Wednesday, 9 November 2011

The Perils of Public Pensions

With controversy over the Government's latest offer and a national day of action looming, maybe it's time for a fresh angle on the public sector pensions debate.

Words like 'unsustainable' and 'untenable' are just semantics. Basically the Government does not wish to spend an ever-increasing amount of public money on public sector pensions, because it judges it to be unfair both within the scheme and to those outside it. The unions argue that the unfairness is to those who have planned their retirement on the basis of a scheme that is now being radically altered.

Whether the public sector offers more secure employment than the private sector is questionable nowadays, but it has generally offered more security in terms of pension arrangements. But that is simply one of the factors people consider when pursuing a career: the public sector tends to be low risk and low reward, the private sector is higher risk and potentially much higher reward.

David Cameron has done himself no favours with phrases like "we're all in this together". This simply antagonises people who feel that those whose actions led to the debt crisis (certainly not public servants) should bear a greater share of the consequences. Whether or not you believe that economic growth will eventually cascade down to all, the steadily increasing gap between the highest earners and the lowest also fails to placate the many public servants on the wrong end of that equation.

On the other hand the unions must recognise the need for change. The world is changing fast, and longer life with longer retirement (at least in the developed world) is an inescapable part of this. Any suggestion that public pensions should remain forever immune from such change simply undermines the credibility of those who argue for it. I would have much more sympathy if public service unions put forward constructive counterproposals to the Government's case, rather than just arguing against it.

But I believe both sides are missing the point by talking public pensions in isolation. It should be – must be – part of a broader picture that aims to compare public employment with private employment as a whole, and give a fair deal for all. I can remember when this was the premise behind a civil service pay agreement that linked civil servants' pay to that of comparable private sector jobs, taking account of employment terms on both sides (pay levels, security, pensions, other benefits). It was only ever fully implemented once before the Government decided it didn't like figures and withdrew.

Which highlights a general issue around working in the public sector. Whilst ministers often praise the dedication of public servants, this comes across as mere lip service. In reality they rely increasingly on public servants' own conscience and vocation for the loyalty they need. Technically many civil servants are not even protected by employment laws that other workers take for granted (because the Crown cannot prosecute itself). In practice the Government still chooses to abide by the legislation it passes for others; it used also to try to set an example as a good employer but those days are long gone.

So my main criticism of Government is not about pensions as such, it's about lack of respect. It's about an attitude that seems to regard the public sector as a commodity to be juggled within the national economy and undermined when needed to influence public opinion. First principles in any management primer these days will tell you that in order to optimise performance, leaders need to inspire, engage and motivate their workforce. This, as an employer, the Government has spectacularly failed to do.

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