February 3, 2010
Pensions and Public Opinion
Britain’s public sector was recently under rightwing attack. The Times claimed “Public sector pay races ahead in a recession”, whilst The Telegraph intoned that “Public sector workers earn 7% more on average than their peers in the private sector — a pay gulf that has more than doubled since the recession began.”
Ben Goldacre did the statistical demolition here, whilst Mehdi Hasan poked fun at the right for its “politics of envy”.
Misleading rants about public/private pay differentials are new on the scene, however. Much better established is the claim that public sector workers receive cushy risk-free “gold plated” pensions at the vast expense to the ordinary taxpayer. Indeed, that we must end “the pensions apartheid” is a favourite meme of right-wing front organisation The Taxpayers’ Alliance. It’s also one that’s been found in the mouth of David Cameron.
But it’s a myth, as demonstrated by this excellent TUC report [PDF].
In particular, it’s worth noting the following:
- “The mean average public sector pension is £7,000 but the majority of public sector pensioners have pensions of less than £5,000 [per year].”
- “The value of the main schemes in the public sector for new entrants are similar to a medium private sector final salary, at around 21% to 24% of salary on average.”
- “Many reports about pensions would lead you to believe that most public sector workers retire at the age of 60 on two-thirds salary, but in fact this only applies to the very few people who work in public service for forty years or more. The pension age for many public sector workers has always been 65 and this now applies to most new joiners.”
- “The average pension in Local Government is around just £4,000 per year, and just £2,000 for women while in the Civil Service the average is £6,500. The average pension for a female NHS worker is £5,000 but the median pension for women is much less. In fact half of all women pensioners who have worked in the NHS get a pension of less than £3,500 per year”
And loads more. Because this matters.
The right is attacking public pensions quite deliberately. Rather than simply being a “politics of envy” as Mehdi Hassan suggests, this approach acts as a Trojan horse for the right: by instilling the idea that the public sector is bloated, out of control and parasitic on the private sector or ordinary tax payers, the pretexts for ideologically-driven state-slashing are laid.
David Hume remarked way back in the 18th Century that all politics is founded upon “opinion”. At one level, Hume was remarking that because rulers are always outnumbered by the ruled, the former can only govern so long as they have the “opinion” of the masses behind them.
The importance of “opinion” was later picked-up by James Madison after the American founding. Madison noticed that public opinion established the terms for what we would now call “public legitimacy”, or what governments can and can’t get away with:
“Public opinion sets bounds to every government, and is the sovereign in every free one”
The problem with public opinion, of course, is that it doesn’t always track the facts (something that deeply concerned Madison). If the right – and specifically the Tory Party – can maintain and fuel the common misperception that the public sector is bloated and parasitic, then it will have “public opinion” on its side to begin a slash-and-burn attack.
The best – and probably the only – way to fight back is to shape public opinion in accordance with the facts. We can start with pensions. Read that TUC report. And spread the word.
Nigel Stanley said,
February 3, 2010 at 1:23 pm
Thanks for the plug for the TUC work. Your analysis is spot on.
The scale of the problem is shown in last week’s New Statesman in the piece by Alex Brummer.
http://www.newstatesman.com/society/2010/01/sector-pensions-retirement
Alex is normally worth reading, but such is the low state of this debate he hasn’t felt much need to fact check his assertions.
See my post on Touchstone for more:
http://www.touchstoneblog.org.uk/2010/01/alex-brummer-attacks-public-sector-pensions-in-the-new-statesman/
freethinkingeconomist said,
February 3, 2010 at 3:00 pm
Read the chapter in the IFS Green Budget today. Then spread the word. I suspect they have slightly less bias . . . .
They first demolish the idea that public sector pay is unfairly high. But then the pensions side.
I really don’t trust the TUC at times, particularly after listening to that execrable Sarah Veale CBE interview
Web links for 3rd February 2010 | ToUChstone blog: A public policy blog from the TUC said,
February 3, 2010 at 7:32 pm
[...] Bad Conscience: Pensions and Public Opinion Terrific post on public sector pensions from Paul Sagar Related posts (automatically generated):Terry Rooney is wrong about top public sector pensionsPublic sector pensions again [...]
Phil said,
February 3, 2010 at 11:49 pm
“The value of the main schemes in the public sector for new entrants are similar to a medium private sector final salary, at around 21% to 24% of salary on average.”
This statement needs some further explaining, and analysis! I find it surprising that the article that you wrote doesn’t touch on the biggest debate in the world of pensions Defined Contribution vs Defined Benefit schemes. The sentence above by referring to final salary alludes to the fact that it is a defined benefit scheme in its wording. It is a well known fact that employers have found DB schemes unfeasible, you only have to look at the likes of BT and British Airways and their spiraling pension deficit issues to see this.
A DB scheme has always been seen as more beneficial to an employee than a DC scheme. Think about it, your pension is based off your final earnings when you are most likely at peak earnings, whereas with DC you contribute payments based on more of an average salary through your life time. It is a well known fact that public pensions are majority DB schemes whereas, par a minority, private companies are DC and those that aren’t are moving towards one (public pensions do also have a security premium in the sense that you would hope UK plc could never go bust and default on obligations). I also wonder how many people have a suitable pension for retirement as the onus is more on the individual in a DC scheme
Now true UK plc has cheaper funding cost and a greater asset base (taxable people) to fund this liability than any private would, but I wonder if we looked at the pension situation of “UK plc” as a liability (which is very difficult to do as we need to assess the actuarial cost based on average lifespan) whether we would see a spiraling issue?
Just wanted to add to freethinking economist, although i have not had time to read the paper, it should probably be noticed that a certain Investment Bank has sponsored and collaborated on the paper, well renowned for have a very right wing CEO! (though i do generally like the IFS I must admit)
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