The Public and Commercial Services Union has threatened the government with strikes in the civil service unless it accedes to demands for improved pay, pensions and job security.
The PCS announced on August 19 that its general secretary, Mark Serwotka, had written to Alex Chisholm, permanent secretary at the Cabinet Office and the civil service’s chief operating officer, giving the government until 5pm on September 5 to meet its demands, with failure being met by a ballot over industrial action.
Serwotka said PCS members are faced by “attacks on multiple fronts”, citing the civil service pay remit cap being placed at 2 per cent at a time of high inflation and a cost of living crisis.
He also criticised the government’s “failure” to abide by the pensions recommendations of the Scheme Advisory Board made in 2019 following a breach of the cost cap.
We are fully committed to our engagement with staff and unions and will respond to PCS’s letter in due course
Cabinet Office
A number of public sector unions have been granted permission for a judicial review over the government’s decision to impose the costs of the McCloud remedy on the 2016 valuations following the pause in the cost-control mechanism in 2019.
Restore the contribution rate cut
The cost cap is calculated as the employer contribution correction cost plus the transitional protection remedy cost, with a 2 per cent plus or minus corridor.
Breaching the cost cap “ceiling”, as many schemes did because of the imposition of McCloud costs, would ordinarily have necessitated benefit cuts and/or contribution rate increases to bring the cost back under control, though the government waived this requirement with respect to the 2016 valuations.
By contrast, breaching the cost cap “floor” could allow for contribution rate cuts and/or benefit increases. The Civil Service Pension Scheme was one of the only public sector schemes not to breach the ceiling as a result of the McCloud costs.
However, their imposition meant that the scheme — which had a cost cap set at 18.5 per cent at pay but recorded just 13.1 per cent of pay — ended up not breaching the cost-cap floor.
The SAB had recommended that contribution rates be cut by 2 per cent in the event of a floor breach, meaning an increase in take-home pay, but the imposition of McCloud costs meant that would no longer happen.
Consequently, in his letter to Chisholm, Serwotka criticised the fact that PCS members must “continue to overpay contributions by 2 per cent” because of the government’s McCloud decision.
Redundancy concerns
Serwotka also took issue with the government’s plans to amend the redundancy rules in the Civil Service Compensation Scheme, part of its drive to cut civil service numbers by 91,000 in order to reduce it to its pre-pandemic size.
Changes to the compensation scheme have pensions implications. The Cabinet Office announced in August that it would revisit proposals first put to consultation in 2017, which would see early access to civil service pensions made to track 10 years behind the state pension age.
It also announced a suite of measures designed to rein in the cost of public sector exit payments. Despite being forced to drop a proposed exit payment cap of £95,000, controlling the cost of exit payments remains a government priority, and it proposed a new regime that would see exit payments exceeding £95,000 receiving extra scrutiny, including a requirement that they be cleared by a secretary of state.
Because pension strain costs — which occur when members are allowed or encouraged to retire early on grounds of efficiency, redundancy or otherwise with the consent of the employer — often add substantially to the final exit payment figure, the government acknowledged that its proposed reforms would see people nearest retirement most likely to have their cases reviewed and referred for approval.
In total, the PCS’s demands include: a 10 per cent pay rise for staff and a £15 an hour “living wage”, in line with the terms of its national pay claim filed in December 2021; a 2 per cent cut to pension contributions as recommended by the SAB in 2019 before the imposition of McCloud costs; a “job security agreement” for the civil service “resulting in an appropriate staffing complement, including a guarantee of no compulsory redundancies”; and a guarantee of “no further detrimental changes” to the compensation scheme.
The PCS said it had raised each matter with ministers on numerous occasions but had “not received any satisfactory assurances”.
Serwotka closed his letter expressing the union’s continued willingness to “explore whether agreement is possible and to seek to make progress where we can”.
Government to respond ‘in due course’
In response, a government spokesperson told Pensions Expert that public sector pay awards must “strike a careful balance between recognising the vital importance of public sector workers, while delivering value for the taxpayer, not increasing the country’s debt further, and being careful not to drive even higher prices in the future”.
Public sector retirees face higher exit payment scrutiny
Substantial exit payments resulting from pension strain arrangements in the public sector will likely see people nearing retirement having their cases referred to HM Treasury, under a proposed new regime.
They said that the “headline range” for civil service pay awards “is up to 3 per cent”, with departments able to make average pay awards up to 2 per cent, with “additional flexibility to pay up to a further 1 per cent where they can demonstrate targeting of the pay award to address specific priorities in their workforce and pay strategies”.
The spokesperson reaffirmed the government’s commitment to “prioritise the lowest paid”, and pointed to its acceptance of the Low Pay Commission’s recommended increase in the national living wage to £9.50 an hour from April this year.
“We are fully committed to our engagement with staff and unions and will respond to PCS’s letter in due course,” they said.
