Union backlash leaves reforms in disarray as Treasury says Alexander's speech did not contain 'concrete policies'

This article is more than 9 years old

This article is more than 9 years old

Government policy on reform of public sector pensions has been plunged into disarray after the Treasury suddenly backtracked on announcements made on Friday by the Treasury chief secretary, Danny Alexander.

Alexander caused fury in the union movement – and triggered threats of sustained strike action – after he unveiled detailed plans for increasing pension contributions for millions of public sector workers during a speech to the Institute for Public Policy Research (IPPR) thinktank.

He also announced that the government would increase the pension age for public sector workers to 66 by 2020, putting them in line with the state pension age.

However, after a union backlash which saw Dave Prentis, general secretary of Unison, warn of strike action comparable to the general strike of 1926, the Treasury said that Alexander's speech contained merely suggestions, not policy. "What the chief secretary put forward were not concrete policies. They are proposals that are subject to negotiations. That is why we are still in negotiations," said a Treasury official.

"We are continuing to discuss these issues with the unions."

The unions were furious that Alexander had appeared to announce the government's policy while they were still in protracted negotiations with ministers on the issues.

Alexander told the IPPR that contributions would rise on average by 3.2% for public sector workers. But low-paid workers earning £15,000 or less would be protected and not asked to pay extra contributions.

The unions and pensions experts had expected the threshold to be set higher than £15,000, meaning more workers would be protected from rises.

The sudden change suggests ministers are seriously worried that a one-day strike by teachers and civil servants on 30 June could be just the beginning of a rolling programme running through late summer and into the autumn.

A senior union source told The Observer that it was clear Alexander had jumped the gun as the Treasury attempted to show it was taking a hard line on the burgeoning pensions bill.

"Danny Alexander has been reined in by the Cabinet Office," said a union source. "What he did was inflammatory and showed no sense of the seriousness of these issues for people's lives."

Public sector workers are already enduring a two-year pay freeze and experts say that many will suffer a 10% cut in real wages once increases in pension contributions are finalised.