Retirement at 60 will 'bust' Britain

Published on 28/11/2005 01:47

Key points

• Sir Digby Jones warns Britain will "go bust" under retirement plans

• Agreement will continue to allow public sector workers to retire at 60

• Union bosses threaten industrial action if plans not actioned

Key quote

""The nation can't afford it - 750 billion a year" - Sir Digby Jones, director general, Confederate of British Industry

Story in full

BRITAIN will "go bust" unless ministers tear up an agreement that continues to allow public sector workers to retire at 60, business leaders warned last night.

The stark prediction that this is unaffordable for the government - made by Sir Digby Jones, the director general of the Confederation of British Industry (CBI) - came as aides to Gordon Brown and the Prime Minister clashed over whether the deal is set in stone.

But union bosses warned that the deal was not up for renegotiation, and threatened industrial action if ministers went back on their word.

Sir Digby has suggested that the agreement, brokered by Alan Johnson, a former union leader and now Trade and Industry Secretary, should be honoured for those aged over 40, but not younger workers.

"The nation can't afford it - 750 billion a year," he said.

If ministers do not revisit the deal with public sector workers, "the nation will go bust", Sir Digby told Sky News.

His predictions came as hostilities between the Brown and Blair camps resumed over the direction of pensions.

Lord Turner is expected to recommend that the state retirement age be raised from 65 to 67 when his pension commission unveils its long-awaited report on Wednesday.

That has provoked claims that last month's pact negotiated by Mr Johnson would lead to Britain having a two-tier workforce.

A Sunday newspaper said Mr Brown shared those concerns and would use the report as an excuse to take on the unions and Cabinet colleagues and redraw the deal. But, in remarks that will infuriate the Chancellor, John Hutton, the Work and Pensions Secretary, suggested Mr Brown did not have a veto over the policy. "These are decisions for the government as a whole to take and that is quite clear," he said.

However, Mr Brown is keen to stamp his authority over pensions as it will be one of the most contentious issues he will have to oversee if he takes over as Prime Minister.

Treasury sources have briefed that public sector workers have to "face the same reality as everyone else" of potentially working longer as life expectancy rises and the proportion of the working-age population becomes smaller.

Yesterday, the department tried to draw back from the comments, insisting it did not want to prejudge the pensions report. The agreement was signed up to by the whole Cabinet and no-one was "talking about ripping it up or blocking it", a Treasury spokesman said.

However, a spokesman said if Lord Turner did recommend changes to the retirement age "that will of course form part of the national debate on the long-term future of pension arrangements for all sectors of the economy".

Mr Blair's official spokesman insisted the deal was a "good one". He denied that the publication of the report would provide an opportunity to "revisit it".

The deal allowed anyone who joined before the end of this year to retire at 60, but the spokesman said with a 10 per cent staff turnover rate, "in ten years' time, 70 per cent of civil servants and public sector workers will be under the new deal, working to 65 not 60".

Mr Blair tried to laugh off suggestions that he was at war with Mr Brown over pensions.

Asked to respond to Frank Field, a former welfare minister's comment, that the Prime Minister's body was not up to another confrontation with the Chancellor, Mr Blair said: "I have to get in the gym a bit more often then."

Union leaders were unimpressed by the suggestion that the deal could be unpicked. Unison, the biggest public sector union, said it would resist any changes, while the Public and Commercial Service Union resurrected the threat of strike action, saying: "For the debate to be reopened would bring the unions together again. The prospect of industrial action would then be back."

Brendan Barber, the general secretary of the Trades Union Congress, accused the CBI, which holds its annual conference in London today, of "monumental irresponsibility" in calling for the deal to be renegotiated.

He said: "The CBI conference yet again threatens to be a whinge-fest with the finger pointed everywhere other than at the failings of British management."

Mr Barber said that, when the Cabinet authorised the deal, it must have been aware of the direction of the Turner commission on pensions.

"It is ludicrous to suggest that the Turner report provides a basis for reopening the deal. Whoever in government is spreading that message ought to be slapped down hard," he said.

David Cameron, the favourite to succeed Michael Howard as Tory leader next week, said the government was in a "mess" over pensions policy.

He also pledged to revisit the deal with public sector workers, saying "greater equity" was needed with the private workforce provisions.