Cost of the cuts 5: Pensions feel the pinch

Hannah Blythyn says the Westminster government’s changes mean workers will be paying more, working longer, and getting less

On 30 November last year the trade union movement took to the streets of towns and cities across Wales and the UK in a day of action to oppose the UK government’s changes to public sector pensions. It was just one step on a long road of negotiations between UK government ministers and trade unions.

Dealing with the deficit

This is the last of a weeklong series of articles dealing with the fall-out in Wales from the Westminster Government’s efforts to reduce the budget deficit.

Before negotiations even started the Westminster government were clear that they wanted public sector workers to pay more in pension contributions, work longer but end up receiving less. It has previously maintained that their plans will deliver a comparable pension to low and middle earners. However, in reality the pension is likely to prove to be a lot less because it will require more years of contributions to earn it, and it will not be paid in full until a higher normal pension age.

The Unite union has rejected the proposed changes to the NHS and Civil Service schemes specifically on the grounds that they mean members will be paying more, working longer and getting less. We are currently awaiting the outcome of negotiations on the Local Government Pension Scheme.

In July 2010, and without prior consultation, The UK government announced that future increases in public sector pensions will be based on the consumer price index (CPI) measure of inflation rather than the retail price index (RPI) measure that had been used for many years. This shift will affect all benefits earned in the past as well as the future. And since CPI is generally lower than RPI inflation, it will result in further driving down public sector pensions.  Initially, the UK government claimed that they were moving to use the CPI as they considered it a better measure of inflation for pensioners. They have since admitted that they chose CPI as it was lower and they wanted to cut costs.

Specifics aside, it is vital that the UK government’s approach on public sector pension reform is viewed through the lens of the wider economic and political environment. They claim that their proposals to change public sector pensions were framed as part of the UK government’s strategy to drive down public spending. In November 2010 they announced their desire to raise pension contributions for members of public service schemes as part of overall plans to tackle the deficit. The deficit is used as a convenient excuse to drive down public sector pensions that are far from being ‘gold-plated’ as the UK government and others have consistently tried to portray them as.

UK government attacks on pensions are part of an emerging pattern that will result in creating greater poverty across all ages and a worrying trend in a rising ‘working poor’. Changes to Working Tax Credits will mean that over 9,000 households in Wales will lose around £4,000 a year unless they significantly increase their working hours from 16 to 24. The chancellor is telling people to work more when the reality on the ground is there just aren’t the extra hours around.

In last month’s budget, chancellor George Osborne attempted to slip in changes that will further impact on people’s personal wellbeing and position in retirement. The freeze in the personal allowance for pensioners will see 4.4 million pensioners across the UK who pay income tax losing an average of £83 per year from this time next year. People turning 65 next year will lose up to £322.

Attacks on the pensions of public sector workers are just one aspect of what is being revealed as an agenda to weaken the public sector as a whole – real terms pay cuts, job insecurity, proposals to introduce regional pay and hammering at trade union facility time.

We can now see the cuts in the public sector starting to take shape. Office for National Statistics (ONS) figures for the fourth quarter of 2011 show that public sector employment decreased across the UK as a whole by 37,000 – 265,000 less that the same time the previous year. In the same year long period public sector employment in Wales has fallen by 8,000.

Any cuts to the public sector and reductions in the conditions of public sector workers are destined to hit the Welsh workforce harder. In Wales many of our communities are largely supported by jobs in the public sector. Out of the UK nations and regions, Wales had the second highest proportion of its workforce – around 26 per cent – employed in the public sector at the last quarter.

Moreover, Welsh women workers look set bear even more of the burden as they make up the large majority of the public sector workforce in Wales. The latest available figures show that around 255,000 women are employed in the public sector in Wales, over 40 per cent of all women in employment in Wales. The corresponding figures for men show that around 142,200 were employed in the public sector, equal to 20 per cent of all men in employment.

Women will feel the pinch of job cuts in the public sector. If they are able to find employment in the private sector – a big if in the current labour market –TUC analysis suggests many women could find themselves having to take lower skilled work and a significant pay cut. The knock on effect of this would be to expand and further entrench the overall gender pay gap.

We could not only witness the rolling back of women’s advances in the workplace but given the significant contribution women’s earnings have made to low and middle income households over the last four decades, but poorer life chances for the most pressed families as well.

Whilst the campaign on public sector pensions continues, it is important that we recognise it is part of a wider movement to ensure that Welsh workers, their families and communities are not unfairly made to pay the price for the UK wide economic deficit and have the opportunity of a decent and fairer future.

Hannah Blythyn is Campaigns and Communications Co-ordinator for Unite Wales.

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