Lord Hutton urges swift pensions deal

 

The government's controversial reforms to public sector pensions may
not be enough to bring costs under control, former work and pensions
secretary Lord Hutton has warned.

The Labour peer, who conducted a review of the system for the coalition, said his findings looked "too optimistic" after UK growth forecasts were drastically downgraded.

He described the Government's proposals for increasing contribution rates and pushing back retirement ages as "credible", and urged ministers and unions to thrash out details quickly.

The comments were welcomed by Deputy Prime Minister Nick Clegg and current Work and Pensions Secretary Iain Duncan Smith, who said the settlement on offer was "very good".

But union leaders insisted Lord Hutton had interpreted the figures wrongly, and public sector workers - who went on strike last week - were being asked to take too much pain.

In an interview with BBC Radio 4's World This Weekend, Lord Hutton insisted pressure on the public finances was even greater following dire economic predictions by the Office for Budget Responsibility (OBR).

"What we've seen is how very quickly the assumptions which underpinned my assessments of the long-term sustainability of public service pensions have been shown to be too optimistic," the peer said.

"Growth is slower, we know that by 2016 on the latest projections the economy is going to be about 3.5% smaller than we thought it would be.

"That is going to affect the sustainability of public sector pensions in a negative way."

He added: "The ground underneath those estimates has changed radically and I'm afraid in the wrong direction so we cannot be sure that the costs will fall over time and that we get to a more sustainable balance."

Lord Hutton said change was the "order of the day" if UK plc was to remain competitive.

"We could be heading for the rocks unless we make adjustments now," he said.

"What the Government have tabled is a perfectly credible offer. I think it gives significant protection to those close to retirement and very generous accrual rates.

"What has happened in the last few months confirms the very important point that we can't be sure that over 50 years we will get to a better balance. So let's bring those savings forward as quickly as we can."

Lord Hutton said there had to be scope for "further negotiation and discussion" with specific issues raised by unions.

"I think there is a genuine issue between the unions and ministers about the pension contributions which I hope is the subject of further discussion because I don't think you can build long-term reform on forcing people out of saving for pensions, that is a crazy way to do it."

He added "The unions have raised some genuine concerns and I hope ministers can look again at some aspects of the way they are planning to increase pensions contributions."

Speaking on Sky News' Murnaghan programme, Mr Duncan Smith said Lord Hutton had "fully endorsed" the coalition's pensions offer.

"The fact is there just isn't the kind of money that they think there is to pay the pensions," he said.

"I think the settlement on the pensions is actually very good for them (public sector workers) in the sense that those on very low pay won't actually have to pay any increases, and those 10 years from retirement will actually not have to see any changes."

Mr Clegg said that "as circumstances are tough it's important that we get a good reasonable deal".

"I'm glad he's recognised that what we've put forward is credible and reasonable," he added.

GMB national officer Brian Strutton said: "Lord Hutton's view that the OBR downgrade of short term growth makes a stronger case for reform of public sector pensions is simply not correct. He has failed to take into account the continuing pay caps and 710,000 job losses in the public sector announced by the Chancellor which more than offset the GDP slowdown.

"Therefore over the long term, public sector pension costs will still fall as a proportion of GDP which is the accepted affordability measure.

"However it is good that Lord Hutton has belatedly agreed with unions that the Government's 50% contribution increase on public sector workers is too much and will drive people out of pension saving."

Meanwhile, it emerged that senior ministers are facing a £4,000 hike in their pension contributions to show they are sharing the pain with the rest of the public sector.

David Cameron has written to his colleagues setting out swingeing rises, arguing that they cannot expect low-paid workers like nurses and dinner ladies to "take on a burden we are not prepared to assume for ourselves".

At 4.2%, the average increase for ministers will be 1% higher than the public sector as a whole. Under the current scheme they can pay in at 11.9% of ministerial salary, receiving a fortieth for each year of service when they reach the retirement age of 65.

Staged rises over the next three years will see Cabinet ministers contributing 17.9% of their £69,000 pay to get the same benefits - some £4,000 more.

Ministers of state will pay an extra 4%, equivalent to £1,320. And junior ministers face 2.5% hikes costing £592.

The Prime Minister himself will be hardest hit with an additional bill of £4,600 per year. Labour leader Ed Miliband will pay an extra 6%.

The MPs also face similar downgrades of their Commons pensions in a review being conducted by the Independent Parliamentary Standards Authority (Ipsa).

Although most ministers are said to be ready to accept the effective pay cuts, they are likely to cause resentment among some who do not have substantial fortunes to rely on.

PA

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
Jamie and Emily Pharro discovering their friend's prank
video
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Daniel Radcliffe and Zoe Kazan in What If
filmReview: Actor swaps Harry Potter for Cary Grant in What If
News
Our resilience to stress is to a large extent determined by our genes
science
Travel
travel
Arts and Entertainment
tv
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Pornography is more accessible - and harder to avoid - than ever
news... but they still admit watching it
Arts and Entertainment
The eyes have it: Kate Bush
musicKate Bush asks fans not to take photos at London gigs
News
i100
Extras
indybest
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Marketing & Commnunications Executive, London

£30000 - £34000 per annum: Charter Selection: This highly successful organisat...

C# .NET Developer (ASP.NET, JavaScript HTML, CSS) Finance

£60000 - £65000 per annum + Benefits + Bonus: Harrington Starr: C# .NET Develo...

MI Analyst-Reporting-Bank-Edinburgh-£260/day

£230 - £260 per day + competitive: Orgtel: MI Analyst-Reporting-Bank-Edinburgh...

Junior Database developer (SQL, T-SQL, Excel, SSRS, Crystal rep

£25000 - £30000 per annum + bonus+benefits+package: Harrington Starr: Junior D...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment