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Govt missed a trick on civil service plans

Trade and Industry Secretary Alan Johnson’s capitulation on civil servants’ pensions is disappointing but sadly not surprising.

As CBI director-general Sir Digby Jones points out, today’s 21-year-old civil servant can retire at the age of 60 in 2044 on a generous final-salary pension – and what that will cost by then we can only guess at.

Sir Digby is, of course, concerned at how difficult this will make pension reform in the private sector where it is already the number one concern for finance directors at many companies.

If Johnson had stuck to the previously hinted at policy of raising the retirement age from 60 to 65 by 2013, in reality, the amount of money saved would not have been huge.

It is 10 to 15 years down the line that costs would have been saved and will now be incurred because the civil service, teachers and NHS pension schemes come out of the taxes of the year they are paid.

Johnson’s choice was predictable because his short-term options were so stark – face down a massive civil service strike campaign or lumber a future government with extra liability.

The unions’ position was clear – we will not accept any change in the terms and conditions of our employment.

In some ways, this is understandable. Who among us would want to carry on doing what we are doing for less in return?

But where the Government has missed a trick is by failing to demand of the unions that, in future pay negotiations the entire package – salary plus the full estimated cost of pension provision – shall be taken into account.

So, if mortality improvements mean that the entire remun-eration package goes up by more than inflation, annual pay bargains should be reduced accordingly. Civil servants can have their final-salary pensions but only as long as they are prepared to pay for them.

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