It is worth reflecting, especially today, on the problems confronting public sector pension provision. I hope the people striking will have sufficient breadth of mind to consider where the country, which had the best provision for pension funding in western Europe in 1997, including in the public sector, went wrong.
In the beginning we elected New Labour, feeling it was safe to do so under the quasi-Tory Blair and ‘prudent’ Gordon Brown. In Brown’s first budget he set off on the road to where we are today when he tampered with the Advance Corporation Tax regime which had applied for years to pension funds. I have seen figures suggesting that this action has deprived them of funds of in excess of £150 billion since then. Part of the effect of this has been that private sector pension pots have shrunk and final salary schemes, once commonplace, have all but disappeared.
Public sector schemes have not been so badly affected because, effectively, they are supported by everyone else’s taxes. As a councillor from 1998 to 2010 I saw that, in my early years it was occasionally the case that no money came from the General Fund to bolster the pension fund, so well were the fund’s investments performing in relation to the demands upon them. Latterly substantial subventions have been necessary and these have come from Council Tax payers.
Which brings us to the second prong of Labour’s creation of the current crisis. Prudence was abandoned and profligacy was the order of the day. The Guardian on Wednesday bulged for years with adverts for new public sector appointments adding hundreds of thousands to the public payroll and billions to the pension commitments made to each of them. Brown, we know, was creating a ‘client state’ of millions of voters with a vested interest in maintaining and expanding the bloated public sector payroll and the Labour government with it. On top of that we had inflation-busting public sector salary increases whereby Chief Executives of even small local authorities are being paid more than the Prime Minister – and it doesn’t stop at CEOs, the others are paid pro rata. And it worked for a time – at the expense of borrowing heavily even in the most benign economic circumstances for decades, when a truly prudent policy would have been to repay old debt, rather than taking on new debt all the time. That, and to boost wealth creation and the private investment from which it flows.
And the country fell for it! It suited many of us to believe that Gordon had really abolished the economic cycle and that the cloud-cuckooland we all inhabited would last for ever. Even George and Dave seemed to fall for it, abandoning ‘Thatcherism’ and banging on about ‘sharing the proceeds of growth’, when they really should have known better.
The egg laid by Tony out of Gordon has hatched an enormous chicken which had to come home to roost sometime. Now is the time, but let no-one be in doubt as to the parentage of this particular bird.