Unite and local government pensions

Submitted by martin on 30 December, 2011 - 9:56

Leaders of the "Big Three" unions, Unison, GMB, and Unite, are talking of a great break-through in talks about the Local Government Pension Scheme even if not in the other big public-sector schemes, health, civil service, and teachers.

But they have not been helpful with detail. On 16 December the union leaders announced that they had signed a deal with the local government employers, but they were "not in a position" to tell members what deal the leaders had signed on their behalf, because "the outcomes have not yet been given the 'green light' by Eric Pickles, the Secretary of State".

Since then Unison at least has published the document agreed with the employers. The Government has also published details, and is emphatic that "In all cases [i.e. including local government] the... cost ceilings set on 2 November 2011 remain unchanged and no additional money has been made available".

Pension issues are slightly different in local government from the other three big sectors. The Local Government Pension Scheme has an actual pension fund (or, more exactly, some dozens of funds) into which employers and employees pay: the money is invested and pensions are paid from the proceeds.

The other three schemes are pay-as-you-go: contributions go into, and pensions come out of, general government revenue.

Increased contributions to the LGPS make no direct difference to the Government's budget calculations. The extra 3.2% of wages which the Government wants to take in contributions in the other schemes has not been a red line in the LGPS talks.

That explains the prize which the three unions claim they have won: "zero increases in employee contributions for all, or the vast majority of members" until 2014, and a vague promise that there may be zero or only small increases after that.

The unions will have traded on the real concern of the employers that heavier contributions in local government will mean even more workers' opt-outs from the pension scheme (where they are already far more numerous than in the other schemes), and so leave the pension funds weaker rather than stronger.

But if the Government says in 2014 that actuarial calculations show increased contributions are in fact necessary, what sort of position will the local government unions be in to fight it after settling for a limp formula now?

The Government has been clear that it wants a saving in the local government scheme as well as in the others, only filtered by way of cuts in central government payments to local authorities. And it insists that it has achieved that saving.

How? The deal offered by the local government employers means that the unions sign up to a increase in pension age and a change from a final-salary to a career-average scheme, which almost certainly means worse pensions even at the later pension age.

It also involves the changed (worse) pensions coming in earlier than in the other sectors. In local government, the worse scheme is to start from April 2014. In other schemes it will be from 2015.

One worsening of pensions, the change from RPI to CPI for adjusting pensions to inflation, is already in place across the board, since April 2011.

The Local Government Pension Scheme has a rule that employers' contributions to it must be set every three years by an expert valuation of the funds as measured against predicted future pension payments. Bringing the worse scheme in quicker is supposed to be a cunning trick to avoid that rule imposing high employers' contributions at the next valuation, in 2013, and thus to convince the Government that it can make savings after all. Whether it can be counted a real trade-union victory is another matter.

On 19 December Unite, GMB, and Unison promised the Government they would suspend strike action on the basis of the deal with the local government employers. Then a tactless letter from Eric Pickles led the unions to retract that promise (though not to plan any further action, and not to retract the deal with the employers).

Unison and GMB retracted the retraction after Pickles "clarified". Unite remains "retracted" until the sector Executive meets on 9 January.

The employer-union document mentions an "accrual rate" of 1/60 for the new scheme, meaning that each year's contributions earn you 1/60 of your "career-average" pay as a pension at retirement age. There are two problems here.

Since "career-average" pay is almost certainly less than "final salary" even for the least-promoted workers, a switch to "career-average" means worse pensions unless it is linked with a much better accrual rate, not an unchanged one.

Further, the calculation of "career-average" depends on what system is used to inflation-adjust bygone years' pay. If your 2012 pay is calculated into an average in, say, 2042, by upgrading it only by CPI, or CPI-plus-a-little, then the "average" comes out as much less than you'd think.

The deal with the local government employers thus means the unions signing up to much worse pensions, and breaking the common front of the public sector unions across the different pension schemes, all for the sake of a loose promise of smaller increases in contributions.

Victory in the pensions campaign would mean at the very least defending the pensions as they are. Even with the right-wing press vilification of strikers and the atrophied nature of many unions, millions of workers struck and rallied on 30 November. The fight is just beginning. Yet with the 16 December deal the union leaders of the big three moved to throw that momentum away, to settle for a wretched deal when the campaign has scarcely started to get underway.

This sort of thing is why throughout the pensions struggle we have demanded and fought for rank and file control of the dispute, not agreements done behind closed doors and then offered to the members as a done deal.

Martin Mayer, the chair of the Unite United Left, has put out a statement titled "Unite has not sold out over pensions". It is true that Unite has not signed a deal with the Government. But then neither has any other union.

Other unions, with the honourable exception of PCS, have signalled both to the Government and to public-sector workers (via the media) that the campaign is over, and all that remains is to negotiate details. Unite has joined in that signalling.

Some other unions (most clearly the right-wing civil service union Prospect) have covered their backs with talk that they reserve the right to take further industrial action if the negotiations go badly. The Unite leaders have not done even that.

Unite and the other unions have signed up to a deal with the local government employers which accepts the government's chief demands with only a vague promise of zero or small increases in contributions, and which leaves the civil service, teaching, and health unions in the lurch.

The United Left and other militants and socialists in Unite must put all pressure possible on the Executive to reject this rotten "deal" on 9 January and restart an active campaign for pensions.

If Unite signs up to this settlement, it is a defeat and a rotten deal for the members. And, signalling to the Government that the public sector unions have no stomach for sustained campaigns, it could be the beginning of a historic defeat for our class.

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