Archive for August, 2010

Is this really about the deficit?

August 31, 2010

Time and again BBC management come back to the size of the pension deficit as the issue that has to be addressed. But read between the lines and you can see that in reality getting rid of the deficit is not Mark Thompson’s main priority. His real priority is reducing the BBC’s long term commitment to the pension fund, and that means drastically reducing the benefits available to members. If the main priority was getting rid of the deficit then the BBC would be searching for ways to pay down the deficit, when in fact it is refusing to consider them. There are plenty of options: Worldwide’s profits could be used – £150 million a year for 10 years would do the trick. Or extend the repayment period to 15 years and you don’t even have to use all of WW’s profits. Similary, the BBC’s property assets like TVC could be declared as assets of the pension fund as the unions have suggested. Neither of these are pain free options, but they are possible. The fact that the BBC refuses to even discuss them makes it clear that they actually don’t want to pay off the deficit if the price of doing so is continuing to have to fund the pension scheme. Look also at the language used in Lucy Adams’ email (quoted in a previous blog); it’s clear that their determination is to deliberately make the benefits available on the existing pensions scheme so poor that most people leave the scheme (leaving only those who are about to retire).

To win this argument we have to hold the BBC to simple targets. They say they want to reduce the deficit – here’s our proposals for doing just that. At the same time we need to try and buy time – there is absolutely no requirement on the BBC to come up with proposals to plug the deficit until well into 2011. And finally, the BBC needs to be frightened of the possibility of legal action to enforce the 43rd deed (see earlier post). If these three arguments can be heard frequently enough then I think BBC management will be forced onto the back foot.

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Mark Thompson’s speech

August 29, 2010

It shouldn’t be a surprise, but Mark duly used his assault on our pensions benefits in his MacTaggart lecture as an opportunity to prove his virility to the BBC’s critics. The key section comes towards the end:

Right now, we’re going through one of the most painful changes of all – confronting the fact that the current pension arrangements for people inside the organisation are simply no longer affordable. I’m determined to end up with pension arrangements which meet the test of affordability in the long-term, but which are reasonable, fair and which will apply evenly across the organisation, no matter how senior or junior you are.

We’re in the middle of a consultation with everyone in the BBC and we’re approaching it with flexibility. If we can make adjustments in the proposals in the light of that consultation and still hit the test of affordability, we’ll do so – but hit it we must. But I don’t see how anyone could look at this process, compare it with pension reform in other organisations public or private, and still claim that we’re not prepared to grasp serious change.

Look at that last sentence. The assault on our pensions is proof that he’s tough enough to satisfy the BBC’s critics. It really sticks in my craw that the BBC’s loyal employees are being sacrificed to buy Mark a bit of insurance as he goes into negotiations with the government over the licence fee.

It was left to Jeremy Hunt to make the obvious point: the BBC would be far less politically exposed – far less in need of this kind of insurance – if its leadership hadn’t mishandled the whole issue of executive pay.

Despite all this, I thought that much of Thompson’s speech was excellent – a cogent argument for a public space separate from the market. And it had one good gag at the expense of James Murdoch, lampooning the positive reaction Murdoch’s own MacTaggart lecture got last year.

You know, you really shouldn’t encourage him. He was so pleased with his attack on the BBC here that a few months later he decided to sink his teeth into another of those sinister forces that lurks in the undergrowth of our national life. Yep, the British Library.

Do you know what they actually do at the British Library? They gather books together and then encourage people to come in and read them for free. The sick bastards.

The 43rd deed of variation

August 28, 2010

Several people have texted me with news of this excellent Telegraph article a few days ago. It points out that in the 43rd deed of variation ‘“pensionable salary” is defined as “a Member’s or Life Assurance Member’s Basic Salary from the Employer. It includes London weighting and such other regular additions to Basic Salary as the BBC may determine from time to time.’

It goes on to ask why on earth JeremyPeat (chairman of the trustees) hasn’t been more aggressive in fighting to protect members’ interests, given that this is the primary duty of the trustees.

One of the central questions about the BBC’s intentions still remains a mystery: why do they think they can get away with such a blatant assault on pensions when it is so clearly against the pension scheme rules? Clearly they have received advise (no doubt paid for out of the licence fee) that there are some grounds for believing that they can ignore the 43rd deed. And there must be some sort of ambiguity or surely the unions would by now be in court. But I’d love to hear from someone what those grounds are: what entitles the BBC to use our terms of employment as a way to avoid the 43rd deed?

Meanwhile the extraordinary general meeting of the pension fund will be a good occasion to push Jeremy Peat on why he has not been more aggressive in defending pension scheme members.

Getting people out of the current pension scheme…

August 25, 2010

I’ve had a fascinating email exchange with Lucy Adams, trying to answer an apparently simple question; how do the BBC’s proposal reduce the deficit so substantially when all the alternatives seem to only have a minor impact. Lucy has gone into some detail, and its very revealing. The bottom line is this: the attraction for the BBC of its proposals is twofold. First, because they are so stingy it’s possible to reduce the deficit with a smaller contribution from the BBC. But secondly a significant factor is that it is assumed that many – if not most people will be persuaded to leave the scheme. This is therefore one of the main aims of the proposals – quite explicitly as you’ll see from the quotes below. To go into a bit more detail…

I had asked what would happen if the proposal was changed to the following: each year pensionable salary rises in line with your pay rise or inflation, whichever is the lower. In summary the effect of this would be that if you had a big jump in salary (for eg because you’re promoted) then your pensionable salary wouldn’t reflect this. But in years where there was an annual pay rise you would at least get inflation (or close to it), thereby protecting your existing pension accrual.

This is the bulk of Lucy’s reply:

“If the current proposals are implemented, the expected total cost of pensions for the BBC is anticipated to be between 5% and 6.5% of the licence fee (compared to 3.5% of the licence fee currently, and around 10% of the licence fee if no changes are made). Over time they also help with risk reduction as some members may decide to move to the defined contribution plan for future service. The 1% limit is well below the long term inflation expectation, is perhaps harsh, but has a significant impact on reducing the deficit (and of course expected pension benefits for many members). The proposed changes also provide members with a choice. Members can remain in the Scheme, build up more pensions, albeit with salary increases for pension purposes being limited to 1% pa, or they can join the defined contribution plan instead. By doing this they can get inflation protection on the benefits built up to date and build up a fund to provide extra pension for the future.

An enhanced variation of the proposed limit on future pensionable salary [ie my proposal] increases will increase costs and likely result in fewer members moving to the defined contribution plan for future service (and achieving less risk reduction). By just increasing the limit from say 1% to 2% (still below long term inflation expectations) would result in an additional cost of c£20m p.a. Some form of inflation proofing, as you suggest, would increase costs further (as well as reduce the number of members moving to defined contribution).”

That’s three mentions of the desire to move people out of the current scheme.

Huw Pym in Ariel

August 24, 2010

Interesting to see Huw Pym’s piece analysing the pension changes in this week’s Ariel. In his very polite and restrained way he seems just as perplexed as all of us as to why Mark Thompson feels the need to make changes now (see earlier posts). He also points out that there are many variations on the BBC’s proposals which appear to have a very similar effect on the deficit and asks the question, why then has the BBC picked just one idea (the most brutal) and chosen to present it as the only alternative?

I am reminded of Tony Blair’s strategy; pick a fight with your own side to show how tough you are to the rest of the world. Perhaps Mark wants to demonstrate to the government (and the Conservative press) that he can neutralise the criticism of the BBC as a bunch of liberal wusses.

More hints about concessions

August 23, 2010

The Guardian has a big piece today previewing Mark Thompson’s upcoming speech in Edingburgh, and again there are strong hints of concessions on pensions. The talk is of a “climb down”, which would be presented as listening to staff. I must say I’m sceptical. The only climb down which would make a significant difference would be for the BBC to pay off more of the deficit, and that would be a huge retreat. Senior management are reported to have been “taken by surprise” by the ferocity of the reaction to the pensions proposals. Really? If so, it shows how seriously out of touch they have become.

Update on senior managers’ salaries

August 22, 2010

My revelation a couple of weeks ago that senior managers’ pensionable salaries would continue to rise in line with inflation (see earlier posts) and not be subject to the 1% salary cap, prompted a rapid damage limitation effort by senior management. Mark Thompson explained that he was determined to ensure that senior managers were subject to the same pensions cap as the rest of us. It’s striking though that he can’t promise to impose the cap on senior managers – it’s apparently wrapped in complex legal issues. If we let this lie then long after we’ve been forced to accept a brutal reduction in pensions it’ll turn out that the idea of forcing senior managers into the same boat has been quietly dropped.

Update on “the rush”

August 19, 2010

A source tells me that in fact there is no need to put in place a deficit reduction scheme until April 1st 2012 (the April after the actuarial valuation is completed). He also said that as far as he knew negotiations about closing the deficit had been ongoing between the BBC and the trustees for about 2 years, focused on the BBC agreeing an increased contribution. Then all of a sudden a senior manager appeared at a meeting and sprung the 1% plan on the trustees. It seems that as far as the trustees were concerned, nothing had changed. It was the BBC that changed its strategy. All of which makes it clearer than ever that a strategic decision was taken at the very top of the BBC to dispense with the defined benefit pension scheme, unconnected to the valuation. It’s not hard to understand why. By 2012 licence fee negotiations will be well underway. And as Mark Thompson made clear to me (see earlier post), he does not want to run the risk that the BBC will be seen as an outlier in pensions provision when the licence fee is being renegotiated. Our benefits are being sacrificed as part of a political power play.

Why the rush?

August 18, 2010

So, the BBC’s top brass have been listening to our concerns, and this week’s Ariel sees a concerted effort to try and fight back against the avalanche of criticism their proposals have generated.

One glaring, obvious question remains unanswered. Why are we being rushed into a decision now? In the FAQ’s the explanation for the BBC’s timing was this:

“The Scheme Trustees are required by law to carry out an actuarial valuation at least every three years to work out how much the BBC has to pay to the scheme, and that was last done on 1st April 2007. The current valuation started on 1st April 2010 and must be completed within 15 months. Following the outcome, the Trustees and the BBC must agree the contributions to pay for future benefits and reduce the deficit.”

“Following the outcome…” it’s a resonant phrase. After the actuarial valuation is complete, the BBC must take action. Not before. Not whilst the actuarial valuation is underway. Following its completion… So there appears to be no compelling legal reason why we have to agree a plan to close the deficit way in advance of the actuarial valuation being completed. Furthermore, it seems to me entirely justifiable and fair to wait for the independent valuation of the deficit before throwing away tens of thousands of pounds in future benefits.

So why are we being railroaded into a deficit reduction plan right now? Because if the BBC is forced to wait until the next actuarial valuation two things will have happened. First, it will in all likelihood be clear that the pension fund situation is not as bad as they are making out, which will bring into play a whole series of alternative options which will muddy the simple message the BBC is trying to sell. Second, and I think infinitely more importantly, the BBC’s ability to act unilaterally will be significantly reduced. Let’s look at that quote from the FAQ again: Following the outcome the Trustees and the BBC must agree the contributions to pay for future benefits and reduce the deficit. In other words, at that point the responsibility to close the deficit falls back on the BBC, and they have to bring the Trustees into play. So it becomes a negotiation and what’s more a negotiation where the BBC is heavily disadvantaged because they have legal obligations to close the deficit. It becomes all about the BBC working out how much it has to pay into the scheme to plug the deficit.

This is hugely significant. If you’ve read an excellent letter from Ian Pollock in Ariel this week, you’ll have seen that currently the BBC is effectively dealing with the pensions deficit as a salary issue, bypassing the pension scheme trustees. Jan Killick (head of pensions) says: “[the proposed limit on pensionable salary] will be introduced through the pay review process… It is not being implemented through the Scheme rules.” Because the rules of the pension scheme are written so tightly to protect the benefits of members, this is the only way that management can massively reduce the BBC’s exposure. Waiting for the results of the valuation undermine this strategy.

So to summarise: I would love to see Mark Thompson answer the question: Why can’t we wait until until the valuation is complete before deciding what action to take? I feel another letter to Ariel coming on…

If we fall for this one we’ll spend the next 20 years wondering how we allowed ourselves to be mugged so easily.

Outliers

August 11, 2010

After the pensions forum on Monday I had a quick chat with both Lucy Adams and Mark Thompson. Lucy was perplexed that nobody seemed to believe that the pensions crisis was as serious as it appears to senior management. I reiterated that very little information has been supplied and instead it feels like we’re being sold a story. I particularly pointed out that it didn’t help to be told that lots of other pension funds are in crisis, and they’re all closing their final salary schemes. That tells us nothing about the health of our own scheme and appears instead to be aimed at creating a sense of inevitability about the need for change. Lucy saw it more as an attempt to explain that all final salary schemes are buckling under the same pressures.
Talking to Mark I said that it seemed to many of us that the changes to the pension scheme are part of a political negotiation with the government. I suggested that he was keen to ensure that the BBC was not an outlier in terms of generous pension provision in 2012, when the licence fee comes up for renewal. He said he wouldn’t deny that being an outlier was an issue.
So I’m left wondering about the extent to which at the very least the timetable for changing the scheme is being driven by a political imperative to avoid causing offence to the government. I certainly don’t feel like having decades of pension contributions devalued in what I suspect will be a failed attempt to persuade the government to go easy on the next licence fee settlement.