Unions in standoff with ODPM over pensions

17 Feb 05
Local government unions look likely to press ahead with ballots for industrial action over controversial new pension regulations, despite last-minute talks with ministers to avert politically damaging strikes just weeks before a general election.

18 February 2005

Local government unions look likely to press ahead with ballots for industrial action over controversial new pension regulations, despite last-minute talks with ministers to avert politically damaging strikes just weeks before a general election.

As Public Finance went to press, Unison and the T&G confirmed that their 'time-critical' strike ballots would go ahead, despite good progress in talks with Deputy Prime Minister John Prescott and local government leaders this week. The parties were due to meet again on February 17 to try to reach an agreement.

From April, the new regulations would raise the retirement age in the sector from 60 to 65 and withdraw the '85-year rule' that allows workers to access their pension once their combined age and years of service total 85 years.

The unions argue that there has been no negotiation over the regulations, described by local government minister Phil Hope as 'moderate', and they will come in 12 months before similar changes to other public sector schemes.

Unison general secretary Dave Prentis claimed that ministers had conceded that 'they'd taken their eyes off the ball' and promises had been made last July to negotiate on all proposed reforms.

But the Office of the Deputy Prime Minister wants to overhaul the Local Government Pension Scheme in two phases to cut the spiralling cost of the scheme and retain its relatively lucrative final salary structure.

Ministers are, apparently, willing to negotiate on phase two of the change, which would include new contribution rates for scheme members from 2008.

Unions argue the changes would erode what they consider to be deferred pay, but the ODPM is concerned that long-term pension liabilities across councils have already reached £30bn.

The ballots are due to begin next week but strike action could still be averted if the regulations are either repealed or delayed. The deadline for this is February 23.

Local government employers, however, oppose any delay on cost grounds. During the talks, Local Government Association chair Sir Sandy Bruce-Lockhart and Employers' Organisation executive director Rob Pinkham produced a study by actuaries Mercer, published on February 14, which estimated that the annual cost savings were around £200m.

According to sources, Pinkham argued these had been factored into council budgets for this year and lobbied hard for an additional handout from the ODPM to cover the cost of retaining the existing system. The EO argued that, otherwise, council tax levels could be affected.

Chancellor Gordon Brown was understood to be sceptical about releasing another large payment to councils following the additional £1bn in this year's local government finance settlement.

But sources close to government discussions said ministers could still agree a delay in the introduction of the new system, accompanied by a payment from the ODPM, to prevent the strikes.

Speaking on February 16, an EO spokesman said: 'The situation is fluid. Tripartite discussions are still ongoing. But employers are seeking assurances that councils would not incur additional costs.'

Privately, union leaders are reluctant to strike, fearing that Prescott may 'pull up the drawbridge' on any future negotiations. But they warn that without movement from ministers they risk alienating millions of voters and activists in the run-up to the general election.

'Of course we are here to unite behind the Labour movement. But the government has to understand that our prime purpose is to stand up for our members,' deputy general secretary of the T&G Jack Dromey told a Labour Spring Conference fringe event.

Prentis concurred: 'We've done a tremendous amount for this government to bring about modernisation – some would say too much. It's our people who get out on the streets. They are the fundamental powerhouse in any election.'

Other public service unions will be keeping a close eye on the talks as changes are proposed across all pensions.

A day of action is planned on February 18, mainly to protest about the raising of the retirement age from 60 to 65. The changes could affect up to 7 million public servants.

Trades Union Congress general secretary Brendan Barber said: 'We are against "work 'til you drop" policies. For those who work with members of the public in the health and social services, it will simply be impossible or lead to ill health and even shorter lives.'

PFfeb2005

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