LABOUR CAVES IN ON PUBLIC SECTOR PENSIONS; Millions Can STILL Retire at 60 - despite the Private Sector Having to Work Longer Pensions U-Turn

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Byline: JAMES CHAPMAN;BECKY BARROW

MINISTERS performed a humiliating U-turn over public sector pensions yesterday.

They dropped plans to raise the retirement age from 60 to 65 for existing NHS staff, teachers and civil servants.

The change, essential to cut the huge bill for public pensions, will now apply only to new employees. The climbdown, condemned as a surrender by angry business chiefs, came after crisis talks with unions who had threatened massive strike action.

Trade Secretary Alan Johnson had insisted as recently as last weekend that the argument for complete change was 'irrefutable'.

He said it would be impossible to tell private sector workers they had to work longer to plug a 'black hole' in pensions funding, while letting public sector staff retire at 60. But yesterday he announced a change of plan.

Unions hailed the deal, but furious business leaders said it would create a twotier workforce. Sir Digby Jones, directorgeneral of the CBI, said: 'Who is running Britain - the Government or the unions?' He accused the Government of kowtowing to its paymasters in a 'craven surrender of the 1970s kind'.

Sir Digby said public sector workers were now officially 'superior citizens' - a civil servant aged 21 would still be able to retire at 60 in the year 2044.

He called the agreement a 'bad deal for the taxpayer' and added: 'This is desperately unfair on the nation. It's selfish beyond belief.' Critics said the Government's failure to grasp the nettle would make it politically impossible for them to proceed with any increase in the retirement age for ordinary workers.

Union leaders representing the three million-plus workers involved had threatened industrial action on a scale not seen since the General Strike of 1926.

Experts say taxpayers face a [pounds sterling]690billion bill to fund existing public sector pensions. The crisis comes because workers are living much longer after retirement.

Ministers had been warned by economists that continued failure to reform pension schemes could force tax rises. The 'black hole' is the equivalent of a [pounds sterling]300 increase for every household over the next three decades.

An interim report by the Government's Pensions Commission, which is investigating the crisis, says the public sector has 18 per cent of the workforce and 17 per cent of earnings, but 36 per cent of occupational pension rights. …