Brian Monteith: No moral case to be made for public sector strike

ON WEDNESDAY, we are likely to see the largest strike in the UK for a generation. To justify it, trade union bosses are trying to give it a veneer of moral respectability that is disappearing fast as the protest draws closer. The strike about public sector pensions is not moral, it is political, with a capital P.

After years of study and a growing library of evidence to support him, the visionary economist, Professor Peter Bauer, defined the West’s foreign aid programmes as “an excellent method for transferring money from poor people in rich countries to rich people in poor countries”. He was not wrong and the evidence of this transfer continues to mount.

At home, such a transfer from the poor to wealthy is also the case, thanks to Britain’s public sector pensions.

The ever-growing cost of public sector pension payments requires not just a transfer of money from the wealth-creating private sector to a public sector that grew by half a million under Gordon Brown’s watch, it represents the transfer through direct and indirect taxes of money from the lower paid to the higher paid – irrespective of whether their job is in the public or private sector.

This cannot be justified on a moral basis, it is a political arrangement that cannot be sustained and it is one that has to be addressed no matter which party happens to be in power in London – or indeed in Holyrood.

The case used to be put that more generous pensions were justifiable in the public sector because the pay of teachers, policemen, fire officers, civil servants and local government officers was lower and such an arrangement gave necessary compensation to attract people into often unappealing work. If that case was ever true, then it no longer holds.

The average wage in Britain is around £26,000, but a qualified teacher’s starting salary is £25,716 in Scotland, a policeman’s £23,259 and a nurse’s £21,176 – it does not take many years’ service in these professions to leapfrog the average wage.

Tax data shows that 18.5 million workers earned less than £20,000 in 2005 while 11.8 million earned more than that. It is beyond dispute that the majority of workers earn below the average wage and their taxes are paying for the subsidies that above-average earning public sector employees enjoy – where is the moral case for that?

Across the private sector, work is less secure, as the many redundancies in the recession confirm, and comes with poorer pensions or no pensions at all. Look into the highly competitive retail sector and you will find managers, even with degrees, working for household names such as Sainsbury’s and Marks and Spencer struggling after many years’ employment to break the £20,000 barrier.

To distract from the reality, examples of bankers and captains of industry are often trotted out by union bosses, but they are a small minority – over 6,000 people were earning over a million in the boom year of 2005 – and rarely have they had the security of a job for life that is the common position of so many public sector professionals.

Over the last five years, private sector pensions have taken a beating as one after another final salary schemes have closed and the value of pensions has been eroded. Unlike the public sector, private sector pensions schemes have to be funded by workers’ contributions or they will collapse. Once the realisation dawned on company bosses that private schemes were moving towards failure – where future pension commitments would not be met – painful adjustments were put in place.

Now that same reality has to be faced by the government, any government, and the adjustment will also be painful to some, although some people are quite properly being offered protection – such as a promise to those in work ten years or less from retirement that they will not see their benefits change.

In the public sector it is not unusual for pensions to be paid out of current expenditure because the contributions have never been enough. It is not unusual in some places for a third of the police and fire budget being used to pay the pensions of former personnel who are no longer working.

A similar problem, albeit on a smaller scale, exists across many other public services (if it is smaller it is likely to be because a greater number of part-time staff have smaller pensions rather than the fact that contributions have been sufficient). Scotland’s Auditor General points regularly to the lack of provision for public sector pension liabilities, but politicians prefer to think it will be for their successors to deal with.

If the UK does not address the public sector pension problem, then the deficit reduction plan will come under threat and the UK faces going the same way as Ireland, Greece and Italy – because foreign investors will no longer view the UK as a safe haven, the UK will lose its triple A rating, forcing up government borrowing costs and there will be a run on the pound.

The deficit has to be reduced, then reversed and turned into a surplus. For every year there is a deficit, the national debt that our children and grandchildren will pay increases. When the general election was called last year, it stood at £781,512,328,767, but some 18 months later it has already climbed to £992,201,928,102 – a staggering £210 billion more thanks to interest and the continuing deficit. We cannot go on like this.

What currently seems like a hard landing from the recession will be like nothing to the real austerity that will be visited upon us by the markets and the IMF. We will all be the losers.

Union bosses can say they are defending their members’ pensions, but it is the self-interest of some coming before the interests of all.

When speaking of the need to climb out of the economic calamity that he inherited from Labour’s deficit-financed growth, David Cameron said “we are all in this together”. If that is to be the case, then public sector workers must accept that their pensions will need to be scaled back, just as the private sector pensions were. Morally, it’s the right thing to do; to resist can only be political nihilism.

• Brian Monteith is policy director of ThinkScotland