Monday, 6 February 2012

Letter to Weston Mercury in response to letter regarding public sector pensions

The following letter has been published in this week's Weston Mercury in response to a letter regarding public sector pensions in last week's issue:

"I am writing to correct the comments made by one of your letter writers in last week’s Mercury about so-called “gold-plated” public sector pensions. The reality is actually rather different because the average local government pension is £4000 per year for men and £2600 for women – hardly gold-plated. It should also be pointed out that local government workers are also income tax payers, council tax payers, national insurance contribution payers and VAT payers. In addition local government workers contribute an average of 6.4% of their salaries to their pensions. The local government pension scheme is affordable – it is well financed with income from investments and contributions massively exceeding expenditure on benefits. The government have recognised this fact, along with the fact that the proposed 50% increase in contributions would turn out to be a false economy by forcing many workers to opt out of the scheme and consequently have to rely on the state in retirement. As a result the ongoing pensions negotiations are now looking at other ways to find the money that the government wants to take out of the pension scheme to pay down the deficit.

The local government pension scheme also has investments in some of the UK’s top companies, and is therefore creating jobs and regenerating the economy. It is not subsidised by private sector workers, and it is not paid for by council tax payers – only 5% of the income collected through council tax goes to our pension fund as part of the employer’s contribution. If the residents of North Somerset think that they are paying for our pensions, then they also need to realise that they are paying for the pensions of private sector workers, because private companies simply add the costs of pensions to the prices they charge us. Quite simply we all pay for each other’s pensions. In fact the really gold-plated pensions are to be found in the private sector, where Chief Executives award themselves large pensions, while offering something much less substantial to their workers - if they offer them anything at all. In local government our Chief Executive is in exactly the same pension scheme as all local government workers.

I would also like to clarify the point I made about the council tax freeze grant, which central government have offered all local authorities this year, and which a number of councils, including Conservative administrations in Surrey, Cambridgeshire, Chelmsford and Peterborough have rejected on the grounds that it will create black holes in their budgets for future years, and because rejecting it is the only way to protect vital public services. The council tax freeze grant is not a good deal for councils for a number of reasons. First as a grant equivalent to 2.5% of council tax income it is well under inflation, and this means that councils’ incomes aren’t keeping up with their costs – we are currently seeing Parish councils raise their precepts for this very reason. Second, the freeze grant is only funded for one year, which means councils will have a hole in their budget for next year and every year after that. In North Somerset’s case this means that every year from 2013 onwards they will have £2.3 million less to spend on services, and this is on top of the £50 million of cuts they are currently making. The consequence of this budget hole is likely to be either much steeper council tax increases in future years or even deeper cuts to services. For instance, North Somerset residents are currently being consulted on reductions in library opening hours. If the council accept the freeze grant then it is likely that in future they will be consulted on library closures instead.

If instead the council reject the freeze grant and increase council tax by between 2.55% up to the cap of 3.5% this money would remain in their budget for subsequent years. We have calculated that a 3.5% increase over the next 3 years would give them an extra £10 million in their budget for services, at a cost of £3.35 per month for the average council tax payer. Residents of North Somerset who have elderly relatives, disabled relatives, children and young people in their families may want to consider whether paying what amounts to an extra £40 a year is a price worth paying to lessen some of the massive cuts the council will be making to services for our most vulnerable residents. Those North Somerset residents who have been campaigning recently to have street lights turned back on, or to save youth services might also want to consider what the council could do with this extra money.

Local government minister Eric Pickles has said that councils have a moral duty to accept the council tax freeze grant, but Mr Pickles and the Coalition government also have a moral duty to ensure that funding to councils is at a level at which councils are able to provide services. A rejection of the council tax freeze grant will send a clear message to Westminster that North Somerset Council, as a low-funded authority, cannot provide essential services on the current levels of government funding, and that increasing council tax is the only way to protect vital public services to our most vulnerable citizens. Finally, an increase in council tax is not about our pensions – it’s about services for the most vulnerable people in North Somerset and ultimately it’s up to the residents of North Somerset to decide whether those services are worth paying for. But I for one think that North Somerset will be a very poor place to live if residents aren’t prepared to pay a bit extra to protect services to the vulnerable."

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