Public sector shake-up: pensions are only the start

Last week's walk-outs by teachers and civil servants over public sector pensions had been billed as one of those seminal struggles between the unions and the government that neither side can afford to lose. In the event, it was a bit of a damp squib although more strikes are threatened for the autumn.

Even if it does come to a fight, there can be little doubt that it is the government who will win. This is not to say the NHS personnel, teachers, local authority workers and others do not have a case when they complain that the rules on pensions are being changed halfway through the game.

But as everybody knows ­ and most accept - the rules have to change because, compared to even 20 years ago, the playing field is unrecognisable.
 
Lives were shorter then and the demography more favourable, meaning there were more workers to support each pensioner. Generous pensions could also be justified because pay was lower in the public sector. This is no longer true, and has not been for a while.

According to the latest official figures, workers in the public sector now earn an average of eight per cent more than their private sector counterparts. They tend to work shorter hours as well. When many in the private sector hardly have any pension provision at all, this makes the public sector's privileged position even less tenable.
 
But while the government looks set for victory on pensions, it may be about to lose another even more important battle.

For decades now, Labour and Conservative governments alike have been saying that, if standards are to improve and costs contained, then the old monopoly model of the public services has to change.
 
Most observers agree, but that has not stopped the unions fighting all such notions, tooth and nail. Tony Blair complained that his battles with the public sector had left scars on his back, and Gordon Brown did not even try. Now it is the coalition's turn, and a White Paper on 'Open Public Services' is expected at any moment.

Writing in the Daily Telegraph in February, David Cameron gave us a flavour of what he had in mind:

"We will create", he promised, "a new presumption ­ backed up by new rights for public service users and a new system of independent adjudication ­ that public services should be open to a range of providers competing to offer a better service...

"Instead of having to justify why it makes sense to introduce competition in some public services ­ as we are now doing with schools and in the NHS ­ the state will have to justify why it should ever operate a monopoly."
 
It was radical stuff, but it was also five months ago. Since then the White Paper has been delayed at least twice, and we have had the U-turn on NHS reform.

Tackling the NHS is always particularly difficult, not least because the Royal Colleges, which wield such influence in the medical world, invariably act like trade unions when it comes to reform. Nevertheless, the ease with which they saw off the ill-starred Andrew Lansley's plans hardly bodes well for the coalition's wider ambitions to reshape the public services.
 
The word is that, following their disastrous showing in May's elections, the Liberal Democrats have insisted the proposals in the White Paper be toned right down, much as the NHS reforms have been. Some Conservative ministers, preoccupied with their own departmental concerns, seem happy to go along with them.

For the unions, who hardly have a presence beyond the public sector these days, such an outcome would be a significant victory. For the government, which still has to show it can curb the deficit without slashing popular public services, it might buy peace in the short term but at a heavy cost down the line.
 
Unlike pensions, this really could be one of those struggles which neither side can afford to lose. ·