Get off the field and strengthen the side.....

Passing through Terminal 3 at Heathrow on the day of the Great Strike made me wonder what all the fuss was all about. LHR was the quietest I can remember. Immigration and security staffs were brisk, efficient, very courteous and friendly (especially the drop-dead gorgeous young lady who chided me with a big smile for leaving something in the tray). We were relaxing in the business-class lounge within literally minutes.

My reflection was that if this is how it works without the strikers it is a case of get off the field and strengthen the side!

Being an inveterate believer in all politics being either cock-up or conspiracy, my take on the public service dispute is that it is a perfect example of both. I have no doubt that it is a transparent trap by the Tories to fix the unions. The intention is to strengthen the law on strikes so that whenever they ballot for a strike, the unions will have to have a ballot for each one-day stoppage instead of getting a blanket approval for a series – hugely expensive. My guess is that larger majorities will be called for, maybe a majority of the members whether voting or not. Only about a third of members voted, so the number in favour was far short of a majority.

We shall see.

That’s the conspiracy. The cock-up is that the unions have walked right into the trap.

We have been here before. The classic example is the miners’ strike. The Tories had spent years planning to fix the eejit Scargill. And they did, big time.

During the Winter of Discontent in 1979, Ford workers went on strike. From memory it lasted a long time, from late 1979 into early 1980. I remember having a drink with a line-worker from Ford Tractors. He told me that the last thing the workers wanted was a strike, at that time of year especially. He said that if he worked until full retiring age he could never make up his lost wages, but the union was bent on a power struggle with management. Except Ford was hugely over-inventoried and needed a freeze on more production. So the union fell for that one, too.

At the same time, I had my one and only strike (not bad during the 1970’s and ’80,s when striking was a national pastime). The strikers were the building etc maintenance workers. But you can’t do too much outside maintenance work in January so I was in no hurry to do anything about it, and in any case it was a national stoppage so I claimed no status in it. The savings on my budgets were very substantial and at that stage in the financial year, suited me nicely.

When I judged that it was time to get back to normal, I took a calculated risk on what the final settlement would be. I then offered a 9% rise on the understanding that if the national settlement was for more, they would get the increase. But if it was less, they would keep the 9%. The settlement was for 9% or a little more. If it had come in less my career might well have ended somewhat earlier than it did.

So what’s it all about? Let’s consider public service as a career compared with the private sector.

When I entered the public service more than 50 years ago, the career motivation was doing a job that mattered to people rather than to shareholders. Pay was substantially below private sector norms. But the compensations were job satisfaction, a much higher level of job security, long holidays, a degree of public esteem, good conditions all round on matters such as sick-pay, the knowledge that your employer wasn’t going out of business ever, and, especially in today’s climate, an index linked pension based on 50% of final salary payable after 40 years service at age 60.

The pension fund was contributory at 8.5 %. I was in a very well run fund, so the employers’ contribution was only about 1%. In other words, we pretty well funded our own pensions, which was possible in a financial climate of rising stock markets and pension fund tax breaks (abolished by you-know-who).

So where are we now?

Almost all of those conditions still apply, with one exception.

Average public sector pay is substantially more than the private sector. Many top salaries can only be described as obscene. In my day the top pay of a local authority Chief Executive was about equivalent to that of a Deputy Secretary in the Civil Service. Not anymore. Some not only exceed the PM’s   stipend but exceed £200,000 a year. Elsewhere in the public sector there are 7-figure salaries. There is no justification for this whatsoever, and tends to make the paying public believe that their servants are no better than grasping bankers.

Here is what I imagine to be the Government’s side:

Because of longevity and cost, pensions at their current rate are simply unaffordable.

Pension age must be increased because 60/65 is no longer justified; when these were introduced the average lifespan was 48.

Pensions are underfunded therefore the employees’ contribution must be increased.

Final salary pensions are also unaffordable and rare in the private sector, so we must switch to average salary basis.

At bottom, I think what the Government is saying is that what is on the table now may not be quite what the public service has become accustomed to, but private sector employees would snatch your arm off for these terms. As the outgoing Secretary to the Treasury memorable wrote to his successor ‘Sorry, matey, we’ve spent all the money’ (or words to that effect). There is no money to sustain the present and future pensions liability.

The union position is that it has no option but to fight a move by the employers to reduce their members’ conditions. They are only doing their job. In particular, the increased employee contribution together with the proposed 1% pay freeze is a substantial reduction in take-home pay, especially at a time of relatively high inflation. It is particularly vindictive towards those on the lower end of the pay-scale (it should not be forgotten that low paid employees suffer from much regressive taxation i.e. that is proportionally higher relative to income for them than for high earners –VAT, fuel duty, Council tax etc).

So what to do?

At the end of the day everyone will have to accept that the current pensions regime is unsustainable. This is so all over ‘social’ Europe, where horrendous problems are building up for the future as pensions liabilities increase and the working population falls. The inevitable must be faced.

I would immediately withdraw the proposed increased contribution for the low paid. I would change the basis of the employee contribution to a sliding scale so that it increases with salary level. A person earning £200,000 a year could easily afford 15%. A person earning £16,000 a year can’t afford a 3% increase.

And I would reduce the sheer size of the payroll by getting rid of the 800,000 new jobs created by Blair/Brown.