The trade unions’ apparent willingness to compromise on the emotive issue of public sector pensions could well turn out to be a master stroke as the Government grapples with how to reduce its long-term liabilities on retirement.
Both the GMB and Unison have sent out signals that they may be prepared to accept a local government pension scheme linked to employees’ career earnings rather than the current final salary.
The Local Government Pension Scheme (LGPS), being funded by staff and employers is not such a bottomless pit as unfunded schemes like the civil service and the NHS.
Contrary to some reports, the typical pension is £4,000 a year, reflecting the fact that most of the local government workforce is modestly paid and increasingly part-time.
It is true, however, that a small proportion of senior staff retire on extremely good pensions and that in the recent past, many council executives have been managed out of their authorities on very generous early retirement packages. Being a final salary scheme, the LGPS has potentially huge liabilities, and the workforce, as in the private sector, is living longer.
It is also unfair that while private sector final salary schemes have almost entirely dried up, the public sector continues to enjoy guaranteed final benefits underwritten by the taxpayer.
Furthermore, with the retirement age sensibly, if belatedly, rising to reflect the fact that we are all living longer, the LGPS, too, needs to increase its own retirement age.
Nonetheless, the idea that local government staff should also be impoverished in old age just so they can look the private sector in the eye makes no sense either. It is not their fault that private sector employers have withdrawn from open-ended pension commitments.
The reality is that the current baby-boomer generation has pulled up the drawbridge behind it by declining to fund the next generation’s pensions.
The task of government is to protect pensioners as best it can, public or private. The unions’ offer to accept a career-based scheme should help persuade ministers the LGPS can, and should maintain its commitments to provide a decent pension for staff.
Michael Burton, Editor, The MJ
Wednesday 11 August 2010
Wednesday 4 August 2010
Planning for the long term
This week’s attack by the right-of-centre think-tank, the Centre for Social Justice on chancellor George Osborne’s spending cuts for taking a ‘blunderbuss’ approach has resonance across local government.
The centre claims the temptation by Whitehall is to cut the easy targets, however effective they are and however many savings they deliver long term, leaving the more difficult but often inefficient programmes in place.
Another often-used phrase is for central and local government, when facing stringent cuts, to ‘go for the low-hanging fruit’. This is a euphemism for cutting area grants to community projects, dropping non-statutory services, squeezing the voluntary sector, postponing road maintenance, or as we have seen this week in Oxfordshire, slashing road safety initiatives, closing branch libraries, indeed, shutting any projects which yield quick savings with minimal upheaval. Most of them have a direct effect on the public, if in varying degrees.
If cuts are carried out in an atmosphere of panic and with no strategic rationale, then the result will be waves of negative local media, disgruntled residents and a council which has trimmed its services but remained largely intact as an organisation.
To complicate the cuts agenda, the public sector is also under pressure not to incur big, upfront redundancy costs. One chief executive recently told me: ‘I need to scale down the department but the redundancy costs mean I wouldn’t get any payback for three years, so there’s no point in doing it.’ The public will take a dim view of councils slashing services on the one hand but maintaining tiers of middle managers because they cannot afford to let them go.
The more far-sighted councils are already looking at the longer-term picture. Short-term cuts become longer-term ‘decommissioning.’ Councillors bury their territorial differences, such as the innovative tie-up between Northamptonshire and Cambridgeshire, to deliver savings, districts share their management teams, and who knows, one day even their councillors.
What councils must not do, as they prepare to take on wider responsibilities across the public sector, is to destroy their credibility among their residents by cutting the low-hanging fruit and avoiding the more difficult – and more long-term – organisational changes necessary to cope with the next four years
The centre claims the temptation by Whitehall is to cut the easy targets, however effective they are and however many savings they deliver long term, leaving the more difficult but often inefficient programmes in place.
Another often-used phrase is for central and local government, when facing stringent cuts, to ‘go for the low-hanging fruit’. This is a euphemism for cutting area grants to community projects, dropping non-statutory services, squeezing the voluntary sector, postponing road maintenance, or as we have seen this week in Oxfordshire, slashing road safety initiatives, closing branch libraries, indeed, shutting any projects which yield quick savings with minimal upheaval. Most of them have a direct effect on the public, if in varying degrees.
If cuts are carried out in an atmosphere of panic and with no strategic rationale, then the result will be waves of negative local media, disgruntled residents and a council which has trimmed its services but remained largely intact as an organisation.
To complicate the cuts agenda, the public sector is also under pressure not to incur big, upfront redundancy costs. One chief executive recently told me: ‘I need to scale down the department but the redundancy costs mean I wouldn’t get any payback for three years, so there’s no point in doing it.’ The public will take a dim view of councils slashing services on the one hand but maintaining tiers of middle managers because they cannot afford to let them go.
The more far-sighted councils are already looking at the longer-term picture. Short-term cuts become longer-term ‘decommissioning.’ Councillors bury their territorial differences, such as the innovative tie-up between Northamptonshire and Cambridgeshire, to deliver savings, districts share their management teams, and who knows, one day even their councillors.
What councils must not do, as they prepare to take on wider responsibilities across the public sector, is to destroy their credibility among their residents by cutting the low-hanging fruit and avoiding the more difficult – and more long-term – organisational changes necessary to cope with the next four years
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