The Bermuda Public Service Union's decision to reject a Government pay offer is unfortunate and short-sighted.

Government offered to increase civil servants' pay by 4.5 percent in the first year of their new contract and by four percent in the second, with the third year to be decided closer to the date.

On the face of it, that is a generous offer, given that inflation is currently at 2.8 percent and has averaged around three percent for the past year.

Barring another spike in the price of oil, the rate seems unlikely to change, especially as interest rates are likely to rise.

The BPSU apparently felt that as Government was expecting to raise $800 million in tax revenue this year, civil servants deserved more.

This suggests that civil servants somehow raise taxes themselves and deserve a bonus as a result. Aside from the Customs Department and offices like the Accountant General and the Tax Commissioner, this is completely untrue. Most civil servants spend money, they don't raise it.

In addition, it is not as if they have to "sell" a product as they would in the private sector. Government sets tax rates and the general public, or at least the honest part of it, pays the taxes, much of which go on wages and salaries.

So it's not Government that can "afford" to pay the civil servants, it's the taxpayer, most of whom would no doubt prefer to keep the money in their own pockets.

It is true that Government keeps raising more money, especially in payroll tax, than it expects. But that's no reason to reward civil servants. It is a reason for Government to get its sums right.

It is likely that sounder minds in the BPSU ? which has always been one of the Island's saner trade unions ? will put a stop to that kind of thought.

The bigger sticking point, and the more legitimate one, concerns the increase in pension contributions.

The civil servants pension fund, the Public Service Superannuation Fund, pays out more money each year than it takes in. That means that barring "top ups" from the taxpayer it will go bust.

The flaw in the fund, as with so many in Bermuda and around the world, is that it was designed to be a "pay as you go" fund in which retirees were guaranteed a pension of a certain size depending on their length of service and seniority.

These pensions were paid in full from the outset, even though the fund was not necessarily viable. As time passes, more civil servants ? who can also retire at 55 rather than 65 as is the case in the private sector ? have retired while the number of contributors has remained roughly the same.

That spells financial disaster for the fund and an ever increasing burden on the taxpayer.

It only seems fair for the civil service to help restore the financial viability of its own fund. And while it is true that it will reduce their wage increase from 4.5 percent to 3.5 percent ? still well above inflation ? it is not as if the money is being taken away from them.

Instead, it is a form of forced savings that will ensure that they have a pension. One alternative is the bankruptcy of the fund, and surely they do not want that. The other alternative is a greater burden on the taxpayer, with ramifications for the Island's competitiveness.

The civil service should show more foresight.