It seems like local government workers are in a straight battle with the government over pensions. But take a closer look. All the government's arguments are sponsored by the European Union – and jointly scripted with the World Bank...
Pensions: bringing capital to heel
WORKERS, MAY 2006 ISSUE
Blair and Brown's announcement at the beginning of April that they have a workers' consensus to go backwards to retirement at age 68 was little more than a show by paper tigers. The pensions day of action the week before had already put the lie to that, making the Turner Report's proposals of late retirement and the further privatisation of state pension benefits redundant. Very few workers are now taking seriously the arguments about living longer, dependency ratios and other such nonsense.
The sophistry that has been used to artificially pump up the deficits for occupational pension schemes has been analysed in previous editions of Workers. Now even the financial pages of the national newspapers are beginning to realise that the ground is starting to shift.
For example on the question of pensions deficits, the Daily Telegraph in a recent article quoted a spokesman for Duke Street Capital (a capital markets' broker of immense wealth and power) as saying, "It's a structural distortion because people are being forced to make decisions due to regulations rather than investment reasons." He went on to say, "The long view is that current valuations are unlikely to prove accurate when we get there."
Similarly a director at accountants Smith Williamson has said, "The fact there are several bodies out there trying to purchase companies' pension liabilities and looking to make a turn on them (ie shifting them to make a profit) would suggest deficits are overblown." By the same token a spokesman for Barclay's Capital has said the government has created "the unedifying spectacle of financial markets gripped by an entirely self manufactured pension fund crisis". A worker on the 28 March day of action summed up by saying "the whole thing is a mess for everyone. If they get away with this, it's going to affect everyone at some point".
It would appear that the government's pensions trick of creating a problem and then pretending to solve it is beginning to fall apart. For example, when recently questioned about volatile gilt prices causing pension deficits to swing wildly in the space of one month, a Treasury insider could only dismiss the situation as "absurd". Yes – but you created the absurdity.
While dealing with absurdity, consider also the state pension scheme. Here the government's arguments as sponsored by the EU have been jointly scripted by the World Bank, using the benefit of their past experience of breaking other indebted countries' state pension structures.
The role of the World Bank in busting pension provision has been studied by Paul and Paul in their excellent 1995 paper published in the International Journal of Health Services. Among the examples they provide is the World Bank's "conditionality" approach, which is to push the line that past pension levels are a luxury, at the same time as producing a flawed analysis of pension inefficiencies and inequities. For example the pensions programme that it foisted on Chile in the 1990s first started with the World Bank complaining that the state pension system did not take adequate care of the most socially vulnerable, that it short-changed the poor. Needless to say, under the new system designed by the Bank, the poor became far worse off. An all too familiar government safety net called Pensión Asistencial paid barely enough to keep a Chilean retired worker from starving to death.
The 1990s Chilean experience as well as the pensions experience of other South American countries at this time is interesting because (not coincidentally) the attempted roll back of the retirement age in this country also started in the 1990s through the "sponsored" equal opportunities court case of Barber vs GRE. The case revolved around Mr Barber finding that his early retirement pension at age 60 was lower than the equivalent payable to a woman of the same age with the same contribution record. The case went to the House of Lords and then on appeal to the European Court of Justice. The European Court in 1994 found in favour of Mr Barber but recommended that to avoid potential "inequities" both males and females should in future "equalise" and retire at age 65.
This was the first time that the EU had been given the opportunity to pronounce on British occupational pensions, a trend that has since accelerated. Shortly thereafter the government stepped in and by 1997 was proposing that from 2010 women will only be able to receive the state pension from age 61, tapering down each year to 62, 63 and eventually to age 65 after 2015. Having implemented this, we now have the latest 2006 equality offering of the state retirement age moving further to age 68 due to "longevity", with occupational pension schemes attempting similar.
For clarity in dismantling the sugar coated veil of equality, it is best to use EU and World Bank speak, where the smashing of pensions is termed as "massification of privilege" – its contemporary description of decent pension benefits extended to ever larger sectors of the population. "What was financially viable for a minority," complains World Bank expert Carmelo Mesa-Lago, "cannot work in the long run for the mass of the insured."
This is their class vision for debt management implementation by the Labour government. But from our working class view we currently have a unique opportunity to wrest control from these "debt junkies" and use our pensions capital to build our country.
So in terms of trade unions negotiating with this bankrupt government, pensions should be taken off the agenda and instead we need to establish how much they owe to the international capital markets in secret loans and deals, for what purpose the money has been used and the attaching terms.
We should then dismiss the government and take matters in our own hands with trade unions dealing with the EU and World Bank direct, stating clearly that we intend to use our resources to build our country and that our pensions level is for us, the workers, to determine.