We can afford anything, but not everything


This Q and A by the BBC about public sector pensions makes an interesting distinction between whether public sector pensions are unaffordable and/or untenable. It reminded me of something that I would often say to councillors and managers when I worked as a finance director: "We can afford anything that you want to do, but we can't afford everything you want to do." That is pretty much the case for all public organisations. Generally they are big, with lots of money, staff, offices, computers and other resources so they could direct them to do almost anything that could be feasibly be demanded by society. The problem of public management is that society makes multiple demands and there have to be trade offs. If a pound is spent on service A, it is not available to be spent on service B. As the finance director of a large council I was, like my senior colleagues, looking for the councillors to make decisions about priorities against which we could allocate resources. The trouble is, for every decision someone is the loser. If you're elected to represent people it is very difficult to make decisions that make some of the people you represent worse off. It doesn't placate the losers to hear the politician say. "we had no choice" because, patently, they did have a choice and they made it. Unfortunately, this leads to politicians trying to avoid making decisions (despite every politician always claiming that they make the tough decisions whilst their opponents never make them). Such decision-avoidance is one reason that many organisations find themselves "salami-slicing" at budget time: ie they make (relatively) small cuts to every service/team/unit rather than protecting the budget of the most important and making large cuts (or abolishing) the least important services because if everyone is a loser in a small way then it's almost the same as having no losers at all.

Going back to the BBC article, it mentions that it is not possible to say public sector pensions are unaffordable because as a society we have not set out what proportion of public money ought to be spent on them. It would also be the case that if public sector workers did not receive pensions there might be higher salaries to pay now and in the future there might be more spending by government in state pensions and welfare benefits to workers who would no longer have as much money from an occupational pension to live on. 

So, it seems, after a year or more of the government saying we can't afford these pensions, the rhetoric is moving towards we don't want to pay for these pensions. At least that is more honest.