Pickles' letter to unions puts pensions deal at risk

Government backtracks after claims Communities Secretary tried to impose last-minute conditions

Ministers yesterday hailed a public sector pensions settlement that would last for "a generation" and head off the threat of further mass strikes, despite a last-minute hitch that threatened to undermine the deal.

Francis Maude, the Cabinet Office minister, said "headline agreements" had been reached with the majority of unions representing public sector workers in the NHS, education, local government and civil service.

The proposals will now be put to individual union executives and members in the New Year, while ministers intend to draw up legislation to enact the new schemes by the spring.

But in a sign of how fragile the agreement is, the Government had to withdraw a letter from the Communities Secretary Eric Pickles to unions representing local government workers after the GMB and Unite accused him of laying down "new conditions" that could be a "deal-breaker".

Faced with the prospect of the pensions deal unravelling before it had even been formally announced, Mr Pickles was instructed to withdraw the letter and issue a replacement.

"It is not a position that has been agreed," said Chief Secretary to the Treasury, Danny Alexander.

But by early last night the new letter had still not been released, causing local government unions to suspend their agreement and seek an "urgent meeting with Government to establish an agreed way forward".

Mr Pickles' department later issued a statement saying it was in talks "to resolve any misunderstanding and reassure them [the unions] that our intentions have not changed."

In the longer term, the Government is also concerned the plans could be rejected when scrutinised by individual union executives.

One of the main civil service unions, the Public and Commercial Services (PCS) union, has already said it will reject the offer while the National Union of Teachers also suggested it would have considerable difficulty recommending it to members.

It is likely to be late January before a clear picture emerges of which unions will agree to the deal.

However, the prospect of another mass walkout of public sector workers has receded significantly.

"We've moved to a stage where we are actively consulting on these proposals rather than actively considering further industrial action," said one senior union source.

"Has a deal been done yet? No. Is a deal now more likely? Yes."

Mr Alexander told MPs that changes to pensions delivered the Government's key objectives of amending them to a career average arrangement, making public sector staff work longer before they receive a pension and paying higher contributions.

But staff less than 10 years away from retirement will face no change to their pensions and those earning less than £26,000 will be protected from a contributions rise next year.

Also included is a pledge to consult over the impact of these changes on staff in the emergency services as well as a commitment to allow those who leave the public sector to retain their right to stay in the pension scheme.

"These agreements deliver the Government's key objectives in full and do so with no new money since our November offer," Mr Alexander said.

"These reforms will save the taxpayer tens of billions of pounds over the next few decades and significantly improve the long-term fiscal sustainability of this country."

But the PCS said it was taking legal advice over being "excluded" from the civil service talks.