Godwin’s Law and public sector pension deficits

Neil Copeland

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Unite has launched an intemperate attack on the Lib Dems, generally considered a fairly inoffensive bunch, for having the impudence to raise the issue of Public sector pension costs.

Contained in Unite’s press release is one of the more bizarre claims I’ve come across in any recent discussion of pension matters – “the current level of public sector pension provision is self-funding i.e. the money needed is covered by the contributions made by employers and employees.”

If we leave aside the myriad of objections that an actuary might have to this sweeping statement, this ignores, as only the public sector can, the fact that the only real source of revenue it has is the tax-payer. “Employer” contributions are taxpayer funded as are “Employee” contributions paid out of tax funded salaries. Many in the private sector despair at this sort of ill thought out logic, having seen their employers struggling in recent years to deal with the harsh realities of escalating pension costs.

It also ignores the fact that many public sector pensions schemes are provided on a pay as you go basis and are not funded at all. I guess Unite’s argument is true if you accept the premise that taxpayers are an unlimited source of tax revenues and can be soaked indefinitely in future years to meet the costs. And, yes, I know that public sector workers are taxpayers too, but that’s just a case of robbing Peter to pay Peter, which makes even less sense than robbing him to pay Paul. No private sector company would be allowed to approach pension provision for its employees in such a reckless manner.

For all the same reasons that have affected final salary pensions in the private sector, the costs associated with public sector final salary arrangements have increased significantly in recent years, to the point where they are unsustainable for the future – see previous blogs.

Even Gordon Brown has now conceded that there will have to be significant cuts in public sector spending in the future to meet the Governments targets for deficit reduction, regardless of who wins the next election. Reform of public sector pensions is one way of reducing the level of cuts which will be required in frontline services and staff, if the Government’s deficit reduction targets are to be achieved.

Unite seems to believe that raising this profoundly important question is a thought-crime associated only with “right wing myth makers” and that it should not be a matter of concern to democratically elected representatives ultimately responsible to the electorate. This seems perilously close to applying Godwin’s Law, which states that as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1, to the legitimate debate on public sector pensions.

We need a reasoned debate on the reform of public sector pensions and to focus on the real issues at hand, rather than indulging in playground name calling.

Neil Copeland

Post by Neil Copeland

Director, pensions consultant and adviser to trustees and employers on all aspects of work based pension schemes.