Defining identity in military terms

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There’s a lot of lobbying going on within the hopelessly divided UK Government at present, with various cabinet ministers engaged in fairly public dissent about a whole range of issues, not simply Brexit.  One of the issues concerns the amount of money being spent on the armed forces, with military chiefs demanding more money.  According to the Sunday Times (paywall), they are also trying to enlist the support of the royal family for their campaign to increase spending.

What particularly struck me was the argument of one unnamed ‘senior source’ who said that “The prime minister needs to recognise that our standing on the international stage is linked to our national identity, which is linked to our strong defence”.  This reinforces a point which I’ve made before on this blog – for Anglo-British nationalists, the armed forces and the glorious (as they seem to see them) victories of the past are a key – perhaps the single most important – element in their whole definition of their own identity.  They’re not the only nation in the world to take an excessive degree of pride in the armed forces and their exploits, but how many other nations actually define themselves in those terms?

It helps to explain why there is such a huge gulf in understanding between the UK and the rest of the EU about the purpose and objective of the EU.  Whilst most European countries regard the wars which have ravaged the continent in the past as unfortunate events which must never be repeated, and therefore want to lock themselves together to prevent any such repeat, the Anglo-British nationalists see those same wars as part of the UK’s past triumphs and want to retain an independent capacity to fight such wars again.

But what sort of national identity is it that depends so heavily on the ability to wage war against its neighbours, and prefers to dwell on the outcome of past wars and prepare for future ones than work with others for a peaceful future?  This is truly the sign of a national identity which has lost its way in the world.

Detail and headlines

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Yesterday saw a report about an initiative in the Vale of Glamorgan to encourage parents to complain to the Welsh Government about the apparent low level of pupil funding in the county compared to the rest of Wales.  Leaving aside the not-exactly-subtle politics of a Tory-run council complaining about the funding they receive from a Labour government, do they actually have a point?

At a detailed level they have some valid issues, but the danger is that the point is lost in an over-simplistic comparison of totals at a headline level.  They argue, for instance, that “…the formula has not had a total review since 2001 and uses census data from as far back as 1991 to distribute some elements of funding”, and “…the formula allocates funding for pupils with additional learning needs based on factors of poverty rather than the huge amount of information available based on pupil needs”.  Both of those seem to me like reasonable points to make, but I suspect that, in the grand scheme of things, the likely difference in the overall total would be very small. 

The headline complaint is based mainly around a comparison of total allocated broken down by authority, which shows a difference of £1,360 per pupil between the authority with the highest allocation and that with the lowest, the implication being that some children are being short-changed.  However, that misses the point, rather, about the underlying objective of the funding formula being used by the Welsh Government, which isn’t simply about funding schools.  It is also about distributing funding ‘fairly’ around Wales and recognising that differences in wealth and opportunity should be reflected in differences in funding.  Merely equalising spending per pupil – which would be a very easy response to argue for - would serve to reinforce existing advantages resulting from comparative wealth, as well as ignoring the differences in costs faced by different areas based on questions such as rurality.

I’ve argued previously that comparisons between average spend per pupil in Wales and average spend per pupil in England are essentially meaningless because they ignore differences in need and circumstance; the same applies within Wales.  There isn’t a ‘right’ amount per pupil to be spending; and even if there were, the chances of that ‘right’ amount being the same across a country like Wales with wide divergences in geography and population levels would be close to zero.  None of that is intended to defend or support the detail of the existing formula in use; there is always scope for review and revision of any such mathematical calculation to ensure that the premises and assumptions are valid as circumstances change.  The point is, however, that, difficult though it might be, the discussion needs to revolve around the detail of that formula, not simply around its headline outcomes.

Brexit dividends

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In his latest pitch for the Conservative leadership, Boris Johnson has returned to the ‘promise’ to spend an extra £18 billion a year (£350 million a week) on the NHS following departure from the EU.  The figure has been widely discredited many times and even most of those responsible for promoting it during the EU referendum have long since admitted that the ‘Brexit dividend’ – i.e. the amount of money available for other things because it’s no longer being sent to ‘Brussels’ would be a lot less than that.

I’d go further – I’d argue that there will be no Brexit dividend for the foreseeable future.  Perhaps there may be in the long term, if the economy really does outperform to the extent that Brexiteers believe want the rest of us to believe, although it’s beyond any reasonable or realistic forecasting window so we’ll never actually know whether we would have been better off staying in or not.  But in the short to medium term, most recognise that there will be a hit to the economy, and coupling that probable reduction in GDP, or at the least reduction in growth of GDP, with the requirement to spend a lot more on replacing all the EU agencies with UK versions, increasing the spend on managing the physical and economic borders, and the other increased costs which will come in the wake of Brexit, I believe that zero is a reasonable estimate of the Brexit dividend within any reasonable forecasting period.

Having said that, I welcome Johnson’s statement that the UK Government can spend an extra £18 billion on the NHS if it wants to.  And I agree with him; they can – it’s just that it has nothing at all to do with Brexit.  Looking at the detail of what has been said by Johnson and his supporters, that’s a truth which they come close to acknowledging themselves.  £8 billion of that total – more than 40% - has already been committed and is in no way contingent on Brexit.  What Johnson has asked for is that an extra £5 billion a year be made available in 2019 and a further £5 billion in 2022.  Given the ease with which more than £1 billion was found to buy a coalition partner, and the total government spend of more than £770 billion per annum, this isn’t much more than small change to HM Exchequer – less than 1.5% of expenditure.

However, for a moment, let’s assume that there is a relationship with Brexit.  Part of Johnson’s argument is that the UK should not honour any perceived commitments to EU budgets after the date of departure, and he wants a maximum transition period of six months.  If he’s right, then why isn’t the whole of the extra money available immediately?  Why do we need to wait until 2022?  And if he’s wrong, then where is the 2019 tranche of money coming from?  The answer to both of those questions is very simple – the initial premise is wrong, and a decision to spend more on the NHS is not contingent on Brexit; it’s a simple matter of policy.  The only reason for linking it to Brexit is to attempt to persuade us that Brexit has a short term benefit, when he knows as well as anyone else that it does not.  But then, Boris and truthfulness have been estranged for a very long time.

Money, students and manifestos

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It’s only a few weeks since the UK General Election and already Labour seem to be rowing back on their promise to write off student debt, with claims in the last few days that it was more of an 'ambition' than a firm policy, even if it didn’t exactly sound that way during the election campaign. 

Here in Wales, Plaid Cymru, the party which helped Labour introduce tuition fees in the first place during the One Wales period, is now criticising Labour for increasing fees to match the latest change in England, claiming that the proposal goes against the Labour Party’s manifesto.  They presumably assume that we’ve all forgotten that when most of the Plaid AMs voted to introduce fees in the first place they were also going against their own manifesto commitment.  (And it’s worth noting that the politician taking the decision to increase fees is actually a member of the Lib Dems, another party with a somewhat, shall we say ‘chequered’, history on the question of fees.)  The whole issue of student fees seems to be one which unites governing parties in supporting them whilst opposition parties unite in opposing them, and that’s true whichever party forms either the government or the opposition.

The underlying question has two strong ideological elements to it.  The first is whether services supplied by the government should be collectively funded or paid for by those who actually use them, and the second is to do with the question of the availability of money for the government to pay for things.

Regular readers will know that I’m a committed supporter of the idea that services should be funded collectively rather than paid for individually, and I entirely accept that that is a position which flows from my own ideological standpoint.  In the case of university education, I accept that those benefitting from it often end up better off financially than those who don’t, but a properly progressive taxation system would ensure that those with the highest earnings also make the highest contributions to paying for services.  (And, as an aside, people who end their education at ‘A’ level tend to do better financially than those with GCSEs, and those with GCSEs do better than those without.  Why single out one particular type of education for payment at point of use?)

But let’s turn to the second ideological factor – the availability or otherwise of money.  Governments, of whatever colour, tell us that ‘we can’t afford’ to provide university education without charging for it.  But like all the other things that they tell us we can’t afford, it comes down to policy choices.  How much the government raises in taxes, how much it borrows, and how much it spends are all political choices.  When the government needs a few billions for some project or other – such as buying the support of the DUP or starting another war somewhere – it can always find it, because the UK Government controls the money supply.

However, the Welsh Government does not control its money supply.  It has long been a theme of this blog that governments are not like households, and they really don’t have to balance their budgets in the same way, but more accurately, that is only true for governments which can control the supply of money – like the UK Government.  The Welsh Government’s budget, on the other hand, really is more like that of a household, and a household whose purse strings are controlled elsewhere and which can be arbitrarily loosened or tightened.  Whilst I might have had more sympathy for Labour’s response if they had been more honest and spelled out more clearly that any promise relating to fees in Wales was wholly dependent on the election of a Labour Government for the UK as a whole (and therefore on voters in England), their basic point that they can only find the money to do something different in Wales if London gives it to them or they cut elsewhere is a valid excuse in itself.

The backtracking by UK Labour is a far more serious issue.  The interesting point is that in his interview McDonnell actually acknowledged that half the nominal amount of student debt will never be paid back in any event.  And figures elsewhere suggest that 70% of students will never repay the whole of their debt.  In essence, the whole edifice of student loans and debts is based on little more than an accounting sleight of hand. 

The UK Government pretends that it is not paying student fees because the students are paying them.  But the students do so by borrowing the money from the Student Loans Company which is wholly owned by the UK Government.  And where does their money come from?  From the Government, of course.  So, instead of using borrowing, taxation or the magic money tree to pay fees, the government raises the same money from the same sources to fund loans through the SLC, and for accounting purposes assumes that it’s going to get around half of it back over a lengthy period.  The other half – the bit that will never be repaid – will, in effect, have already been paid by the government – exactly what the government says it ‘can’t afford’ to do as a reason for introducing tuition fees in the first place.

Before the election, it appeared that Labour were offering hope to young people that they could enjoy a university education in exchange for paying a fair share of tax if they earned more when they took up employment.  It even looked as though they understood that governments are not like households.  After the election, it appears that they’re reverting to type and falling in with the Tories’ attitude towards finances after all.

Overseas aid isn't the problem

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The UK has a relatively large budget for foreign aid compared to other countries (although still not large enough), and it should surprise no-one that not all of it is particularly well-spent.  Last week’s story about an Ethiopian girl band allegedly receiving a sum of £5.2 million for their “branded media platform” was a case in point.  I’m not sure that we’ve been given all the details here, but even taking the story at face value, it does little more than underline the fact that any detailed analysis of how money is spent would throw up apparently unjustifiable examples. 

Part of the problem with the aid budget is that those running aid programmes have a strange desire to receive proper credit for the aid given – they prefer to give the money to something on which they can then stick a Union Jack so that people know where the money has come from.  And if there’s a photo-op for a politician as well, then all the better.  A girl band ticks the right boxes.  It’s not dissimilar to the Welsh Government’s approach to projects which it funds – they have the same preference for projects which can be badged and used for ministerial PR.  The result, in both cases, can be that the visibility of the expenditure is more important to the politicians than ensuring that the money goes where it’s most needed.

But accepting that the aid is not always being spent in the best or most effective way is an argument for better control and targeting, not for a reduction in the amount being spent.  The fact that a girl band may not need £5.2 million doesn’t mean that people in Ethiopia don’t need that £5.2 million.  And it certainly isn’t any sort of excuse for the argument being put forward by some of those drawing attention to this sort of spending that we need the money more in the UK.

In this specific case, we had some Tory MPs arguing that the money should instead be spent on “funding adult social care in the UK”.  It’s an utterly false choice.  It isn’t just Tory MPs, of course – how often have we all heard the line about ‘charity starts at home’, or ‘why are we sending money abroad when there’s so much poverty at home?’.  Just scan the letters columns of any daily newspaper over a period.  But is inadequate funding for adult social care really the direct result of the way the UK spends its foreign aid budget?

At its basest, this attitude is based on an assumption that we can’t tackle poverty in the UK (or fund mental health or social care - insert here any pet project of your choice) because we’re spending our money on foreign aid instead.  And the ‘conclusion’ which is drawn from that is that the way to help the poor is by taking aid away from the even poorer.  There is a massive level of inequality in the UK but, according to this view of the world, what keeps people in their current state isn’t that the richest in our society are accumulating an ever greater share of total wealth, it is that a tiny proportion (0.7%) of UK GDP is spent on overseas aid, and an even tinier proportion of that might be being misspent.  And of course it has nothing to do with decisions to spend money on other things within the UK (such as a new laser weapon system, with a price tag of £30 million – it makes that £5.2 million look like a very wise investment).  One has only to put it in those terms to see the complete fallacy of the argument.

So how do they get away with it?  Why is it that people are so ready to believe that the problem isn’t with the richest siphoning off the country’s wealth, but with the attempt to provide a minimum of assistance to the world’s poorest?  Perhaps we should start by asking ourselves who controls the content and direction of public debate - and whose interests are served by convincing the poor that the problem is the even poorer.

Comparing apples and pears

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One of the difficulties faced by the authors of the Government Expenditure and Revenues Wales study (GERW) was that information on many items of expenditure and revenue was not available separately for Wales, so they had to make estimates.  And any estimate will always be based on one or more assumptions.  There’s nothing at all wrong with that; it’s the only way of producing even an outline idea of Wales’ position.  The problem arises in deciding which assumptions to make; different people would make different assumptions – and I suspect that the same people might make different assumptions as well, if the context were different. 

That question of context is one of the reasons why a study aimed at analysing Wales’ position in the past (2014/2015) within the UK will never produce the same answers as a study aimed at considering Wales’ position in the future as an independent nation.  GERW was clearly aimed at doing the former not the latter, and it seems to me that the assumptions made are reasonable in that context, and that the document therefore helps a great deal to aid understanding in that context. 

If we were to attempt to look to the future rather than the past, even within the context of the continuation of the union, we would need to make a range of additional assumptions about future policies and their impact on revenues and expenditures, and we would also need to change some of the existing assumptions on apportionment of revenue and expenditure.  I won’t cover all of those, but it’s worth considering a few just to give a flavour of the differences which would emerge.

Firstly, what would be the position in relation to the national debt?  What would Wales’ share be?  At the time of the Scottish referendum, the UK Treasury indicated at one stage that it would continue to be responsible for the whole of the debt, even if Scotland became independent.  That was more about reassuring the lenders than about establishing a start position for negotiation; and the SNP’s response (that Scotland would take a share) was similarly about establishing and maintaining international credibility.

But on what basis should we estimate Wales’ share of the debt?  GERW uses a per capita basis, but there are other approaches.  Part of the reason for the debt is current expenditure, so if Wales receives more in benefits should we take a larger share?  But part of it is also about funding infrastructure projects, where Wales receives less money than our fair share, so should our share of the debt be less than on a per capita basis?  And even after establishing a base line (difficult enough in itself) at the point of independence, if we want to project forward we need to make assumptions about future budget deficits or surpluses, borrowing patterns and rates of interest.  None of these factors is entirely straightforward or uncontroversial.

Or take defence spending.  GERW uses a per capita basis – entirely reasonable to estimate Wales’ share of current spending.  But the UK spends around 2% of GDP on defence – other countries spend less (Germany, for instance, spends around 1.1%).  What would an independent Wales spend on defence?  And GERW draws a clear distinction between spending for Wales and spending in Wales; much of the current spending on defence goes outside Wales, which means that we pick up the cost in the GERW figures, but don’t get the whole GVA benefit, or the multiplier effect.  In an independent Wales, whatever we spend on defence would be in Wales as well as for Wales.

Or take pensions.  How do we assign the costs of pensions?  Wales has a higher proportion of pensioners than the rest of the UK taken as a whole.  Part of the reason for that is that people choose to retire to Wales.  Who should pay their pensions?  In a unitary UK, the question doesn’t arise, but in the scenario of an independent Wales, it most certainly does.  When citizens of the UK retire to France or Spain for example, their pensions are paid by the state in which they contributed when they were working, i.e. the UK.  France and Spain do not pay those pensions.  So, in an independent Wales, would Wales be expected to bear the cost, or would the arrangements be the same as they are for any other member country of the EU?  The latter seems likely, but even then there is a further complication – does that apply to existing retirees or only to new ones?  The latter would seem to me to be easier to implement and manage, but the historical commitment might well be a factor which those negotiating a share of the national debt would wish to take into account.

My purpose in all the above is in no way to disparage the work of those who have produced GERW; indeed, we should be grateful to them.  It is, rather, to give a flavour (there are many more points which could be made) of why a study of Wales’ current position cannot simply be extrapolated without significant change to a conclusion about the position of an independent Wales at some future date.  And that's a project which will require a lot more work.

What's the real issue?

Tweet I thought that this story was rather confused and confusing when I read it first; and after re-reading it, I haven’t changed my mind.  There is a lack of clarity about whether the problem is where the powers lie, whether it’s about what is done with those powers, or whether it’s simply about spending priorities.

The headline claims that failure to devolve more road safety powers to Wales is costing lives on Welsh roads because the numbers of deaths and serious injuries have fallen more slowly here.  But the reasons for that are less than entirely clear – lack of devolution surely means that the policies being followed in Wales are the same as those in England - the question about why they have a different result is more complicated than simply where the power lies.

And later in the story, the director of the RAC which is the organisation behind the report says that “The UK risks breaking apart in terms of road safety policy with different administrations having varying levels of power, funding and political will to deal with death and injury on the highways”, which sounded to me more like an argument for less devolution than more - in direct contradiction of the headline.

In essence, the detail of the criticism seems to be more about whether the Welsh Government is spending enough on road safety than about where the power lies, but that looks more like a criticism of the Welsh Government for not setting the same spending priorities as England than of any lack of devolution.  It’s an argument for consistent central decision making rather than for more devolution.

And that, perhaps brings us to the nub of the issue here – as on so many issues, there is a lack of understanding of the fact that the very existence of devolved administrations inevitably means that there will be differences in outcomes in the different countries of the UK.  I don’t say that to defend a situation where Wales is failing to reduce deaths and injuries on roads as quickly as England; no-one would want to defend that.

Comparisons with what happens elsewhere are inevitable and entirely proper, and with England being so close, it’s the obvious point of comparison.  The RAC are right to draw attention to the divergence in outcomes, and it is something which should concern us.  I’m not sure that the story sheds much light on the answer though – calling on the Welsh Government to spend more in any area where it is underperforming (whilst it has no control of its total revenue) is easy; saying from where the cash should come is a great deal harder.

It's about politics, not economics

Tweet Later today, the Chancellor will make his autumn statement.  There’s plenty of speculation about what will be in it, along with a great deal of pre-announcing as the government tries to maximise the impact of the good news bits.  There seems little doubt that his message will be, in essence, that the current account deficit has not gone down as planned, but that there’s money available for some gimmicky giveaways and re-announcements.

He will, of course, blame factors beyond his control for the first part, and claim all the credit for the second.  (Whilst his coalition partners will claim that the second is all down to their moderating influence)

The real announcement is the one that he won’t make, which is that he’s known all along that current account deficit reduction is not as important as he told us it was.  In fact, it hardly matters at all.

In that sense, the Tories have pulled off a political master stroke.  They’ve succeeded in persuading the media and the other parties to obsess endlessly about how to reduce the deficit, whilst they carry on running one.  They’ve used the excuse of the deficit to mount an ideologically motivated attack on the welfare state, and managed to get the main opposition parties to commit to continuing largely the same policies.  Even if they lose, they win.  And we let them.

How to spend it

Tweet There’s a sort of a rule in politics which says that the publicity given by Ministers to their decisions is in inverse proportion to the importance of those decisions.  It’s probably the influence of all the Sir Humphreys in the background somewhere. 

Anyway, the announcement this week that the National Assembly will be allowed borrowing powers seems to fit the pattern, in terms of timing if not of principle.  Three busy minsters from three different parties and two governments assembled to tell the world that the Welsh Government will be allowed to borrow some money at some point in the future if and when they can find a way of supplementing the block grant with monies raised locally.  In the short term, it’s not much of a deal at all.

It may just be a bit of clever politics; tying three parties into the deal may make it harder for any of them to reject any tax-varying powers proposed by the Silk Commission.  Clever politics by whom is another question, with at least two of the parties involved lukewarm at best over the idea of transferring any real revenue powers to Wales.  A sort of mutual assured torture, perhaps.

It could also turn out to be a double-edged sword for most of Wales as well.  Many of the schemes being touted for funding through borrowing are highly Cardiff-centric.  We’ve already seen a pretty naked attempt by Cardiff-centric commentators to grab Convergence funding from the poorest areas of Wales and spend them in the richest, and I wouldn’t be at all surprised to see any available borrowed funds being appropriated in similar fashion.

It’s part of what I’ve noted before – whilst Welsh politicians are quite happy to criticise the London-centric economic policies of the UK, they seem equally happy to replicate the same phenomenon on a smaller scale here in Wales.  As we saw in another report today, it’s probable that when the statisticians say that the UK is coming out of recession, what they really mean is that London is starting to boom whilst the rest of the UK continues to be in recession.  It’s not a good outcome, and I can’t for the life of me understand why anyone would want to replicate that in Wales.

It underlines the fact that winning borrowing powers, even if the Government were in a position to use them, is only part of the picture.  Making sure that we use them for the benefit of the whole of Wales is another matter entirely.

PS – Much of the reaction to the announcement was predictable, but I have to admit to being surprised to read an article by the former leader of Plaid in today’s Western Mail in which he described Scotland as a “white elephant”.  I can’t imagine that going down too well in SNP HQ!

More to the olympics than gold

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The opinion poll finding that most people in Wales think that the Olympics will be of no benefit to Wales is hardly a surprise.  It would be a bit like an opinion poll finding that the majority of people believe the world to be round.  Whilst there’s always a minority whose beliefs fly in the face of the objective evidence, most of us are willing to believe that which is factually evidenced.

More interesting though would have been the supplementary question which appears not to have been asked, and that is whether the UK should still be staging the Games regardless of the question of economic benefit.  There is a sort of assumption that ‘no benefit’ leads automatically to ‘don’t do’.  That doesn’t only apply to the Games, of course; but I’d challenge the assumption.

Part of the problem with the Games from the outset has been the UK Government’s obsession with trying to prove that they have a financial benefit, for the UK even if not for particular parts thereof.  But is that really the basis on which we should decide?  Certainly, there are questions about the way in which the expenditure has been treated; it is perverse that those elements of spending aimed at regenerating a particular area of London are counted as being ‘UK’ spend rather than local spend.  And there are major questions about whether staging the Games has become too big a commitment anyway as different hosts vie to outdo each other from one Games to the next.

But there is, or should be an underlying spirit to the Games.  Partly it’s about peaceful rivalry and competition between the athletes from different states, but even that seems to be a sometimes tribalistic divergence from the real spirit.  That is surely about the world’s best athletes, in a range of sports, coming together to challenge each other and compete.  Isn’t that worth doing anyway?  Most of the athletes are, I suspect, more interested in testing and proving their own prowess than in which flag they compete under; the flag is merely part of the route to the Games.

The whole event has become so big and so expensive that smaller countries in the world, such as Wales, could never dream of hosting it under current financing models.  That’s a pity; the world is so much bigger than merely the capital cities of the larger countries.  It would be more in the spirit of the Games themselves if all countries contributed an annual amount on a sliding scale to an international fund, enabling a cheaper event to be held in more places.  Who wouldn’t want to host the Games then?

Overheads and packages

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For decades, pension provision was seen and treated as part of an overall remuneration package.  Employees didn’t just get a salary, they got a package, and people thinking of changing jobs were encouraged to compare the total package, not just the headline salary. 

I’m aware that some employers even implemented flexible arrangements under which employees could, within agreed limits, sacrifice part of their salary for higher employer pension contributions, or even reduce the contributions for an increase in salary.  Such arrangements suited employees, who could vary the elements of the overall package at different points in their lives, and they were generally cost neutral (other than administration costs) for employers.  Above all, they encouraged people to think package rather than salary.

I’m not entirely sure at what point ‘part of the package’ became an ‘unaffordable overhead’ apparently provided by the employers out of the goodness of their hearts, but the perspective certainly changed.  Factors such as increasing longevity come into the equation, but I have a feeling that the crucial event was the raid on pension funds mounted by Gordon Brown when he was Chancellor.

I’ve never felt that he was wrong in principle; the previous tax treatment of pension funds gave disproportionate benefit to the most well-off rather than the least well-off.  But he was wrong, and badly wrong, in practice, by introducing the change without warning and with no transitional period for both employers and employees to adjust to the significantly increased contributions which would be required from both if previous pension provision was to be maintained. 

Overnight, an approach to occupational pension provision which had been so successful over decades was rendered unviable.  The pensions crisis may be coming to the fore under a Conservative-Lib Dem coalition, but the seeds were sown by Gordon Brown and New Labour.

The sleight of hand by which pension contributions have come to be regarded as an ‘overhead’ disguises the fact that employers reducing the benefits or increasing the level of employees' contributions are, in effect, reducing the total remuneration package of their employees as certainly as if they were simply reducing wages.  The wrath of those being hit by this attack is easily understandable.

The surprising thing to me is not that public sector employees are protesting so strongly, but that private sector employees did not protest more when the changes impacted them.  It underlines, perhaps, the extent to which economic power has become increasingly unbalanced in favour of capital and against labour.  However, the mere fact that private sector employees have already had to suffer the closure of final salary schemes and the prospect of reduced income after retirement is no basis at all for arguing that public sector employees should meekly accept the same fate.

It’s also often overlooked that not all public sector pension schemes are the same; some are much more actuarially sound than others, and there really is no need to treat them all on the same basis.  There are some serious problems though, particularly in those services where pensions are paid from current revenue rather than from a properly funded long term savings scheme.  Arguing that all schemes can just continue as they are is as disingenuous as arguing that they all have to change fundamentally.

What is surely clear overall is that we have a choice between reducing the size of pensions after retirement and increasing the amount saved before retirement.  The position we’ve got to seems to be that public sector employers are determined to make that decision unilaterally, just as private sector employers have already done.  It’s a short term decision though; it saves money today at the expense of potentially creating a bigger problem for pensioners in the future.

The government is giving conflicting messages as well.  On the one hand they say – quite rightly – that we need to save more to make provision for retirement, and on the other they seem likely to further postpone auto-enrolment in the new pension scheme because they want us to spend not save in order to boost the economy.  Long term needs conflict with short term ones, and as is usual with politicians, short term considerations are likely to win out.

Seeing pensions as part of a remuneration package rather than as an overhead puts potential industrial action by employees into its proper context.  There will have to be changes to the package in many cases, of course; but change should be negotiated not imposed, and public sector employees are right to insist on that.  That surely is at the heart of what trades unions are about.