The Teaching Profession is being made the scapegoats of a crisis they did not cause

Allan Beavis's picture
The insularity and arrogance of the government has now engineered a collision course with the teaching profession as the NAHT today announced that it was “highly likely” that heads would now ballot for a strike over pension changes. Last month, two of the country's main teaching unions voted to ballot members for a national strike over reforms.

The government’s refusal to listen to the concerns of teachers – from academies and free schools, pensions, EMA, BSF, schools sports partnerships, the reform of the national curriculum, synthetic phonics – may result in the closing of thousands of primary and secondary schools in June.

A pyromaniac’s fuse was lit back in December when Lord Hill of Oareford, Under-Secretary of State for Schools, wrote to Academies advising them to ignore NASUWT’s request that they sign up to an agreement that their teachers would continue to work under national pay and conditions. Furthermore, he hinted that ministers might even turn down schools (already desperate for cash) for academy status if they declared themselves happy to stick with national pay agreements. He may well be encouraging academies to flout the law in which case they could face judicial review or an employment tribunal.

The government then poured more petrol on the fire by announcing that teachers would do their training not in universities but in schools. The inferno now threatens to rage further out of control as teachers, like all public sector workers, refuse to be made scapegoats for a financial crisis they did not cause.

Governments usually only commission an independent review if they know the outcome, so it was no surprise that Lord Hutton’s recommendation was neither “fair” nor “independent” as he claimed. He said his recommendations are not about cutting the deficit but about making schemes "sustainable and affordable" but this is untrue and he knows it. Even his own interim report last October showed that the cost of public sector pensions is falling. The National Audit Office report in December showed that changes already agreed will reduce public sector pensions costs by 14%.
What fatally undermines Hutton's argument, though, is Gideon Osborne explicitly telling parliament that "from the perspective of filling the hole in the public finances, we will seek changes that deliver an additional £1.8bn of savings per year in the cost of public service pensions by 2014-15".

So public sector pensions are being cut not because they are unaffordable or unsustainable but because there's a hole in the public finances and that wound was not blasted open by public spending, public sector workers or their pensions but by the banking crisis and the recession that resulted. And the banks? Business as usual – bonuses cut but salaries increased to make up for it.

The unpalatable truth is this government does not respect teachers as it does not respect public servants who provide public services – health workers are taking a battering from Andrew Lansing – so they will withhold a decent wage and a decent pension.

But they will bend over backwards for the private sector - especially if they want to profit from the public sector, so we should be even more vigilant of the recommendations of the ASI report, allowing profit making companies to run academies and free schools. The pension row has its tentacles wrapped around this issue too. The CBI’s John Cridland recently argued that public sector pensions act as a barrier for "third sector and private sector organisations" who want to run public services. If these organisations want to scrimp on staff pensions it begs the question, are these the sort of organisations that we want running our welfare system, our schools and our hospitals? The government appear to think so. No wonder they want to push through unfair pension reform.

Gove made the usual placatory murmurings at the NAHT Conference today but three things are clear. The first is that the disruption to our children’s education in the summer term is the result of the government’s dismantling of our schools and their contempt for teachers. The second is that the attack on pensions is about crude cuts to solve a problem public sector workers did not cause. The third is that government policy is laying down the stepping stones towards the wholesale privatisation of schools and other public services.
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tokyo nambu's picture
Tue, 03/05/2011 - 09:04

Public sector pensions were never going to be sustainable, and hardly surprisingly the scheme collapsed as soon as the first substantial cohort started collecting.

When the schemes were set up, male life expectancy was about 70. Women weren't expected to work full time once married, and indeed it was routine for women to be given back their superannuation contributions upon marriage. Paying in 6% for forty years means you paid in 2.4 years' average salary; collecting 50% for five years from 65 means you got back 2.5 years of your final salary. Assuming that the final salary wasn't too much more than the average (and for head-teachers it was, but then there weren't many of them) the numbers added up. Even with the retirement age shifted to 60, it represents five years' salary (ten years times 50%) for slightly less than 2.4 years' payments: that adds up if you assume a matching contribution from the employer (as is usual).

Because government debt never defaults (!) and economies never shrink (!!), governments of the fifties and sixties assumed they could spend public sector superannuation money, secure in the knowledge that the ever-expanding public sector (!!!) would provide sufficient payments later to meet the obligations.

But now, male life expectancy for people in middle-class pension schemes is 87 (or it was last year when I ceased to be a trustee of a defined benefits scheme) and female life expectancy is more. If people are allowed to retire at sixty, they will have paid in 2.4 years' salary, and collect benefits worth 13.5 years, and that's assuming career-average. That means contributions need to be worth ~30% of your salary, and that's before considering the costs of the already retired. The cash has to come from somewhere --- real cash, paid every month to existing pensioners. You either reduce benefits, increase contributions, raise the retirement age or accept that the public sector wage bill just increased by about 25%. It's sad that increasing life expectancies are seen as a problem, but if you can't see that a pension scheme founded on people dying in their early seventies has to change in order to accommodate people routinely living into their late eighties, then I can only ask what colour the sky is on the planet you live on. And that increase in life expectancy shows no sign of stopping: my children now probably have approaching a 50% chance of making a hundred. If you think a pension scheme could survive providing 50% salaries for forty years as the median case, that sky must be rainbow coloured.

(I got into a lot of trouble for suggesting that as a pension trustee I should be encouraging members to smoke untipped senior service with their Big Macs --- unfortunately, my riff was heard by a work experience kid who spread my message around his school. However, I was being half-serious: the law of unintended consequences means that the historically un-funded public sector pension obligation is collateral damage in large public health initiatives).

You have to ask a simple question: in forty years, will people be prepared to pay massive amounts of income tax to provide good pensions to a small subset of the population, while themselves living in poverty? I think the answer is no: I think a party which made a manifesto commitment in 2050 to tell "the golden generation" of defined benefit pensioners to get stuffed as "we're all in this together" would sweep to power. Most of the public sector expenditure is salaries; there are already sub-sectors (the police, for example) where pension commitments are approaching 30% of their wage bill.

Defined benefit pension schemes are good, and using government power to borrow (rather than having a massive investment scheme) is not a bad strategy. But if people are living five times longer post-retirement than they did a couple of generations ago, pension provision is five times more expensive. That money has to come from somewhere.

Allan Beavis's picture
Wed, 04/05/2011 - 11:31

I would say that your “small subset of society” - our nurses, teachers and other front-line staff - are actually the pillars of any civilized society. And a recent YouGov poll for Prospect shows that the British public value this “subset”. By more than five to one, the British public says the average public sector pension should be increased to at least £10,000 . Only 11% of people say public servants should get less than £10,000. The increase was supported by 63% of those polled and contrasts with the average public sector pension now in payment of £6,500 (Independent Public Service Pensions Commission).

Pressure to increase contributions does not come from the public, who are far more fair-minded than the politicians and right-wing commentators. I think this sense of solidarity was made manifestly clear during the 26 March protests when many private sector employees stood behind and with Trade union banners.

The coalition has swallowed and propagated the myth that public sector pensions are gold-plated, peddled by bodies like the Institute of Directors, Institute of Economic Affairs, the CBI and certain Conservative and LibDem politicians. Their reaction to the Hutton Report shows how out of touch they are with public opinion, which is evidently much more fair minded. It is deeply unfair for public sector workers like teachers to disproportionately bear the brunt of a global financial crisis that was caused by the irresponsible actions of the banks, who are getting a tax cut from the Conservative-led government this year. As Hutton’s interim report previously pointed out, the average public sector pension in 2009/10 was worth £6,500 and in local government just £4,000. To call this gold-plated is an insult to public sector workers.

The YouGov findings also follow the warning by Baroness Eaton, chair of the Local Government Association, that if public sector workers are made to pay higher pension contributions they will opt out of schemes, so reducing scheme income and in January, Prospect’s evidence to Lord Hutton’s review said that opt-outs posed a genuine danger to the future affordability of schemes. Official projections from the Government Actuary’s Department show that under existing arrangements the net cost of public sector schemes will drop from 1.5% of national income in 2009-10 to 1.1% of national income by 2050.

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