Thursday, 10 March 2011

State Capitalist Attacks Its Workers' Pensions Again

The British State Capitalist has decided once more to attack the pensions of its workers. In a report by John Hutton, a series of proposals have been put forward that would involve workers in the State Capitalist sector, paying hugely increased contributions towards their Pensions, working longer, and receiving fewer benefits.
At a time when those workers are facing massive job losses, a continued freeze on their pay at a time when inflation is going through the roof, and like all workers seeing further attacks on their living standards through increased Tax, and diminishing services its no wonder that the Trades Unions in the State Capitalist Sector are looking towards putting up some kind of resistance to these proposals.
The one element of Hutton's proposals that might have been a step forward, the idea of a “lifetime average” rather than “final salary” basis for calculating pensions, has in fact already been undermined by the Liberal-Tory Government who by changing the basis of index-linking from the RPI to lower CPI, have already knocked around 20% off the “lifetime average” calculation of pensions! The lifetime average is a more equitable basis of calculation, because in the State Capitalist Sector, in particular, those who receive by far the largest pensions, are those at the high end of the salary scale, the Chief Officers, and top Civil Servants, whose salaries are multiple times those of the ordinary workers. These workers have, in fact, paid in lower contributions as a proportion of their Pension, over their working lives, because they will have started out lower down the salary scale.

But, how successful the Trades Unions, in the State Capitalist Sector, will be is doubtful. This is just the latest round of attacks on workers pensions in the State Capitalist Sector. In all of the previous attacks, the Trades Unions have caved in to pressure from the bosses. In the Civil Service they have even undermined the potential for a unified response by their workers, because in the past they agreed to the establishment of a two-tier workforce, that saw new workers already having to accept a worse pension scheme than existing workers. Moreover, those previous struggles were conducted in conditions where the economy was expanding, and where the last Labour Government was pumping large amounts of additional financing into the State Capitalist sector. The conditions then, with expanding workforces were much better than they are today, when the Liberal-Tory bosses are seeking to reduce the number employed in the State Capitalist Sector, and are seeking to cut back State spending.

As the strikes in Greece by workers in the State Capitalist sector over the last year has shown, under those conditions, strikes are a pretty toothless response. In fact, they are an example of what Engels described in the 19th Century, when he spoke about the way the bosses can use strikes for their own advantage. For the Liberal-Tory bosses, if workers go on strike, then that will immediately do their job for them. It will mean that their wage bill falls, because they will not be paying workers when they are on strike. It will also mean that their other costs of providing services falls too. Moreover, to the extent that life goes on during the strikes, to the extent that the Liberal-Tory bosses are able to get work done, transfer work to others in the private sector etc. they will be able to turn around to people and explain why their plans for such privatisation have been verified in practice.

We are probably likely to see that in relation to the Post Office dispute over coming weeks.
In the 1970's, the Marxist economist Michel Aglietta, argued that the revolutionising of productive potential that had arisen as a result of the introduction of microchip based technology, had transformed social relations, and the work process. In the same way that “Fordism” had transformed manufacturing production, he argued, “Neo-Fordism” was leading to a similar transformation in relation to Services. That happened first in the private sector, particularly in those services such as in Finance, where massive improvements in efficiency were made possible, with equally massive improvements in profits. But, Aglietta argued, it was inevitable that these transformations would also have dramatic consequences for those kinds of activities within the State Capitalist Sector.

That is what we are seeing now. It is being sharpened by the fact that in a globalised economy, many functions, especially in relation to service provision can be provided by workers anywhere in the globe, and being paid wages accordingly.

If you are sad enough to get your information from the Daily Mail or Daily Express, or even from some of the more respectable news providers, you could be forgiven for believing that all workers in the State Capitalist sector get lavish pensions, all of which are paid for by other workers via their tax. Nothing, of course, could be further from the truth. The average female worker in Local Government after a lifetime of hard work, and paying quite large amounts into their Pension Fund – no one ever mentions, of course that during the 1990's when Stock Markets were soaring and so these pension Funds had more than enough money to pay out benefits, the Local Government employers stopped making their contributions to keep down Council Tax – will receive only around £55 a week!
Part of the reason that the Pensions in the State Capitalist sector are so poor is to do with the vast amounts of commissions, and charges that the Pension Fund managers – basically those same Banks and Finance Houses that caused the Financial Meltdown – rake off.

The sums are truly staggering as a Panorama investigation showed recently. As I related in my blog Pensions How dare They?,

“It found that the investment of workers funds was almost like the kind of Ponzi scheme that others have recently been jailed for. It involved, workers money being taken in by Pension Companies, who then placed it with other institutions based on how much of a kick-back those institutions would give them, and a large cut in commission, and administration charges was deducted by each of these institutions. In total these organisations were deducting so much that workers pensions were being reduced by anything between 30%-60%.

“In one HSBC pension plan, £120,000 paid in over 40 years would result in fees and commissions totalling £99,900.

The company said its pension product is competitive.”...

I demonstrated that difference in my blog , Co-operatives And Pensions, which showed that the average pension for a worker at the Spanish Mondragon Co-ops, is £13,600 a year. That compares with a pension of just £3,500 a year for the average Local Government worker in Britain!!!!”

In other words, the average worker in the Mondragon Co-op Pension Scheme receives a Pension nearly FOUR TIMES that of the average British Local Government worker. That despite the fact that wages in Spain are generally lower than in Britain! It shows yet again, just how much workers are being ripped off by Capital, and it does not make any difference whether that Capital is Private Capital or State Capital. It demonstrates once again that whilst workers have no reason to accept the Liberal-Tory proposals for privatisation of State Capital, they also have no reason to simply defend State Capitalism either, which exploits them often more brutally, and effectively than does Private Capital.

As The Success of Workers Power At John Lewis demonstrates, where workers have just enjoyed an 18% bonus based on the success of the business they collectively own shows, the way forward lies in the slogan “Neither State Capitalism Nor Private Capitalism But Workers Ownership”.


Jacob Richter said...

Where are workers pensions in the UK invested?

I'm for the takeover of the health-industrial complex and all assets of workers' insurance and private pension funds into permanent public ownership, with levies against enterprise assets for any fund deficits, with appropriate pro rata transfer provisions for prospective pensioners, and with decisive worker participation in their administration, and that's because governments here better manage the pension investment portfolio than private investors, and especially because it's harder and harder to have individual savings.

Boffy said...

In the Uk, workers Pension Funds are invested largely in FTSE 100 companies, some is allocated to major foreign companies, and a significnt proprtion is invested in Government Bonds. Indeed, because they have a fiduciary responsible to ensure that funds are invested so as to provide a reliable income stream in the longer-term, they have to invest a significant proprtion in longer dated Gilts. There was some controvesy over that a few years ago, because when the last Government introduced even longer dated paper, it was suggested that the price of this was artificially inflated due to the need of Pension Funds to buy it.

I would absolutely oppose the Capitalist State taking over the workers pension funds. On the contrary, I would favour workers being able to opt-out of national Insurance, and Income Tax payments equivalent to what would be calculated to go towards their Pensions, and instead to be able to have control of these funds to invest in their own Worker owned and controlled pension Funds.

I've written in the past about what a con the State pension scheme is. When it was set up, very few workers lived long enough to collect any of the money they had paid in. Time after time the Capitalist State has failed to even index the pension to prices when prices are rising rapidly like now, and during periods when prices were rising slowly, they changed tracks to index to prices rather than earnings. Now that workers are living long enough to be able to draw their paltry pension for a few years, the Capitalist State has decided to arbitrarily raise the retirement age!

As with everything the Capitalist State does, it is a rip-off, another means by which Capital exploits Labour.

Jacob Richter said...

Thanks for the material in the first paragraph. At least our countries have something in common when compared to the idiocy of the US government's pension system: Social Security investing in only T-bills.

Another reason why I'm advocating what I'm advocating is that workers in small businesses have little to no pension benefits. Naturally, such costs would be costly to their employers. Hence, the state aid.

Re. the rip-offs: comrade, I read your prior comments on rip-offs, and even Mike Macnair's legal FYI. That is another reason I advocate the state aid above, to prevent private employers from thieving away like GM did.