Forestry Commission Trade Unions - www.fctu.org.uk
Pre-Budget Report
Institute for Fiscal Studies - Post Pre-Budget Report briefing
11th December 2009
Follow the above link to view the IFS briefing on the Pre-Budget Report. This details the outlook for the next spending review and summarises the implications of where the pain will be felt in departmental saving; what cuts to departmental spending have been identified; past record on efficiency savings and where the Conservatives plans stand.
Mind the Gap
There appears to be a £15bn gap in the Government's plans on savings, they want £35.7bn to be saved by 2013/14. But the £12bn in efficiencies, £1bn in public sector pension reforms, £5bn cut from low-priority budgets and £3.4bn from tighter control over public sector pay only adds up to £21.4bn.
Civil Service Pensions and the Pre-Budget Report
11th December 2009
Today you will have received a letter from our HR Director outlining what the Chancellor said and meant about Civil Service Pensions. Unfortunately the quote missed out the Chancellor's opening sentence in which he said, "Thirdly, on public sector pay and pensions, public pensions need to be broadly in line with those offered in the private sector. So, by 2012 contributions by the state to public sector pensions for teachers, etc, etc ....."
The worry for us must be the reference to bring our pension into line with the private sector. We are justifiably nervous about any suggestions that may have an affect upon our pensions now an in the future, we took to the streets a few years ago to convince the Government that we are very passionate about protecting our pension rights. It is worth noting that at the moment, pensions are managed by different parts of the Civil Service and administered by 6 public and 2 private sector providers, over 9 sites. The plan is to bring them all together, so the administration of Civil Service pensions is managed as one team working across all Government departments. The Civil Service pensions themselves won’t change but the administration will be much smoother, more efficient, and provide a better service for all involved.
Sir Gus O’Donnell, the Head of the Civil Service asked the Department of Work & Pensions (DWP) to host the project. A team has been set up to plan the changes and make them happen. They’ll also be responsible for managing Civil Service pensions administration. The new team will work within DWPs Shared Services, working under contract to a new Scheme Management Board. They’ll report to the DWP Permanent Secretary.
We need to watch with care any mention or initiatives and remain sceptical and vigilant on any correspondence about Civil Service pensions.
Highlights of the Pre-Budget Report
10th December 2009
Below we have summarised the highlights from the Pre-Budget Report from Wednesday 9th December 2009, and its focus on the Public Sector. FCTU Secretary Allan MacKenzie has said of the Pre-Budget Report that again we have to see our members being asked to sacrifice their standard of living to help towards paying for the excesses of those who nearly brought the UK financially to its knees. The major problem we face is that for the past several years we have never had a pay award that actually matched inflation or was not subject to a Treasury capping policy. It is this cumulative effect that is wearing our members down and creating resentment with those who still seem hell bent on getting their excessive bonus at any cost.
It is true to say that as Civil Servants in the Forestry Commission we are under attack on many different fronts, we face the spectre of pay capping in the future, the proposed cuts to the Civil Service Compensation Scheme and the implied threat from Mr Darling that public sector pensions need to be broadly in line with the private sector.
The Chancellor also said that he wants maximum value from every pound spent and that the Government has found another £12billion a year by 2013-14 in further efficiencies and that it is prepared to sell those assets that can be managed better by the private sector.
We are facing some tough times ahead and a great deal of uncertainty as to how all this will look after the next election but we can be sure that no matter who forms the next Westminster Government we can expect those tough time to continue and perhaps even escalate beyond anything we have seen so far.
The Chancellor of the Exchequer (Mr. Alistair Darling):
Across world economies, the first half of this year saw a sharper deterioration than had been expected. That was also true here in the UK. Up to the third quarter of this year, the global recession has meant a cumulative economic contraction of 3.2 per cent in the United States, 5.6 per cent in Germany, 5.9 per cent in Italy and 7.7 per cent in Japan. Over the year as a whole, the UK economy is expected to have contracted by 4.75 per cent this year, but as I forecast at the Budget, I expect a return to growth in the fourth quarter.
Next year, I forecast growth of between 1 and 1.5 per cent, as I said in the Budget. Because of the underlying strength of our economy, the pick-up in world demand and the substantial spare capacity opened up by the recession, my Budget forecast, broadly in line with that of the Bank of England, of growth of 3.5 per cent in 2011 and 2012 remains unchanged. This growth, however, will come from more varied sources and not depend as much on the financial sector, which will, of course, remain an important part of our economy. Growth will be driven by fresh opportunities to export as the global economy expands and by investment by businesses in the key industries of the future. It is growth that I am determined to support in this pre-Budget report.
Partly because of the reversal of the VAT cut, consumer inflation will rise from 1.5 per cent to around 3 per cent early next year, before falling back. The Bank of England expects inflation then to fall below target and reach 1.5 per cent by the end of next year.
Fairness in tax is a crucial part of maintaining fiscal sustainability, but the majority of the reduction in borrowing will have to come from slower growth in overall public spending. We have already set out our spending plans until April 2011, but I believe it would be dangerous, as the head of the International Monetary Fund said only a couple of weeks ago, to reduce spending too soon, so to continue to support jobs and the economy, we have decided to stick to our spending plans for next year. In 2010–11, total public spending will increase by £31 billion, a growth rate of 2.2 per cent in real terms, providing continuing strong support for the wider economy until the recovery is firmly established. Once recovery is secured, we must, as I made clear at the time of the Budget, reduce the rate of growth in public spending, and meet our ambitious target to halve the deficit.
So, although the period ahead is going to be challenging, our public services are in a better state they have been for decades. However, we have to be realistic: the spending environment will be tough over the next few years. For as long as extraordinary uncertainties remain in the world economy, this is not a time for a spending review. We have already set out clear and firm departmental budgets for the next financial year, but to try to fix each Department’s budget now for the next five years is neither necessary nor sensible. We can, however, set out a clear direction, based on our economic priorities and our values as a Government.
First, we must make sure that we get maximum value for every pound we spend. Between 2005 and 2008, we delivered £26.5 billion of annual efficiency savings, and between 2008 and 2011 we are delivering further efficiencies worth more than 3 per cent of total departmental spending per year. This week, we announced plans to deliver another round of savings, amounting to £12 billion a year by 2013–14. We will abolish quangos, cut consultancy and marketing costs, improve procurement and streamline back-office functions. We will also sell those assets that can be managed better by the private sector.
Secondly, we need to focus better on those areas that make most difference to people’s lives. We have begun a root-and-branch review to examine every area of Government spending to drive through efficiency, to cut waste and to cut lower priority budgets. Today, I am able to announce £5 billion of savings from spending programs. This includes: phasing-in the roll-out of pension personal accounts; cutting back on the scope of major IT projects; reforming legal aid and outsourcing inefficient prisons; refocusing regeneration spending, so that it is spent where it is most needed; and cutting the cost of residential care by supporting older people to stay in their own homes. Those are necessary choices.
Thirdly, on public sector pay and pensions, public pensions need to be broadly in line with those offered in the private sector. So, by 2012 contributions by the state to public sector pensions for teachers, local government, the NHS and the civil service will be capped, saving about £1 billion a year. Public sector workers will make a greater contribution to the increasing value of pensions, with those earning more than £100,000 paying more. Public sector pay makes up about half of departmental spending. The senior civil service will take the lead with a cut in its pay bill of up to £100 million over three years, and any new Government appointment of someone on more than £150,000 and all bonuses of more than £50,000 will require explicit approval by the Treasury. I can announce that for the two years from 2011 we will ensure that all public sector pay settlements are capped at 1 per cent.
Mr. George Osborne (Tatton) (Con):
On spending, the Chancellor is prepared to tell us what he will spend money on, but he stays almost totally silent on where the real axe will fall. He is achieving the previously impossible trick of ring-fencing a black hole. He said, with understatement, that this is not the time for a comprehensive spending review. This is from a Chancellor who said that that he was acting from a position of strength! Why is it not the time for a comprehensive spending review? The Government has all the figures and they have access to all the information that they need. They had spending reviews just before the 2001 election and just before the 2005 election. Now, suddenly, the spending review has to wait until after the 2010 election. That spending review is the massive missing piece of this pre-Budget report. They have given us lavish detail on the few things that they say that they are protecting, and almost nothing on the many things that they are planning to cut. They are not being honest with the British people about the real price of their incompetence. This has got nothing to do with protecting front-line services and everything to do with protecting themselves. What we see today is not a credible plan on the debt, and the Chancellor has failed his second task.
Dr. Vincent Cable (Twickenham) (LD):
It is a little like the old story of the economist who is given a tin of food to eat and says, “Let’s assume the existence of a tin opener.” The Government are saying, “Let’s assume economic growth.” Why? Have they made any estimate of the very real risk that the economy will revert to a double-dip recession or continue to stagnate? What is the risk of those things happening—is it one in 10, one in five, or one in two? Surely we cannot operate on the basis of a single-line forecast that is based entirely on optimism and very little else.
To the extent that we can understand what the Government are doing about cutting public spending growth, it comes down to two items. Perhaps the Chancellor will confirm that. One of the items involves hitting low-paid workers by cutting the proposal for personal allowances, which I understand has been postponed or deferred. The other is the approach adopted to public sector pay. On the assumption that the Govt have made, a 1 per cent increase for a low-paid manual worker is a real cut. Of course, it is worth 10 times as much for a permanent secretary on £150,000 a year as it is to a worker on £15,000 a year. If there is to be restraint—and we have argued for it—surely it should be a flat sum across the board. We have argued that it should be £8 a week for everyone. That is the heart of the issue of fairness, which the Chancellor claimed was at the heart of his statement.
Of course it is right that we should be concerned with fairness in the tax system and in public spending priorities. The hon. Member for Tatton (Mr. Osborne) keeps saying that we are all in this together, but that is simply not right: we are not all in this together, as some people have done much better than others.
PCS responds to pre-budget report
100,000 jobs have already gone in civil and public services, leading the union to warn that key areas such as justice and civilian support for the armed forces would be further damaged if the Chancellor swings his axe to pay for the financial crisis.
The union went on to criticise the government of being cynical in arguing that it could protect the delivery of frontline services whilst cutting spending, as part of its pre-election manoeuvring.
The union warned that capping pay would further undermine morale and entrench low pay in the civil service where 1 in 5 earn less than £15,000. Pay in the civil service is lower than that of comparable jobs in the private sector with pay gaps of more than £5,000 between the civil service and private sector.
The union went on to argue that public spending cuts would choke off recovery and turn recession into a depression.
The union also expressed concern over moves to cap employer contributions to public sector pensions and called on the government to reaffirm its commitment to honouring the pension’s agreement it made two years ago with public sector unions. Far from being gold plated, the average civil service pension is £6,500.
Commenting, Mark Serwotka, PCS general secretary, said: "Having experienced over 100,000 job cuts our members know, as the government try to outflank the Tories ahead of a general election that it is false to think that you can cut public spending and protect frontline services”.
"Following on from last week’s unilateral changes to civil servants’ redundancy terms, it is clear that the government are preparing to cut more jobs on the cheap”.
On public sector pay and pensions he added: "The hundreds of thousands of low paid civil and public servants who are keeping this country running and getting people back into work will view the prospect of further cuts in real terms as scant reward for their hard work”.
"Pay cuts and pay freezes have been a common feature for civil servants as the government has sought to drive down pay, with 40% of staff working in Jobcentres receiving 0% last year and 1% this year.
"To make matters worse there will be concern over the future of public sector pensions and we would urge the government to stand by the agreement it made on change to public sector pensions two years ago”.
Unite's reaction to the Pre-Budget Report
Responding to the government's proposed public sector pay cap Unite's assistant general secretary for the public sector, Gail Cartmail, said: "We know the Treasury and Number 10 are targeting high earners in the public sector but we urgently need to talk to the Treasury about an across the board pay cap. A pay cap would hit the lowest paid hardest. One per cent for the lower paid is a pittance, but the highest earners would get significantly more cash.
"The proposed cap also compromises the independent pay review bodies which were set up to take the politics out of public sector pay. Labour's implementation of the review bodies has been a success and to ride roughshod over them is a step in the wrong direction.
"On the proposed changes to public sector pensions Unite is seeking clarification, as NHS workers, teachers and civil servants recently agreed to wide ranging changes to pension schemes that include caps and cost sharing, as well as higher employee contributions?
Prospect’s reaction
Half a bonus is still a bonanza, say civil servants
Deputy General Secretary Dai Hudd said the 50% levy on bank bonuses in the Pre-Budget Report would still leave bankers with half their bonuses while civil servants would be held to pay rises of 1% or less for the next three years.
“To our members, even half the bonuses being paid to the people who brought the British economy to its knees would look like all their Christmases had come at once.
“Public servants will still be pulling people from floods, coming to their aid in traffic accidents and protecting the public against threats to animal and human health. They will do this without a bonus of any kind, simply because that is their job.
“It remains incomprehensible why these dedicated public servants should have to be penalised for the sins of the banking sector.”
GMB reaction
Commenting on the Pre budget report Paul Kenny, GMB General Secretary said, “This action to tax bonuses paid to bankers is long overdue. It is incredible that the Banks would even consider reinstating the bonuses. It is almost as if the bankers have been out to lunch for over a year and have just come back in to the office. There is a cultural issue here that needs to be addressed and the public will support the government in dealing with it.
Low paid public sector workers did not create this crisis and it is grossly unfair to single them out for a pay cap that may be well below the rate of inflation over the next few years.
Extending free school meals to half a million more children is good news for their health and their education. We now want to see it extended to all primary school children."