At the weekend, the government appointed Lord Hutton, former Secretary of State for Work and Pensions, to head a commission reviewing public sector pensions. Accepting the job was a controversial move, for evident reasons of Hutton’s political affiliation and the evident remit to ‘contain’ public sector pensions costs, but the commission is intended to be ‘independent’, as George Osborne confirmed to Andrew Marr not once, not twice but three times.
But, just how independent the (other) Hutton commission is going to be able to be is a moot point. We’ve had already the unedifying spectacle of Clegg sticking the boot in on the basis of some rather spurious accounting via the (similarly ‘independent’) Office of Budget Responsibility; the apparent remit of the Commission to come up with ‘early savings’ does, as The Guardian commented (first link above), provide not so much as a clear steer towards, but a pointed indicator of, an increase in member contributions; and today’s Budget reports that public sector pensions in payment will be indexed in the future not by the Retail Price Index, but by the Consumer Price Index.
(Incidentally, as the following graph shows, CPI is habitually lower than RPI: in 14 of the 21 years since 1988, the annual rate of change in RPI has been higher than that of CPI in the September which is used for uprating benefits, including pensions, while CPI has been higher in just three; while £1 in 1988, uprating for CPI, would be worth £1.74 by 2010, compared to £1.99 where uprating was by RPI – 14% more in this period.)
Today’s announcement would appear to restrict the Commission’s room for manoeuvre by taking away one of the negotiations options which might be otherwise have been used to ‘sell’ reform to a sceptical workforce.
Independent? I wouldn’t bank on it. Another fig leaf for long-held Tory ambitions to cut public sector pensions? Probably.
[Edit 23/6: as Cameron seems to have confirmed today in another undermining of the independence of the Hutton Commission: not only was the total bill for public sector pensions becoming ‘unaffordable’ but ‘major changes’ would be needed for the future based on ‘no longer final salary schemes or having to put more money in’.]