As The Guardian has reported, on the Today programme yesterday, Francis Maude tried to claim that the reason Public Sector Pansions should be reformed was becasue they are unaffordable. It's surprising he did - as Justine Greening had tried the same thing on the same programme the day before, and got hammered for it. And as Evan Davis had been given the opportunity for a dry run the day before, he really skewered Maude. Here's the interview - more later on the wider issue.
But for now...enjoy!
Intervew begins:
ED: I want to just ask about your credibility. The prime minister said the other day [that the pension system is in danger of going broke]. Do you stand by that claim?
FM: Well, I'll just quote what Lord Hutton said, the former Labour pensions secretary, when he did his report. He said very clearly the status quo is not tenable.
ED: That's not a quote, is it. Because I did my little control f key search on the word tenable [ie, a word search] on his report [and] couldn't find it in his report.
FM: He has said that the system is not tenable.
ED: Did you say that it was going broke if nothing was done. Because I can only find that graph which shows the cost falling in terms of GDP. It has been repeated so often that it's unaffordable, it's out of control. I just can't see it in his report. He doesn't say it's unaffordable. He says it's not fair. And that's a very different justification for reforming pensions than it's unaffordable.
FM: And he said that if we want the system of defined benefit pensions, which few people elsewhere have, to be sustained into the future, long-term reform is needed.
ED: Is it unaffordable?
FM: It will be unless we make these changes.
ED: That's not what he says.
FM: Well it will be. The cost to taxpayers of supporting public sector pensions has gone up by a third. It's £32bn a year. What Lord Hutton said in his report is that the extra costs of people living longer – because the average 60-year-old today is living 10 years longer than they did in the 1960s.
ED: Have you read the report?
FM: Yes, of course I've read the report.
ED: Can you tell us why does it show the cost falling over the decades in terms of the proportion of GDP going to public sector pension recipients? Just explain why it's going down, because if you've read the report you will know the answer.
FM: The answer is that the expenditure on pensions by the taxpayer has increased by a third.
ED: Why is it going down? In his report, the big picture is it's going down. Why is that? Just explain to the public why the cost is going down.
FM: Well, the cost to the taxpayer is going up. That's the point.
ED: As a proportion of GDP?
FM: The cost of the increase, the cost of paying pensions to people who are living longer, which is obviously good news – you cannot continue to have more and more people in retirement being supported by fewer and fewer people in work. That's why it's so important that we're going to ask people, if you want to continue to have very good pension schemes which are a guaranteed level of pensions available to few others, that's got to be paid for by higher contributions by those who are going to have those pensions, and to ask them to draw those pensions later.
ED: I'm going to read you a line and ask you whether you think the account you've given is the same as the one he gives. "There have been significant reforms to public sector pension schemes over the last decade. Some of these changes have reduced projected benefit payments" - blah, blah, blah - "Projected benefit payments fall gradually to around 1.4% of GDP after peaking in 2010-11 at 1.9%." That's just saying it's not unaffordable, we don't want to afford it. It's cheaper. It's going to be 25% cheaper in the next few decades in terms of the burden on GDP than it is at the moment.
FM: What he's saying is that long-term reform is needed.
ED: Absolutely. For different reasons.
FM: The point is, there's been widespread pension reform across the economy. People in the private sector have seen old, defined benefit schemes disappear. What John Hutton has said - and we've totally agreed with - is we do not want to see a race to the bottom.
You can read Lord Hutton's final report here (pdf). The graph showing spending on public sector pensions going down as a proportion of GDP is on page 23 of the report
Many thanks to Andrew Sparrow at The Guardian where I got the transcript from.
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