A public sector workers analisys.

So. The household of UK Ltd. is in a bit of trouble with the bank manager. The government are the ones holding the purse strings and have to get all us kiddywinkles to swalow the medicine they've got lined up for us. But should be be swallowing like nice little girls and boys or should we be throwing a tantrum? Well, let's have a look at this.

Any household in trouble knows there are two possible actions. The first is to cut spending. The second is to earn more.

Labours position was to support the latter. The conservatives are going hell bent for leather on the former. Both have their good and bad points. Let's start, however, with the pensions side of things.

If you look at life expectancy, then we've added a good five years to our lives in the last thirty years. That's from government statistics. (Edit-only relative to 1980) There is an argument that pensions do need to be changed and given these figures, working longer is a valid argument, but the ultimate question is, by how much?

This fact alone, however, does show how the issue can't be tackled on a broad stroke basis. Office workers could put in more extra years than someone doing a physical job like a fireman, nurse, ambulance worker, police officer, things like that. This is one key argument against the current proposals. We are now at such an age difference that one size will not fit all.

But what of the other two mechanisms, paying more in and getting less out. Well, that's more difficult.

The deficit in the public pensions wasn't helped by the fact that public bodies were allowed to borrow from the pension funds. This practice was severely restricted in 2009, but many local government still owe money to the pension schemes of their staff. Some councils wrote large cheques to clear their defecits, but others are drip feeding back at the slowest rate they can manage.

A pension fund relies on its asssets to build. If it doesn't have the assets then it can't generate the returns. The actual amounts vary accross the board and is attributable to the management of that council rather than its political aliegance, but the government has to face up to the fact that it has a significant part to play in the fact that some pension funds are not fit for purpose. It is now asking staff to put their hands in their pockets to cover government borrowing from their own pension pot.

It is no wonder that some of these pension changes are going down like a ton of bricks.

Pensions are, like anything else, an investment. After the investment matures (at the time of drawing) an anuity is bought. The figures are given at the end of every financial year in the terms of a pension statement. Assuming that I worked until my late sixties and that, given the likelyhood that I will live in to my late eighties, based on the governments own statistics, then my current return on my pension would be akin to putting my money in to a bank account that earns a little shy of six percent. That's not bad. Not great, but not dire. After the changes, however, the forecast drops to under four percent. Even in our stricken times, I can do better than that in a building society.

Those maths themselves prove that our pensions aren't gold plated. The irony is also that the people from the various financial services who are supporting the governments change of pensions from final salary to career average, are themselves on final salary schemes. One admitted such on the sofa of BBC Breakfast the other morning.

The other thing missing from pensions is the rate at which they keep pace with inflation. An annuity that doesn't keep proper pace with inflation will see the monthly pension payments earn less as the years go on. But is this fair?

The annuity will be free to earn money at the rate of inflation; follow the markets and enjoy the full up and down. In effect, a pension that pays out worse returns over the years, is actually building up funds for the pension pot, to the detriment of the individual who put their money in it. This is an issue which has undermined many private pensions.

If the government actually want people to put money in to their own pensions, then this kind of behaviour needs to be stopped. They need to be bringing private pensions up to the standard of public pensions rather than the other way around as this is effectively daylight robbery; peoples hard earned cash going in to the hands of private companies running annuities.

This is the sort of behaviour that prevents people from actually saving for pensions in the first place and placing even more burden on the state.

Personally, I'm starting to put odd bits and pieces in other investments. It leaves less money in the household for the here and now, but in my opinion the future pension is not going to give me a livable fund. To do this, however, you have to keep on top of investments. You can't just put your money one side and forget about it. Independent financial advice has been invaluable, as has been keeping on top of things.

There is a problem with this, however. With the government forcing people to put more of their money in to a worsening pension, then that leaves the household with less money. That means less money to live with and therefore less free cash with which to invest. This means that there is a growing strength to the argument that some people would be better off getting out of the public sector pension and making other investments. Obviously, independent advice will be needed before making such a bold move, but that is the reality of the devalation of the public pension being undertaken.

The conclusion on the pensions side...

1) The government aren't quick to tell people that one of the reasons that the funds aren't up to scratch is that they let councils borrow from them and that blunted the pots ability to grow.

2) Some changes are necessary as statistics do show we are living longer, but the figures are cutting the value of pensions to a level which is out of porportion with the extra life expectancy.

3) The protections of our annuities under the changes will be out of step with inflation and won't represent good value for money. The cautious will need to save more in avenues outside the pension scheme (while having less available money to do this) while others will have more reason to throw caution to the wind and live a good life now, intending to sit back and live an armchair retirement off the back of the state.

So, are we being lied to? Well, "poli," being Latin for "many," and "ticks" being, "blood sucking creatures," when you're dealing with politics, you can be sure as eggs are eggs that you're being lied to.

I went on a Union treasurers course during which we were given the following sheet. It consists of figures that, as a nation, local government are predicting will happen to their reserve (forecasting that councils would eat in to their reserves by hundreds of millions of pounds) against what actually happened. (their reserves grew by hundreds of millions of pounds and sometimes growing reserves nationally by a billion pounds.) Even in the worse of the financial of years the pesimism ran over the billion pound mark, but local governments still managed to put £249 million in the bank, on top of what was already there. At the same time, they were bleating poverty.



As a nation, we're not as broke as you think, even at local government level. However, individual councils will have their own small story concerning this and if you want to know what is happening, then your own councils financial statement has to be publically available. Most have it on their web site.

If you really want to understand what you're local council is doing then it is worth learning enough to read these reports and ascertain what they're doing. Frequently, many plans will be contained in the financial reports because the funding needed to carry them out, has to be within those pages anyway.

The annual financial report is perhaps the single most important local council document to read.

Now we move on to the job cuts and the outsourcing to the private sector.

Many local authorities have a history of services being bounced out to private companies and then back in again. There is also a history of permanent staff being sacked, replaced by a force of contractors and then the contractors made permanent. These cycles continue.

A private company can not deliver a service of good standard at the same time as making money for its shareholders, on the kind of money that local government already pays for its in house service. If a council out sources its services then this is valid reason for looking at the quality of the management. After all, if the private sector can do it, then the public sector can as well; and without the need to make a profit, this translates to a saving for the public purse.

The driving factor behind all this is politics. Whether you want a large public service working for the people, or a large private sector making money for shareholders. Classic conservative and labour positions.

Also remember that Chief Executive in the Nottingham-ish area who put forward the financial case for out sourcing services and a few years later, created another report making the case that they would save money by bringing the same services in house again.

Let's have a look at the deficit. The actual amount we owe in terms of financial number, is very high. The key, however, is how our outgoings relate to our incommmings.

Translated, as long as our country is bringing in more money than we spend out, then we're sorting the deficit out.


It is things like this which make decisions like Birmingham councils choice of sacking local workers to outsource to India, very politically damaging. It upsets this balance as rather than money rolling around our countries economy, it is leaking outside the country and affecting this balance.

It is also why the privatisation is hurting us becuase many companies are themselves funded by overseas banks (because our own are restricting lending) and the local firms that support local people are going to the wall while the multinationals are gaining contracts which are taking our money abroad, yet again.

We are undermining our local busineses, our money is going abroad and we're losing money purely because the companies being brought in to run our public services or from whom we purchase products and services are, in themselves, containing foreign elements.

Shifting from public to private won't help our GDP and won't help balance the countries books unless all the purchases are kept locally.

The only thing helping this are the private industries which are exporting and feeding money in to the system via taxes.

This is all well and good, but this is an uphill struggle if the workforce or companies that supply the services that keep our country running, or else supply the funding and therefore earn the interest from such investments, are foreign.

At the very least, the companies, workforce and financial investment, needs to be British. However, with all the European competition rules, we do have our hands tied a little there.

Another section of figures from the meeting. It shows that as a country, we have income and expenditure. Cutting expenditure by cutting jobs ends up increasing the outgoings on social spending regarding housing and benefits. It just moves from one side of the equation to the other. The real things which are going to sort out the countries financial state are corporation taxes while supporting our local economies and businesses to make us less reliant on imported services and providing British investmant funding to help stop the leakage of finance abroad.

You can probably now see why, to me, it doesn't make financial sense to move the public sector in to the private sphere. Not unless those companies are British and funded by UK investment.