Michael White on the public sector workforce

Peter Mandelson's efforts to tone down the proposed curb on tobacco advertising in the new Queen's Speech? The high-handed arrest of Tory MP Damian Green? Nationalisation of those hapless banks?

No, it was to illustrate a claim that in many towns ("Soviet boroughs" in Mail speak) across Britain, from Inverclyde to Hastings, nearly half the local workforce is in the public sector.

It is a pretty crude smear, since genteel Cambridge features at 46.7 per cent; not because of hospital porters at Addenbrooke's either. It is those public sector academics who swell the numbers. Oxford (40.7 per cent) is close behind. So much for the knowledge economy!

I mention it not simply to tease the Daily Beast. David Cameron last week drew attention to the growth of the public sector - 600,000 recruits, a quarter in the NHS, since 1997 under Labour. More than five million in all, almost a quarter of them NHS staff.

'Pensions apartheid'

Why the fuss? The Tory leader had dared mention the P-word, what he called "pensions apartheid". It separates secure, final salary schemes - still widespread in the public sector, below 20 per cent in the private - from cash-purchase schemes, which most of us are in, except in Inverclyde, Cambridge etc.

Actually, that is not correct either. Despite the failed efforts of successive governments (recall Mrs T's personal pensions mis-selling scandal?) many people have nothing but the state's£90.70 a week.

Chris Grayling, Dave's work and pensions spokesman, was quick to stress that no decisions have been made, that it would be irresponsible not to review all policy options for an incoming government, etc, etc.

The new 2008 Pensions Act represents a fresh go at low-cost personal pensions, though Mr Grayling already warns its costs may be too high and he may have to can it.

Retirement age

Not that public sector pensions are all the fat cat£168,000 a year (plus lump sums) packages which disgraced ex-Met police chief Sir Ian Blair is this week starting to draw. Unison's Dave Prentis was right to complain about that. The average public sector pension is£7,000, in local authorities half that much, GPs allegedly six times as high.

In other words, there is apartheid within both public and private sectors as well as between them, one where fat cat regimes protect top management in ways that elude most of us. It is a salary and bonus gap as well as a pension gap, much of it unjustifiable.

Oh yes, there is also the retirement age dimension, which drags in Alan Johnson. Now health secretary, he was at the Department for Work and Pensions in 2005 when talks to reduce the cost of public sector pensions ended in strike threats. Johnners backed off a showdown, so only new recruits, not all staff, will have to work to 65, leaving most to retire at 60.

The deal will save£13bn over 20 years, a trifle compared with overall liabilities here: between£650bn and£1trn worth of state pensions which are not properly funded except by current taxes.

Rising costs

Small print in last week's pre-Budget report confirmed costs are rising fast, up£1bn to£3.8bn next year. Dave Prentis and Labour MPs (who are very well provided for) want private sector pensions improved, not public ones degraded.

That is fine, but let's get real. No MP or official I rang about this called me back: always a bad sign. But it is easy to see why. Even without a recession, better pensions require us all to save more, though many can't afford it. The timing is not great.

Put another way, my final salary pension was junked in favour of a money purchase scheme 20 years ago, well ahead of the trend. It was obvious, even then, that no firm could guarantee such largesse without going bust when the NHS helps us live so long.

Despite 30 or so years of paying in, I expected to draw a pension worth about 30 per cent of my salary. But that was before the market crashed. Keep typing, Mike. That is the new realism - public and private, Labour or Tory.