Tag Archives: public sector

Pensions, the public sector and tomorrow’s strike

Wednesday sees a strike by public sector employees. There seems to be a lot of spin by both Government and unions over the strike, which may affect public services in many different areas.

One of the unions, Unison, explains they are striking “to defend their pensions, after they voted overwhelmingly to join the TUC co-ordinated day of action”.

The Government proposals – and it isn’t easy to find them (I have tried: they are pretty well hidden) – stem from the Hutton Report, published last year.

Hutton’s recommendations included (taken directly from the executive summary of the report [pdf])

  • pensions will continue to be an important element of remuneration
  • public service schemes, along with a full state pension, deliver at least adequate levels of income
  • Government must honour in full the pension promises that have been accrued by scheme members: their accrued rights
  • members of the current defined benefit public service pension schemes should be moved to the new schemes for future service, but the Government should continue to provide a form of defined benefit pension as the core design
  • a new career average revalued earnings (CARE) scheme should be adopted for general use in the public service schemes
  • Government should increase the member’s Normal Pension Age in the new schemes so that it is in line with their State Pension Age

There are also several recommendations about the administration of public sector pension schemes and the transparency and publication of data about them.

Basically, then, the Hutton report recommends that members of public sector pension schemes get to keep what they’ve got – their accrued rights – but will be moved to new schemes for future rights.

The HM Teasury website sets out the Government’s proposals:

If you are currently in a final salary scheme, when the changes come into effect in 2015 your pension will be worked out differently. Your pension will be worked out using the salary you earn in each year during your career rather than your salary at retirement.

Your retirement date will be changed so that it is the same as the date you take your state pension.

You will be able to retire earlier than this and no one will be forced to work longer. Current public service workers can draw the full pension benefits they have earned under their current pension scheme at their current normal pension age. For many people who are near retirement, this will be 60. However, you may choose to work longer and earn more pension benefits under the new scheme.

(This webpage isn’t dated; I assume it sets out the earliest proposals from June 2011, rather than the amended proposals set out in November 2011.)

The first paragraph quoted sets out the new pension schemes, the second changing the usual retirement age in line with the state pension, the third assuring accrued pension rights: what was set out in Hutton.

This is a similar situation to that faced by many employees in private sector pension schemes: you keep the pot you’ve built up so far, but the scheme is changing for future pension accruals.

This is of course a change to terms and conditions; but it strikes me as different to the rhetoric being laid out by the unions. It does represent a decrease in remuneration – pension rights are effectively deferred salary, and by increasing the age at which a pension can be taken, the Government is reducing the total value of the pension. But the protection given to accrued rights means it is only future rights that are being changed.

Dave Prentis of Unision is quoted as saying “This is a fight not just about whether it is right to increase contributions, but it’s a fight for the survival of public service pension schemes.” Not according to Hutton or the Government it isn’t – it is a change to the schemes.

Jonathon Ledger of Napo said “[Government’s] attack on their pension entitlement is not fair, not reasonable and not necessary. They have joined the hundreds of thousands of hard-working public sector workers who are uniting in defence of their pensions – pensions earned after years of demanding work on behalf of our communities.” This is ambiguous, but I think wrong – the pensions earned so far – the accrued rights – are protected.

And so on and so forth.

I started writing this post to support my view that public sector workers were right to strike. I have changed my mind: I had the misconception that the Government policy threatened the pension rights earned to date. It clearly doesn’t. What is being changed are the future benefits. Public sector workers are indeed being asked to work longer and pay more into their (new) pension schemes – and if that happened to me, I’d probably want to strike, too. But they are not losing any of their earned rights to date.

Any worker is free to strike; any worker is free to move to another employer. In the current economic circumstances (and I write this as they are debating the Chancellor’s autumn statement on the radio: it doesn’t look pretty), that right to move to another employer is probably fanciful.

But I can’t help thinking the public sector workers – whether they strike or not – are on a hiding to nothing. And I no longer support their strike.

[Many of the links in this post came from the Guardian. This is because the Guardian had the easiest to navigate archive of articles relating to the public sector pensions proposals and Wednesday’s strike. I was shocked how hard it was to tease out the issues from all media sources, including the Guardian.]

A Conversation on Public Sector Change…

I recently had the opportunity to talk to a friend who works in public sector change, and we talked about lots of issues around the topic, in which I have been interested for the last year or so. [My friend asked not to be identified.]

My main concern is that, given the scale of cuts to the public sector in this country – traditional cost cutting mechanisms familiar to anyone working in either the public or private sector over the last decade or so won’t work: you can’t “salami-slice” 25% of your costs away without the system seizing up. The complexity of public sector service provision appears to be such that something has to give: it is like that game where you have a tangle of sticks, and try to remove them, one by one: quite quickly the pile becomes unstable. Things could collapse.

What is needed is a different way of looking at the system – and a different way of structuring it – a complete rethink of the way services are provided. Despite recently meeting some very impressive public sector change managers at Tuttle a few months ago (I believe they came from Lambeth, though I couldn’t swear that), I’m worried that to come up with cuts quickly, most public sector service providers will instead do things the way they have always done them. Indeed the culture of the organisations they work in will drive them to this – they have neither the time nor, perhaps, the skills to think through how to do things differently.

Unfortunately, my friend wasn’t able to change my mind: indeed, he seemed as concerned as I was.

There were, my friend felt, many ways in which money could be saved: he believed that a lack of joined up thinking in the public sector wasted many billions of pounds. For example, local councils are responsible for social care of the elderly, the local NHS trusts for medical care; some simple interventions by local councils which could keep the elderly out of hospital were often put in place, because the council could save money by not doing so (at the expense of the NHS). [To counter this, my friend told me a great story of an enlightened local council that gave residents in care-homes a new pair of slippers every year – and, in doing so, reduced the number of falls those residents have, and the number of and length of hospitals stays they require.]

Early intervention appears to be more effective than late; but when money is short, late intervention becomes the rule – crisis management, if you like. This wastes money and time – and with headcount being cut, time isn’t always available. I was told another story of a local authority which had analysed in detail where their money went; it turned out a number of “chaotic families” were responsible for millions of pounds of local authority expenditure across a range of services – housing, social services, education and public order. It would have been much cheaper to send the children from such families to public (ie fee paying) schools and to rehouse the families in hotels. Though expect they might then have spent a fortune defending their actions from the Daily Mail onslaught… Instead of such drastic action, early interventions, joined up across several authority functions, could have saved the authority a lot of money, but the cuts had made this is less rather than more likely: functional managers are responsible for their own budgets, not for enabling other departments realise savings. Managers have a “guilty knowledge” of total saving that could have been made.

There are many services that local authorities have a legal obligation to provide. With funding short, they have to prioritise. It isn’t possible to make any cuts without affecting people (particularly if you are trying to do things the same way – that is, “salami slicing”). People – a service’s users – complain. It is easy to understand why a council such as Brent would seek to cut library services, since the real pain of removing access is less than, for instance, cutting social services. On the other hand, users of library services may be a bit more savvy than users of social services – they know how to use the courts to their advantage.

There are two other players in all this: central government and the media. The government largely controls local authority income: it funds local authorities by government grant and has recently frozen council tax. (Councils can also raise funds through other services, such as parking.) By freezing council tax, central government is stopping discussion of council funding as part of the democratic process – even if voters wanted to pay more for local services through increased council tax, they can’t. Council tax raises only about 25% of council funding (according to DirectGov.co.uk), so councils would have to increase council tax considerably to make up for other government cuts.

Political interference by central government is rampant. Eric Pickles communities and local government secretary (an appointment which isn’t mentioned in the biography on his website), makes frequent pronouncements on the priorities for local government – which is his job – but frequent changes of priority make planning difficult for local authorities. (Personally, I believe that the best place to make decisions on priorities for local communities are at a local level; but I am not certain that the population as a whole trust their local representatives with these decisions. They may be right.)

The media also plays a big part, because they have the create a storm, divert attention and – perhaps – ruin careers. This may sound melodramatic but Sharon Shoesmith, Haringey’s former head of education, was fired by Ed Balls, then Children’s Minister, following a firestorm of media criticism over the death of Baby P. The Department of Education and others lost an appeal (and the right to further appeals) over their action. Devolving decision making to local authorities creates a lot of media heat – the cliché of the postcode lottery as a media scandal is rampant. Frankly, a postcode lottery is exactly what one should expect from local authorities making decisions for their communities, and no one should be surprised that local priorities differ.

Of course it is important that public officials are accountable for their actions, and the media are one of the ways that we can hold elected officials accountable. Scrutiny is important; but it needs balance

This leads to another barrier to change in public services: it can make managers overly risk averse, even when change is needed. My friend told of a meeting with an elected council member during which the councillor bellowed “find out who is responsible for this blame culture – and fire them!” Surprisingly, no one around the table held a mirror up to the elected representative.

A culture of risk aversion and resistance to change may become engrained in an organisation – and when that organisation is trying to change radically, that is a dangerous combination. Trying to bring about change in such a risk averse organisation is a difficult proposition. Not many people would be keen to take on the task, and those within such an organisation are not likely to be up to taking it on.

Which brings us back to the salami slicer as a way to make cuts…

It was a pretty gloomy conversation, all in all. There are clearly pockets of clear thinking – the people I spoke to from (perhaps) Lambeth, my friend themselves – and, surprisingly, the private sector: apparently, some large companies working with the public sector have some bright ideas, in part because they can have a longer term view than those within the public sector. (I foresee media comments about “back-door privatisation”…)

Whatever happens, I hope those working for change in the public sector get it right: many things within our society ride upon it.