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Cake and misdirection. The VC’s chat with the students

Cake and misdirection. The VCs chat with the students

The students recently occupied the VCs office to quiz him about the USS pension plans. The resulting video (part 2 here)  provides an opportunity to hear Sir Christopher’s defence of UUK plans to remove the guaranteed pension for academic and academic related staff at level 4 and above.

We have identified four core arguments he offers and we refer to these, for reasons that should become clear, as

  1. Cake
  2. Hobson’s Choice
  3. Lost the money
  4. Shift the blame

Throughout, his responses are peppered with reassurances that he knows what he’s talking about (“that’s the reality,” “let me explain,” “it’s more complex than that”) – but once you poke under the veneer, the arguments are flimsy. At the end, he adds a few other rhetorical flourishes but we will deal with the big four first.

CAKE

This is the “not enough money argument” We call it cake as he talks about there “only being one cake.” (NB: We believe Marie Antoinette used this metaphor previously).

The VC says that keeping the Defined Benefit scheme would cost this university £9m, and this would force cuts elsewhere (there is only one cake). Later he says that to return to 1997 contribution levels, the university would have to pay up to £12 million.

Our VC – and UUK – seem very keen to create fear about the cost of USS.

We have seen similarly inflated claims by other universities. We suspect that UUK has been rehearsing these arguments with university leaders, along with shared strategies and scare tactics.  We have seen very similarly worded emails being sent to staff at different universities about deductions of pay for working to contract, for example.

In 1997, the employers were paying 18.55% into USS. If this had continued, there would be no possible excuse to claim that the scheme might have a future deficit.

In 1997, however, the employers claimed the scheme was in surplus and reduced their contribution to 14%. We think Southampton stopped paying into PASNAS around this time as well, citing the same reason.

Even with the USS “pension holiday” by the employers, the scheme is doing surprisingly well. The best actuarial estimates show that it is not in deficit at all.

So these “cake” arguments are about further reducing the possibility of the employers having to make additional payments in the future. Universities want to reduce liabilities and salary spend in order to generate more profit, and attract financial investment – like our Bond. Interestingly, the pension liability was described as fairly low risk in the bond application; it is only now we have the £300 million in the bank that we are being told that pensions are a high risk.

It seems to us that, basically, employers would like more cake for themselves. We say they should invest in their staff who actually deliver education and research.

HOBSON’S CHOICE

… or the “we have no choice” argument.

He says “we have a moral obligation to have the best possible pension scheme we can have.”  Yes, this is about morality and obligation. The employers made a covenant or promise to staff about a guaranteed pension.  They have made lots of promises they have not kept.

This is the third change to the pension scheme in seven years: the scheme was changed in 2011 and in 2014, and each time we were promised that the changes would be stable for years into the future.

Staff want the Defined Pension because it provides some certainty about the income they will get in retirement and crucially, unlike Defined Contribution, the risk is collectively shared by the employers, not pushed onto the individual.

DC is not “the best the employers can do.” Universities can decide to value staff and reward them. They seem very happy to make the argument that pay matters to senior staff whose reward packages have gone up and up, while staff pay has fallen in real terms,

The DB scheme and its guaranteed pension was a moral obligation and a promise.

WE LOST THE MONEY

…or DB is just too expensive and we’ve lost the money (and all the while USS executives and investment managers are earning in their millions).

Sir Christopher says the DB has “become more expensive because basically the investments haven’t generated the money they need to.” See how neutral that sounds.  It is as if the money invested itself and fared badly. But it seems to us that the employers keep redoing their sums to get an answer they can use to argue for removing DB.

The “technical provisions” proposed by USS in September 2017 did not cast the scheme in a sufficiently bad light to satisfy the hardline VCs at Universities UK, so they launched a special consultation not just of  mainstream universities but also of all the other small employers who have a few members in the USS pension scheme. Fewer than half responded (unlike our UCU strike ballot) and, of those that did, a minority called for even more pessimistic “technical provisions.”

It later emerged that a third of this hard-line minority consisted of individual Oxbridge colleges, each of whom have few USS members, who wanted to bring down the shared USS covenant as it favoured other universities over Oxbridge. Based on this minority position, the USS trustees were persuaded to adopt new “technical provisions” in November 2017. These artificially inflatde the cost of a defined benefit pension by about 4% of salary, making them (falsely) appear unaffordable.

We suspect Christopher Snowden was also amongst the minority who pushed to destroy the USS guaranteed (DB) pension. The non-Oxbridge supporters of this position seem to be VCs who have taken out large private-sector bonds. He is also trying to do similar damage to Southampton’s local PASNAS scheme.

SHIFT THE BLAME

Finally, he tries to shift the blame. Basically he attempts to offload the blame to anyone but UUK and the employers. First he tries to blame THE GOVERNMENT. This is the argument that “it’s that nasty pension regulator what made us do it.”  He suggests the deficit problem is “coupled to a pensions regulator” and the scheme isn’t compliant with these regulations.

Then he tries to blame THE STUDENTS – they don’t cover their cost.  Even with fees of £9250 the University is not generating sufficient money to cover the cost of education for the UK/EU students. This is a neat way to attempt to sever the emerging coalition between staff and students to defend higher education. Our pension is being taken away because they don’t pay enough.  (He says his view is that the government itself should recognise the social benefit in education and shouldn’t rely so heavily on fees. See how this cleverly loops back to the first blame argument – he’s trying hard here).

Finally in a last ditch attempt to shift the blame he tries to blame THE UNIONS. This one is subtle because he suggests that it is the complexity of the negotiating framework that makes it too difficult to get a decent pension. We acknowledge that there is a JNC that has UUK and UCU sides and there are 366 employers represented by the UUK side.  But the large employers are the 64 in the strike. And our VC has a very powerful voice to influence the direction of the negotiations as a former chair of the UUK and one of the most senior vice chancellors in the country. Why did he side with Oxbridge?  Could it be because of the bond we mentioned above?

AND THE REST…

He then mentions the 1/75th or 1/80th  of salary for calculating defined benefit– either in a final salary or CRB (career revalued benefits) scheme.  This is basically the cake argument again.

He then brings up one point made in a proposal by ‘UCU members’ about retaining 18% employer contributions, but moving to DC. This refers to a discussion document prepared by 3 UoS academics who are also members of the union. This discussion document is not union policy or our positon. The current UUK proposal will not put 18% into the pension pot; it will put a maximum of 13.25% in to the DC scheme. This is a cut to deferred salary.

On the consultation regarding changes to the PASNAS scheme he blames the students, invokes Hobson’s choice, and says they lost the money here too.

He cleverly dodges the question of reducing his own pay.

On the expenses scandal he shifts the blame to ALL THE OTHER UNIVERSITIES because we showed all our dirty linen but the others hid theirs better. Even if the FOI revealed all the questionable expenses of the senior team, the point is that these people are behaving like FTSE 250 CEOs, not educators in a public education system.

He agrees with UCU that the outcome of the current UUK proposals is a totally different type of scheme. He suggest that because others – including his own son – have a ‘worse’ DC scheme we should all have one, too (“That’s the reality,” so deal with it…). This is a race to the bottom argument. We might be tempted to say that as some VCs can live on £150k pa then maybe all should?

The UUK proposals are for a worse pension. Yes, accrued benefits remain (but are subject to volatility of investments to an extent) but this is a move to DC. The questioner makes a great point that he’s “not sure employees want flexibility, I think they want security …it’s perfectly reasonable to say that people don’t want their pension to be decided by the stock market on the day that they retire.”  Exactly. One of our students understands what we are asking for better than UUK and our own VC.

Near the end of the session, Sir Christopher hints that if the finances improve the employers will pay more into our pension. What makes him think we are ever going to trust our employers again?

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