New Labour cave into Unions

Trade unions and the government have agreed a deal over the future of several public service pension schemes.

The TUC says the government has dropped its suggestion that current members of the health, civil service and education schemes should retire later, at 65.

In exchange the unions have accepted that a higher retirement age will be phased in for new staff.

The TUC said the agreement was a "sensible compromise" which meant that pensions promises would not be broken.

The trade union organisation hailed today's agreement as a major breakthrough which it would recommend to its members.

The government had originally proposed that a higher retirement age be introduced for the existing pension scheme members from 2013.

The TUC said its members now "need suffer no detriment in their pension arrangements".

Trade and Industry Secretary Alan Johnson, who has been leading the government's negotiations, was also pleased with the deal.

"This is quite a breakthrough because the normal pension age in education, health and the civil service will be 65 for new entrants from next year," he said.

But business leaders were furious and claimed the government had caved in to union pressure.

On Monday, the British Chambers of Commerce (BCC) complained to Tony Blair that it was unfair for the public employees to have better pension arrangements than private employers.

David Frost, director general of the BCC was furious at today's agreement: "This deal is unacceptable from the standpoint of British business.

"The government needed to grasp the nettle and increase the public sector retirement age for existing employees on a sliding scale. They have failed to do this," he added.

David Willets, the Shadow Trade and Industry Secretary, criticised the move.

"There is a growing divide between public and private sector pensions which cannot be sustained," he said.

"At this rate it could take forty years for the public sector retirement age to rise. The Arctic ice cap is melting more rapidly than the Government is reforming public sector pensions."