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Letter to THE: Plea for more balanced reporting on USS

I have complained to the Times Higher Education magazine about their reporting about the USS. They tend to present deficit figures as if they are given facts rather than misleadng statistics derived from the misapplicaiton of financial theories. Fair reporting would at least acknowledge that the whole question of the deficit is political and highly controversial.

I would recommend that all should heed the advice of the Cambridge economist Ha-Joon Chang in his latest book "Economics: A Users Guide" and in his recent Guardian article "Economics is too important to leave to the experts" After all we are all participants in the economy and as such users of economics.

Letter to the Times Higher Education to be published on 25 September.

Dear Sir

I wish to complain about your reporting about USS pensions. Your reports tend to imply that statistics show a funding deficit as if the USS's assets and liabilities are objective scientific truths when in fact they are based on theories.

There are two principles on which DB (defined benefit) pension schemes are organised: pay-as-you-go - used throughout the public sector including the teachers' pension scheme - and funding - used for smaller pension schemes offered by private sector employers in the risky market place. How we think about the USS depends on which of these principles we apply. Viewed as a PAYG scheme USS appears to be financially strong with an annual surplus of over a billion pounds a year, a strongly performing investment portfolio and growing membership. The deficit figures you quote come from regarding USS as if it were the other type of scheme, one belonging to a small company that must be prudently managed against the likelihood of the firm failing. But to apply that approach to the whole pre-92 HE sector covered by USS is to misuse a theoretical model by applying it in circumstances it was not designed for and in which it will cease to work. We have heard a lot about economic models failing in the financial crash of 2008; we have the same issue today with pensions.

Can I suggest that you follow the advice of Ha-Joon Chang when he says "Economics is too important to leave to the experts"? Rather than taking on trust the opinion of someone styled as a pensions expert (as you frequently do) you actually get them to justify in detail what assumptions they are making, and recognise that the whole issue of the state of the USS is in fact highly controversial.

Dennis Leech
Professor of Economics
University of Warwick
Coventry CV4 8UW
d.leech@warwick.ac.uk
www2.warwick.ac.uk/fac/soc/economics/staff/faculty/leech
07712353201

Dennis Leech : 22 Sep 2014 09:59 |  Tags: Economics Neoliberalism; Pensions; Uss; |  Comments (0) |  Close comments |  Report a problem