Since the launch of our third Council Spending Uncovered paper last week, which looked into the cost of the Local Government Pension Scheme, there has been a lot of media discussion of the issue - which is, of course, exactly what we hoped for. This is a crucial issue and the cost of the unreformed scheme is placing a severe burden on council budgets and taxpayers, so it is good that the true cost of the Scheme is being discussed.
Predictably there has also been some mud slinging from some usual suspects. Given that back in December we identified a £450 million local government publicity machine, it is no surprise that some people have been spinning earnestly. At least some of the taxpayers' money spent on PR men is being put to use...
So we thought this would be a good opportunity to answer the issues, questions and dubious claims that have been raised in the last few days.
It will come as no surprise to you that the main sources of these comments are the Local Government Association and the trade unions UNISON and the GMB. No vested interests in squeezing as much money out of the taxpayer as possible there, then.
First up is the GMB's statement. A somewhat old-school practice in spin doctoring is the smear, and the GMB's press office are obviously not people to pass up a good opportunity so they jumped straight in with it, describing us as
"The far-right Taxpayers Alliance..."
A classic example of the unfounded smear - and probably worth a lot of points in the Eye Spy Book of Spin. We can't say we expected the GMB to agree with us about making the pension settlement more equal, but trying to lump us in with the National Front is a bit below the belt even for them. Not content with that, they thought they'd try to undermine the facts of the report, too, claiming
Brian Strutton, GMB National Secretary, said “It’s a shame the Taxpayers Alliance didn’t do their homework. They ask for a reform of local government pensions oblivious to the fact that a new scheme starts in April 2008.
It's somewhat unfortunate that Mr Strutton doesn't seem to have actually read our report, or he would have read on Page 3 that:
On 1 April 2008, employee contributions will decrease to 5.5 per cent on earnings up to £12,000 and increase to 7.5 per cent on earnings above £12,000, while the early retirement age will increase to 55.
The point is that we are well aware that there is a change being made to the pension scheme in April, but it is not enough of a change. It is tinkering round the edges rather than real, fundamental reform of the system. The Unions should be well aware of this, as it is in fact the last tattered vestiges of the reform package they ripped to shreds with threats of strikes bringing the country to a standstill when the Government proposed them.
So let's move on to UNISON's comments. Describing the description of gold-plated pensions as a "myth" is rather deceptive - the kind of pensions enjoyed by Local Government staff are in fact so unsustainable and so generous that they are almost extinct in the private sector. The reason? They are simply too expensive to save for.
The Government Actuary's figures show that between 1995 and 2004, the proportion of public sector workers enrolled in final salary pension schemes has increased from 78 per cent to 88 per cent. At the same time the proportion of private sector workers has declined from 23 per cent to just 16 per cent.
As the population grows older, the private sector, which has to make the books balance, has woken up to the need for change and has had to move away from these final salary schemes. Not so the local councils, though - why rein in your spending when you can just charge it to the taxpayers' tab? If these pensions aren't gold-plated, how come they are unaffordable to everyone else?
UNISON's Head of Local Government, one Heather Wakefield, goes on to produce a very misleading statistic - that in local government
the average pension is just £3,800 a year
Whilst this is probably broadly factually correct, it is used very misleadingly. Given the high number of employees and staff turnover in local government - as the LGA themselves remind us, councils do provide over 800 services - this does not mean everyone working a full career for a local authority gets an average salary of £3,800. It includes everyone who worked for a council for 6 months, and then went to do something else; people who entered the local government sector for a short period of time, left and may well find with surprise that they are due a pension of 20p a month in 50 years' time. To put it in perspective, even this average of £3,800 would be a relatively sizeable boost to the basic state pension of £4,500. Given that only one in four of the general populace have private pensions, even if we take this average figure it means that local government workers are better provided for than those that struggle to pay council tax.
There was also an odd piece written on the Channel 4 News web site, who run a feature called FactCheck, which analyses data released by campaign groups, think tanks and political parties. Their piece on the report - which they seem to have spoken to the Local Government Association about but not discussed with us (and have not returned our calls) - parroted the line about the surface changes being brought in April that we've already dealt with. It also claimed we'd been disingenuous about the headline figure.
The main figure, that councils spent £4.6 billion in 2006-07 on employer pension contributions, is the fact that Unison, the GMB and the LGA all stepped quietly around. None of them have been able to undermine it because it is true - and shocking in its size. What Channel 4's report, which echoes closely LGA and union press statements, took issue with was our pointing out that £4.6 billion is equal to 21 per cent of the £22.2 billion of council tax raised in 2006-07.
This isn't an unreasonable comparison, given that the Council Spending Uncovered series is about identifying areas of spending where savings can be made that could be passed on in council tax cuts. C4 point out that councils get the majority of their income from central government, so the £4.6 billion does not come solely from council tax payers. It's unfair of them to suggest that we've tried to hide this, given that our press release stated that
Council tax is not the sole source of income for councils, nor is it earmarked for pensions, but all spending comes from the same pot - any savings made could be used to reduce council tax.
and we then repeated it in more detail in the report itself.
The facts are stark and undisputable:
1) Pension contributions by councils = £4.6 billion
2) £4.6 billion equates to more than 20 per cent of the amount raised by council tax.
3) Any savings made by reducing the £4.6 billion could be passed directly on in council tax cuts.
We want to see council tax reduced, and we're making honest, well-calculated suggestions for how to do it. Perhaps we can judge how close to victory we are getting by the way opponents have responded.