The UK's main teaching unions are organising a major strike this month over pensions reform. David Davison at Spence and Partners laments their misguided 'bullying tactics'.
I find the actions of the UK's main teaching unions, the Association of Teachers and Lecturers (ATL) and the National Union of Teachers (NUT), in encouraging their members to strike at the end of the month over proposed pension reforms quite astonishing. Such short-sighted actions taken against the general economic background we are all facing will hopefully be met with a strong political response and little sympathy from the general public.
The ATL and NUT have led their members to this proposed industrial action in an effort to safeguard a generous, taxpayer-subsidised final salary pension scheme that is no longer viable and will have repercussions for all of us, including the members these unions will represent in future. When the turkeys voted for Christmas, it was, at least, only their necks on the line. This latest action threatens the future of the entire farm.
It's time for a reality check. Over the last 20 years, we have seen numerous pension reports that have all come to the same stark conclusion: we either have to pay more, work longer or retire on less. Former Labour pensions minister Lord John Hutton, who came to the same conclusions, carried out the most recent of these independent reviews. The Hutton report was unambiguous in its findings: public sector pensions are too expensive, too heavily subsidised by the taxpayer and, as a result, are creating a national pensions apartheid. Increased longevity is making existing pensions provision unaffordable, and change is inevitable.
Hutton described the final salary pension schemes - which these teaching unions are prepared to go to war over - as "inherently unfair", especially for higher earners in the public sector whose salaries tend to rise most as they approach retirement. Given that this has created a scenario whereby lower-paid public sector workers are effectively cross subsidising their higher-earning colleagues, it is not logical to see trade union members fighting to maintain this unaffordable status quo.
Hutton proposed a move to a career average re-valued earnings (CARE) scheme, where benefits would build up annually in isolation to avoid this specifically to deal more equitably with this issue. The proposed scheme would still be very attractive and considerably better than what is on offer to the vast majority of individuals in the private sector.
One of the biggest issues we face is the 'inter-generational premium', the shortfall of scheme funding from scheme members being passed on to existing ones. If the teaching representatives and other public sectors unions maintain their current position, this funding gap will widen, with our children and grandchildren saddled with an even greater problem.
This approach concerns me greatly and will have a hugely damaging impact for so many people. Students, who have been ironically supported by many in the teaching professions over the rising costs of education, could be one of the groups to feel the most pain. Already faced with an increased future burden through students' loans, is it reasonable for them also to be faced with a higher general level of taxation to fund the unrealistic pension expectations of the current generation of teachers and lecturers?
While the alternative for the teaching profession and other public sector employees is not as attractive as the status quo, it is not all bad and, most important, it is more affordable. The stated objective of the government is to maintain a high-quality defined benefit pension scheme for the public service, with a proposed scheme that is potentially more equitable for employees at the lower end of the salary scale. Are these not the people the trade unions should be most concerned about protecting?
While there is still some uncertainty about the final basis of the government's proposed scheme, there is still a period of negotiation to come to work out final details around members' contributions and other key issues. Until this process has been completed, any calls for industrial action seem as premature as they do irresponsible.
Time will tell if strike action can be ultimately avoided on this occasion, but whatever the outcome, the trade unions need to adopt a much more pragmatic and realistic approach on pension provision. Fighting for a status quo that is unsustainable, unaffordable and inherently unfair could be the biggest threat to the future of public services in this country.
We must have a more reasoned debate on this issue that takes into account the needs of all stakeholders. Clearly, what we have already are the rules of the playground, where the biggest boy tries to bully everyone else into submission, regardless of what impact his intentions have on the rest of us. One can only hope common sense will ultimately prevail.
David Davison is head of public sector, charity and not for profit practice at Spence and Partners