Strike over local government pension reform

In March 2006, more than one million public sector workers took strike action over planned changes to the local government pension scheme. The ongoing disputes are the result of controversial changes to the pension scheme in relation to the retirement age for current and future employees. If union concerns are not addressed, industrial action is scheduled to continue in the run-up to the local elections in May.

On 28 March 2006, over a million public sector workers took strike action against planned changes to the local government pension scheme. The strike, undertaken jointly by 11 trade unions, took place after ballots showed strong support for industrial action. Support for the strike was strong even among unions that are usually not in favour of industrial action, such as the National Association of Probation Officers (NAPO) and the Association of Educational Psychologists (AEP). Unions warned that this was not a one-off strike, but the beginning of a longer campaign. Dave Prentis, General Secretary of Unison, the largest union involved, indicated that the walkout was just the first in a rolling programme of strikes designed to disrupt council services over the coming months.

Proposed changes to pension scheme

The ongoing dispute stems from the government’s plan to abandon the so-called ‘85 rule’ from the existing pension scheme. Under this rule, local government employees currently can retire at the age of 60 years, provided that their age and length of service add up to 85 years. The unions accept that the retirement age for new staff will increase in line with wider pension reforms, but they want existing pension scheme members to retain the 85-year rule. A 13-week consultation period on changes to the scheme closed at the end of February 2006, and both the trade unions and local government employers must now await an announcement from the government on how it proposes to proceed.

In October 2005, government ministers and public sector unions in the national health service, education sector and civil service agreed on a package of pension reforms in which new entrants to the relevant pension scheme would retire at 65 years of age, but which protected the rights of existing scheme members (UK0511101N). The agreement was welcomed by the Trades Union Congress (TUC) and the public sector unions, as they viewed the government’s decision to honour ‘pension promises’ as a breakthrough in negotiations. At the time, union leaders called for the same principles to be applied in negotiations over the local government pension scheme, arguing the case for equal opportunities. The unions claim that the rights of certain local government workers, mostly women in lower paid jobs, are not protected in the same way as other public servants. Unions fear that this will create a two-tier pension system whereby, for example, a teacher can retire at the age of 60 years while a teaching assistant, earning substantially less, will be expected to work longer until aged 65 years.

Differing views on pension costs

However, Sir Digby Jones, Director-General of the Confederation of British Industry (CBI) criticised the strike action by saying that it was ‘selfish and divisive’ and ‘trade unionism at its worst’. He stated that ‘the government has given unions all the ammunition they need to say that current pensions arrangements are divisive, by its craven surrender in letting their nationally employed colleagues continue to retire at 60’. He also believed that private sector employers and their staff have had to recognise that longer life expectancies and the rising cost of providing pensions mean longer working lives, and that public sector workers should have to do the same.

The Conservative-controlled Local Government Association has stated that, without reform, the local government pension scheme will cost an additional GBP 6 billion (€8.7 billion) over the next 15 years, putting an extra 2% on household council tax bills each year. The association argues that the burden of higher council taxes – which have almost doubled in 10 years – is felt more by elderly people on low pensions. However, the GMB, Britain’s general union, argues that the average pension payout is less than GBP 4,000 (€5,800) a year and many women receive only GBP 1,600 (€2,320), while paying pension contributions of 6%. The union claims that the local government pension scheme costs just 2.7% of the council tax bill. Although employer contributions are rising and currently average 22%, the GMB argues that the scheme has substantial assets and that income from the fund’s investments yields more than GBP 3 billion (€4.35 billion).

Unions withdraws political support

In what is believed to be an unprecedented decision, Unison is withdrawing election funding and support from the Labour Party. The union usually donates GBP 1.5 million (€2.17 million) to Labour each year. Steve Warwick, Chair of Labour Link, the committee in charge of the election funds, explained that it was now neither ‘politically sensible’ nor appropriate to give Labour support in light of the dispute over pensions. Thus, unless a deal is reached over the pensions dispute, the union will not provide support for the party’s campaign in the May 2006 council elections.

Tripartite talks have resumed between ministers, local government employers and trade unions to try to break the deadlock.

Helen Newell, Industrial Relations Research Unit (IRRU), Warwick Business School