Tory pension plan? Cuts!

Instead of levelling up, the Tories want to level down – the pensions of public sector workers will be cut, using the defence that private sector workers have less generous pensions. Would it not be a better idea to ensure that every worker has a decent pension in retirement?

The FT reports:

Cameron hints at phasing out public sector pensions
By Andrew Bounds, Alex Barker and Nicholas Timmins
Published: November 26 2008 23:32 | Last updated: November 26 2008 23:32

Generous final salary public sector pensions would be phased out by an incoming Conservative government, David Cameron has signalled, in comments that could presage a huge battle with up to 5m NHS staff, teachers, civil servants and local government officers.

The Conservative leader has told businessmen that he wanted to switch public sector workers away from final salary schemes and into money purchase – or defined contribution – schemes.

The issue has become a hugely charged one in recent months as private sector workers face the threat of paying ever more in tax to support generous public pension schemes at a time when their own final salary schemes are being scrapped or scaled back.

The Conservative leader told a meeting of the Greater Manchester chamber of commerce earlier this week that “my vision over time is to move increasingly towards defined contribution rather than final salary schemes” for the public sector.

“We have got to end the apartheid in pensions,” he said, where growing numbers in the private sector rely on, usually much less generous, defined contribution pensions but public employees still enjoy final salary schemes largely paid for by the taxpayer.

He accused the government – which recently introduced relatively minor reforms expected to save £13bn over 20 years on a total liability that the Treasury puts at about £650bn – of being “remarkably feeble” on the issue.

Any such move would almost certainly cost money in the short term, even though there should be substantial savings later. However, defenders of the idea say that the Treasury is facing a 40 per cent increase in the cost of public sector pensions to 1.4 per cent of national income in 20 years’ time, according to the Pensions Policy Institute.

But Mr Cameron’s argument brought a furious reaction from the unions. Brendan Barber, the TUC general secretary, said the news would come “like a bolt from the blue to millions of hard working public servants”.

Both Unison and PCS, the biggest health and civil service unions, said that they would oppose any such move. Dave Prentis, general secretary of Unison, said that, at £7,000 a year, the average public sector pension was far from generous.

Mr Cameron’s office said last night that the Conservative leader – whose comments came in answer to questions from the floor after his speech – was merely outlining “the direction of travel”. The party has not yet “ruled any option in or out”, a spokesman said.

Is progressive taxation is back on the agenda?

The Compass group has welcomed the Pre-Budget Report with as much optimism as the Chancellor’s asessment of the depth of the recession:

Neal Lawson chair of Compass said: “Today’s Pre-Budget Report marks a move away from the Neo-Liberal/free market economic consensus pursued by both Labour and Conservative governments of the past 30 years – but this should not just be a blip before normal service, in the shape of speculative consumer capitalism, is resumed – the government needs to make this a turning point that leads to the moral transformation of our society”.

Jon Cruddas MP said: “This is exactly the kind of measure that we’ve been advocating for a while now and it’s good news for people like my constituents in Dagenham. This should be the first stage in re-balancing the tax system so it’s fairer for middle and low income earners, as well as kick-starting the economy in the short term. When the new US administration takes office then we have the chance to move in to another phase – an international crackdown on corporate tax evasion. Meanwhile, Cameron is now retreating from New Conservatism into orthodox Thatcherite economics and we have to expose that.”

Gavin Hayes General Secretary of Compass said: “A financial crisis that was in part caused by the excesses and risky behaviour of those at the top should not be allowed to unnecessarily hurt the rest of us, so today’s announcement on reducing VAT, whilst at the same time announcing plans to increase the tax burden on the super-rich should both be welcomed, it is absolutely right for government to limit the impact of the recession by using pragmatic and sensible measures such as these.”

As Richard Murphy points out, cutting VAT by such a small amount isn’t likely to impact upon retail prices for consumers:

On an item costing £4.99 the VAT saving will be under 11p. Can you see anyone shifting that price to £4.89?

On £500 (VAT inclusive price) the saving is £10.60. That’s neither here or there: if you are going to spend £500 then £10.60 or so will not change the decision. Other influences are much stronger.

So at low price points this is a boost for the retailer who will take much of the gain. I really do not expect them to pass this on. At high price points I doubt the impact.

Either way the saving goes to marginal jobs in the UK, and Woolworths won’t be saved by this, whilst cheap imports are the only likely sector to see a boost. The business to business sector will see none at all: VAT does not impact them.

But it’s more than that: this might fuel deflation, which we can ill afford. So it’s a mistake.

VAT is regressive, but not as badly as some taxes (e.g. council tax) so the poorest who need help will not benefit most.

John McDonnell MP, chair of the Left Economics Advisory Panel said of the tax changes:

“The introduction of a higher rate of tax for high earners is long overdue but the Government’s proposals are hardly a revolution, and delaying them until after the next election is pointless. The higher rate should be the start of creating a fair tax reform agenda, redistributing wealth from the super rich in order to take the low paid out of taxation altogether.

“The Government should also move immediately to tackle the large scale tax avoidance by the corporate sector, introducing legislation to outlaw tax havens, mirroring the Obama bill in Congress. The public revulsion over City bonuses and bank executive salaries has opened the way for radical tax reform. Government must seize the moment.”

The Public and Commercial Services Union warns of the impact of so-called “efficiency savings” and points out that billions of pounds in taxes go uncollected:

Commenting, Mark Serwotka, PCS general secretary, said: “Further efficiency savings of £5 billion should not be a prelude to yet more job cuts, office closures and privatisation.

“Key public services, such as justice, welfare and tax are already struggling to cope against a backdrop of massive job cuts and office closures.

“Whilst the promise of additional funds for jobcentres is welcome, the government needs to reverse its job cuts programme across civil and public services to safeguard their delivery.

“Whilst the promise of additional funds for jobcentres is welcome, the government needs to reverse its job cuts programme across civil and public services to safeguard their delivery.

“For example the government should be looking at tackling the £21.5 billion worth of uncollected tax and £25 billion lost through tax evasion, by putting more resources into HMRC to claw back the billions in lost revenue, which could be ploughed into public services and stimulate the economy.”

The Morning Star‘s editorial is critical of the direction of travel signalled by the Pre-Budget Report, not so much a return to Real Labour but a continuation of Blue Labour:

Out of his own mouth
(Monday 24 November 2008)

CHANCELLOR Alistair Darling condemned himself out of his own mouth when he said that the central objective of his unambitious pre-budget report was to support firms and businesses going through difficult times.

That is why he opted for a cut of two-and-a-half percentage points on VAT, which will be absorbed into business income rather than find its way into lower prices.

Working people, especially those wondering how long they will be in a job, are unlikely to run out on a spending spree on the basis of a VAT cut.

And, if Mr Darling really wished to spark economic activity, he should have helped those on the lowest incomes whose extra cash would certainly have increased demand.

Those robbed when Gordon Brown abolished the 10 per cent tax rate should be compensated by being lifted out of income tax liability entirely.

State pensioners, whose living standards have been eroded every year since the Tories abolished the link with wages, those working for a totally inadequate minimum wage and others forced to exist on the jobseeker’s allowance pittance should receive a boost in their income.

It is pathetic that the Chancellor should be posing the possibility of no more than a 5 per cent increase to 45 per cent for tax on annual incomes over £150,000 and then only on condition that Labour wins the next general election.

This proposal will not bring any additional income to the Treasury in the life of this government. It’s not even of sufficient scale to encourage the electorate to vote Labour in the hope that it will switch the burden of taxation from working people to the rich.

Government failure to tackle the spiriting away of potential tax revenues of at least £25 billion a year through overseas tax avoidance centres, mainly in British crown territories, emphasises once more its priorities.

The bulk of taxation should fall on the shoulders of those able to pay rather than those too poor to afford avoidance schemes.

And the government should also lift the cap on National Insurance contributions, which is a hidden tax benefit for the better-paid, and introduce a wealth tax.

But the government must not restrict itself simply to measures calculated to increase demand.

It has a responsibility to intervene actively in the economy, especially since the banks have been quick to accept cheaper Bank of England lending and government investment but have not passed benefits on to small businesses seeking to weather the recession.

The government must put substance behind its much-vaunted commitments to environmental issues and to higher employment levels.

Financing at least 100,000 new council homes a year and a nationwide programme of renovating and insulating existing local authority properties could begin to tackle the housing crisis, improve energy efficiency and cut fuel bills.

Similarly, a crash programme of expanding the railways would not only improve the transportation network but increase demand for steel, concrete etc, safeguarding jobs in these industries as well as construction.

Unless the government adopts an economic programme with social justice at its heart, its cosmetic measures will simply prop up big business and ensure that costs of the recession will be paid for by workers.

Pensions threat – New Labour bows to big business?

Looks likely. The FT reports:

Moves that would weaken the protection for pension schemes are to be considered by ministers, the government will announce on Wednesday.

Rosie Winterton, pensions minister, will announce that she is bowing to a big demand of employers by consulting on changes to so-called Section 75 – which compels any business winding up a pension scheme as part of a corporate restructuring or demerger to cover fully its liabilities. The issue has become more pressing for businesses as falling stock markets have increased pensions shortfalls.

In remarks prepared for a breakfast meeting of CBI employers, Ms Winterton will say that the moves are aimed at easing the burden on scheme sponsors which are coming under strain in the current economic climate, and who “remain committed to the scheme”. The “debt on the employer” rule has been a source of irritation to business since it was enacted, with many companies complaining that it has been a barrier to corporate activity.

Section 75 – enacted in 2004 – closed a loophole that cost about 125,000 pension scheme members all or part of their retirement funds. It was prompted by the case of Maersk, the Danish shipping line, which tried to walk away from the pension liabilities of its UK subsidiary even though it remained solvent.

The original rule was adopted on an emergency basis as plunging stock markets and falling gilts yields unmasked record deficits at UK companies and after new accounting rules for the first time made the size of those deficits transparent to investors. Companies, on realising the extent of their pension debts, sought to reconfigure themselves to avoid responsibility.

Ms Winterton will say the Department for Work and Pensions has begun a four-week “informal consultation” on the matter. In her remarks, Ms Winterton is set to acknowledge that balancing the needs of employers and pension security is a delicate act. But Ms Winterton will tell the group: “If we can, we will hold a full public consultation in February and introduce any changes in October 2009.”

In anticipation of the likely backlash from pensions groups, Ms Winterton will say that the department will seek industry’s views on the options for not triggering a debt “where the employer remains committed to the pension scheme”. However, it was unclear on Tuesday night what this might mean.

The risk to government is that if the change goes wrong, more schemes could be forced to rely on the Pension Protection Fund.

Fuel poverty could kill 20,000 this winter

Research that suggests thousands more pensioners will needlessly die this year because of the huge hikes in energy bills by the privatised gas and electricity companies…

Fuel poverty will kill thousands of pensioners this winter
Published: Wednesday, 22 October 2008, 11:57AM
By Dr Stirling Howieson

If the recent hikes in the real cost of fuel cannot be reversed before winter sets in, the impact on the elderly fuel poor will result in an additional 20,000 excess deaths.

This is on top of the 23,900 excess winter deaths registered during the winter of 2006/07.

The UK has one of the highest excess winter deaths rates in the world.

Put simply the elderly fuel poor are dying prematurely because they live in cold damp homes.

Sleeping in cold bedrooms will cause this group to die prematurely from heart attacks, stroke and respiratory infections.

The work undertaken in this field by a variety of university research teams has produced clear conclusions.

These deaths are essentially preventable if the elderly can be kept warm during the winter.

Although insulating the housing stock is the only long term and cost effective solution, a short term palliative can be found by re-directing the current winter fuel payment allowance exclusively towards the elderly fuel poor.

The government must act now if these deaths are to be prevented. If they do not they should be held to account for what amounts to nothing less than gross negligence and manslaughter.

Dr Stirling Howieson is the director of the Centre for Environmental Design and Research. He has spent the last 25 years researching the impact of the built environment on public health.

ITV also reports on yesterday’s pensions protest:

Pensioners and trade unions have joined forces to call for the basic state pension to be increased above the poverty level.

More than 1,000 protesters of all ages are lobbying Parliament to urge MPs to pay single pensioners at least £151 a week.

They also want the state pension to be increased immediately in line with earnings or prices, depending on which is higher, and for it to be paid universally to all existing pensioners, rather than being based on National Insurance contributions as is currently the case.

The campaign is organised by the National Pensioners Convention and 15 trade unions to mark the centenary of the introduction of the state pension.

The groups believe it is the first time that both working age and retired people have joined forces to call for a higher pension for both now and in the future.

NPC general secretary Joe Harris said: “After 100 years of the state pension it’s a national disgrace that at least 2.5 million older people are still living below the official poverty line, and millions more are struggling to meet the rising costs of living.

“Pensioners – both now and in the future – need dignity and security in retirement that only a decent state pension can provide.

“The Government should use the huge £46 billion surplus in the National Insurance Fund and give everyone a pension that takes them out of poverty.”

The butcher’s apron and the bus pass

While reflecting upon the centenary of the old age pension, it was pointed out to me by a senior citizen of my acquaintance that citizens over the age of sixty can now travel for free on England’s buses.

The English National Concessionary Travel Scheme has been welcomed by millions of pensioners and is a rare progressive policy by New Labour administration – though since pensioners are most likely to vote, it’s likely to be a cynical move.

Note that the cards feature the St George’s Cross and the red rose symbol of England:

The Labour party would be advised to drop Brown’s Britishness agenda as well as Brown himself (because he’s a useless Tory, not because he’s Scottish) – if there’s one issue the Conservative and Unionist party are weak on, it’s the position of England in the UK.

The ENCTS is a modest social-democratic policy, but it’s exactly the kind of inclusive Englishness needed to fight the fascist BNP and embarrass Cameron’s New Tories.

Government ministers are considering a windfall tax on the energy giants, with the monies going to help people struggling to pay the soaring bills – which is a pretty radical policy for Thatcherite New Labour. While they’re feeling open-minded, let’s hope they consider giving us an English parliament to go with the bus passes…