The two Huttons’ proposals for reforming public sector pay and pensions tackle major areas that are in the government’s sights for cuts. But how fair are they?
Are you au fait with British public life? Then you don’t get your Huttons tangled. That’s Belfast Lord Hutton peering over his spectacles, who reported into Dr David Kelly’s death. Then there’s sharp-suited former Labour minister Lord (John) Hutton asked by the coalition to look into public sector pensions. And finally, there’s former newspaper editor, economist and ubiquitous commentator Will Hutton (not yet a Lord, outrageous!) who has been investigating public sector pay.
So what is a Hutton? A Hutton is admired for his flinty intellect and readiness to work for different political masters.
The original Lord Hutton had been brought in by Blair as a fierce figure nobody could dream of accusing of going soft on the government – although many thought he then did.
John and Will are men of the Left who took on tasks for the coalition. In each case the task they’d been given was big but thankless.
John Hutton was told to review public sector pensions, which (according to the Office for Budget Responsibility) would face a £9bn funding gap over the next four years alone. These are the pensions described by the politics-of-envy Tory tabloids as ‘gold plated’. Cutting back will cause real pain and anger and Tory ministers know it. All credit, you might say, to a Hutton for being prepared to pull on the rubber gloves.
Will Hutton’s task was to look at the gaps in public sector pay between those at the top, and those further down. The public sector has been infected by the boom years. If the bosses of FTSE companies could earn huge sums, why not the people running swathes of taxpayer-funded Britain? If you want the best, you have to compete. But whatever happened to fairness and the public service ethic? Another pair of rubber gloves, nurse – and fetch me a Hutton.
John Hutton’s remedy for pensions is radical surgery without much in the way of anaesthetic. Many public servants would have to work longer, pay more into their pensions and get less back in the end. Well, why should hard-pressed taxpayers have to keep shelling out for other people’s unaffordable pensions? Some people retiring expect to spend 40% of their adult life retired.
So he proposes that the uniformed services, such as the armed forces, firefighters and the police would have to work to 60, not 55, while others must wait until state pension age. That’s sensible. But then came the Treasury’s cash reductions, with pensions tagged to the CPI rather than the higher RPI.
Ouch. Hutton also proposes public sector workers move from final salary schemes to ones based on career average earnings – an idea, at best, ambiguous when it comes to the impact on low-paid public sector workers. The average pension paid to public servants is under £8,000 per year. About half get less than £5,600. Gold-plated? Hardly.
So what about the other end of the scale? Will Hutton was expected to recommend a cap on top pay in the public service of 20 times the lowest pay. But he found that only 70 out of 6 million public sector workers earned more than that multiple. Instead, he has come up with plans for more transparency and performance bonuses.
He wants senior executives to have to earn at least a tenth of their salary for good performance – and lose it if performance targets are missed. It’s less simple than it seems. But it does introduce real incentives and some real sanctions.
Will Hutton deserves a thumbs up. The only problem is his managers with their performance targets might find many of their staff demoralised because of the pension proposals from John Hutton.