Could Northern Ireland’s public sector pension liability really be this bad?

The recently released Varney Review discussed here once again highlighted how hugely bloated Northern Ireland’s public sector is, pointing out that an incredible 28% of Northern Ireland’s workforce are in the public sector as opposed to 20% in the UK and that public spending accounts for 67% of GVA, the highest in the developed world. But one area it didn’t touch on was what sort of pension liability this entails for Northern Ireland going forward, which by my reckoning is already hitting 20 29.7 billion pounds and rising.

Most public sector pension schemes are unfunded so the liabilities being built up today are not matched by the accumulation of funds to pay for them. The British Government Actuary’s Department (GAD) has calculated what these pension liabilities for the UK as a whole are, using estimates of life expectancy and assumptions on salary growth and discount rates. According to the Institute for Fiscal Studies, the liability has been rising alarmingly over the last few years, even using the official figures:

2006 – 725 billion
2005 – 530
2004 – 460
2003 – 425
2002 – 380
2001 – 350
2000 – 330
1999 – 310
1998 – 295

Other estimates put the 2006 liability at as high as 1,025 billion. The huge increase is due to a variety of reasons such as the increases in life expectancy, recent public pay increases (public pensions depend on final salaries) and the jump in the number of public sector workers over the period. Under New Labour, the numbers of UK public sector workers has increased from 5.18 million in 1997 to over 5.8 million nine years later.

So what about Northern Ireland’s liability?

Lord Varney says that 20% of Northern Ireland’s workforce is in the public sector, which works out at around 157,000 or 2.7% of the UK total, giving an unsecured public pension liability somewhere in the region of 19.5 billion on the official 2006 figures. That’s 85% of Northern Ireland’s GDP.

Apologies: It’s actually a lot worse as 28% is the percentage of Northern Ireland’s workforce in the public sector while 20% is the UK average. This works out at 214,000 or 4.1% of the UK total, giving a giving an unsecured public pension liability total of 29.7 billion on the official 2006 figures. That’s 129% of Northern Ireland’s GDP.

  • Mark McGregor

    George,

    You often identify this element of the false economy in the 6 counties but another aspect you overlook is the inflated ‘voluntary’ sector that is another huge part of the ‘economy’. Non-sustainable jobs based on nothing other than temporary charity just about covering up, along with the bloated CS, some of the worst proper employment rates around.

  • steve48

    the pensions system needs a complete overhaul and the end of final salary pension schemes for new public servants must be introduced

  • George

    Mark,
    it’s not that easy getting decent economic figures on Northern Ireland and I generally have to satisfy myself with distilling down UK figures to a NI level.

    As this “voluntary” sector phenomenon is a particular Northern Irish favourite, I am suffering from a dearth of data on how big it is and how it compares with the UK average or with the Irish Republic.

    But the fact that Northern Ireland has failed miserably to close the per capita GDP gap with the UK over the past 10 years and has fallen further behind the Irish Republic despite having an official unemployment rate of 4.2%, (must be the lowest in Western Europe), I’d say it’s pretty clear that the “proper employment” rates aren’t half as rosy as many like to let on.

  • Garibaldy

    I’ve been told there are 30,000 paid community workers, and another 70,000 voluntary ones. Don’t know if it’s true or not.

  • runciter

    an incredible 28% of Northern Ireland’s workforce are in the public sector as opposed to 20% in the UK

    Who decides what constitutes “hugely bloated”? Why is the UK the gold standard?

    Denmark, Norway and Switzerland all have higher public sector employment rates.

    It is also absurd to expect Northern Ireland to overcome the legacy of its politcal history overnight.

  • DC

    Interesting George, dare I suggest a somewhat different view: perhaps we could view the GFA as a political stop gap to the killing, bearing in mind such unsustainable figures re above, the treasury may wish to seek an alternative solution to this problem. Political leaders in Great Britain may consider slowly turning off the money tap here coupled with a repatriation scheme that encourages migration to GB.

    Perhaps it is time for the great lights of Britishness to go back to Great Britain over the next 10-20 years. A shameless return to Britain, back home to the 50 million populace. We’ve enjoyed it while it lasted, now England and HM Government, all we need now is a propaganda campaign, around the year 2010 onwards (when the rest of the EU opens up to the A8, the Ulster-British can take up the slack of A8-out migration and any other decent jobs available in their wake). So over to you Britain, get us all home safely by providing a smoothe 10-15 years to repatriate in an integrative fashion, and we may get home at long last. It almost brings a tear to my eye.

  • Driftwood

    This summer I know of several teachers retiring in their early fifties on excellent packages. That’s probably hundreds locally if not more. Many people- in the public sector- have come to expect this as the norm. No-one, at Westminster or Stormont wants to deal with this.

    The Civil Service don’t even pay into a scheme, the government provide them with a fat pension free of charge, and this continues. Why would anyone want a private sector job? When you can get a job for life, with huge ‘sick ‘pay entitlements, at least 3 weeks a year up to 6 months full pay, usually a year. On top of working when you feel like it at home etc.
    The NICS is even better than DLA! and you can even pretend you actually have a job! Magic.

    Who will dare to burst the balloon?

  • joeCanuck

    Repatriation.

    That’s a pretty big red rag you’re waving about, and on a Saturday night too.
    Haven’t you got a few bob to go down to the pub for a pint?

  • DC

    Joe – out tomorrow instead, off Monday.

    Driftwood:

    “The NICS is even better than DLA! and you can even pretend you actually have a job! Magic. Who will dare to burst the balloon?”

    You are very true btw with the above statement, largely fuelled by the community-determined ‘Catholic’ middle-managers who over-employ by recruiting an administrative glut of AOs to SOs to wipe their asses, while at the same time not even blushing at the wanton disregard of economic sense, given where the cash is coming from.

    But, burst the balloon? Probably, maybe, HM Government. The reality is that if the public sector were to cut back over the next 10-15years and no private sector-led economic cure, with unemployment put on me as an example, I would be across the water for work.

    It’s that simple, especially if encouragement were to be given to those with solely British citizenship in NI, why not get that little bit closer to it if it were put in such terms. That’s why I like the EU, free movement of people, and personally if the out was given in the form of a little use of forceful economics, like large parts of youthful students who leave and do not come back, I would, therefore, merely only be following in their footsteps. Nothing stays the same, change is good 🙂

  • runciter

    A shameless return to Britain, back home to the 50 million populace. We’ve enjoyed it while it lasted etc etc

    Bizarre.

    largely fuelled by the community-determined ‘Catholic’ middle-managers

    Now that’s shameless.

  • DC

    “Bizarre.”

    No, unconventional.

    “Shameless”

    Shameless, no, it’s called anything for an easy life courtesy of UK Taxpayer and well the juicy pensions, that’s just compensation for the years of hassle 😉

  • Rich v Workers

    I know that the Bank of Ireland in its “Wealth of the Nation” report (published in 2007)quoted figures in relation to actual wealth for the South of Ireland/Free State/26 Counties, It stated that:

    “We estimate that the top 1% of the population holds 20% of the wealth, the top 2% holds 30% and the top 5% holds 40%. However, if we exclude the value of housing wealth and focus primarily on financial wealth, the concentration of wealth increases. In this instance, 1% of the population accounts for around 34% of the wealth.”

    Can someone produce similar stats for the North/Ulster/Six Counties, etc? Or what the top 10% own, North or South?

    I’ve tried to access those stats but it appears they’re not readily available. Can anyone help?

  • abucs

    Are these pensions also linked to inflation ?

    Any vacancies at the moment ? :o)

  • slug

    Some of this stuff on the public sector misses the key point. The real issue is improving skills and productivity. In the end that is what matters and that is where the focus should be.

  • willis

    “The Civil Service don’t even pay into a scheme, the government provide them with a fat pension free of charge, and this continues. Why would anyone want a private sector job? When you can get a job for life, with huge ‘sick ‘pay entitlements, at least 3 weeks a year up to 6 months full pay, usually a year. On top of working when you feel like it at home etc.”

    I haven’t noticed many teachers working from home when they feel like it, or nurses, or police officers, or carers.

    However if we could get the Roads Service to work from home all the time…….

  • Comrade Stalin

    I haven’t noticed many teachers working from home when they feel like it, or nurses, or police officers, or carers.

    However if we could get the Roads Service to work from home all the time…….

    But we’re talking about the civil service. Not public sector workers in general.

  • willis

    I know, I know

    However the original thread topic was the public sector as a whole.

    So what proportion of the public sector is the civil service?

  • Greenflag

    ‘Who will dare to burst the balloon? ‘

    The answer to that is easy. Any would be Government that doesn’t need the votes of the ‘public sector’ in order to get into power in the forst place . As usual things will muddle along until such time as the Government starts running out of money, tax intake from the private sector decreases significantly , income tax revenues decrease , borrowing to pay for public sector pensions and wage hikes becomes interest rate prohibitive ,forcced monetary devaluation to ahem ‘hide’ the reality of decreasing trade competitiveness etc etc.

    The Republic went through this exercise in the late 1980’s early 90’s until finally the penny dropped and public sector employees faced the possibility of their pensions not being paid !

    Northern Ireland has been able to escape the worst consequences of it’s economic set up simply because it is a small less than 2% of the UK economy . If England were to have say 70% public sector dependency sterling would be in the same international currency league as the Zimbabwe dollar and the Windsor family would be looking for political asylum in Canada .

    As I’ve said in earlier posts Unionism is incapable of reforming the ‘basis’ of the dependency relationship which exists between NI and Westminster . The new ‘power sharing ‘ Assembly will make that dependency even more acute for guess which political party will be to the forefront in demanding not reductions but increases in public sector expenditure in NI ? Sinn Fein of course.

  • I seem to recall that, throughout a lifetime career in education, I had 6-8% monthly deduction for pension contributions. I later discovered that the private sector (i.e. “public” schools) paid more in salary, and had better pension schemes.

    The teaching unions nagged for decades that teachers’ pensions should be funded: as the Exchequer was trousering a neat profit on it (teachers having an endearing habit of keeling over soon after retirement) that didn’t happen. So I blame any “crisis” on the success of the NHS keeping Old Beaky alive.

    Slightly off-topic, didn’t the payment of Imperial pensions come up as a side issue during the Economic War of the 1930s? Could history be repeating itself?

  • Frustrated Democrat

    We will not fix our problems overnight; a mixture of 30 years of IRA activity and direct rule incompetence have removed the motivation to take riks and have bred a wave of civil service clones with an aversion to risk and a love of luxury pensions.

    Who will wield the axe to take out 1/3 of civil servants, not the shambles we have in Stormont who have no idea how to control the departments who work for them never mind get rid of them.

    How many years? 10,20,30 ………. I have no idea does anyone else?

  • Greenflag

    malcolm redfellow,

    ‘Could history be repeating itself?’

    Life expectancy is on the decline in the USA where I read that in 1,000 counties in the Appalachias the average life expectancy for women has gone down by 3.5 years over the past decade with a reduction of 5 .5 years in some counties in southern Virginia . The culprits are of course relative povery , lack of exercise , smoking and now obesity brought about by poor choices in eating including the fast food phenomenon.

    It’s not unreasonable to expect the same trend to impact in Britain and Ireland over the next decade .

    The NHS is up against serious competition as McDonalds et al lead the charge to reduce life expectancy and thus save the National Exchequers of western nations billions.

  • aquifer

    “largely fuelled by the community-determined ‘Catholic’ middle-managers who over-employ by recruiting an administrative glut of AOs to SOs to wipe their asses, while at the same time not even blushing at the wanton disregard of economic sense, given where the cash is coming from.”

    So it was jobs for life for the Orange boys, and now it is our turn to waste Brit cash?

    Trouble is, the previous stormont regime was run as a tight wee ship financially. So if you want to live the high life without the trouble of delivering affordable public services for a low wage economy, maybe you should think of working in financial services in London or Dublin. Or Belfast.

    To avoid those pension hangovers, it has to be voluntary payoffs, or even layoffs, for non-frontline public sector workers.

    And an outputs based system of public service delivery.

    Delivery is the graveyard of a civil service career, that should change.

    Trouble is that our MLAs have to decide what the outputs should be before we can invite public private or voluntary sector bids for delivery.

    Participation in the job market?
    Affordable Housing?
    Affordable childcare?
    Accessible public transport?
    Cheaper home heating?
    A physically fit population?
    Graduates working in R&D;?

  • DC

    “We will not fix our problems overnight; a mixture of 30 years of IRA activity and direct rule incompetence have removed the motivation to take riks and have bred a wave of civil service clones with an aversion to risk and a love of luxury pensions.”

    Ah, while I have been facetious above, I may as well also pose this argument too that just how much damage was done in using political institutions as a form of politicoreligious symbolism as a means in itself? For example, the IRA wasted life, years and social progress over 30years, many of its political ideas are defunct and were largely non-runners due to its own alien characteristics (Marxism being one), but on the otherhand much of the substance of political life here in NI since the birth of Stormont until its collapse has been largely meaningless if not wholly counterproductive, hence the collapse.

    I mean really much of the old Stormont was delivered on Protestantism, whereas politics of substance has largely gone amiss, which could be seen as the precursor to the Troubles as it had a fairly anti-Catholicism stance to it. Stormont has been anything but a node of social progress, perhaps it may well carry on along such lines if today’s shapings are anything to go by.

    So, how much fault is there to rest with Unionism, or perhaps Protestant-Unionism (which is largely as one) as before the ‘war’ any policy that could benefit Catholics was seen as a move against Protestantism because Stormont was there to protect the religious integrity of Northern Ireland and this is the case in point, namely that Stormont rule was wasteful to the point of subtle belligerence. To contrast though it would be fair to say that the North was tapered off from the south because it was largely favouring its religious own along similar lines.

    But nonetheless, as it is an NI context I am debating, how much time and progressive social policy was squandered or beaten to death using sharp sectional interests, which were largely done to maintain a conservatively false political system. False in that large parts were left unattended through exclusion linked to another false belief of Protestant ascendency based solely on religious doctrines. This kind of political thought should obviously have been excluded from any political system given the way it was delivered under such absolutism (Paisleyism and his effects on life here comes to the fore of course, until he danced with death).

    So, really, who hasn’t had a negative part to play in the delaying of economic progression, at least up until now?

  • Frustrated Democrat

    DC

    Direct rule used the public sector as a means of reducing unemployment, probably more in the catholic than protestant communities.

    The result we got low employment and stable incomes not a great breeding ground for terrorists, the plan worked.

    Now having reduced the terrorists to a rump or even common gangsters we now have got to redress the balance – the ‘governments’ haven’t a clue what to do – sound familiar? think Iraq!

  • aquifer

    To compete with regions with cheaper labour or better opportunities we need to provide both affordable living standards and high value high tech jobs.

    That should mean spreading the protections from economic insecurity available to civil servants to low wage earners and researchers.

    i.e. Providing high quality affordable public services and lots of research related jobs.

  • willowfield

    The pension issue is a UK one, not a NI one. It was be solved at a UK-level and not a NI-level.

  • willowfield @ 11:03 AM:

    The pension issue is a UK one, not a NI one.

    Fair enough. Pass the buck.

    Here, and in a parallel related thread, some of us have wrung our hands in despair that the gross proportion of NI’s GDP pre-empted by the public sector cannot be moderated.

    Now, could this possibly be relevant to the wider issue? —

    Officer suspended for seven years
    A member of the PSNI has been suspended on full pay for more than seven years, the BBC has revealed.
    The officer is one of 35 officers currently suspended at a cost to taxpayers of hundreds of thousands of pounds.
    Another officer has been suspended for four years, one for three years, five officers for two years and seven for longer than one year.
    Salaries for the 15 officers amounts to £600,000 or a wage bill for 28 years.

    Sorry about the BBC’s grammar there; but perhaps it isn’t always someone, somewhere else who should be held answerable.