Unions go to high court over public sector pensions reform

http://www.guardian.co.uk/money/2011/oct/2...P=FBCNETTXT9038

Judges asked to rule on whether ministers broke the law when they switched uprating of pensions and benefits to CPI as opposed to historically higher RPI

 

Unions representing public sector staff are going to the high court to challenge the government's decision to change the way their pensions are calculated – a move they say will be unfair to millions of workers.

 

Two groups are asking judges to rule that ministers broke the law when they decided to uprate pensions and benefits according to the consumer prices index (CPI), which historically has risen by a smaller amount each year than the retail prices index (RPI).

 

One group is made up of the Fire Brigades Union, teachers' union NASUWT, the Prison Officers Association, the Public and Commercial Services Union (PCS), Unison and Unite, while the other consists of Prospect, the FDA, GMB, the Police Federation, the National Association of Retired Police Officers, and the Civil Service Pensioners' Alliance.

 

If successful the action, which comes ahead of a planned strike on 30 November, could cost the Treasury £6bn in lost savings by the end of this parliament and £200bn over the next 40 years.

 

The groups are acting on behalf of millions of public sector workers who have guaranteed defined-benefit pensions that, until April, rose in line with RPI.

 

Once they retire, those workers can now expect to see their pensions lose their value at a faster pace than they previously would. Last month, the CPI measure of inflation was 5.2% compared with 5.6% for RPI.

 

The unions say that CPI is about 1.2% lower on average than RPI, and the loss to existing public sector pensioners will be about 15%, with the change already affecting staff currently paying into career average schemes. One union, Prospect, said the average civil service pensioner could lose between £15,000-£20,000.

 

The chancellor George Osborne announced the change in the June 2010 budget, when he claimed CPI was the more appropriate measure.

 

The general secretary of NASUWT, Chris Keates, said: "The question the court is being asked to answer is whether it is just and fair to arbitrarily change the basis on which pensions are calculated, reducing their value by thousands of pounds.

 

"The government's actions are a breach of the contract with ordinary working people. We are looking to the court to make sure that millions of ordinary workers will not be left facing a bleak and uncertain future at a time when cost of living is soaring."

 

Mark Serwotka, general secretary of the PCS, said: "The switch from RPI to CPI is just another example of how this government wants public servants, pensioners and people entitled to benefits to pay the heaviest price for the recession.

 

"For new entrants to the civil service it means an immediate cut in their pensions, ripping up an agreement we reached just a few years ago."

 

Unison's general secretary Dave Prentis said his union was backing the judicial review "because we cannot allow the coalition to run roughshod over pensioners".

 

"The way that a country treats its citizens when they retire is a mark of a decent and fair society," he said. "The government has stepped over that mark – the switch is nothing but a cynical, multi-million pound raid on pensioners to pay down a deficit they did nothing to cause. This flawed measure of inflation does not even include housing costs – a major expenditure for many retired people."

 

The change will also affect hundreds of thousands of private sector workers who are tied to the downgrade by the rules of their own occupational pensions. The cost to private sector workers is estimated at £75bn over the next 40 years, the unions say.

 

Dai Hudd, deputy general secretary of Prospect, said: "Although this action is predominantly being taken by public sector unions, we are also anxious to highlight that millions of private sector workers and pensioners will be affected by this change."

 

Lawyers for the unions will argue that all negotiations in recent years over pensions were based on retention of the RPI link. They will also say that the switch to CPI is a retrospective cut in pension benefits, which is a breach of the Human Rights Act and social security rules, because it applies to past and future retirement income. Reforms up to now have been restricted to future benefits.

 

A Treasury spokesman said: "Public service pensions will continue to provide protection against inflation and will remain among the very best available, providing a guaranteed pension level for all employees.

 

"CPI is already used by the Bank of England to set its inflation target and, unlike RPI, is designed to take account of the fact that consumers tend to shop around, switching to cheaper alternatives when prices for similar goods change."

 

The switch has also met with opposition from the Royal Statistical Society, which has complained that the CPI measure is a poor reflection of the cost increases faced by pensioners. It has complained to the UK Statistics Authority, which oversees the inflation indices, asking for officials to show to what extent it includes a basket of typical costs faced by pensioners.

 

The case is expected to last three days.

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If the legal system was based upon what's morally right and what's actually just, then the unions will win this case hands down... Unfortunately, as we all know, the law is an ass, and there is a very wide gulf between justice and between law... I also dont expect them to win because the Child Poverty Action Group had their case thrown out last week concerning the changes to Social Housing provision and Housing Benefit... And it is still a very clear fact that the legal system in this country continues to be shot all the way through with cronie-ism, the "old boys network" and very much in the control of vested interests... The legal system only really looks out for the interests of the elites and the powerful, the 1% in other words.....

 

So, like I say, dont hold your breath....

 

 

If it is a breach of the Human Rights Act and the judges rule against it, they can always take it to the European Court of Human Rights. That would fuck off the Tories immeasurably and the EU court is pretty much certain to rule with the Unions I'd have thought.

They have a point and a valid case but to be demanding more money at a time when the country could be about to go into another recession is not the right time, everyone has to tighten their belts.

 

I got a 2.5% rise this year in my salary which is half the rate of inflation but I accepted it in the spirit of the current economic turmoil and 'we are all in this together' so the unions should accept 'we are all in this together' too.

 

 

They have a point and a valid case but to be demanding more money at a time when the country could be about to go into another recession is not the right time, everyone has to tighten their belts.

 

I got a 2.5% rise this year in my salary which is half the rate of inflation but I accepted it in the spirit of the current economic turmoil and 'we are all in this together' so the unions should accept 'we are all in this together' too.

 

Yeah, but that's the thing we're clearly NOT "all in it together" (that phrase will continue to haunt David Sca-Moron for the rest of his days..) :lol: :lol: , so IMO, your union was rather foolish to accept a below inflation rate pay deal.... You dont have a pay-rise, you have a real terms pay cut because your spending power is decreased...

 

Anyway, pensions are not the same thing as a pay deal or wages, you cant compare the two... And when you consider that employees are going to be forced to pay in more and get less out and now this, then, sorry, it becomes a pretty clear case of taking the piss.....

Of all the misguided political slogans "We're all in this together" spouted by a bunch of multi-millionaires has to be among the most ridiculous. It makes John Major's "Back to Basics" seem almost sensible.

My guess is that the government will win. If pensions are guaranteed to be "linked to inflation" then it is up to the government (within reason) to determine what that means.

 

The main difference between CPI and RPI is that RPI includes housing costs while CPI does not. The government can argue that a large (and, presumably, increasing) proportion on public sector workers will own their own home. In particular that means that it can be assumed that their mortgage will be paid off by the time they retire. Therefore, rent / mortgage costs will be zero.

 

That won't necessarily make the decision right. After all, a lot of retired public sector workers will not own their own home and will still have to pay rent. However, I suspect the government will win this case.