Pension Fat Cats

I see from the Herald that I and the STUC appear to have upset the Institute of Directors on pensions. The IoD are the 'Fat Cats' union and in response to their attacks on the pensions of low paid workers I said, “The Institute of Directors is simply anxious to keep its members’ incomes bloated at the expense of cuts for ordinary workers.”

 

This is apparently "deceitful". Well let's look at the facts. The TUC's latest survey looked at the pension arrangements of 329 directors at 102 top firms. It found that:

• The average director's pension pot (transfer value) has risen by £400,000 in the past year to £3.8m.
• The average accrued pension of nearly £228,000 is worth 26 times the average occupational pension of £8,736.
• Most directors' pensions schemes build up pensions at least twice as fast as those of their staff - usually at a rate of 1/30th a year compared to 1/60th or 1/80th for ordinary staff.
• Directors in defined contribution schemes received average contributions from their employers of £134,760 a year, worth 19% of their salaries - three times the average contribution rate made for employees.

As the TUC's General Secretary, Brendan Barber put it;

  

"Employers often tell us that decent staff pension schemes are no longer affordable. Directors' representatives are in the vanguard of those attacking public sector pensions. Yet greed is still good in the nation's top boardrooms, where directors continue to reward themselves with seven-figure pension pots."
 
Judge for yourself who is being deceitful here!

Just Transition

I spoke at the Stop Climate Chaos Scotland fringe meeting at the SNP conference yesterday evening. This is part of a series of fringe meetings at the party conferences to promote the SCCS manifesto for next year's Scottish elections. The meeting was chaired by the Cabinet Secretary for Finance, John Swinney MSP.

My contribution was on the need for a 'Just Transition' to a low carbon economy.

There is a broad agreement across the political parties on the benefits a low carbon economy could bring to Scotland. However, without a just transition there could be some economic dislocation as workers in high carbon industries are impacted, leading to a potential loss in public support for the measures we have to take to cut emissions.

The Scottish Government recognised this in the 2009 Joint Communique with the STUC that covers the need for a just transition strategy that addresses the economic, employment and social impact of moving to a low carbon economy. The SCCS manifesto proposal to deliver on this commitment, supported by the STUC, is the establishment of a Scottish Forum for a Just Transition. This would be a partnership body that would advise on the necessary training for new skills, promote Green Workplaces and maximise the employment opportunities.

I gave a couple of practical examples of current Scottish Government initiatives that contribute towards a just transition including the Energy Efficiency Action Plan and the forthcoming Scottish Water Bill.

Just transition is the key to winning support for tackling climate change. We need to highlight the opportunities to build the economy and create quality employment. But this won't happen by accident. We need to put practical measures in place now.

SNP Conference

In Perth today for the SNP conference. We held the UNISON/APSE fringe meeting last night on the subject of the future of public services. As always it generated a wide ranging debate amongst a good audience. 

I took the meeting through the ideas generated by the IBR report. Common ground with most of the audience on the need for an alternative economic strategy and keeping Scottish Water in public ownership. Less consensus on the Council Tax freeze following the First Minister's announcement earlier in the day. UNISON believes that a continued freeze is not viable in the current financial climate. Even less on local government pay with the leader of the SNP group at CoSLA sharing the platform!

A number of SNP councils are considering outsourcing essential services. It was therefore helpful to have Andrew Spowart, APSE's Scottish Director on the platform to explain the work they have done on this issue. Many councillors have no experience of privatisation and are presented with inaccurate reports from management consultants claiming savings that rarely materialise in practice. I was able to refer to the recent report on Liverpool Direct, the flagship English council outsourcing, that shows that the council had been overcharged by £19m and that the council could save £23m annually by taking the work in-house.

Sadly most party conferences are largely stage managed events and the SNP conference itself is not as entertaining as it used to be. However, on the fringe and in the bars the debate and discussion is much more lively.

More cuts impact

More bad news this morning to demonstrate the impact public spending cuts will have on Scotland, even ahead of the Comprehensive Spending Review next week.

The hard numbers come from the latest unemployment statistics that show Scotland is rising faster than any other part of the UK, with 13,000 more people joining the job queues over the summer- the equivalent of 140 a day. The rate of increase of people looking for work was double the next highest UK region.

Other data comes from the Scottish Chambers of Commerce  whose latest survey found that confidence weakened across all sectors of Scottish business in the third quarter. Optimism in key sectors including manufacturing plunged to levels last seen in the first quarter of 2009, when Scotland was deep in recession. These findings indicate that many of the private sector firms, who the UK government expect to lead the recovery, fear that the medicine prescribed to cure the public sector deficit may now tip the country back into recession. A view confirmed by the Chambers spokesperson on BBC radio this morning.

The Herald comments that the recovery in Scotland is starting to feel more like a recession as firms prepare for deep cuts in public spending to take a heavy toll on the private sector. While Scotland formally exited recession in the final quarter of 2009, official data show that the economy flatlined between January and March.

I am off to the SNP conference in Perth today. We will be highlighting some of these issues at our fringe meeting this evening.

Hutton Review

The 'Independent' Public Service Pensions Commission's interim report has been published this morning. The report gives a detailed overview of public service pensions in the UK and the challenges they face. It then sets out a range of options that Lord Hutton will consider before completing his final report before April 2011.

His report does recognise the importance of public service pensions. One in 5 people in the UK have a direct interest. That is higher in Scotland and even higher if you take into account a wider group of dependents. What his report doesn't emphasise is the impact this has on the Scottish economy, including the investment impact of schemes with managed funds.

He highlights the cost of increasing life expectancy by going back as far as 1841. Whilst this may make a good headline, it isn't very informative. We also need to be careful about averages in this regard. Average male life expectancy in the 15% most economically deprived communities in Scotland is 57 years (60 for women). Therefore on average they never live to collect their 'gold plated pension' pension.

Whilst his report does make the usual comparisons with the private sector (although not with private sector bosses!), he does not support a race to the bottom and states that savings levels in the private sector are "not optimal". He might also have pointed out that it is the taxpayer that has to pick up the bill in benefits for the shortfall in employer commitment to their workers pensions.

He indicates that there are few practical short term options to make savings other than a rise in pension contributions. He concedes that the planned change to indexing from the RPI to the CPI will, at a stroke, reduce the value of benefits by around 15%. This rises to 25% when other recent changes are taken into account. He compounds scheme costs by suggesting that the discount rate is at the high end of what is appropriate. This is based on a crude comparison with private sector schemes that in our view is not justified.

The report sets out a number of pension principles against which long-term options for reform should be judged. Some of these are reasonable and includes some recognition of the consequences of reform on benefits such as pension credit. This is particularly important for most of our members who struggle to pay existing pension contributions and could result in much greater opt outs. There is a clear ideological line in the report on the importance of removing barriers to outsourcing, no doubt reflecting Lord Hutton's New Labour past. However, the obvious risk is that he promotes the very race to the bottom in pension provision that he claims to want to avoid.

He leaves the manner and level of increases to the Government. Public service workers are already paying increased contributions, they also face pay freezes and other attacks on their terms and conditions. This would be a further tax by the UK Government on workers to bail out the fat cat bankers and corporate bosses whose pension pots remain untouched. The government ought to be focusing attention on those employers who don't contribute a penny towards their workers pensions, leaving the taxpayer to pick up the long term benefits bill.

Lord Hutton's long-term options point to a move away from final salary to career average or hybrid schemes, whilst recognising that the defined contribution model is not suitable for all employees. There is also a strong hint that retirement ages will increase. However, all of this is for the final report and UNISON will need to continue to make the case for schemes that remain sustainable and affordable whilst providing a decent income for workers in retirement.

Right to strike

I appeared on a BBC radio programme this morning discussing the CBI proposals to tighten the laws on strike action. In essence they want to place additional requirements on unions to make industrial action almost impossible.

I pointed out that we already have the tightest restrictions on strike action in the advanced world. This is simply a cynical attempt by the CBI to undermine a fundamental human right.

The proposals do nothing to improve industrial relations. No recognition that poor management cause disputes. Nothing about strengthening ACAS and the conciliation machinery. In fact they even want to reduce the consultation period for redundancy, giving even less time for negotiation.

In my long experience of negotiations and dispute resolution I have never known members to vote for strike action except as a last resort. Strikes are so rare that most union members have never been on strike. But without this sanction the bosses who run the CBI would have unfettered power to trample on the workforce.

These proposals are designed to address any strikes that might be driven by cuts in public services. The irony of course is that the cause of these cuts is the corporate greed of the big businesses that run the CBI. An organisation that is still in favour of the very light touch regulation that got us into this mess.

As the CBI refused to put anyone up to defend their proposals it was left to the Adam Smith Institute to argue their case. I was asked if I would take some advice from them. From the organisation that brought us the Poll Tax - I think not! The Institute's President once said "We propose things which people regard as on the edge of lunacy."  Well this is another proposal that meets that criteria very well.

Cuts Industry

It probably shouldn't surprise me but I never fail to be amazed at the ability of consultants and contractors to seek a business opportunity to profit from the public purse. Even during a period of cuts they relentlessly seek to divert scare public resources from service delivery to their own profit margins.

This is well illustrated as I flick through the Holyrood Magazine's Public Spending supplement. It starts with an editorial quoting various neo-liberal economists making the case for 'reform'. Apparently the cuts won't be that bad, its just the planned increases in expenditure that are being cut.  These people just don't live on the same planet as the rest of us, let alone public bodies wrestling with how to implement real cuts in services.

Then we have another neo-liberal guru (Tom Miers), who of course must be right because he has written a book. He churns out the old nonesense about the public sector 'crowding out' the private sector. Not a scrap of evidence is offered to justify this claim, but as the old adage goes, 'say it enough times......'.

Having set the scene for 'reform' we then get a series of articles and adverts from the consultants and contractors, who tell us how they can solve all our problems if only we will give them vast sums of money to install their software, reorganise etc. We are all heroically called upon to make 'a fundamental step change' or recognise that this is 'time for decisive action'. When the only action they really want is for public bodies to divert even more of their scarce resources into the pockets of these companies.

In fairness to Holyrood Magazine (unlike others) they do at least make an effort to provide some balance, including an article from me setting out our alternative approach. But you get the drift of the strategy.

This strategy reminds me of the quote attributed to the Roman writer Petronius in 210BC:
"We trained hard . . . but it seemed that every time we were beginning to form up into teams we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization."
Management consultants have clearly been around for a long time!

This was brought home to me today in a practical way when looking at a proposed reorganisation of a large public body in my organising team area. This organisation used to have centralised HR and finance functions. Some years ago, following the latest management thinking, they decentralised. Now in the face of massive cuts they are centralising again. Just about everyone in this organisation believes that in ten years time they will reorganise again in the other direction.

The losers in this process are the staff who face further uncertainty, the service users who face disruption, and the rest of us who pick up the bill. The 'heroic' consultants are laughing all the way to the bank.