Archive for October, 2010

BECTU’s position

October 29, 2010

Gerry Morrissey is going around saying that if the deficit comes in at less than £1.5 billion then BECTU will reopen its pensions dispute with the BBC. It isn’t going to happen. The BBC’s offer only committed the BBC to reopen negotiations if the deficit is below £1 billion. BECTU have voted to accept that offer. The latest word is that as per my earlier post the deficit is likely to be £1.2 or £1.3 billion – far below Mark Thompson’s scaremongering “£2 billion or maybe higher” – but not low enough to trigger renewed negotiations.

Meanwhile the official BECTU advice to its members comes as close as they legally can to supporting NUJ picket lines:

“BECTU members have voted to accept the BBC proposals for now, and this means that we cannot ask you to take industrial action and you should work normally on these (NUJ strike) dates, but you should not do any work that would normally be undertaken by NUJ members who are on strike. If however as a matter of conscience you decide not to cross a picket line and the BBC attempts to discipline you then you will have the full support of BECTU.”

Saying “we cannot ask you to take industrial action” is to explicitly protect the union against legislation banning secondary action.



October 28, 2010

The NUJ has moved fast: two sets of 48 hour strikes (5/6 Nov and 15/16 Nov) have been announced with more to follow. In my view the union has done well to seize the initiative, before the BBC’s attempt at a fait accompli can become accepted wisdom. 

So it looks like there WILL be a fight to defend our pensions. There are two big questions: how effective will the NUJ strikes be, and how many non NUJ members will refuse to cross picket lines?

Ballot result

October 28, 2010

BECTU have voted to accept the BBC’s offer, the NUJ have said no.

Lucy Adams’ email to staff shows that the BBC’s strategy is to ignore the NUJ vote, and simply impose the pensions proposal. With breathtaking arrogance she dismisses the NUJ as “only 17%” of the BBC’s workforce. She says that “some” members of the NUJ rejected the offer: actually it was 70% to 30%, what’s known in the trade as “a majority”.

The threat to withdraw the improved CAB2011 offer turned out to be an empty one, just the usual posturing ahead of a ballot. The BBC knows that to withdraw it now would just drive BECTU back into the NUJ’s arms.

All eyes on the NUJ now: will they use the mandate and call strikes? It’s an uphill battle, but not an impossible one.

Ballot closes this week

October 26, 2010

We’ll find out after Thursday whether the BBC’s “final” offer has been rejected. At least one of the unions – the NUJ – seems confident its members will reject the offer.

I keep asking myself this question: if CAB 2011 had been Mark Thompson’s first proposal three months ago, what would our reaction have been? I think we’d have thrown it out with contempt. The BBC is trying the oldest trick in the book – make an outrageous offer, then come back with one that’s marginally less outrageous and present it as a concession, in the hope that this way we’ll buy something we would never have accepted under normal circumstances.

We only have this one chance to fight for our pensions, so it won’t come as any surprise to readers of this blog that I hope there’s a resounding “no” vote.

Those figures in full…

October 22, 2010

For those of you who want more information on the kind of figures that justify my previous post…

With permission from the writer, David Gallagher, below are exerts from a letter he’s written to Mark Thompson laying out the figures that justify keeping the current pension scheme. It’s dense, but worth following the argument – the BBC is relying on us not having the gumption to look behind their arguments.

Dear Mark

At this challenging time, I’d like to propose an idea that will save the BBC at least £10 million per year.

The idea is this: to retain the existing BBC Pension Scheme, exactly as it is, including allowing new joiners into the Scheme. 

Here’s how the calculations work out.

The BBC currently pays £150 million p.a. in pensions contributions.

Ariel stated on 5 October that the latest pensions proposals would require BBC contributions of £260 million p.a. [, p. 3]

Below is a proposal to fund the existing Scheme for the next 50 years or more that would require BBC contributions of £250 million p.a.

This is £100 million p.a. more than currently, but £10 million p.a. less than the latest proposals.

The Pension Scheme faces two problems: the deficit and the increase in life expectancy.  These are costed as follows.


Let’s take a worst-case scenario and suppose it’s £2bn.

Life expectancy

Government statistics show that since 1980, there has been a rise in life expectancy of appoximately one year every five years.  Government projections for the future take this as their ‘high’ estimate – so, another worst-case scenario.  [Figures are here:]

In Ariel on 29 June Zarin Patel stated: ‘For every one year increase in life expectancy the BBC has to pay £35m extra into the pension fund.’  [, p. 10]

Therefore, using the government’s ‘high’ estimate, the BBC will have to contribute an extra £35m in the next 5 years, plus an extra £70m in the following 5 years, plus an extra £105m in the following 5 years, and so on.

The proposal

1. Use assets from TV Centre and Worldwide to cover some of the deficit.  Figures as high as £1.4bn have been quoted for the value of these assets, but it is recognised that given the problems of valuing companies and property, the Trustees may not accept a valuation anywhere near that high.  Pensions discussions in August suggested that these assets might be used to cover ‘25%’ of the deficit – e.g. £400m if the deficit is £1.6bn, but £500m if the deficit is £2bn.  Assuming, once again, a worst-case scenario suggests the adoption of the lower figure of the two just quoted, ie £400m.

This reduces the amount needed to pay off the deficit to £1.6bn.

2. Negotiate a 20-year repayment period for the deficit.  [NB this is only a necessary part of the proposal if the deficit really is as high as £2bn.  If it’s £1.2bn, for example, the standard repayment period of 10 years would achieve the same result.]

3. Commit an extra £100m p.a. of BBC contributions to the Pension Scheme.  [So BBC contributions would rise, as initially stated, to £250m p.a.]

This has the following results:

Paying off £1.6bn over 20 years costs £80m p.a.  Thus, each year for the next 20 years there would be an additional £20m going into the Scheme to cover the life expectancy increase.

At the 20-year point, the deficit would have been paid off, and £400m would have been paid into the Scheme to cover the life expectancy increase (which more than covers the £350m extra required by this point to cover the life expectancy increase).

After the 20-year point, since the deficit has been paid off, the full £100m extra being paid into the Scheme can be used to cover the life expectancy increase.

By the 40-year point, the total amount paid into the Scheme to cover the life expectancy increase will be £400m from the first 20 years plus £2bn [=20x£100m] from the following 20 years, ie a total of £2.4bn.  This is well ahead of the £1.26bn extra required by this point to cover the life expectancy increase).

By the 50-year point, the total amount paid into the Scheme to cover the life expectancy increase will be £3.4bn.  This is almost £1.5bn ahead of the £1.925bn extra required by this point to cover the life expectancy increase.

So this proposal – based on a series of worst-case assumptions – would provide a large contingency (£1.5bn) in case of future problems.  If, for example, the deficit is well below £2bn (which, as we know, is extremely likely) the figures would work out even more favourably.

It is therefore extremely likely that BBC contributions could fall below the assumed £250m p.a. in future.

Two further factors would lead to additional savings: retaining the existing Pension Scheme instead of introducing new schemes will mean significant administrative savings; and by the 50-year point the cost of providing benefits will have fallen significantly because most Old Benefits members will be dead and Career Average members will make up a significant proportion of beneficiaries with pensions in payment.

So this suggests that in the long term this proposal would save the BBC considerably more than £10m p.a. as compared with the current proposals under consideration.

Since all calculations are given in today’s money, you’ll be aware of an underlying assumption, which is that the Scheme’s investment returns need to keep pace with pay rises/inflation.  This highlights an important feature of the proposal, which is to keep the existing Scheme open to new joiners.  Closing the Scheme to new joiners would create a new financial problem for the Scheme, by starving it of new money (since there would no new contributions from either new joiners or the BBC) and thus encouraging lower-risk, lower-yield investments.  Keeping the Scheme open to new joiners will keep the Scheme healthy by ensuring a continuing flow of new money into the Scheme.

I hope that you will recognise the advantages of this proposal, both financially and in terms of the immeasurable fillip to BBC staff morale, and that you will move swiftly to adopt it.

With thanks in anticipation


Another look at some figures

October 22, 2010

I’ve been getting some interesting emails from people who have been taking another look at the figures the BBC has released about the pension deficit, and the cost of covering it.

They make the point that looking forward the BBC is exaggerating the future scale of its liabilities. Since the final salary scheme was closed to new joiners in 2006, the really high cost members are an ever diminishing band. Sure, there’s the existing deficit, but you’ll have seen posts from me ad nauseum about how this could be dealt with, combined with Zarin Patel’s confession in Ariel 2 weeks ago.

These are the key figures.

Currently the BBC spends about £140 million a year on pensions

Under CAB 2011 that rises to £260-£265 million – the BBC says this is the maximum they are prepared to spend on pensions

Doing nothing would allegedly raise the cost to £350 million a year.

So let’s interrogate. That £350 million was based on a deficit of £1.5- £2 billion. But it won’t be this high, it’ll be between £1 and £2 billion. This will reduce the £350 million cost because the cost of paying off the deficit will be less.

Using non licence fee assets to offset the pension scheme loss would further reduce the deficit and therefore the £350 million figure.

Increasing the payback period from 10 years to 20 years would also reduce the £350 million figure.

Better people than me have done the maths, and when you add all this up the costs of sustaining the present scheme come in at £250 million: less than the cost of CAB 2011. And there is a good chance this figure would fall in the long term as the final salary members retire.

So why on Earth is the BBC pushing ahead with a more expensive scheme? Because in the long term their aim is not to sustain the cost of pensions, but to reduce them. And because they want to protect the BBC from cheap tabloid headlines about “gold plated pensions”. (Although we know that only the upper echelons of the BBC actually benefit from really fabulous pensions.)

More reflections on the licence fee

October 21, 2010

There’s a good article here on how the licence fee deal came to be.

What does it mean for our pensions? As I said a couple of days ago, it increases the funding pressure, and the BBC will use that to argue that our pensions are still more unaffordable. I don’t agree. I think the questions that we’ve been asking about the deficit, about how big it really is, about alternative ways that the deficit could be funded, and about the true scale of the long term liabilities are just as valid now as before. The BBC’s long term aim – quite explicitly – is to reduce the amount it spends on pensions. It’s a choice, and there is nothing unrealistic about asking the BBC to change that choice and stick to the long term commitments it entered into when it set up the pension scheme.

The licence fee

October 20, 2010

So all Mark Thompson’s efforts to position the BBC for next year’s licence fee negotiations were in vain. The attack on our pensions, the sacrifice of Mark Byford, the cuts in Mark T’s own salary – all thrown casually aside by the government. It is a brutal deal that will affect all of us who remain at the BBC for many years to come. I wonder how much worse it would have had to get before Mark T considered resigning? No doubt tomorrow it will be sold as the best that the BBC could have got, and maybe that’s right. But if the best is so disastrous, would refusing to go along with the government not have been a better (albeit high risk) strategy?

And what of our pensions? It’s difficult to see this as anything other than bad news. There are bound to be job losses and the pressure to cut our pensions has increased dramatically. There are two thoughts. First, the whole pensions issue could now be overtaken by a more general campaign to try and protect the BBC. And second, it’s worth remembering that in this country parliament is sovereign – this is a deal that could still unravel over the next few months if opposition mounts.

The consultative ballot

October 19, 2010

This week the vote starts on the BBC’s “final” offer. It is a big decision.

Everyone – union and management – agrees that this is the best offer that can be achieved by negotiation. If we want more the likelihood is that we are going to have to engage in a bruising campaign of industrial action. (This doesn’t necessarily mean lots of all out strikes: short stoppages lasting just a few hours can have a dramatic impact at relatively little cost.)

So what to do? 

The BBC’s offer is terrible. If CAB 2011 had been the BBC’s first offer, back at the start of the summer, we’d have thrown it out. Anyone who has played with the pensions calculator following the principles I laid out a week ago will know just how bad CAB2011 is.

For me there are two tests for strike action. Is there a clear objective? And is that objective achievable. It seems to me that the answer to both questions is  yes.

The objective is to force the BBC to follow its own procedures: withdraw the “draconian” pensions proposals and negotiate with the trustees to deal with the deficit and future funding issues. That is a perfectly reasonable and realistic demand.

Is it achievable? Of course. We’re not asking for anything outrageous, simply that the BBC negotiates in good faith with the trustees of the pension scheme – just as the rules of the pension scheme insist. There are many ways in which the BBC could address the current and potential future deficit without taking the draconian action that it has decided for political reasons it wants to take.

My view is this. If we don’t fight now, we’ll spend the rest of our working lives, and our retirement, regretting our timidity. Working at the BBC we tend to believe in a reasonable world, where difficult issues can be resolved by discussions between fair minded people. This pensions dispute is not like that. We’re caught up in a power play, as Mark Thompson attempts to position the BBC for the next licence fee discussions.  (Take a look at Steve Hewlett’s piece in Ariel this week for some heavyweight confrimation of this line of thinking.). Reasoned argument is not (yet) going to win the day. It’s about power, and the only power we have is to withdraw labour and make the costs of going ahead with the proposals too high for the BBC.

And here’s the good news. Mark Thompson’s strategy is to win favour with the government by forcing through unpopular pensions reforms. He very quickly loses that political capital if he drags the BBC into a prolonged battle with its own workforce. That runs the risk for the BBC and for the government that the story becomes resistance to pension reform, rather than the successful achievement of pensions reform.

We’ve earnt our pension rights, they’re not unreasonable and they’re not unaffordable. Now they need defending. It’s time to fight back.

How big is the deficit?

October 19, 2010

More information seeping out, and once again the BBC is being devious.

Zarin Patel has responded (in Ariel today) to the NUJ leak. She says that it is “misleading”. Interestingly she doesn’t deny the document’s authenticity. Instead she restates that the BBC “still believes the actuarial deficit is likely to be around £1.5 billion”.

My understanding is that the reason she can say this is that there are two valuations underway; the actuarial valuation and a separate valuation being carried out by the BBC (which is being conducted by KPMG). Embarassingly for the BBC, its own valuation is the one which is coming in with a deficit of less than a billion. Why the difference? The actuary is apparently using a significantly higher prediction of future life expectancy than the BBC’s consultants. It’s a shame that the BBC doesn’t feel able to share all this information with us. Perhaps that’s because it is so damaging to their own PR.

Again, my understanding is that normally in these circumstances there would be a negotiation between the BBC and the actuary to settle on a final figure for the deficit. So we might expect it to come in at £1.2 or £1.3 billion.  If this interpretation is true then it’s a very far cry from the “probably over £2 billion” which the BBC kept repeating at the start of this fiasco. And something of a vindication for those of us who argued all along that the BBC was exaggerating the size of the deficit.


Apparently the reason the BBC’s actuary is coming in with a lower deficit is because their estimate of life expectancy is based on how long BBC staff actually live in their retirement. The outside actuary is using predictions based on the general population. Sadly for us, our life expectancy comes in below the population at large, and therefore the BBC’s lower figure is more likely to be accurate. So we’re losing out twice: the BBC wants to rob us of our pensions using the wrong figures, and we’re going to die sooner anyway.