Dominic Lawson: It is the haves going on strike, not the have-nots

If there is a class divide in the employment market, the underdogs are not the public sector

Dominic Lawson@indyvoices
Tuesday 29 November 2011 01:00

Children who make unreasonable material demands of their parents, especially around Christmas, tend to meet a standard rebuke: "Money doesn't grow on trees, you know." For too long governments failed to impress this unfortunate fact on their voters, and, in particular, on those whose remuneration was derived entirely from the ability of the state to raise the funds from taxation and borrowing.

This is now being brought home with particular force in countries such as Greece and Italy, where the state's attempt to maintain the ability to borrow at all has precipitated belated efforts to reform their unaffordable public-sector pensions. It has led to physical violence, not just on the streets of Athens, but on the floor of the Italian parliament. The leader of the Northern League party, Umberto Bossi, had been objecting to the reform plans, when the leader of the Future and Liberty of Italy party, Gianfranco Fini, suggested that Bossi's stance was linked to the fact that his wife had retired on a state pension at the age of 39. This remark, one newspaper reported, "sparked fisticuffs between MPs from the two opposing parties, with parliamentarians lunging for each others' throats".

How decorous seems our Prime Minister's Question Time by comparison: there has been relative political consensus on this inherently divisive issue in Westminster, with Eds Miliband and Balls avoiding any suggestion that Labour backs tomorrow's "day of action" by the public-sector unions.

Different states within the European Union have their own peculiar versions of the same problem; and this is true within the United States of America, too. Within the US, those states closest to the European model of high public spending and influential public-sector unions are now facing a pensions crunch of similar severity. There, an expanded public-sector workforce on salaries which had increased above the private sector rate over the previous 15 or so years of easy borrowing, combined with an equally dramatic rise in life-expectancy, hit the wall of a sharp slowdown in economic activity and of the amount of money that could be raised through taxes.

Nowhere has this been more painful than in California, as Michael Lewis details in his superb new book Boomerang. Lewis visited the city of Vallejo, which had declared bankruptcy. By 2008, when the credit finally crunched, says Lewis, "80 per cent of Vallejo's budget was wrapped up in the pay and retirement benefits of public safety workers. The public safety workers thought the city was out to screw them on their contracts; the citizenry thought that the public safety workers were using fear as a tool to extort money from them."

A similar division of opinion will be evident in this country tomorrow, with more than 57,000 NHS patients liable to be affected due to the cancellation of operations, outpatient appointments and diagnostic tests. Then there is the mass inconvenience (to put it no higher) of closed schools, and disruptions to transport, libraries and even funeral services.

Len McCluskey, the general secretary of the Unite union, said yesterday that "the public will put up with the inconvenience because they understand the fairness of the public- sector workers' case. I believe they also realise that it is raising issues about... how much inequality any society can withstand before the very notion of society starts to fragment."

To judge from the opinion polls, the majority of the public as a whole do not support the strike; and indeed, although 75 per cent of those Unite members who voted in the official ballot chose to back the day of action, only 31 per cent of the membership actually turned out – which means that just 23 per cent of Mr McCluskey's members voted for strike action. That level of inertia does not suggest a level of passion to match McCluskey's fiery rhetoric against what he calls "Tory class warriors".

In fact, if there is a class divide within the employment market, the underdogs are definitely not the public sector. As the most recent official figures from the Office of National Statistics show, the median gross weekly pay in the private sector was £465, compared with £539 in the public sector; when employer pension contributions are added in, then the median private sector figure is £479, way below the public sector median of £615. That growing gulf is a reflection of the fact that defined benefit pension plans are all but extinct in the private sector, but still available across the board in the public sector.

It is true that the public sector traditionally expected better pensions, as a quid pro quo for the fact that pay rates were lower than jobs of equivalent responsibility in the private sector. But now (because of Gordon Brown) the gap in basic pay is the other way around. So the fact that the state's employees get an effective bonus of about 30 per cent of their salaries in the form of employer pension contributions (paid for by all taxpayers, including those with no employer pension provision whatever) is objectionable on precisely the grounds that Mr McCluskey seeks to defend his members' privileges: inequity and unfairness.

In this newspaper yesterday, a Torquay teacher called Julia Neal said that she was backing the strike against the Government's proposals because "one of the things I really resent is for teachers to have to work until they're 68". Actually, she will not. Under the Government's highly conciliatory proposals, a 42-year-old teacher who has worked for 22 years and now earns £32,000 a year will have to work until the age of 62 to get the £15,200 a year pension that she would have received from the age of 60; if she decides to work until 67 she could increase her teacher's pension to £20,200 a year. That's not an investment banker's pay-off, but it's an unimaginably good retirement package compared with what awaits those of similar earnings and long service in the private sector, where the average pension pot provides an annuity of just £1,200 a year.

Len McCluskey draws a different contrast: he argues that his strikers are "victims of the elite policy of taking money from the taxpayer to give it to the bankers". Yet if anyone is the biggest victim of that phenomenon, it is the ordinary private-sector workers, whose annuities have been pulverised by the weakness in the stockmarket and the ultra-low interest rates used by the Bank of England to counter the effects of the credit crunch on banks' balance sheets. Because the public sector's pensions come overwhelmingly out of the pot of (future) general taxation, rather than an accrued investment fund, they, by contrast, have been immune.

In other words, tomorrow's day of action is a strike of the haves, largely at the expense of the have-nots.

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