15.02.2007
Thieves at large
Jim Moody analyses Royal Mail's decision to exclude new staff from schemes that ensure a retirement payout based on a percentage of a member's final salary
Pensions may be deferred wages, but for employers they are a source of surplus value to be cynically utilised for the benefit of capital. In recent months and years, even those pension schemes thought to be set in stone have been raided for the corporate and state bottom line. Surprisingly perhaps, such theft is not only legal: it is even incumbent under company law.
Sadly, not only Britain's trade unions, but some supposed revolutionaries have proved to be not up to the job of defending pension provision, let alone fighting to increase pensions to a level that meets need. This failure has surely encouraged both private and public sector employers to continue their assault.
A week ago Royal Mail became the latest in a growing line of big companies to announce the exclusion of new staff from schemes that ensure a retirement payout based on a percentage of a member's final salary. This latest attack is particularly significant in that the Royal Mail pension scheme is the sixth-largest in the UK, with some 450,000 members. A spokesperson said the cost of servicing its retirement obligations had "ballooned by £280 million to £730 million during its 2006-07 financial year. This had sent first-half interim profits tumbling to just £22 million, compared with £159 million the previous year" (Times Online February 8).
Some commentators clearly see Royal Mail's action as a stalking horse. According to the Financial Times, "The plan "¦ could set a precedent for the public sector. Ministers backed the state-owned postal operator's plan to curb its pensions liabilities, with Alistair Darling, trade and industry secretary, stressing his 'full support'." The article went on to note: "Three-quarters of private sector employers have closed final salary schemes to new employees, but until now the public sector had not followed suit. However, pensions experts said the move would increase pressure on ministers to curb the billions in unfunded liabilities of other public sector schemes" (Financial Times February 9).
So the government is behind such employers every step of the way. After all, the state funding package that includes a whopping £1.7 billion subsidy for the Post Office and a £1.2 billion government loan is conditional on retrenched Royal Mail pensions. And, as long as the hatchet was out against the final salary scheme, the government would also agree to allow Royal Mail to use £850 million of reserves to support the pensions deficit.
"If Royal Mail presses ahead with the plan, new workers will be the first in the public sector to lose what has, until now, seemed like an inalienable right of being on the government's payroll: a generous pension pegged to final salary ... [Royal Mail chairman] Leighton said Royal Mail's only choice was to boost productivity and to take painful decisions. 'Continuing to transform our operations isn't optional,' he said. Yet some believe that Mr Leighton and his chief executive, Adam Crozier, have been deliberate doomsayers on a variety of Royal Mail's challenges in order to bounce unions into agreeing unpopular measures" (The Daily Telegraph February 9).
The CWU, which organises Royal Mail workers, reported on its website: "The Communication Workers Union today reacted angrily to the announcement that the company intended to end the final salary pension scheme in Royal Mail for new employees. The announcement had come as a complete shock to the union." But what will CWU and Amicus do about it? Their websites at the time of writing seem to reflect the state of shock: nothing about possible members' action on this pensions crisis at Royal Mail.
Dave Ward, CWU deputy general secretary, is also quoted as saying: "We have not been involved in discussions on this issue, nor have we even been made aware of these intentions. The government and Royal Mail have had a responsibility to discuss the future of the pension scheme with us and they have failed to do so. Ignoring the union on the crucial issue of the pension scheme is irresponsible and so is the plan to discriminate against future employees. We are both shocked and angry at how this announcement has been made."
While Ward said that the CWU would use the six months consultation proposed by Royal Mail to marshal opposition, postal workers and the rest of us are no wiser as to what that opposition might entail, and whether it would be any more than token.
But the most antagonistic press reaction - to the union - appeared in The Independent on Sunday. Frothing about the response of "comrade Ward" to Royal Mail's attack on CWU members' pensions, business editor Andrew Murray-Watson wrote: "The Royal Mail pension scheme is £6.6 billion in debt - £1 billion more than had been previously estimated - the equivalent of an awful lot of first class stamps. Had Royal Mail kept the final year scheme open for new members (existing employees are not affected), additional billions of pounds would have had to be raised. That would have meant a further bailout from the government - or another hefty rise in the price of stamps. Either would significantly diminish Royal Mail's competitiveness at a time when it is facing growing challenges from commercial rivals."
Murray-Watson continued: "There is also the wider issue of how the private sector is continuing to subsidise the pension schemes for public sector workers. Hardly a company in the country now offers a final-year scheme to new workers. People are living longer and the deficits in many FTSE company pension schemes are larger than the companies' market capitalisation. Taxes - especially council tax - have risen to pay for public sector pension commitments" (The Independent on Sunday February 11).
Nothing like knowing who your enemies are, anyway. Of course, this is the 'common sense' view of one of capital's ideologues; but the reaction of the union bureaucracies is of more interest. Will they be browbeaten into acceptance by the bosses' wailings about loss of income? Will there be a plan of industrial action proposed while this six-month consultation period is progressing? Will they attempt to draw up a common plan of action alongside other unions at the wrong end of the imposition of a two-tier pension scheme? Or are we once again going to see defeat painted in the colours of victory?
It is, of course, obvious that rightwing bellyaching about the level of pension received by public service workers is but a reflection of the penurious level of state pension received by the very large number of retired workers who were not in such schemes or were unable to contribute to a private scheme. Neoliberal privatisation and measures compelling workers to work longer before retiring are being imposed on the specious grounds of the growing proportion of aged in the population. It is clearly inconvenient that more people are in receipt of pensions because nowadays they have the damned cheek of living to 76 or 81 instead of dropping dead at 66 or 67.
Many companies reneged on pension agreements between 1988 and 2002, taking 'contribution holidays' when their employees' pension funds were in temporary surplus, to the tune of a cool £27 billion. More than a third of pensions were paid under 'early retirement' schemes, whereby the employer avoided making redundancy payments, using the pension fund instead.
Now, around two-thirds of existing final salary schemes refuse to accept new members. In recent years, employer contributions have been halved. Added to which, over the last decade the pension funds and insurance companies that own half of the shares on the stock exchange have failed Britain's workers and pensioners.
Unlike television licences, which pay for the BBC, national insurance is not a hypothecated tax (ie, a tax paying for something directly), but goes into general government revenues just like income tax. You merely qualify for state pension by paying national insurance for the requisite number of years, not draw out what you paid in with interest.
Almost all occupational and private pension schemes depend on contributions that are taken from the employee and/or employer and invested in a pension fund. Slightly differently, national (ie, not local authority) public sector pension schemes are paid out of current government revenues. Within all these there are final salary, average salary, and defined contribution (money purchase) schemes, respectively in descending order of benefit to the retiree. Royal Mail's scheme is unusual in the public sector in that it is funded, and so subject to competition. When it comes down to it, though, Britain has one of the poorest paying state pensions systems in the advanced capitalist world - much worse than in most European countries and even worse than in the USA.
Eleven months ago, nearly 1.5 million workers in 11 unions struck in defence of pension rights. And at last, Unison's leadership has agreed to hold a special local government service group conference on the Local Government Pension Scheme, which will take place on Tuesday March 6 at Alexandra Palace. But it is unlikely that this will take any decisions in favour of specific action, as a ballot on strike action will still be in progress while it is taking place.
Over the last two years, union leaderships have delayed and controlled the pension dispute very tightly, trying to minimise harm to the Labour government. As has been noted by this paper's writers before, the Public and Commercial Services Union leaders have conceded a lot for very little gain, talking tough as a cover for their failure to fight. Typical union bureaucrats at work, you might say. They can only get away with it thanks to a weak rank and file and a lack of revolutionary organisation. But the union leaders in question are mainly members of revolutionary organisations - and yet their behaviour is little different from any other bureaucrat.
Two leading Socialist Workers Party members voted for the scandalous pension deal brokered by the Socialist Party in the PCSU. One of them left the SWP and the other was eventually disciplined in late 2005. As for Mark Serwotka and the Socialist Party, they claimed that surrender was victory. New workers in the civil service will now have to work until 65, an extra five years.
Where is the class response? Obviously, in the PCSU, SWP and SP union leaders have proved weak reeds, failing in their duty to advance the interests of the class of which they claim to be partisans.
Pensioners certainly need more than the 13% of average income they are getting at the moment (projected to fall to 9% within a few decades if capital gets its way). A more realistic level - more realistic in terms of need - would be a pension to be paid as of right set at the level of two-thirds the average income: currently, that would bring each pensioner around £15,000 a year.
What about the increase in the age of retirement? Instead of being raised, we say the right to retire should be immediately reduced to 60 for all. But there should be no compulsory retirement. People should be allowed to carry on working if they are fit enough and want to, or they should be able to pursue leisure activities free of the constraints of social labour. Certainly if they decide to retire it must not be a time for penury and eking out a miserable existence.
Our demands are most reasonable. We demand nothing more than a pension which reflects the material and cultural needs of the 21st century. There is easily enough material wealth available for our programme. If capital as a system says it cannot afford even the present miserable levels of pensions, let alone deliver what is needed, then it simply underlines once again that it is a barrier to human fulfilment.