Britain’s assault on pensions

WHEN JOHN Hutton, at age 55, stepped down from public-sector employment last May, he collected a lump sum of around $100,000 and a pension entitlement of around $60,000 per year. Five months later, Lord Hutton, as he is now known, has published his review calling for public-sector pensions to be slashed and the retirement age raised.

Workers in the future should draw on their savings and assets, not depend solely on pensions, the former New Labour defense minister recommended in a report commissioned by the Conservative-Liberal Democrat government.

Hutton himself will be able to eke out his pension with undisclosed earnings from membership on the board of U.S. nuclear power company Hyperion Power Generation, which he joined in June. He also operates as a consultant on "public affairs and strategic communications" for public relations firm Apco Worldwide. And he chairs the defense think-tank, the Royal United Services Institute.

None of his additional earnings affects his Member of Parliament pension. Likewise for the roughly $500 tax-free allowance he pockets each day that he turns up at the House of Lords. That's for attendance: he's not required actually to do anything.

There was a hullabaloo of praise for Hutton's review two weeks ago. These gold-plated public-sector pensions were no longer sustainable.

The average public-sector pension falls short of $7,836 per year--less than a seventh of Hutton's. A quarter of civil service workers qualify for under $3,134 per year. Women local government workers pick up, on average, $2,507 per year.

Some of the most vital public-sector workers--school-meals staff, domestic caregivers, social workers, librarians--are among the lowest-paid and already contribute an average of 6.4 percent of wages toward their pensions. National Health Service workers pay in an average of 6.6 percent.

Then there's the war on "benefit scroungers!" A picture has been painted of work-shy schemers living high off the hog, doing the double, organizing dole-drops, diddling the Disability Living Allowance (DLA), etc. (How many west Belfast welfare fraudsters would it take to make as deep a dent in public finances as Philip Green, whose Top Shop company has so far funneled dividends of $1.9 billion or so into the tax-free Monaco account of his wife, Christina? That's "spending tsar" Green, regular star of this column and top government adviser on bridging the gap between tax receipts and public expenditure.)

Benefits payable to people of working age with no other income range from $102.58 per week (Job Seekers Allowance or Income Support) to $151.79 (Employment Support Allowance).

The most basic benefit, then, for a single person capable of work who doesn't have a job, provides $65.45 to cover everything apart from housing--food, clothes, heating, light, travel and newspapers to read of Philip Green's determination to end this unsustainable drain on the public coffers.

IN SPITE of strident howls giving the impression that benefit recipients taking a part-time job to make ends meet are dragging the country down, the combined cost of income replacement benefits ($31.7 billion) and DLA ($10.3 billion) accounts for only 13.8 percent of the social security and tax credit bill. This represents 3.8 percent of public spending, 2.7 percent of disposable household income (figures from the Joseph Rowntree Foundation).

The reason people on benefits are singled out for these assaults is not that they are claiming an unfair or unsustainable share of public resources--when compared with the sums lost through tax evaded, avoided or otherwise uncollected, for example--but because the decision-makers reckon that the people at the bottom are least able to fight back.

We shall see.

In Guildhall Square last week, I met an old friend at her wits' end. She'd just received a letter that her mortgage assistance was being slashed. "It said that I was now legally entitled to $179.37 per week--$102.58 for me, $76.79 for interest on the mortgage. Back in January 2007, the law said I needed $254.11 a week--$98.61 for me, $155.50 for interest."

The amount she has been receiving "for herself" had inched imperceptibly upwards. But her mortgage assistance has plummeted. So her overall income is down $74.73. That's a reduction of almost 30 percent over three-and-a-half years--from a 'high' of $253.90 per week.

And she's going to continue to lose out as mortgage assistance is pegged to the Bank of England's base rate--rather than to the higher commercial rate which actually applies. Her prospect for the future is of continuing increasing intolerable pressure.

What can public-sector pensioners, welfare recipients and people facing the loss of their homes do about the dire prospect ahead? Individually, nothing. Collectively, a lot. The place to be is outside Belfast City Hall for the Irish Congress of Trade Unions demo next Saturday. We can take it from there.

When your back's to the wall, you have to stand up.

First published in the Belfast Telegraph.