Ministers will impose a public sector pensions deal at the end of the year if trade union leaders reject final peace offering
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Mark Serwotka, the general secretary of the Public and Commercial Services Union, is seen by ministers as a hardliner who could scupper a deal on pensions. Photograph: Luke Macgregor/Reuters
The timing looks tricky. On 30 November, a month before the deadline for an agreement between the government and trade union leaders over pension reforms, up to three million public sector workers are likely to go on strike.
The sight of teachers and health workers taking to the streets of Britain will suggest to many that there is no hope of a deal on reforming public sector pensions. But that is not the view of ministers, as I report (along with Robert Winnett of the Daily Telegraph) on Saturday.
Ministers are reasonably relaxed about the strikes. They believe they are an irritant but they point out that there will still be another month to go after the strikes until the deadline for a deal with the trade unions. Negotiations will continue past the strike and right down to the wire.
It had been assumed that Danny Alexander, the chief secretary to the treasury, and Francis Maude, the cabinet office minister, made their final offer to the unions on 2 November. The government put slightly more money on the table when it improved the accrual rate – the percentage of salary earned as a pension every year – and delayed the full implementation of the reforms by seven years.
But Winnett and I report on Saturday that the government is prepared to make further concessions in the highly sensitive area of transferring pensions from the public to the private sector under the Fair Deal system. Introduced in 1999, this says that public sector workers whose jobs are transferred compulsorily to the private sector should receive "broadly comparable" pension provision.
Trade union leaders fear that ministers are aiming to use a consultation on the Fair Deal, which closed in June, to sweep away these rules. The former Labour work and pensions secretary John Hutton, now Lord Hutton of Furness, who drew up the blueprint for reform, warned in June against a "race to the bottom" on the Fair Deal.
Ministers have kept their concessions on the Fair Deal up their sleeves until the final stages of the negotiations with the trade unions. A senior Whitehall source said there is no more money but there is some "flexibility" over the Fair Deal. But there is another clear message: concessions in this area are "conditional" on unions accepting the broad principles of the government's reforms. These are that employees will have to contribute more and pensions will no longer be based on a final salary but on the career average of an employee's salary.
Ministers will tell the unions that reforms to the Fair Deal are vital after Hutton said in his interim report in October last year that it was difficult to justify the status quo. On page 109 he wrote:
Given current public service pension structures, this can make it harder for private sector and third sector organisations to provide public services because providing a 'broadly comparable' defined benefit pension scheme can be significantly more expensive and risky for private sector organisations than for public sector employers.
On page 15 of his final report, published on 10 March 2011, Hutton said:
Recommendation: It is in principle undesirable for future non-public service workers to have access to public service pension schemes, given the increased long-term risk this places on the Government and taxpayers (Recommendation 16).
But ministers will show that they have listened to Hutton who wrote on page 190 of his final report:
There was a mixed response to Fair Deal and the requirement for public service providers to provide 'broadly comparable' pensions to transferred workers out of the public sector. Some parties argued that this was necessary in the name of fairness to public service workers that may be outsourced, and others argued that it stifled the innovation of public service providers and contributed to a 'two-tier' workforce.
On page 191, Hutton wrote:
It was further argued that Fair Deal should be retained, yet simplified, and the option in the LGPS [Local Government Pension Scheme] for contractors to enter into an admission agreement should be retained.
Ministers are hopeful that they will eventually reach agreement with trade union leaders because they sense that Brendan Barber, the general secretary of the TUC, is keen to cut a deal. But they fear that "hardliners", such as the general secretary of the PCS Mark Serwotka, could yet scupper the deal.
If the "hardliners" win then ministers will impose a deal on the unions. Ministers have yet to make up their mind whether they would withdraw the concessions they made on 2 November and revert to their earlier position.
Christmas in the Highlands (Alexander is MP for Inverness, Nairn, Badenoch and Strathspey) and in West Sussex (Maude is MP for Horsham) may be less relaxed than usual if negotiations go down to the wire on 31 December.