Danny Alexander, the Chief Secretary to the Treasury, will have a crunch meeting with union leaders next week to try to head off a summer of strikes by millions of public sector workers over pension reforms.
Trade union leaders warned that radical changes proposed by Lord Hutton yesterday could “light the blue touchpaper” for industrial action. Teachers may be the first to walk out, although council workers, NHS staff, civil servants and other public sector employees could take co-ordinated action.
Under Lord Hutton’s plans, six million public sector workers would lose their generous final salary pensions and many will have to work at least five years longer. Although the peer recommended that the changes, to be implemented within four years, would take into account accrued pension rights, he made clear that “baby-boomers” in their fifties would not be exempt.
Those in their early fifties today might have to work up to a year longer to retire on the same benefits, Lord Hutton told The Times. Nurses, doctors, policemen and teachers in their forties and below will face the full impact of the changes. High-flyers and those promoted late in their career face losing tens of thousands of pounds each year.
The uniformed services, including the Army, were not exempted from the recommendations and will be expected to work an extra five years to 60, as disclosed by The Times.
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All new recruits to the public sector irrespective of their age would move straight on to the new schemes, which are designed to save the Treasury billions of pounds.
George Osborne, the Chancellor, decided yesterday not to respond immediately but said that he would consider the proposals carefully. He indicated that the Government would not consider less generous schemes linked to the stock market by agreeing that public service provision should remain a “gold standard” defined benefit scheme.
Lord Hutton’s proposal that benefits increase with average earnings rather than inflation is unlikely to be accepted, however, which could leave people on lower incomes worse off. He also wants the Government to allow workers to retain the link with their final salary at the end of their career for the portion of their employment before the scheme takes effect.
David Cameron may also be reluctant to take on the Armed Forces at a time when soldiers are fighting in Afghanistan.And public sector employers could face industrial tribunals over changes to previously agreed contracts, although the reforms could bring the end of the Fair Deal, which forces companies to guarantee public sector pensions when staff transfer.
About 12 million public sector employees depended on pensions in retirement but costs were increasing as people lived longer, Lord Hutton said. The pension bill is now over £30 billion a year and the Government has £1 trillion in liabilities for current pensioners and workers.
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Unions stepped up their threats of industrial action and warned that workers such as midwives could resign or stop paying into the scheme.
Dave Prentis, leader of Unison, said:“We want to talk to the Government about their response as a matter of urgency, but I am sending out a clear message to our 1.4 million members warning them that industrial action is now one big step closer.” Brian Strutton, national officer of the GMB, described many of Lord Hutton’s conclusions as “questionable”.
He added: “It’s not cogent enough to be a blueprint for reform but it might well light the blue touchpaper for industrial action.”
Peter Carter, the general secretary of the Royal College of Nursing, said: “There’s no doubt that these proposed changes are another hammer blow to the morale of dedicated nurses.”
Business leaders supported the reforms as a “big step forward” towards making public sector pensions affordable. John Cridland, director-general of the CBI, called for the recommendations to be “implemented in full by Government and public sector employers”.