Introduction

Today, according to the National Pensions Convention, there are about 4 million pensioners living below the official poverty line. Britain has one of the lowest state pensions in the entire OECD group of countries. It amounts to only 47% of the average national wage. Only 4 countries in the OECD, Mexico, Korea, New Zealand and Ireland have state pensions representing a lower proportion of the national average wage. Many workers in Britain are part of company or private pension schemes since the state pension is so low. The attack on pensions is part of a more general attack on the social wage or the part of the wages of the working class which is taken by the state in taxes and returned in benefits. When the state fails to provide the benefits for which it has deducted taxes this is equivalent to a direct cut in wages.

Attacks on the social wage of the working class are part of the attempt by the capitalist class to restore the profitability of capital and they are now occurring throughout the countries at the core of the world capitalist system. The fact that our rulers now feel it is necessary to mount such a direct attack indicates that there other options for restoring profitability are no longer so effective. This is discussed in more detail in the article on Rover's collapse in this edition to which we refer readers. Of course our rulers disguise the reasons for these attacks with a smokescreen of lies. The most widely used lie is that pensions must be reduced because we are living longer! For capitalism pensions have always represented an unproductive overhead and they would dearly like us all to die without drawing any pension, or go to the workhouse. The proposals that we retire later and accept smaller pensions represent a return to the good old values of the Victorians. However, the argument about living longer is actually a camouflage for the real problem which is that the profitability of capital has declined to the point where pensions cannot be adequately funded out of profits. It is this which is behind the moves to cut pensions and make us retire later.

A system in crisis

Over recent years strikes and mass demonstrations have taken place across Europe over the issue of pensions. Workers have taken action in France, Belgium, Austria, Italy and Germany ⁽¹⁾. In Britain the theft of private pensions by companies has been going on for years, not just through well publicised scandals like that of Maxwell and Daily Mirror workers, but through the systematic plundering of pension funds to cover the fall in profits faced by industries as a direct result of the deepening of the capitalist crisis. Throughout the 1990's many companies stopped making contributions to occupational schemes, and so saved themselves estimated £18 billions. Naturally enough, they didn't tell staff they'd taken so-called "pensions holidays" believing a strong stock market would cover their theft. Workers continued to make their payments into the fund, discovering the fraud when the companies ditched their final salary schemes after the collapse of the stock market. Companies such as Unilever went further and transferred the pension fund directly and took it as profit. Since 1992 Unilever has taken £1.2 billions from the pension fund and handed two-thirds of it to shareholders as dividends.

Until recently, scandals such as this were blamed on greedy companies or the fall of the stock market. Workers in the public sector were told their pensions were safe, and state pensions were also seen as untouchable. In reality successive Governments have been quietly chipping away at state pensions. In 1980, the Tories abolished the link between state pensions and earnings. Those hoping a Labour Government would protect their pensions have been sadly disappointed. One of Brown's first acts as Chancellor in the newly elected Government of 1997 was to remove tax credits from share dividends which are included in pension funds. These dividends previously went back into the pension funds and allowed them to grow. Now that they are taxed growth is slower and workers are being asked to make up the difference with larger contributions from their wages. This represents a cut in private pensions which are important to many workers since the state pension is so low. This tax means, in effect, that the state has taken roughly £5 billions a year from pension funds.

Now it's the turn of workers in the public sector. The current round of proposed cuts in public sector pensions was raised by John Prescott, a politician who keeps bringing up his working class roots as though this would exempt him from being a reactionary. He has proposed that all local authority employees work until 65. (It should be remembered that cuts in pensions come against a background of massive job cuts, with Labour planning to sack tens of thousands of civil servants and local authority employees). The effects of changes to pensions will be drastic. College lecturers stand to lose 23% off the current value of their pension if they retire at 60. Others face cuts of up to 30%. In fact the only public sector workers not facing pension cuts are the armed forces. The 85 year rule, where a worker's age plus the length of time they've been paying into a scheme add up to 85, allowing them to retire early, is set to be scrapped. It is estimated this could affect half of all local government workers. The amount of money put into the pension fund by employers is to be reduced and rules on retirement on the grounds of disability and payments to family in the event of early death are all to be tightened up. Given the fact that the average local government pension is £3800 a year, and that many retire on the grounds of illness (three quarters of NHS Paramedics have retired on the grounds of ill-health, an option that may not be open to them in future), many pensioners face years of serious poverty. At the moment almost five million pensioners survive on pensions so low they are entitled to Pension Credit. To date 2 million people entitled to it haven't claimed, either because it isn't publicised enough or because the forms are too complicated.

Dismantling the post-World War II settlement

Pensions were introduced into Britain in 1909 by a Government worried about the prospect of revolution. In 1945, Labour introduced a universal pensions' scheme as part of the welfare state in an attempt to prevent any unrest after the war. After decades of capitalist crisis, the welfare state is, bit by bit, being dismantled. The NHS, hit by scandal after scandal, is an under-funded, incompetent mess which would collapse without immigrant workers. Education, housing and health are all in crisis due to years of under-funding and undermining by successive government schemes. It is ironic that pensions are now being cut under the pretext that we are all living longer when current evidence states that the health of children now is so appalling it is likely this will be the first generation to have a shorter life span than their parents. If, somehow, they do make it to retirement age, a pretty grim fate seems to be in store for them. State pensions have steadily decreased as a percentage of national earnings since 1979. Throughout this period, both under Labour as well as the Tories, there has been a massive switch of spending from workers' pensions to pensions for the richest in society. Of existing government pension spending, nearly half is in tax relief on private pensions and rebates for contracting out of the state second pension. The richest 10% of taxpayers get 50% of this relief. Brown's latest contribution to boosting pensions, due in April 2006, is to let private investors hold residential property of up to £215,000 tax free in their pension fund every year. This will increase the link between pensions and astronomical house prices. From 2008, Labour wants to reduce workers' pensions further by taking overtime and weekend pay out of the calculations, abolishing final salary schemes and making workers pay more without getting any more on retirement.

Unions undermine working class resistance

In March some 1.2 million workers were due to come out on a TUC-led strike to protest against Government plans. The usual one-day strike was planned amongst public sector workers. A token action from the start, even this would have left large sections of workers out. Healthcare unions held back from balloting members even though their members face the same attacks as everyone else. However, they needn't have worried. In true trades union fashion the strike was called off after last minute 'negotiations' which won absolutely nothing for the working class but saved everything for the Labour Party. Calling off the strike delivered the Labour Party from the prospect of a massive strike on the eve of an election and gave them breathing space to phase in the cuts after the election. Naturally, the unions trumpeted this as a victory even though they couldn't give one concrete example of any concession won, other than the concession to negotiate. Peter Allenson from the T&G summed it up in a particularly mealy-mouthed statement when he said: "The one thing that transcends everything is that instead of compulsion it will be negotiation and that is a significant difference for us". Darling of the SWP, Mark Serwotka, General Secretary of the PCS Civil Service Union said: "Through our positive campaigning and vote for industrial action, what was previously deemed as set in stone and non-negotiable is now open for negotiation". In fact it isn't. Local Authority workers have already been told that all of the cuts planned will go ahead. Not only did the unions protect the Labour Party's electoral campaign by calling off the strike, they also showed that they can control and contain, and ultimately stop, any class action as long as workers have faith in them.

As with the strikes in Europe, as long as action is left in the hands of the unions it will be doomed to failure. The unions will no more repel the attacks on the social wage than they would defend workers from other effects of the increasingly desperate drive towards profitability. The main concern of the unions is, and has always been, the health of the industry they work in, be it private or the state; they will always sacrifice the conditions and jobs of their members for the sake of that industry. It is no coincidence that pensions are being attacked now. The crisis, brought on by the falling rate of profit, which has rocked individual capitalist concerns, exposing pension fraud, is the same crisis which now forces states to make cuts. Workers can fight back if they ignore the boundaries imposed on them by the unions. The only way to succeed is to hold mass meetings beyond the control of the unions, with recallable delegates, to organise action between public and private industries, across regions and with workers in other countries. There is no doubt that attacks on the social wage and on pensions in particular will increase in the coming months and years. A unified, organised response which breaks out of union isolation is the only chance to fight the cuts which capitalism has in store.

(1) See Revolutionary Perspectives 27 "Pensions and Social benefits under attack" and Revolutionary Perspectives 12 "The greatest robbery in history. How the US is looting the Social Security Pension Fund."