Pension reforms: Hutton warns ministers over punitive rise in costs

Former business secretary and pension reform architect calls for deal with unions and says coalition risks exodus from scheme The former Labour business secretary who designed the coalition’s contentious public sector pension reforms will warn ministers on Thursday that their plans are risk becoming so punitive they could force people out of pension schemes altogether. Lord Hutton of Furness will warn of a “serious” risk of a mass exodus from the local government pension scheme – which is funded and has 3.5 million members – if contributions are raised too high and no other compensation is provided. But he will also urge the unions and ministers to get back round the negotiating table to thrash out a deal. “If these reforms have any chance of succeeding then people need to know that they are being treated fairly … there should be full and proper consultation and discussion with the trade unions,” he will say. “That is how we do things in Britain – the public would take a very dim view of any government that fails to honour this basic requirement. “We must try and avoid the confrontation and division that marked previous decades and must not turn the clock back.” Danny Alexander, the chief secretary to the Treasury, sparked a union backlash last week by unilaterally announcing plans to increase contributions for public sector workers and raise their pension age to 66 by 2020. Ministers have also accused some unions of undermining talks by announcing strike action on 30 June before the negotiations conclude. Hutton, who was work and pensions secretary in the Blair government, will speak at the Institute for Public Policy Research thinktank in London. He will stress that there is no choice but to reform pensions as people live longer. “This issue is coming down the track at us whether we like it or not and we can’t afford to duck it or fudge it,” he will say. He will question the coalition’s moves – under the “fair deal” consultation that ended last week – to allow private companies to drop public sector pensions when they take over a state service in an outsourcing arrangement, saying: “We have to avoid a new race to the bottom here.” On the risk of opt-outs, Hutton will urge ministers to consider alternatives being proposed for local government workers. His report to the government in March urged caution about the risk of members pulling out more generally, but on Thursday he will highlight the plight of the local government pension – a self-contained, funded scheme unlike the majority of public sector pensions, which rely heavily on the Treasury. Ministers have acknowledged the risk of the welfare system being left to pick up the pieces after a mass opt-out from public sector pensions. Last week Alexander announced that those earning under £15,000 a year would be exempted from the 3.2 percentage point average increase and for those under £18,000 it would be limited to 1.5 percentage points. But that underpinning means even bigger increases for higher earners, including teachers, doctors and managers. A survey by the GMB union suggested that about 50% of middle earners in local government could opt out as a result of higher contributions. Delegates at Unison’s annual conference in Manchester on Wednesday heard appeals for co-ordinated walkouts in the first week of October to disrupt the Tory party conference should the talks on pensions, due to resume on Monday, collapse. Unison, the biggest public sector union, voted to mandate its general secretary to ballot for strike action at any point, with some members calling for a strike to disrupt the Tory conference in October, which is also in Manchester. Amid defiant warnings that state employees would not be railroaded into changes, John McLoughlin, a delegate from Tower Hamlets council, London, said: “We should come back to this city, and when Cameron and George Osborne get up to speak they should be met with resistance.” David Cameron’s official spokesman said on Wednesday the government wanted to avoid strikes. “Our objective here is to protect public sector pensions in a way that is fair to public sector workers but also fair to taxpayers,” he said. Public sector pensions Danny Alexander Welfare Trade unions Liberal-Conservative coalition Conservatives Polly Curtis Dan Milmo guardian.co.uk

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