Monday, 27 June 2011

Getting pensions in perspective

The education secretary Michael Gove has played his designated role when faced with teacher strikes: he has urged teachers to turn up for work to show their professional commitment on Thursday, as two of the three big unions, the NUT and ATL, strike over pensions, and suggested that schools should defiantly remain open staffed by militant mums. Meanwhile the Labour leader, Ed Miliband, has joined the chorus of criticism over the strikes, recognising that any sign of union support could terminally hurt his already weak leadership ratings.

Of course, the strike is a fairly blunt instrument, and has been more used in conference motions than actual pickets by the teaching unions over the years. The NUT rarely manages fewer than half a dozen such threats at its annual Easter shindig. But this time the anger among teachers, as with other public sector workers, seems a lot stronger than usual. The relatively moderate ATL is striking, and even the moderate leadership of the National Association of Head Teachers is tempted to join in, though the second biggest union the NASUWT has so far resisted doing so.

The issue is pensions. The typical teacher will have to pay an extra 3.4% a year of their incomes into pensions by 2014, up from 6.4% to as much as 9.8%. At the same time, the retirement age is rising, the value of pensions will fall with a link to the Consumer Prices Index rather than the Retail Prices Index. And, most contentiously for headteachers and school leaders, the value of the pension will be based on average rather than final salary. All of this comes amidst a pay freeze that happens to coincide with significant inflation. As the NUT's attempt to justify its action shows, it makes a powerful combination in teachers' pockets. The change could knock £16,000 a year off the pension of a secondary head and cost an average teacher an extra £1000 a year in pension deductions.

Teachers feel that the salary gains made in the Labour years are already being eroded, and that without strike action, their pensions case will not be heard. This government is certainly more sensitive to the unions than the Thatcher government, and Cabinet Office minister Francis Maude has been presenting himself as the Government's union point man.

It does seem premature to be having strike action, as some unions have recognised. However, talk of banning strikes in the weekend press seems at odds with Maude's efforts too, and can only increase the tensions on both sides. And the case on pensions may enjoy more public sympathy than ministers expect. Lord Hutton, the former Labour minister whose excellent report on pensions heralded many of these changes, has warned of the dangers of moving too quickly.

The problem is that the Government's hurried approach to reform seems particularly inappropriate with pensions. Not all public sector schemes are the same: the teachers' scheme is fully funded whereas the local government scheme could collapse if members withdrew over high contributions. Polling has suggested that teachers don't mind paying a bit more so long as they retain their pension scheme: the problem is less the extra contributions than all the other changes combined. And for heads, the loss of a final salary scheme is a particularly bitter blow. Ministers may not want to signal any retreat before Thursday, but they should be open to looking again at the combined impact of their proposals, and alternative mixes to reach their required savings.

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