In recent months there has been a lot of talk about a period of industrial strife to equal or surpass any since the winter of discontent in 1978/79. This has mainly been caused by public sector union anger over proposed changes to their pensions, and has led to some days of disruption due to strikes. The government, their advisors and even the Labour peer (Lord Hutton) they asked to look into the problem of funding pensions in the long term, all have stated that the current system is unsustainable due to increased life expectancy. Also, it is monumentally unfair to the vast majority of the population who work in the private sector. By implementing reforms now, the advocates of these proposals believe that it will make the public sector pension system sustainable into the future and will reduce the burden on the taxpayer. However, the opponents of the pension reforms claim that no real modification is needed to the pensions and benefits of state workers because their schemes are sustainable in their current format and that it is actually ideology and politics which is driving the present attempts to change the system.
Both sides are now firmly entrenched in their positions with little chance of a lasting solution being found because nobody is willing to give ground. If the current government gives in they will be seen as weak and indecisive and unflattering parallels will be drawn with the Heath government of the 1970s who when faced with union pressure performed numerous climb downs and lost their authority to govern. If the unions change their position they too will face problems as there is a long history in the British labour movement of regarding leaders and bodies who negotiated (especially if they do not have the overwhelming support of their members) as sell-outs and traitors to their class. Therefore a solution needs to be found to the current impasse which allows both sides to save face.
My solution to the problem of public sector pension reform, which would hopefully get the negotiations out of their current troubles, involves the following: The government will commit itself to not increasing empoyee’s pension contributions or bailing out the public sector pension funds if they get into financial difficulty. They will also put in the proviso that they are willing to put extra funds into the public sector pension pot if it gets into trouble, only on the condition that the unions accept any and all reforms proposed unconditionally. The unions have already claimed that their pensions are no different from anyone else’s and they get no special treatment from the government and therefore they should have no problem with this proposal.
This solution is logical because the government is not committing itself to higher and higher contributions over and above what a regular employer would pay. Also if the unions are right in their current arguments they get to keep their pensions as they are currently because the system has been proven to be sustainable. If they are wrong however, they have put themselves in the unenviable position of having rejected the chance for a negotiated reform of the system when they had the chance. If the government is right, the State is not committed to propping up an unreformed, unsustainable and increasingly costly scheme and reforms to public sector pensions will be introduced unconditionally when the current system gets into difficulty. If on the other hand they are wrong it will not cost them anymore in real terms than it already does. Finally, if the unions reject the solution that I have outlined, the government will have called their bluff and it would prove that they know that the public sector pension system is unsustainable and are simply looking for a fight with the government and expect the rest of the country to carry the burden of their unaffordable pensions.