Anatomy of a theft
WORKERS, NOV 2005 ISSUE
The attempt to divide workers in the public sector by worsening the pension terms and conditions of new entrants seeks to undermine the collective bargaining principle that workers doing the same job should receive the same rate of pay and accrue the same rate of pension. It is true the government would like to have gone further than force workers into accepting different retirement ages depending on when first employed, but let us not pretend that this is the end of their attack: there is more to come. As regularly outlined in Workers, pensions have been continually undermined. For example, prior to the spurious longevity arguments, the government were already pushing women's retirement age back to 65 under the guise of equalisation with men.
What has underpinned the attack since 1999 but never acknowledged or mentioned, has been the fall in long-term interest rates which has given the government and employers the opportunity to cost future pension payments at all-time artificially high projected capital values. Yields now stand at 4.3%, whereas prior to 1999 they had stood at a minimum of 7% for around 25 years. Although not obviously apparent, a 1% increase in assumed future yield would reduce the current estimated occupational pensions deficit from £57 billion to £21 billion.
All of this of course is based on financial models but suffice it to say that what is being attempted on pensions is akin to the 1929 attack on wages. At that time, it was the Gold Standard that was used as the totem, whereas now they call it EU monetary union and interest rate convergence.
What happened on 18 October was that the government, having already taxed £47 billion from occupational pension investments since 1997, persuaded trade union negotiators to accept a pensions downgrade. This was to help satisfy the recent EU demand that Britain should remove a further £10 billion from its capital expenditure. Trade union negotiators would be better armed in the future if they were to have a more sound understanding of political economy, rather than being pension enthusiasts dazzled by sophistry.