There’s nothing unaffordable about public sector pensions

Writing on the PoliticsHome website, Conservative MP Brandon Lewis argues that the Public sector is not immune to change and that the coalition government has made a ‘fair’ and ‘generous’ offer.

So the premise of his argument rests solely on the key measure of ‘affordability’.

This, as anybody who has actually taken the time and trouble to read the Hutton report  knows, is something of a myth.

What page 23 of the report shows is that even without the Hutton reforms, the cost of public sector pensions on the key measure of affordability (as a percentage of GDP) has already peaked and is set to decline markedly over the years ahead. That's because public sector pensions have already been quite significantly reformed, the two main changes being higher employee contributions and the shift from RPI to the generally lower CPI for indexing purposes.

Whilst Brandon Lewis is right to say that in general  private sector pensions have suffered,  (when Lab abolished the tax credit on dividends)  this alone is not a good reason to be equally pernicious to the public sector. Brandon’s policy is a "race to the bottom".

What he really proposes is a move to the leveling of public sector pensions down to the disgracefully low standards that rule in the private sector?

What Brandon Lewis also fails to tell his readers is that the Office for Budget Responsibility projections, as shown in the bar chart beneath, show much the same thing. Far from rising as a proportion of GDP, the cost of public sector pensions is set to decline even assuming no further reform.

This graph clearly shows that the PS pensions peak in 2012-13 and that at 1.4% of GDP they are most certainly affordable. This is no demographic time bomb!

What Brandon Lewis is really saying is that whilst he thinks it’s fair that taxpayers fund the NHS, Police and Schools within a universal tax system, he doesn't think it’s fair that the nurses, police officers and teachers have a pension that is more favourable than those in the private sector.

It’s this perceived ‘unfairness’ (or the politics of envy) that Brandon finds objectionable.

Whilst he and his fellow MP’s have only been paying very little into their own defined pensions scheme since 2006 and enjoy probably the best gold-plated final salary pension available to any public sector employees, I feel he is on rather shaky ground.

The public sector pensions are most definitely affordable it’s just that this government has other priorities.