By David Williams
Proposals to make outsourcing deals more attractive by removing pension costs from contracts have been rejected by unions and the Treasury.
In a report published on June 15, the CBI recommended that Whitehall employees should stay in government pension schemes when transferred to contractors.
The business lobby claimed firms were being put off applying for contracts by current arrangements, which guarantee equivalent pensions terms for transferred staff.
But a Treasury spokesman immediately shot down the proposals, saying: ‘If pensions were taken out of the bidding process, it would not be possible to undertake a fair value-for-money comparison between in-house and outsourced services.
‘The government believes the CBI’s proposal to extend public service pensions leaves taxpayers underpinning private contractor arrangements and would therefore not offer good value for money.’
Charles Cochrane, secretary of the Council of Civil Service Unions, told Public Finance that keeping pensions out of contracts undermined one of the main principles of outsourcing – relieving the taxpayer of risk.
He added that he did not believe outsourcing was suffering due to firms’ reluctance to match public pension terms. ‘They’ve been quite happy to go along with Tupe, which protects people’s terms and conditions, and with the Fair Deal on pensions.
‘What’s changed is that there’s a recession and they’re probably realising that they’re not doing as well on some of these contracts as they did in the past. But perhaps that demonstrates that they’re not as efficient as they thought. I don’t buy the argument that the rules are stacked against them – I don’t think there’s any evidence for that at all.’
The CBI argued that more attractive terms would accelerate reform by bringing in more providers and increasing competition.
Kevin Beeston, chair of the CBI public services strategy board and non-executive chair of contractor Serco, added: ‘It’s a major technical barrier to public service reform.’
He said pensions costed at 15% of salary by public sector employers would cost private firms 35% of salary.
John Cridland, CBI deputy director general, said: ‘The government needs to face up to the real costs of pension provision and not ask the private sector to bear costs that it is not asking the public sector to bear.’
The CBI said government estimates for the long-term cost of pensions were over-optimistic, while private companies must build more conservative estimates into their offers for contracts.
Local authority employees can remain in public pension schemes when they are outsourced. However, this is more difficult to achieve in central government due to technical differences.
Proposals to make outsourcing deals more attractive by removing pension costs from contracts have been rejected by unions and the Treasury.
In a report published on June 15, the CBI recommended that Whitehall employees should stay in government pension schemes when transferred to contractors.
The business lobby claimed firms were being put off applying for contracts by current arrangements, which guarantee equivalent pensions terms for transferred staff.
But a Treasury spokesman immediately shot down the proposals, saying: ‘If pensions were taken out of the bidding process, it would not be possible to undertake a fair value-for-money comparison between in-house and outsourced services.
‘The government believes the CBI’s proposal to extend public service pensions leaves taxpayers underpinning private contractor arrangements and would therefore not offer good value for money.’
Charles Cochrane, secretary of the Council of Civil Service Unions, told Public Finance that keeping pensions out of contracts undermined one of the main principles of outsourcing – relieving the taxpayer of risk.
He added that he did not believe outsourcing was suffering due to firms’ reluctance to match public pension terms. ‘They’ve been quite happy to go along with Tupe, which protects people’s terms and conditions, and with the Fair Deal on pensions.
‘What’s changed is that there’s a recession and they’re probably realising that they’re not doing as well on some of these contracts as they did in the past. But perhaps that demonstrates that they’re not as efficient as they thought. I don’t buy the argument that the rules are stacked against them – I don’t think there’s any evidence for that at all.’
The CBI argued that more attractive terms would accelerate reform by bringing in more providers and increasing competition.
Kevin Beeston, chair of the CBI public services strategy board and non-executive chair of contractor Serco, added: ‘It’s a major technical barrier to public service reform.’
He said pensions costed at 15% of salary by public sector employers would cost private firms 35% of salary.
John Cridland, CBI deputy director general, said: ‘The government needs to face up to the real costs of pension provision and not ask the private sector to bear costs that it is not asking the public sector to bear.’
The CBI said government estimates for the long-term cost of pensions were over-optimistic, while private companies must build more conservative estimates into their offers for contracts.
Local authority employees can remain in public pension schemes when they are outsourced. However, this is more difficult to achieve in central government due to technical differences.
