David Davison: Public service pension protesters miss the point

Passport control points at airports are likely to be manned by senior civil service management where we will, hopefully for the sake of any incoming travellers, witness the rare event of a quick decision made by a civil servant.

Joking aside, it’s important to stand back and look at the issue at the centre of this industrial unrest: pension reform. Unions say their members will be left worse off by the latest UK government proposals which will require them to work longer before collecting their pension and to contribute more. The government, however, is adamant that reforms are needed as the current pension provision is unsustainable.

On the face of it, this may appear to be a good old fashioned left v right showdown but considering the long-term economic consequences of what the unions are proposing and the impact this will have on ordinary working people – especially those not fortunate enough to have a public sector pension but are expected to help fund those who do – it is anything but that.

The current union position where they are fighting to safeguard a generous, taxpayer-subsidised final-salary pension schemes is no longer viable. It is unaffordable, unfair to those in the private sector who, in the main, have no such provision and it will have repercussions on all of us, especially and ironically on ordinary working people.

Over the past 20 years we have seen numerous pension reports which have all come to the same stark conclusion: that we either have to pay more, work longer or retire on less. The most recent of these independent reviews was carried out by former Labour pensions minister Lord John Hutton who came to the same conclusions. The Hutton report was unambiguous in its findings: public sector pensions are too expensive, too heavily subsidised by the tax payer and, as a result, are creating a national pensions apartheid. Increased life expectancy is making existing pensions provision unaffordable and change is inevitable.

Hutton described the final-salary pension schemes as “inherently unfair”, especially for lower earners forced to subsidise those higher earners in the public sector whose salaries tend to rise more than the average. It seems illogical to see trade unions fighting to maintain this unaffordable and inequitable status quo. Hutton proposed a move to a career average re-valued earnings scheme where benefits would build up annually in isolation specifically to deal more equitably with this issue. The proposed scheme would still be very attractive and vastly superior to what is on offer to the vast majority of individuals in the private sector.

While the alternative for public sector employees is clearly not as attractive as the status quo, it is not all bad and, most importantly, it is more affordable. The stated objective of the government is to maintain a high-quality defined-benefit pension scheme for the public service with a proposed scheme that is potentially more equitable for employees at the lower end of the salary scale. Are these not are the people the trade unions should be most concerned about protecting?

It’s important for the government to hold their ground on this issue. Continuing to fund an unsustainable pension provision will eventually mean higher taxes for us all or further reductions in key areas such as education, police, health budgets. By fighting to maintain the status quo, the unions are risking their members’ jobs in the longer term as escalating pension costs will divert further funds from service delivery.

At a time when Greece and other European nations are paying a heavy price for failing to address government spending, the UK unions seem oblivious to the potential consequences of their actions.

• David Davison, head of public sector, charity and not-for-profit practice, Spence and Partners.