader, allows existing state sector employees to retire at 60. But this sits uneasily with proposals to raise the retirement age to 67 to mitigate the effects on public finances of rising life expectancy, expected to be made in a report by Adair Turner's Pensions Commission tomorrow.

Mr Brown told the CBI conference in London that there was still a "lot of work" needed on the public sector pensions, putting him at odds with No 10's insistence that the agreement would not be ripped up, regardless of what Lord Turner proposed.

Mr Brown was asked about the public sector deal by business leaders, who accused the government of sending out mixed messages.

Alan Wood, the chief executive of Siemens, said companies faced huge problems in trying to "make sense" of pensions arrangements for employees.

"Many of us have had to take quite drastic measures, yet we see a reaffirmation by the government about pensions in the public sector," he said.

"Frankly, none of us can understand it. It leaves us dismayed and demoralised."

Mr Brown replied that: "On the public sector settlement, a lot of work has still to be done."

The agreement should form part of the debate that would be generated by Lord Turner's report but it would save 13 billion, he said.

Meanwhile, Mr Blair's official spokesman insisted that the government was not about to do a U-turn after reaching such a recent deal. "We reached an agreement and the government's view is that it's better to stick with a deal than tear it up within a month," the spokesman said.

Mr Brown was also cautioned by Labour's left wing that he would unleash a war with the trade unions if he were to torpedo the deal.

John McDonnell, a Labour MP and chairman of the Socialist Campaign Group, said that any attempt by the Chancellor at the behest of bosses to tear up the agreement would be met with a "co-ordinated resistance across the labour and trade union movement".

But John Sutherland, CBI president, told the conference that the government could not expect "private-sector employees to work until 67 to finance the pensions and early retirement of public sector employees".

He continued: "In an era when society as a whole can no longer afford such schemes, this is totally unacceptable."

Downing Street has repeatedly said that with a 10 per cent turnover of staff in the public sector each year, only 70 per cent of public sector workers would be covered by the deal in ten years.

However, David Willetts, the shadow trade and industry secretary, accused Downing Street of making factual errors.

According to official figures revealed by ministers, 70 per cent of the workforce would still be covered by the early retirement agreement in 20 years.

Mr Willetts also disputed claims that 40 per cent of private schemes had a retirement age of 60, saying the true figure was closer to 17 per cent.

"The government has made a complete mess of public sector retirement ages. Now we discover that No 10 doesn't even have the basic facts correct."

He called on the government to reopen the decision in light of the true figures.

The National Union of Teachers warned that teachers across the country would be "angry" if the retirement deal had to be renegotiated. An official from the Association of Teachers and Lecturers said: "We would be furious and would wonder whether this government can be trusted at all."