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Pension, Housing, Public Sector Pay Crises: How a perfect economic storm could be turned, by an enlightened Police Commissioner.

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By Ivan Jordan, chartered Architect and Police and Crime Commissioner candidate for Devon and Cornwall. This paper is not about policing, but it is very relevant to police constabulary and staff, and key workers. It contains proposals to:

Stop the demand for higher pension contributions from Police ofcers. Improve the performance of Public Sector pension funds Provide affordable housing for Key Workers Boost local economies Stop pressure to sell off land owned by Public Sector organisations.

Figures have been included in the text to clarify descriptions.

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1. The Current Problem The economic crisis is nearly half a decade old. One relatively small aspect, that has great impact, is the depletion of pension funds. The Police Service has a hole in its pension pot of 1.2BN, underwritten by the treasury, i.e. you and me. The Governments decit reduction plan has brought public sector cuts - police redundancies & retirement (A19). This has resulted in fewer contributing to the pension fund. Increased police retirement has increased the burden on the pension fund. Poor performance in investment markets and Quantitative Easing (the effect of which is disputed here) has shrunk the pension pot. The Police Service pension fund is under extreme pressure. The standard strategy to deal with this is to increase pension contributions from staff, which is happening to the Police now. They are not happy about it. A side-effect of increasing pension contributions is recessionary: contributors have even less disposable income to spend (if they had any to start with). This is a heavy price for all of us to pay, for an uncertain return, and we are locked in a cycle of reduced spending and recessionary pressures.

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The Solution We must improve the performance of the pension fund itself. Investment returns at present for many funds would be lucky to get 6%. However, in the Netherlands, pension funds are getting returns of 10-12%, by investing in housing. We do not invest pensions in housing in the UK because it is too risky. Why precisely is another story, but the biggest barriers are the price of land, and developer prot. Some volume house builders have returned to prot recently, after years in the doldrums, but they still dont look a good bet for a pension fund manager. Yet we have a huge demand for housing, particularly key worker housing. Parts of the public sector, e.g. the NHS and the Police Service, own land that that could be used to build housing. Add to this the fact that construction is itself a driver for economies, with some estimating a 300% return in growth terms (I have been told a typical building project has a positive impact on up to 400 jobs), and there appears to be a virtuous circle waiting to be joined.

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The Plan Police Commissioners could work together, with NHS and other public sector bodies, to start schemes for the housing of key workers, funded by pooling some of their own pension pots. Procurement would be direct, with no need to introduce developers unless they could demonstrate remarkable efciencies. The emphasis would be on employing workers to build good, sustainable homes, using open-book contract management. The homes would be rented or sold as leasehold to the workers, at affordable rates. This would be enabled by the low or possibly zero cost of land. Mortgages would be provided by the pension fund itself, which would retain a title on the asset. The portion of rent or mortgage that would have turned a prot for a developer will instead be the pension funds healthy return. Police and other key workers would not be asked for greater pension contributions, but would be rewarded for their contribution to society with decent homes at an affordable price. They would know their rent or mortgages were contributing to their own pension security, which would go with them if they want to move on. Their disposable income would be increased, economy. so they could spend more in the local

The contractors building the homes would be employed, boosting the local and wider economy. The housing and urban design would be of a high quality, creating better, safer neighborhoods for everyone. This is a simplied account of a plan, simplied even further in the diagram included, but it is surely time we started to innovate think boldly, and use the assets we have to work our way towards a brighter, shared future. Why Propose This? It is unlikely that those who framed the Police Commissioners role envisaged this sort of engagement. The Commissioner will be responsible for holding the Police to account, but should also, in my opinion, improve their lot, and the lot of police staff however possible. Morale is low and redundancies loom, so we must look to support those we are asking so much from. I believe we would all reap dividends from the success of this scheme. Ivan Jordan RIBA November 2012