The gulf between state and private sector is widening, says Richard Harvey. And nowhere more so than in the pensions sector

Okay, we can all be forgiven for having indulged a little too heftily over the festive period. And all right, if our intake of vino collapso was truly heroic, well, isn’t that the whole purpose of paracetamol?

The hangover that often accompanies the dawning of a new January has been matched in recent years by the queasy feeling that investment returns for the foreseeable future were likely to remain at levels between measly and rotten.


But this month, if we are to believe our political masters, we can bound from our beds, sparkly-eyed and clear-headed, convinced that happy days are here again. Even if it’s stretching it a bit to join Del Boy in the hope that “next year we’ll be millionaires”.

Businesses are beginning to turn in decent profits. Three jobs are being created in the private sector for every public sector job that is cut. The deficit is being brought under control. And there is a serious risk that Ed Balls is going to erupt like an over-cooked tomato, as he yells across the Despatch Box at a smug-looking George Osborne.

One for You, Two for Me…

But, in the midst of this overflowing cornucopia of good news (OK, perhaps not that last bit about Irritable Ed), comes a reminder that private pensions remain in clear and present danger.


Pensions minister Steve Webb has announced that index-linked final salary pensions could disappear in the private sector, even though 5.1 million state employees will continue to benefit from them.

According to Webb, removing the legal obligation from employers to sustain the index-linking element for payouts would make it easier for them to continue offering final salary schemes – and who knows, it might even see their renaissance.

If this comes to pass, it’ll be a kick in the teeth for the 1.7 million workers who currently benefit from these gold-plated schemes. Despite being in the engine room of our economic revival along with other private sector workers, and despite having seen their living standards eroded, they can now also contemplate a retirement where their pensions are effectively cut each year by the rate of inflation.


This breathtaking act of governmental ingratitude might not be so difficult to swallow if only the public sector were being treated the same. But no.  In exchange for the government’s recent tinkering, there will be no further changes in public sector pensions for the next 25 years – the clearest evidence of what campaigner Ros Altmann, formerly of Saga, calls ‘the pensions apartheid’.       

Quelle Horreur

On the other hand, the government’s moves to raise the retirement age in line with increasing longevity might be unpopular, but they are at least fiscally responsible – and, deep in their hearts, most British people know it. (Even Mrs H, who once thought she would draw her State pension at 60, and now finds she’ll have to wait another seven years).

But astonishingly, but not wholly surprisingly, the complete opposite has happened across the Channel, where President Hollande reversed his predecessor’s plans to gently increase the retirement age, and where French public sector workers can continue to put their feet up at 60.

We spent Christmas and New Year in France, and I sat alongside a Frenchman at lunch one day, who fulminated in Balls-esque fashion that it was ‘incroyable’ that Les Anglais would put up with having to work longer.

My command of the language was insufficient to persuade him that maybe this indulgent act of State generosity might be one reason why France’s economy is in the merde – and that, according to the opinion polls, Hollande is the most unpopular President in living memory.

Hollande’s stock is set to plunge even lower if rumours are confirmed that the French, like us, may have to pay tax at source. Given that tax avoidance is more popular than petanque as the nation’s favourite sport, the reaction will be straight out of Les Miserables:

To the barricades!



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