Business View: Union stamps its feet, but pensions must get sorted

Scrapping final year pensions will at least help to fill £6.6bn black hole

One of the most outrageous press releases I have seen in a long time landed on my desk last week. It was from the Communications Workers Union, which was "angrily" reacting to a decision by Royal Mail to end its final-year salary scheme for new members.

Dave Ward, the CWU deputy general secretary said he was "shocked and angry" at the announcement that had - gasp - been made without consultations with the union. Furthermore, comrade Ward said that the plan to give postal workers over £5,000 in phantom shares, that will give postmen a stake in Royal Mail, "caused concern" for the union. Yes, I can see his point. If someone gave me five grand I might be concerned as well.

Unions play vital roles in upholding the rights of the workforce across huge swatches of British industry, but on this occasion the CWU politburo has lost track of reality.

The Royal Mail pension scheme is £6.6bn in debt - £1bn more than had been previously estimated - the equivalent of an awful lot of first class stamps.

Had Royal Mail kept the final year scheme open for new members (existing employees are not affected), additional billions of pounds would have had to be raised. That would have meant a further bailout from the Government - or another hefty rise in the price of stamps.

Either would significantly diminish Royal Mail's competitiveness at a time when it is facing growing challenges from commercial rivals. Bad news for the 190,000 staff.

There is also the wider issue of how the private sector is continuing to subsidise the pension schemes for public sector workers. Hardly a company in the country now offers a final-year scheme to new workers. People are living longer and the deficits in many FTSE company pension schemes are larger than the companies' market capitalisation.

Taxes - especially council tax - have risen to pay for public sector pension commitments.

But this isn't an issue of whether it is right and proper that those who toil for the public good should be given a comfortable retirement by private enterprise. According to the Treasury, public sector pension schemes are over £500,000,000,000 in debt. The Institute of Economic Affairs, a think tank, puts the figure at £1,000,000,000,000, but lets not quibble over the odd £500bn.

Either way, the amount is vast and unless the public sector takes steps to reduce the deficit, the UK will reap an apocalyptic financial whirlwind.

In addition, the IEA report from December said that government contributions to public sector schemes would hit £90bn per year by 2045 - more than the total NHS budget for 2006. The most iniquitous element of the current situation is that people who are not even born yet will spend their lives paying for the pensions of the working population today.

Gordon Brown could do us all a favour and stop taxing pension schemes, but there has to be a realisation in certain quarters - such as in the CWU bunker - that the days of gold-plated pension schemes have to come to an end.

NTL's future on hold

I have been an NTL customer for several years and have never had ground for complaint. Apparently, I have been lucky according to friends who long ago gave up on the cable company. But when NTL went all Virgin on Thursday, I thought I would put the company to the test and give it a call to ask about its new V Plus digital video recorder.

After waiting on hold for 25 minutes and having spoken to three different call-centre staff I was suddenly cut off. It seems it may take a while for Virgin to work its magic on the company.

a.murray-watson@independent.co.uk