What Hutton actually says.....

Frances Maude, Danny Alexander and other Coalition ministers quote "former Labour Pension Secretary" Lord Hutton's report in every second sentence to justify the claim that public sector pensions are un-affordable.  Unfortunately, they have clearly never read what Hutton actually says.  Thanks to Mehdi Hassan in the New Statesman for this:

"One final point: can we, once and for all, nail the right-wing lie that public-sector pensions are "unaffordable"? The cost of public-sector pensions is set to fall in the coming decades. Don't believe me? The Hutton Report, commissioned by the coalition government and used by ministers as a justification for the "reforms" to pension contributions, states on page 22:
There have been significant reforms to the main public-service pension schemes over the last decade, including increased pension ages for new members and a change in the indexation of pensions from RPI to CPI indexation. Some of these changes have reduced projected benefit payments in the coming decades. For the interim report, the commission asked the Government Actuary's Department (GAD) to project future public-service pensions expenditure. It projected benefit payments to fall gradually to around 1.4 per cent of GDP in 2059-2060, after peaking at 1.9 per cent of gross domestic product (GDP) in 2010-11.


But, as Jon Snow's interview with the Cabinet Office Minister, Francis Maude, on Channel 4 News on Monday evening revealed, the government seems totally unaware of the contents of the report that it commissioned -- and that it now chooses to hide behind." 

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Pension Reforms

There’s a lot more right than wrong in John Hutton’s wide ranging report into how we need to adjust our assumptions and expectations about state-provided pensions. Difficult though some of his conclusions are in terms of indexing, contributions and retirement ages, we are all living longer and we need to work through the implications of that.

Treasury provided pensions in the UK exist to fund two main groups; a basic level of retirement income for all of us through the state pension in its various forms and occupational pensions for public sector workers, from bin men and classroom assistants to school heads and NHS chief execs.

The principle since the post war social contract has been that the state pension is funded from NI contributions accrued by the Treasury. In contrast, public sector occupational pensions are funded through a mix of individual contributions and employer (central or local government) contributions paid into conventional pensions funds in much the same way as private sector pensions. These latter arrangements vary widely between different working groups. School teachers’ contribution and pension rules are very different from low paid council workers. Local government workers have a completely separate (and fully funded) scheme; civil servants are part of the overall Treasury fund.

So making changes to the system is complex and needs careful negotiation to get a the right balance of fairness between new and long standing public employees on the one hand and the wider tax paying public on the other. Negotiations which have been under way between the DWP and unions representing the main public sector workers groups for some time. Despite what the tabloids rant on about, the unions have always been ready to negotiate a long term solution.

Enter Danny Alexander, Chief Secretary to the Treasury, with his speech to the IPPC last Friday. In a 20 minute, rapidly delivered monologue, Mr Alexander did huge damage to the chance of a negotiated settlement. A settlement that was there to be negotiated and which would have opened up long term solutions to the pension problem created by the success of the NHS and other social reforms in delivering a longer-living society. The Chief Secretary laid out exactly what the coalition intended to do effectively predetermining the outcome and making the negotiation sessions still to come this week and next meaningless at best.  Now Hutton himself has warned that the coalitions approach risks driving many public sector workers out of the schemes altogether.

Why did he do it? He’s been closely involved in the negotiations, so I hope it wasn’t political naivety.

So was it deliberate? A tactic in an overall strategy to provoke the public sector unions into strikes and other protests that would allow the coalition to blame the unions for undermining the economic recovery, neatly getting him and Osborne off the hook for car-crashing growth? Only this week, ONS figures highlight the growing gap between government rhetoric on spending cuts and the actual level of government borrowing.

Working out a fair, long term solution for public sector pensions needs serious – and non party political –engagement between the government and the different public sector groups affected. Its too important to be rushed, or conducted by public posturing. Danny made a well reasoned case for change in this week’s Inverness Courier. Why do his actions in London seem driven by a very different agenda?

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New Ideas for Scottish Labour....

In my last post, I argued that Scottish Labour needed to start developing policies which would fit with a distinctive Scottish agenda, but which also needed to reflect economic and social needs in different parts of the country. Here’s a first example of what I mean.

Like many Labour politicians, I’ve long argued the need for link “green“ investments to the creation of real jobs and other economic infrastructure. This wont just happen, it needs government policy, planning and pump-priming. The Highlands are at the centre of developments in off-shore wind and wave power but how do we ensure that benefits don’t just go to the developers, manufacturers elsewhere or specific communities – welcome though that would be locally - but are shared across the whole area?

The Crown Estate Commission (CEC) owns the rights to developments on the seabed for up to 12 miles offshore. In recent years, the CEC has used that right to levy charges on businesses operating offshore, first on major fishing companies and now on the offshore wind and wave developers, most of whom are operating on sea-beds off the Highland coastline. The potential revenues are growing rapidly as the scale of offshore development ramps up.

At present, all that money goes to the UK Treasury.

Highland Council, HIE and others have long argued that a slice of this revenue should be earmarked for economic and social development in the Highlands and Islands, in the same way as the Shetland Oil Fund was used back in the 1970s.

The LibDems used to support just such a policy but seem to have abandoned it now. No doubt vetoed by Chief Secretary to the Treasury Danny Alexander as part of the same deal which saw the LibDems sell out on Student Fees, VAT and the Cuts. The SNP want all the CEC’s powers and revenues transferred to Scottish Control. There’s a strong case for that, but there need to be assurances about how such powers will be used to benefit specific regions and not just fund favoured projects elsewhere.

We promised a Scottish Crown Estate Commissioner in our 2011 Scottish Manifesto. Should Scottish Labour seize the initiative and make the case for a Highlands Renewables Fund - kick-started from a share of CEC Revenues – which could be used to benefit the region socially and economically?

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