“800,000 low-paid part-time workers, 90 per cent of whom are women, will be paying more.”
Ed Miliband, 30 November 2011
There are few quick answers in the epic debate about who will win or lose from the public sector pensions shake-up.
We grapple with the claim of whether the new deal is better for lower and middle-income earners than the current deal in another post.
Labour’s front bench went down a different road at Prime Minister’s Questions on Wednesday.
Ed Miliband claimed that low-paid part-time workers would end up feeling the pinch, and claimed that Mr Cameron didn’t understand his own policy when a clear answer failed to materialise.
We’ve blogged on this before at some length, so we’ll try to keep things brief now.
The Labour leader is correct to point out that there are a large number of part-time workers who could potentially lose out under the current pensions deal. Here’s why.
The government has pledged to protect the very poorest from the effect of rises in pension contributions.
No one who earns less than £15,000 a year will see their pay packet depleted more than it is already, while people getting between £15,000 and £21,000 will see their contribution rise by 1.5 percentage points, according to the most recent government offer.
What the unions are seizing on is the fact that the £15,000 cut-off point excludes people who work part-time but earn the equivalent of £15,000 a year if they were full-time.
In other words, whether part-timers qualify for an exemption from the higher pension contribution will depend on their hourly rate of pay, not on the total amount of money they earn in a year.
The government says that’s fair, because if you did it the other way round it would mean a senior manager on a big hourly salary who only worked one day a week wouldn’t be affected, whereas a full-time worker on £16,000 a year would.
The unions say it’s not fair, because there are a lot of part-timers who earn slightly more than £15,000 pro rata but actually take home a small annual wage, and they’ll be hit by the rise.
When we first FactChecked this issue, we thought about 1.1 million people could potentially lose out.
That was based on number-crunching by the TUC, who used Labour Force Survey figures to calculate the size of the public sector workforce.
The unions have now revised that estimate down to 806,000 after switching to more conservative figures from the Annual Survey of Hours and Earnings.
The government initially dismissed the claim as “a nonsense”, saying it was impossible to say precisely how many people would lose out, and by how much.
The Treasury later came out with a detailed rebuttal, saying about 350,000 of those part-time workers who actually earn less than £15,000 but would earn more than that if they were full-time , (add important comma here) work in local government, where a consultation is still underway on alternatives to contribution increases.
A spokesman said a further 150,000 will see contribution rises capped at 1.5 percentage points, as their full-time earnings are less than £21,000. And about 250,000 aren’t enrolled in the pension scheme anyway, according to the Treasury.
The remainder “earn on average £32,000 on a full-time equivalent basis”, the government says.
There are too many unknowns to come down hard on either side at the moment. For example, that £32,000 figure used by the Treasury is a mean average, we’ve learned, so it could be skewed by a few very high earners.
And we’ll have to wait for the outcome of detailed negotiations over the various individual pension schemes before we know the full picture.
It could still be the case that hundreds of thousands of part-time workers who earn relatively little are looking at a rise in their pension contributions.
And the Labour leader is perfectly right that the vast majority of potential losers are women – something that could give the Prime Minister a sleepless night as he struggles to woo female voters.
But to claim, as Mr Miliband does, that all those 800,000 people “will be paying more” looks like an exaggeration.
By Patrick Worrall