Hutton: pension reforms are urgently required due to lack of UK growth

5th December 2011

Citywire reports Hutton as saying: "Growth is slower. We know that by 2015 on the latest projections the economy is going to be about 3.5 per cent smaller than we thought it would be.

‘That is going to affect the sustainability of public sector pensions in a negative way. The ground underneath those estimates has changed radically and I'm afraid in the wrong direction so we cannot be sure that the costs will fall over time and that we get to a more sustainable balance.'

However Hutton also warned that the Government had to be careful that the increases in contributions for public servants particularly those on low to medium pay earnings did not lead to a big increase in opt outs which would not serve the country well.

The Telegraph reports that Hutton's remarks have still provoked the ire of trade unions. It quotes GMB national officer Brian Strutton saying: "Lord Hutton's view that the OBR downgrade of short term growth makes a stronger case for reform of public sector pensions is simply not correct. He has failed to take into account the continuing pay caps and 710,000 job losses in the public sector announced by the Chancellor which more than offset the GDP slowdown."

The Telegraph story provokes a large number of comments.

observer20 writes: "How telling the comment by GMB officer Brian Strutton is. The justification for avoiding reform now is suddenly that we are going to have fewer public sector workers so it's OK for them to receive larger pension suport than anyone else.  By that logic he presumably thinks that if we have 2/3rds fewer it would be OK to pay them three times the pension."

Telegraph commenter coojee also wades in from the private sector side of the argument:

"As a tax payer I'm contributing to public sector workers pensions as well as trying to pay for my own pension. The value of private sector pensions was decimated by Gordon Brown and I didn't see any public sector workers kicking up a fuss about that despite all their bleating about how they're just after fairer pensions for all. My employer doesn't contribute 22% into my pension like the government does into the public sector scheme, I'd be lucky to get 10%. I don't have a final salary scheme, I have to make do with whatever the pot's worth at the end."

Last week, trade paper Money Marketing canvassed the views of several striking public sector workers but it does feel as if it is case of never the twain shall meet between public sector and private sector opinion.

It quotes Sahsa Elliot is a primary school teacher from Camden saying: "The Government usually carries out independent valuation of the schemes every four years. It is refusing to do the one due now because it knows it will prove it is perfectly sustainable. The truth is, it is quite handy to rob them. The NUT estimate that since 1923, when the teachers' pension scheme started, that £46bn has been paid in that has not been paid out, so it is quite clearly a profitable cash-cow. She says removing pensions is part of efforts by Education Secretary Michael Gove to fully privatise the education system using the free school and academy programmes."

Meanwhile, there may be bad news for better off pensioners with the Deputy Prime Minister Nick Clegg calling for better off pensioners to lose their entitlement to free bus passes and free TV licenses as the Telegraph reports though there is opposition from the Conservative side of the coalition.

More on Mindful Money

Pensions hit by move from RPI to CPI

How Eurozone uncertainty affects UK employment

Parents' fear for bleak financial future

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