The incompetent targeting of public sector pensions

The largest UK walkout since the 1926 General Strike took place today. But the size of the strike over public sector pensions is not the most interesting part of the story: up to 61% of British people sympathise with the strike, a surprising figure given the media and political climate surrounding public sector workers.

While recent polls suggested support in the mid-40s at most, something has clearly shifted. Margaret Thatcher would not have let such a strike garner 61% public support – the miners could not have won with the coalition and resources she mobilised during the 1984-5 strike. But the current government appears completely out of its depth. The description of strikers as “militant” does not resemble the reality of even the most ardent Tories. 99% of Tories do not trust the government account, unlikely to believe rubbish collectors and nurses are ‘lazy’ and leaching on public money. Unions not known for radicalism, like the National Association of Headteachers, are striking for the first time – even Tories have to gain a liveable retirement.

In the government’s spending slashing narrative, pension cuts are a ‘common sense’ solution to the demographic challenge of more retirees and thus increased costs. But rising life expectancy figures are more complicated than they first appear. Rapidly decreasing infant mortality rates is just one reason for rising life expectancy. Yet many aren’t living much longer as shown by life expectancy in many Glasgow areas dipping under 68. Poorer retirees will be financially impacted if the health inequities between the richest and poorest pensioners are not factored – increasing the retirement age to 67 would amount to a larger real terms cut for the poorest quarter than the richest quarter as with Social Security in the US. Workers forced to retire early because of unhealthy and unsafe conditions could be reliant on less ‘generous’ benefits than pensions. Furthermore, raising women’s retirement age faster than men’s retirement age would worsen both the gender pension and pay gaps.

The Conservative narrative has dominated during the last 3 years, having free rein to argue the deficit is a result of Labour overspending – which they supported until 2008 – rather than the economic collapse. They’ve been allowed to argue public sector workers are ‘vested interests’, unproductive when contributing £9bn worth of overtime, overpaid when the average director of the top 100 companies receives a pension of over £200k with tax relief. But there is no clear dichotomy separating public and private sector workers; when private sector pensions are so low, the government went too far in attacking public sector pensions which act as a source of middle-class wealth.

Perhaps most fascinating is 80% of the 18-24 population supported the strike. Many on the right believe young voters can be won over by arguments about pension costs – they advocate National Insurance (NI) payments are directed to individual pension accounts instead of subsidising retirees. The opposition is partly rooted in government incompetence – young people already feel financially burdened with increased tuition costs and Educational Maintenance Allowance cuts. Pension cuts are not the solution for young people worried about their stake in the workplace even if there is no immediate benefit for 40 years. One way of increasing their stake may be to lower the retirement age, allowing younger workers to take the place of older workers.

The debate over public and private sector pension inequalities or men and women’s retirement ages ignores the central reality of secure pensions: for working people it represents their stake in the workplace and society. It is a means of increasing their economic power with regards to housing, care, and other needs during retirement. As seen with Social Security in the US, publicly funded pensions immediately boost the living standards of the elderly and reduce poverty amongst retirees. Considering pensions as a means of increasing the social and economic power of workers and the elderly throws doubt on the ‘crisis’ narrative of an aging population; public sector pensions may well peak, and then decline in cost terms. Fundamentally as Chris Hayes has argued, we should celebrate that increased living standards and welfare mean more people are living longer. One political response may simply be increased taxation to guarantee pensions, and the stake of workers and the elderly. Increasing pension funding rather than cutting it may be the most appropriate response to changing demographics, particularly amidst declining pension funds and housing assets. In the UK this could be financed by limiting the £22 billion claimed in private pension relief by higher earners, or raising at least £8.5 billion by abolishing caps on higher earners’ NI contributions.

The opportunity presented here to unions isn’t of their making. The government have overplayed their hand even with control of the political narrative. They may have presented unions a historic opportunity to reverse their post-Miners’ Strike decline, particularly amongst women and the young. The elderly may no longer be their biggest demographic challenge.

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