Brace yourself for a winter of discontent

26 Sep 11
November 30 marks the next stage in the industrial dispute over public sector pensions reform and is likely to be on a scale 'unprecedented for a generation or more'. Can anything be done to avert the strikes? Richard Johnstone reports
November 30 marks the next stage in the industrial dispute over public sector pensions reform and is likely to be on a scale ‘unprecedented for a generation or more’. Can anything be done to avert the strikes? Richard Johnstone reports
Marching orders: the UK's three biggest unions, Unison, Unite and the GMB, are balloting for strike action on November 30.

It now looks like June’s strikes by teaching unions, which affected more than half of England’s schools, were only the beginning of a potential winter of discontent.

The proposed changes to public sector pensions would usher in higher contributions, a later retirement age and a shift to a career‑average rather than a final‑salary scheme and have emerged as the chief cause of conflict for the government and the unions.

Following the Trades Union Congress’s annual conference in London last month, June’s strikes look like the first step in a wider industrial dispute over pensions changes. This winter, up to three million public sector workers, including nurses, teachers and care workers, could take part in industrial action, across as many as 14 unions, as a result of the reforms.

The day of action will be on November 30 and the three biggest unions in the country – Unison, Unite and the GMB – are all balloting their members for action.

According to industrial relations expert Professor John Kelly, from the department of management at the University of Birkbeck, the November strikes could include around half the membership of the Trades Union Congress. It would represent the biggest action since the early 1980s.

‘The unions only call industrial action on this scale when they face a large‑scale threat and usually that’s legislation, but in this case it’s a threat to members over pensions – affecting two-thirds in terms of the members of unions,’ he said.

The effect of the strike on public services would, he said, be ‘huge’, and departments and services are making plans to mitigate the impact.

So, what has led to industrial action being taken on a scale that Kelly calls ‘unprecedented for a generation or more’?
The government has criticised unions for balloting while talks are ongoing over the changes it says are needed to make schemes affordable and deal with increasing longevity. But the unions hit back at a lack of what they term ‘meaningful’ negotiations.

Brian Strutton, the GMB national secretary for public services, has been part of the unions’ negotiating team since the government backed the recommendations of former Labour Cabinet minister Lord Hutton’s review.

Initial negotiations were intended to lead to a framework for scheme‑specific discussions on changes to the main schemes affected – civil service, NHS, teachers and local government.
However, Strutton says that unions feel it has not been made clear which of the major changes are negotiable.

‘The central discussions struggled to set the parameters, and that’s because, from the government’s point of view, they had the type of reform they wanted to see – contribution increases, capped government contributions and acceptance of the Hutton report’s other recommendations.

‘They said these things are the parameters and they are inevitable, but the TUC said that’s going to be a bit difficult. We argue that if we can’t negotiate on these things then the central talks cannot come up with a set of rules for the scheme-level discussions. But the scheme discussions took place anyway.’

The scheme-by-scheme negotiations, which started in July, have so far been no more successful. Strutton points out that the civil service scheme hasn’t held any meetings since the government announced the start of specific talks.

Unions have therefore decided to ballot because ‘the negotiations are running out of time’. The government plans to introduce the first stage of the 3.2% employee contribution increase for the schemes next April. This will amount to extra contributions of £1.2bn in the first year and £2.3bn and £2.8bn in subsequent years.

Asked what could stop the ballots, Strutton says: ‘What we’re looking for is the opportunity to negotiate and not just discuss how this lot of changes are implemented. At the moment, that’s all we are left with. The main decisions are made by government and we are in there to carry them out. Management of them isn’t negotiation.’

Ministers maintain that the reforms will ensure that public servants continue to receive some of the best pensions available.
John Wright, head of public sector consulting at pensions consultancy Hymans Robertson, shares that view. He says that ‘even after the reforms, these will still be a gold‑standard scheme for pensions in the UK’.

However, Wright makes clear that the government needs to do more to involve scheme members. He highlights the example of the recently concluded pension reform in the Isle of Man. 
Here, initial reluctance to change was overcome by a consultation that led to genuine reform.

There wasn’t any industrial action, he says, and ‘that was because of the consultation’.

Wright adds: ‘There was flexibility on the details, and changes were made to take account of feedback.’ This, he says, is missing in the current UK debate, in part because the government plans for a cost ceiling on its contributions have not yet been announced.

‘People don’t understand what the reforms mean and I think it will be harder for the government to get agreement. [People] don’t understand that the pensions are being protected.’

One way this impasse could be overcome is to split up some of the changes. This would address one of the major difficulties the unions face: the need to agree to all the changes in one go.

One of the first pension funds to put forward reform proposals to scheme members is the London Pension Funds Authority. It is part of the local government scheme, which is being treated differently in the negotiations.

This follows an agreement between the government and the TUC that it has ‘specific circumstances’, as it is fully funded whereas the others are pay-as-you-go.

The LPFA proposals, chief executive Mike Taylor says, are an attempt to split up the ‘number of different things going on here’.
He says two parts of the changes – the increase in contributions and change in inflation measure – are decisions taken centrally by government.

However, like Wright, he argues that ‘rather than having someone impose the regulations’, details of reformed schemes – such as retirement age – should be worked out through consultation between funds and members.

The LPFA model – which calls for acceptance of a switch from a final salary to a career average pension and for a change in accrual rates from 60ths to 70ths of average salary – is ‘not far from sustainable’, he said.

He concludes with the same dilemma that Strutton highlights. ‘If you want to implement something by 2015, you need regulations in place by 2013, so you need to start deciding it in the next 
18 months.’

With the even more pressing date at the end of next month, there is no time to lose. 

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