Julian Knight: Stop this childish wrangling – just reform pensions

(CHRISTOPHER FURLONG / GETTY IMAGES)

Only some of the most vulnerable people in our society will lose out when large swathes of the public sector go on strike at the end of the month.

Couples with kids, and lone mums, will have days thrown into chaos when the schools close, while those needing crisis loans and emergency housing will find the doors of local benefits offices closed.

The Government and the unions have been busy blaming each other over this dispute, but the truth of the matter is that both parties have shown no willingness to genuinely talk. A group of union leaders has in effect been planning a dispute for months, knowing that whatever is offered they want a walk-out, while the Government's offer not to raise the pension contributions of people earning less than £15,000 in the public sector is the most minimal possible concession.

A threshold of, say, £21,000 would be much more effective, perhaps to be paid for by raising even further the contribution levels of those on more than, say, £50,000. It is, frankly, depressing and childish, and so is the language. Union officials bang on about bankers' bonuses and tax dodgers as if that has any bearing whatsoever on the simple fact that in this country of 60 million people life expectancy is racing ahead. A teacher at age 65 in 1955 could expect to live to 76, while now it's 89, yet pension ages and contribution rates have altered little over the intervening years.

Lord Hutton, the former Labour pensions minister, has concluded that the open-ended, taxpayer-backed, final-salary benefit is unsustainable, and has called for its replacement with a career-average scheme. I have a foot in both public and private camps as I spent five years in the public sector, but a quick calculation shows that it would take 15 years as a member of the generous Independent private pension scheme for me to build up a pot big enough to buy me a pension income equivalent to what I earned in just five years in the public sector.

In addition, my contributions today are much higher than they were in the public sector, and there is no guarantee that if the stock market crashes it will not send my pension planning into a tailspin, while the public-sector pension will always be backed by the taxpayer. On this theme, I heard a civil servant on the radio bemoaning the fact that she would have to pay £170 a month to secure a pension of £8,000 a year over 20 years. But what she doesn't realise is that to secure an annuity income of £8,000 from a private pension pot she would need nearly £200,000 – about five times as much as she will contribute into her public-sector pension over the next 20 years at current prices.

These sums don't add up, and as we live longer they become ever more ridiculous. Now the articulate chief of the Public and Commercial Services union, Mark Serwotka, says we mustn't race to the bottom and that just because the private sector is worse off, that doesn't mean we have to impoverish the public sector too. He is right to emphasise that there is an inverse politics of envy at play here, but where his argument fails badly is that any shortfall in pensions is paid for by the taxpayer – three-quarters of whom are not in the public sector and see no benefit, only a cost. Open-ended public-sector final-salary schemes are a risk that we can't afford. This is a must-reform issue.

Let's hold off on the Rock sale

Sir Richard Branson probably wishes he had been a little braver when he had the chance to buy Northern Rock in 2007 for what was probably a song. Now, with the Chancellor confirming that the Rock will be sold sooner rather than later, the entrepreneur will have to pay a fair whack if he wants the Rock and its branch network. Nevertheless, Sir Richard has to be one of the favourites to secure the Rock, and the long-awaited entrance of Virgin on to the high street will increase plurality and no doubt lead to product and customer service innovation – both welcome.

However, I can't help but think that the Government ought to wait – ensure the Rock repays all it owes, then remutualise it. The mutual sector is consolidating rapidly just now and we could really do with a player such as the Rock in this space, particularly with its strong regional connections.

Who the Rock is sold to – rather than just the price fetched – is as important as the decision to nationalise it three and a half years ago. Having rescued the bank, the Government has a duty of care to its customers, employees and the wider market.