Union fury at pensions 'bomb'

(EPA)

Union leaders threatened to walk away from talks over pensions reform today after the Government detailed plans to require most public sector employees to work longer and pay more for less generous entitlements in retirement.

Chief Secretary to the Treasury Danny Alexander provoked fury by warning public sector workers it would be a "colossal mistake" to reject a deal that was the best they could hope for.

The reforms include increasing the general retirement age in the public sector from 60 to 66, moving from a final salary system to benefits based on career-average earnings and raising contributions by an average 3.2%.

But Mr Alexander insisted that those on the lowest incomes would not have to pay any more and that low and middle earners would get roughly the same benefits as they do now.

The proposals, based on the recommendations of former Labour Cabinet minister Lord Hutton, come amid a threatened wave of industrial action starting with up to 750,000 teachers and civil servants going out on strike on June 30.

Unions chiefs responded angrily to Mr Alexander's intervention today, accusing him of trying to sabotage negotiations by announcing details of the Government's position to the media.

The GMB threatened to pull out of the negotiations altogether.

Its national secretary for public services Brian Strutton said the Government appeared to have "already made its mind up on some of the matters we are negotiating on".

"If that's right, if that's the Government's position - that they have decided what they want the answer to be - then it is going to make it impossible for us to stay in these negotiations," he said.

Describing the Government's position on contribution increases as "plain barking mad", he added: "I was convinced that the Government was reconsidering its position on that and thinking it through carefully.

"I'm worried now that they are not. If Danny Alexander is going to say 'Actually, we've made our minds up', then that is a show-stopper."

TUC general secretary Brendan Barber said the speech and the way it had been spun in the media had dealt "a serious blow to the unions' confidence in the talks.

Unite union assistant general secretary Gail Cartmail said Mr Alexander's intervention was "tantamount to bombing the talks".

And the FDA, the union representing senior civil servants and managers, accused "hardliners" at the Treasury of "doing their best to provoke strike action".

General secretary Jonathan Baume said: "I am rapidly coming to the view that these negotiations are doomed to failure while the Treasury is in the driving seat, and it is increasingly inevitable that there will be widespread industrial action across the public sector, which would be likely to include the FDA."

Labour leader Ed Miliband accused the Government of "mismanaging the situation" and warned that strikes would be "a sign of failure on both sides".

Mr Miliband said, during a visit to Greenock in Scotland: "My advice to the Government is, instead of shouting from the rooftops, they should engage in proper dialogue and negotiation with the workforce.

"That's the way you sort things out, not shouting as they have been doing, not engaging in megaphone diplomacy,"

But Downing Street said the Government was trying to have a "constructive dialogue" with the unions and pointed out that almost half - 44% - of public sector workers were non-members.

"Clearly, we have a duty to speak to those people as well," Prime Minister David Cameron's spokesman said.

Mr Alexander, one of the most senior Liberal Democrats in the Government, used a speech to left-leaning think tank the IPPR to say it was "unjustifiable to ask the taxpayer to work longer and pay more so that public sector workers can retire earlier and receive more themselves".

The Government's proposals include bringing the public sector retirement age into line with the state pension, meaning that most employees will have to work until 66, although that will not apply to the uniformed services like firefighters, police and the military.

But the Chief Secretary promised that low and middle earners would receive as generous pensions at retirement as they do now - albeit at a later age - and that those on the lowest incomes would be spared higher contributions.

In a further overture, the Government is to phase in the contribution increase, with only 40% of the rise taking effect in April next year, 80% in April 2013 and in full from 2014.

Mr Alexander said reform was unavoidable and that it was a "colossal mistake" to think the Government would change its mind.

"The history of reform is littered with examples where people simply deny the facts, deploy their myths and dig their trenches. This may hold out for a little while but eventually reality bites and when it does change is often urgent and uncompromising," he said.

He added: "Our offer is by far the best that is likely to be on the table for years to come."