Public sector’s final-pay pensions face new review
Monday 21st September 2009, 2:29PM BST.
THE pension scheme of thousands of current and former States employees is under review, the Guernsey Press can reveal today.
The new team in charge of the States pay negotiating body will investigate whether the final salary scheme remains viable as finances come under increased pressure.
One option could be to close it to new entrants.
Similar moves are becoming increasingly common in the private sector, which views a guaranteed pension based on final salary as unaffordable.
‘The simple fact is since I took on this job I have had more questions, comments and requests about looking at the public sector pension scheme than I have had about any other aspect of the work,’ said Public Sector Remuneration Committee chairman Allister Langlois (pictured).
He was elected to the post around two months ago.
‘Politically, that’s what people are talking about. That’s not a precursor to say we’ve already decided to do away with it, that’s a precursor to say there’s work to be done to review again where the scheme stands. We would not be honest to the electorate if we didn’t consider it.’
When Treasury and Resources deals with the investments of the pension fund it acts as would a trustee of a private sector scheme.
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gold plated pensions eh. i’m fed up to my back teeth hearing this mouthed by high paid people who over the last ten or more years were having good appraisals, a good percentage pay rise and getting nice fat bonuses buying nice goods or fantastic holidays. Now they are being curbed with little or no bonuses they are complaining. the bonuses they have recieved over the years along with the good pay rises have far outweighed whatever i certainly recieved as a public sector pay rise. bonus what is that? my appraisal every year has been good but it gets me nowt but job satisfaction. if the so called high paid have not invested their bonuses or extra cash wisely, tough. If you like my job that much you could put your money where your mouth is and apply. oops, no growth in personnel, guess i will have to work harder doing the work of many for job satisfaction rather than pay. i’m local and proud of it, if you serve your island all your working life instead of going for the easy money why shouldn’t you get a reward.
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Hey busarider!
Guess what?
Forget about the ‘high paid people’ that you obviously don’t like. The facts are that your unsustainable high pension is being paid for by the taxes of the very low paid.
Is that fair?
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So busarider, am I to understand from your post that someone doing your job for a private sector firm would be earning bonuses for undertaking exactly the same tasks as you do and with a bigger salary too?
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What never seems to get mentioned in these articles is that us public workers have to pay 6.5% of our salary into the pension scheme. We don’t have a choice if we are full time workers, it’s compulsory. So not only am I paying for it every month from my salary, I’m also paying for it via my taxes.
I fully support what busarider is saying – I’ve seen departments where staff have been lost and not replaced and the remaining staff have had to pick up the work for often, no additional money.
So next time someone mentions that gold plated pension scheme, remember that I have a decent chunk of my salary deducted each month to contribute towards it. I can’t stop that from happening.
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People that are advocating cutting pensions for the poorest whilst applauding the business sense of the private sector need their head examining.
They gamble with your future for short term profit. If it goes wrong, well, life’s not fair, they’ll say.
I’m glad that old people are a legitimate start for an attack on the public sector. It really shows the depth of debate.
What next? Send the children up the chimneys?
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The deal in the public sector has always been “here’s a job with pretty good security and a steady predictable pension at the end of it. In return you’ll be paid less than in the private sector and you’ll get no annual bonus”.
That’s one important reason why people with talent have been prepared to work as teachers, doctors, and so on for the public sector. It’s certainly a big factor in me continuing to work in the public sector.
If the rules get changed, then expect the upcoming talent (i.e. those newly graduating) to stick with the private sector instead.
If the pensions and the conditions are so great, how come we struggle to recruit enough teachers, nurses, and doctors?
And to answer Doug’s point expressing scepticism that people in the public sector could earn more in the private sector, I’ll give you a concrete example. My job. I work for the States. I get around £25-£35 an hour. When I do private work, I charge between £90 and £200 an hour.
Most States employees earn far less than me – many on £20k-30k. When they retire, if they’ve served the community for 40 years without any breaks (e.g. due to childcare), they’ll receive a pension of half their final salary. Half of a not very big salary is itself not very big. A pension of £15k doesn’t seem to me that “gold-plated”.
We already have a big problem as a society in terms of pensions – most people (and especially most young people) aren’t saving enough, and we’re facing a time-bomb of a whole cohort of people reaching retirement age with nothing much to live on.
The answer is not to get rid of the last remaining defined benefits schemes around. What we should be doing is making it compulsory for all employers to offer a reasonable pension, and compulsory for all employees to save for their old age.
The alternative is a whole generation of pensioners living in poverty or expecting to be supported by younger taxpayers who are still working.
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I also hope that Allister Langlois will be looking into the pension arrangements for States Members.
As I understand it their pensions are similar to States Employees, save, that they are non contributory.
So I suggest that the Deputies get their own house in order before they look into the States Employees scheme.
If they dont it just shows the hypocrisy of our current House.
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James – Over in mainland UK one issue is that many public sector jobs that were indeed once poorly paid are now coming with pay scales similar to the private sector, I’ll concede that mostly these are ‘management’ positions. I don’t know if this is true in the States too?
I assume your £90-£200 per hour is for casual work or are you seriously turning down a salary of £187,000 to £416,000 in order to work for the States?
To comment on your point about half final salary pensions. In order to purchase an annuity of £15k with index linking, without an ongoing pension for a spouse, one would currently need a pension pot of some £350,000. It takes a lot of 6.5% contributions to get to this figure and unfortunately you are right that too many people will retire without an adequate pension.
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Andrew,
Your understanding is 20 years out of date. The pension scheme for States members was non-contributory until 1990; since then the scheme has been optional and contributory with contributions set at 6% of a member’s basic allowance.
I do not contribute to the scheme, so I shall not be entitled to anything. Those who have contributed, once they are former States members and aged 65, receive between £1.77 and £9.70 per week for each year of service.
All of this information is available to the public at http://www.gov.gg by clicking on the following links: 1) Government; 2) States Members and Committees; 3) Payment Rules.
Opinion will be mixed, of course, about whether the States should maintain, modify or close the existing final salary scheme for employees. But whatever view one takes of that, I don’t think deputies can be accused of hypocrisy merely for examining the options.
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VQ – if you object to the more than generous terms of the public sector pension whilst employed by it then you are a fool.
For the rest of us there is no equivalent product available commercially that has such handsome terms, simply because everyone that isn’t a States worker is also paying into your pension fund.
James – I take your point that not everyone that benefits from the public sector final salary pension is a high flying civil servant on £100,000K+ a year. As you say, it’s very well documented that most people in the private sector are saving either nowhere near enough or worse NOTHING towards their own retirement.
Consider that £20K-£30K bracket you put forward, I’d bet that in the private sector the majority either don’t have a private pension or put away a paltry sum every month that they somehow expect to magically grow into a large pension fund.
Don’t put any more burden on employers. Compulsory personal retirement saving has to be the only way forward here. The farcical Ponzi scheme that is the State pension can’t be allowed to carry on any further. It’s expensive and it just won’t be able to pay out in a few years time.
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The public sector is in danger of becoming over run with licence holders who incidentally cost much more than local residents to employ. You may be thinking why? Well the licence holders all have very generous housing allowances added to their salaries which enables them to buy up local houses – they even get their legal fees paid for and their furniture transported or stored at public cost. local people cannot compete (they get nothing if they try and come back to the island) and it is true that they have to pay a high percentage of their salaries in pension, tax and insurance. No bonuses, no health insurance and no perks at all. Most licence holders leave after their 2 or 3 years of rent allowance runs out – they don’t care about Guernsey. They sell up – walk away with a good bonus from their house sale and never give the island another thought. Others get given 15 year licences on a plate – and they are the ones taking over the senior positions in the public sector. They don’t care about the fact that they are ruining the Guernsey way of life and ruining the very culture that once made us different from the UK. They can’t make decisions but instead employ people to run endless projects and reports which the States ignore anyway!
I am aware of local public sector workers who are being overlooked for promotion (even though they have the relevant qualifications and experience and in a lot of cases have been doing the job in an acting up position) while the licence holders are given the higher paid jobs. It is happening more and more and I don’t understand how it is happening. Are housing checking all these requests for licences? They cannot be. I know of locally qualified teachers, police officers healthcare workers and civil servants who have been overlooked for positions.
It is scandalous. I am totally fed up of the media and others slating the public sector as being overpaid and underworked – if it is so easy why are they not queuing to join? I also agree that the politicians need to sort their own house out first before having a go at the public sector. Goodwill is disappearing, morale is plummeting as the rich get richer and everyone else struggles to make a living.
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Matt Fallaize,
Thanks for that.
But surely you must agree that, if Public Sector pensions are beeing looked at, it is only right and proper that States Members pensions should also be examined.
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Mrs P – I didn’t say I objected to paying into the Scheme, I was simply pointing out that I don’t have a choice about whether or not I do and the fact that whenever the golden pension scheme is mentioned, nobody ever gives a mention to the fact that we are contributing to it.
I appreciate that it is a good Scheme which is why I’m willing to stick with it because one of the few things that is keeping me working for the public sector is the thought of having already paid 20 years into the Scheme and receiving a good pension at the end of my working life. It certainly isn’t for any of the other ‘perks’!
Unfortunately every one’s taxes are being paid to fund things that an individual may not need or use – that’s life.
I do however agree with you that some kind of personal pension funding should be made compulsory – but isn’t that what social security contributions are? If the money in this fund is going to run out in the next few years that somebody needs to be looking at it now to see how much of the money is being wasted on unnecessary benefits. But that’s a whole other argument…..
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James
Is your admission of a potential 65K salary and 200 p/h private work supposed to make people who may read this and who earn less than the average salary want to support your pension??
I think you’ve taken the wrong tact if that was your goal.
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6.5% into any other scheme would buy you nothing. The states as employer puts in 25% of your salary, too. What’s worse, this additional contribution is a tax and GSSA-free perk. This perk isn’t available to other empoyees, as GSSA would be charged on the additional contribution (if my reading of the law is correct). For some reason the GSSA law specifically exempts the CS pension, yet it is a significant benefit which would be taken into account for anyone else.
Someone on 20,000 CS rate is earning the equivalent of 25,000 in the majority of the private sector. They will usually get no pension. We don’t all work for banks out here, you know. The CS still get holidays, maternity leave and all sorts of other perks not common outside the finance sector. They are far from hard done by.
Maybe, like the GSSA OAP, the CS pension should be capped, so that a maximum pension exists, while no cap should be applied to contributions (as Matt intends for GSSA).
I wonder if James’ “private” work is allowed under the terms of his states contract, or if he uses resources/tools/knowhow paid for by us as taxpayers? Most people charging that rate for any service usually have significant expenses – rent, insurance, employees. That is presumably where Doug’s answer lies. Easy money if there are no expenses. A bit too difficult to leave the cosseted world of perks and guaranteed income to go it alone.
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Bob – I wish the States did contribute 25% of my salary into the pension scheme, I’d be coming out with a lot more! I can assure you, the States does not contribute anywhere near 25% of my salary into the Scheme.
And it’s not tax free either. The monthly pension is taxed in the same way as a salary is taxed.
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VQ – no you wouldn’t. The states contribute as much as is needed to provide the benefits agreed. That’s the point of the scheme.
I am not making this stuff up, VQ. For reference purposes, try this:
Billet XX of 2005, p.2333 recommends an increase in the employers contribution to 22% for general civil service employees and to 34% for teachers. That was based on the somewhat more buoyant stockmarket and investment conditions ruling in 2004.
The pension itself is taxable. The “benefit” of the very fact that there is a part contributory pension is not assessable to GSSA, yet the scheme is “worth” an additional few thousand a year, even to the low paid. That is the perk which would be assessable for GSSA upon everyone else, and was specifically legislated for by GSSA in late 2005, or 2006.
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Andrew,
I would have no objection to a review of States members’ pension arrangements.
Bob,
VQ is right: the contribution of the employer [the States] is around 13-14%, not 25%.
And as far as I am aware, there is no cap on the employee’s contribution, thankfully. It is 6.5% of all pensionable pay.
The last major review of the public sector pension scheme was considered by the States in October 2007. It’s in Billet d’Etat XXII of 2007 – available under ‘government’ on the States website.
That report tells us that the scheme is based on two policy positions endorsed by the last States: a) pension benefits for Guernsey public sector employees should be broadly comparable with those of their UK counterparts; and b) the scheme should assist with recruitment and retention of employees necessary to maintain vital public services.
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VQ – work on an assumption that for very £100,000 in a pension pot at for a chap at 65 he’ll get an index linked annuity of £4500. The extrapolate this to the annual pension you’ll receive and you’ll see how big a pot of money needs to be set aside for you. Take your 6.5% contributions from this sum and you’ll see how much the States must be contributing towards your retirement.
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VQ – the last actuarial review I can see is that of 2004/5. That review was recommending an employers contribution of 22% for general CS and 34% for teachers. If the states are paying less now, then they will need to catch up. Investment conditions since that review have been “difficult” and further employers increases are likely.
The scheme was re-arranged a coule of years ago, but it seemed more of an increase in benefit in exchange for a tiny increase in members’ contributions.
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While I disagree with quite a bit of what Merlin says – I don’t think we’re being ‘overrun’ by license holders and in my experience 15 year licenses are not handed out on a plate – I do agree that if the States wants to save significant sums of money they could take a good close look at the costs involved in the way they employ non-locals.
Yes, quite a lot of license holders leave when their rent allowance runs out (it’s a rent allowance, not a housing allowance, so you can’t use it to buy a house). They leave either because at that point they can’t afford to keep living here, or because what’s on offer elsewhere is then better. So we end up employing another license-holder, on the same terms, and paying out yet another rent allowance and moving costs.
I don’t think this is fair to the taxpayer or to local people who are doing the same jobs for less money.
But the problem we have is that we advertise these jobs locally and no one suitable comes forward wanting the job. The job only goes to a license holder if there’s no one locally who meets the essential criteria on the job description.
I’ve scratched my head to see if I can think of a way out of this problem, and I can’t. Maybe our deputies can do a better job.
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“James
Is your admission of a potential 65K salary and 200 p/h private work supposed to make people who may read this and who earn less than the average salary want to support your pension??
I think you’ve taken the wrong tact if that was your goal.”
No, it’s supposed to help people see that a) many people who work in the public sector could earn more in the private sector; and b) since a pension is part of the overall remuneration package, if you take away a public sector worker’s pension, they may well be tempted to go private instead – not to mention the public sector struggling to recruit any new talented graduates with a tempting offer like “work for us and earn less money and have no pension”.
Hands up anyone for a privatized US style health service? Fancy adding 50-100% to what you spend on healthcare? Thought not.
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There seems to be a worrying lack on knowledge on how final salary schemes work!! Well done to Bob and Doug for their points.
What is worrying is that a lot of the actuarial reviews are not taking into account the poor performance of equity markets since the financial crisis.
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Matt – spoken like a true politician.
The “headline” contribution rate as per last actuarial review (2004) was around 15%, but they recommended increasing this to 22% or paying in additional lum sums of 5.6 million a year – for 13 years. I’m sure the CS would have been on strike by now if the funds hadn’t been voted…
The Billet you refer to suggests the long term (i.e. in perpetuity) average costs will be rising to circa 16%, but that review does not deal with actuarial assessment of the fund – which is the additional “capital” or 5.6 million-a-year payments currently being made, which brings the percentage up considerably.
Any idea where the 2007 actuarial review might be found?
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I can see both sides to this.
However, if I remember rightly a few years ago the States Employees Pension Scheme was doing very well, so well in fact that it was decided by the States of Deliberation to take a large amount of money out of the the pot and divert it to other funds.
So surely that has contributed in no small way to the problem.
Perhaps if it were paid back it would help the situation
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Andrew – that is (in part) the reason for these additional payments. The fund was then doing very nicely, and investment returns were much, much better than 2001-2004. I don’t think the states actually removed money, just contributed at a lower rate than the long, long term average for a few years. More money borrowed from our future, at a time when we could and should have been putting it aside.
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James: September 24th at 12.20pm posting.
You obviously don’t know the rules relating to housing allowance. It is payable for 2 or 3 years and the employee can use it towards either rent or towards a mortgage. I know this for a fact as i have colleagues who have purchased houses and told me they had their legal fees paid too. After all, there is no rule here against who can buy a house – only who can live in them.
Whilst i don’t disagree that some 15 year licences are needed there are more and more being given out (or that may just be the perception i have of the people I know of). If it was just for jobs that could not be filled by a local person that would be different – but it isn’t. I would ask how Housing check that a department has tried and failed to get a local person to fill the position. Sometimes the job specification is so skewed towards a particular person that it is obvious that the job is being manipulatied.
What can the States do to keep costs down? Perhaps give local people the same perks to try and encourage them to come back to Guernsey? They need to get on the housing ladder too – if they have property that is different. That would be a start. The other thing that could be investigated is perhaps making those who leave early (i.e before their 5 years is up) some kind of tax on the profit made from buying then selling a house. There is always the argument that we need to provide these extra perks otherwise we won’t get anyone wanting to come and work in Guernsey and there will be some truth in that. However, people come here because it is a fantastic place to live, with low crime rates and high quality education and healthcare. We need to start talking up this island instead of incessantly moaning about it.
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The States pension scheme should exist to help lower earners, maybe those on 30k and below, in my opinion a pension for the likes of James that earn upwards of 50K a year ( and the ludicrous amount of money that he is able to earn part time ) should not be subsidised by others who for the most part can only dream of earning that sort of money.
I would argue that those on higher salaries should have enough disposable cash to pay into a private pension fund.
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James
Thanks, I was aware of the point you were initially trying to make, however I just wanted to point out that in making your point you may have alienated a lot of people against your cause.
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Gotta come out in support of James on this one, particularly following Kevin’s comment.
It would appear to command such a large salary James has made certain choices in life to educate himself/take a career path – I believe a good phrase would be “done well for himself”.
Why then should he be penalised, in Kevin’s suggestion, by having his entitlement to a pension removed? That is frankly preposterous.
And if he can command fees of between £90-£200 per hour, then clearly people are willing to pay those fees for the service either from James or someone else. Market forces will dictate the price he can charge – if he can charge £200, why not do it!
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The joke is that people don’t want the public sector to be able to compete for the talent. Yeah cut the pensions and salaries, what will we end up with?
If anything the private sector needs to come to it’s senses and apply wage caps across the board. Then the governments wouldn’t have to be quite so generous.
Once again it’s all the banks’ fault. So there.
By the way, goldfishes, this recession and these discussions have been caused by the finance industry, not by the States keeping a fair pension scheme going.
Tax the rich first then target the vulnerable if you have to.
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I think much of the problem here is that the Civil Service is perceived by many as being an inefficient, bloated, poorly managed behemoth. Whether that reputation is justified or not is debateable however there’s no doubt that people with that perception will invariably resent seeing their taxes supporting such a system.
I can understand and appreciate Kevin’s reasoning that higher earners shouldn’t receive a contributory pension – it certainly sounds good in principle and would save money on wages. The sticking point however is that such a policy would put our public sector at an even greater disadvantage against the private sector when it comes to recruiting high calibre staff. It may pay dividends short term but longer term it could cost us. The old saying “pay peanuts, get monkeys” would seem to apply: surely if we want our Civil Service operating at peak efficiently we should be looking to recruit the best possible management and staff to run it – if necessary replacing those who haven’t made the grade. That may cost more in the short term but longer term we would hopefully see the benefits.
Right or wrong, I can’t see Arnald’s suggestion of a wage cap on the private sector happening any time soon unless the Communist Party comes to power. I’m also presuming his “it’s all the banks fault” comment was a little tongue in cheek as it’s not just banks who pay senior staff higher wages than the Public Sector.
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Not too sure what communism has to do with wage caps, you are coming straight away from a position where you believe that two equally qualified and experienced people deserve to have different wages. If one is working for say, Barclays Wealth, and the other for say, HSSD, why should the tax dodgers friend be more rewarded by society than the Health employee?
That’s not communism, that’s common sense!
Add the fact that the type of services the banks provide here are at the very best socially useless, the case for them being demonstrably destructive is overwhelming – only blind eyes see no damage caused – then this argument about public sector pay is piffle.
We are trying to cut the wrong things. Things that will make the public suffer more.
We need worth, not wealth.
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Arnald I wasn’t disagreeing with you in principle, just pointing out that your solution wasn’t likely to happen any time soon.
I mentioned the Communist Party as the only way I could imagine your idea ever being a political reality was a completely State controlled economy where private enterprise is effectively removed. Rightly or wrongly, governments of free market economies simply wouldn’t allow such a policy.
I read a lot of your posts and agree with many of your views which are morally right. I suppose I’ve just come to the conclusion that humanity’s desire for personal gain will always prevent this kind of equality at a national scale – someone will always get more. Even the Communist nations with their supposed equality philosophy couldn’t resist getting rich at the expense of their own people.
It’s therefore the responsibility of the individual to seek to make the best use of what they have. I suppose I broadly take John Wesley’s view that each individual should seek to “gain all they can, save all they can and give all they can.” A greater exposition of this can be found at:
http://www.drurywriting.com/keith/wesley.htm
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Kevin – with regard to your comment about having a subsidised scheme for the lower earners, what do you propose will happen with all of the contributions I made from my salary when I was junior member of staff if, once I’ve reached a position of seniority, I’m no longer entitled to a pension? I’ll have wasted years of paying into a pension scheme for what? A lof of Civil Servants, myself included, join the Service from school as the lowest graded rank and have worked our way up the promotion ladder through training and taking on more reponsible roles. We don’t just come in to the Service and stagnate in a low graded post – the ability to move and progress is one of the benefits of the Civil Service and provides a healthy turnover of staff.
And having joined the Service straight from school, I’ve watched friends in the private sector receive salary bonuses, free flights, free medical insurance, office parties paid for by the company etc We don’t even get our tea and coffee paid for!! (By the way, neither should we but even something as simple as this is provided in a lot of private places) But I can live with that because I know I’m going to get a decent pension at the end of it.
Paul Le P makes a valid point about the perception of the Civil Service and in some cases, it’s true. There is some poor management and some people sitting around not very busy but this is in the minority. (And I don’t need any comments about the fact I’m on this website in the middle of the afternoon, 5 minutes break isn’t going to hurt, my work will still get done and I won’t get paid overtime for staying after 5pm to do it!) For the majority, we are working hard to serve our Island with very little thanks and a lot of knocking from the Guernsey Press and the public who feel they are hard done by. If you think we’ve got it cushy, come and join us.
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This might slightly go off topic, but Paul raises an interesting point about humanity’s desire for personal gain..preventing…equality.
I think it’s more to do with fairness and equality and the relationship between the two. I can very much understand why someone who worked hard through school/college/university/jobs etc in an effort to provide as well as they can for their family (or just for personal satisfaction) would feel agrieved at their efforts being “equalised” with someone who has not made the same efforts.
It might be equality, but is equality always “fair”?
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It should be abolished and all the money put towards the state pension scheme.
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Interesting thought Billythefish and you definitely have a point. The honourable concept of “equality” shouldn’t be abused by either side. We shouldn’t forget that as well as the wealthy who acquire gain by exploiting the poor, there are those who exploit normal hard working people in order to get a free ride. People who cheat on benefits and make fraudulent insurance claims come to mind as examples.
There is certainly a sense where people shouldn’t feel guilty about seeking the best for themselves and their families. I think the aim should be, as far as possible, to provide equal OPPORTUNITIES to succeed to the best of one’s ability: if people choose to work hard and take those opportunities they should be rewarded for their work; those who choose to not take the opportunities shouldn’t complain when others reap those rewards.
However we all know that that is a vision for the ideal world – and we don’t live in it! There will always be inequality in the world – human nature will see to that. That doesn’t stop those of us who have been given opportunities to succeed (and by the grace of God taken them) to use the fruit of our labours to help others who are genuinely in need.
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The structures underpinning current levels of inequality are artificial. They can be dismantled. This has nothing to with human nature and everything to do with the rich making the rules for the rich to prosper more.
Believing the trope that humanity is unfair is ludicrous. It implies that wealth is natural.
It is not.
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Good post Andy, not.
If everyone took your view we would have no police, firemen, nurses or teachers to name but a few.
But lets be honest about this, if they change States Employees Pensions, they in turn, will sue the States of guernsey for breach of contract and we, the public, will have then to pay those costs aswell.
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Arnald – I agree those structures are artificial can be dismantled however I maintain the view that humanity is, on the whole selfish. The dominant characteristic of humans is to always look out for number one, it’s in their nature and the lessons of history have shown it again and again. Opinions differ on the reasons why – Christians call it a result of original sin; biologists like Richard Dawkins call it the “selfish gene.”
How did the rich get rich in the beginning? With a few exceptions it was when people used their power to impose their will on others weaker than themselves. History documents times when the weak rise up against this repression – however it also shows that when this happens the weak become the strong and are invariably caught in the same trap, looking to gain power and wealth for themselves. The case of the 1917 Russian revolution is a good example of this, as is the French Revolution.
I guess we may have to agree to disagree on this particular point!
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Why wouldnt we have Police, Teachers etc by that argument we shouldnt have Carpenters or Butchers.
Im guessing you have a connection to this ludicrous situation.
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Arnald,
I think you were a little harsh in dismissing Paul’s suggestion of a link between wage caps and communism.
It seems to me that your proposal is, indeed, based on one of the foundations of Marxism – the labour theory of value, where the value of a commodity is determined primarily by the labour required to produce it.
Nonetheless, I broadly agree with your condemnation of extremes of inequality.
Inequality can be measured quite reliably by something called the Gini coefficient, which is a measure of statistical dispersion. Changes in inequality within a country, and comparative inequality among all countries, can be tracked over time using the Gini coefficient.
I am a hopeless mathematician, so please don’t ask me to explain how to calculate the Gini index. What I do know is that it demonstrates consistently that in communities with the greatest inequality there is usually less contentment and more extreme social problems. It should be another nail in the coffin of the extremely unsuccessful Anglo-American model, but we have discussed that on here many times before.
Paul,
I don’t think that the French Revolution of the 18th century can be remotely compared with the Bolshevik uprising of 1917.
The former was motivated by the principles of the Enlightenment; the latter by the radically different ideology of communism. One has essentially endured; the other collapsed, albeit not quickly enough.
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Surely it all balances out – civil servants earn less – but they get a decent pension. Private sector earn more and either dont get a pension, or they get a relatively poor one compared to the civil servant. Private sector employee gets bonuses, healthcare, share options etc. If he/she were wise they would use these extra benefits to their long term benefit, ie plough your bonus, healthcare savings etc into a private pension, RAT etc instead too many use them to have flash motors, exotic holidays and private school for the next generation of public school, private bankers. Is that anyone elses fault but their own? I think not.
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