By Joseph Willits
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In a statement to the Commons yesterday, immediately after PMQs, Chief Secretary to the Treasury, Danny Alexander talked of a "generous offer" being made by the Government to reform public service pensions. Alexander said he had "decided to revise the government's offer after negotiations with the TUC, since early October, and with recommendations from the Secretaries of State for Education and Health.
Alexander described the offer as "conditional upon reaching agreement" but believed it "should be more than sufficient to allow agreement to be reached with the unions". It was Alexander's hope, he said that "on the basis of this offer, the Trade Unions will devote their energy to reaching agreement not on unnecessary and damaging strike action".
Alexander announced an increase to the cost ceiling of pensions:
"Future schemes will now be based on a pension to the value of 1/60th of average salary, accruing for each year worked. That is an 8% increase on the previous offer … A teacher with a lifetime in public service with a salary at retirement of £37,800 would receive £25,200 each year under these proposals, rather than the £19,100 they would currently earn in the final salary Teachers' Pension Scheme. A nurse with a lifetime in public service and a salary at retirement of £34,200 would receive £22,800 of pension each year if these reforms were introduced, whereas under the current 1995 NHS Pension Scheme arrangements they would only get £17,300."
Pension reform was inevitable because of people living longer, and it was because of this, Alexander said, that "the costs of public service pensions have risen to £32bn a year. An increase of a third over the last 10 years. And whilst they accounted for just under 1 % of GDP in 1970, they account for around 2% of GDP today".
The reforms would mean public sector pensions would "remain considerably better than available in the private sector". Tory MPs, whose constituencies are predominantly made up of private sector workers, echoed Alexander's remarks that public sector workers would still receive a better pension than most in private sector. Dr Phillip Lee (Bracknell) said:
"Many in the public sector would have to contribute a third of their salary and pension contributions in order to get similar pensions in the private sector".
Andrew Percy (Brigg & Goole) also welcomed the changes, saying:
"It is low-paid private sector workers working beyond retirement age … who are subsidising public sector pensions while receiving none of the benefits. I therefore welcome the proposed changes, and hope that my former colleagues in the teaching profession will accept them."
Despite Alexander saying that the pensions proposal was an "offer that the opposition should support", the reactions from the Labour benches drew some criticism. Anne Main (St Albans) described their response as "lukewarm", stressing her disappointment. Main also asked of Alexander, to "stress to the unions that this is not the opening salvo in further negotiations" and at present there is a "realistic opportunity to come up with a long-term solution for the 25-year period that would be best for the taxpayer".
Richard Graham (Gloucester) also expressed disappointment at Labour's inability "to welcome today’s news, especially as workers in businesses such as Wall’s in my constituency have recently seen their own pensions significantly watered down". However, not all Tory MPs were damning of the Labour reaction to Alexander's statement. Bernard Jenkin (Harwich) asked Alexander to "welcome the notes of conciliation in the response by Her Majesty’s official Opposition". He continued:
"Although our politics does not lend itself to consensus, is this not a subject on which we wish to reach a broad consensus both for the well-being of public sector pensions and for the country and economy as a whole".
You can read Danny Alexander's Commons statement in full here.