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Cost of public sector pensions spiralling despite Coalition cuts

A think-tank has predicted a £32bn cashflow shortfall in public sector pensions by 2017.

The Centre for Policy Studies, which is non-partisan but was founded by leading Conservative to champion free market causes, says the gap is “unsustainable” and “impossible to ignore”.

Although Government cuts to public sector pensions are aimed at decreasing their total liability to the public finances by 40% in half a century’s time, the near-term cashflow problems are immense, according to report author Michael Johnson.

He told the Telegraph: “The thing that really matters is year-to-year cashflow. Because that is real, it is tangible, it has to be financed. Over the next few years – and we are not talking decades, we are talking a few years – that hard-hitting cashflow reality is going to become absolutely catastrophic.

“Public sector pensions is something that no politician wants to touch. It has been booted into the long grass for half a century and the problem has just got worse.”

But a Treasury spokesman said: “The Government’s reforms will nearly halve the cost of public service pensions, saving £420bn, to deliver long-term sustainability. Fairness is also at the centre of our reforms; for instance, increased member contributions will save around £3bn a year by 2015. At the same time we have been able to protect the accrued rights of those who have dedicated their careers to public service.”

Tell us what you think – have your say below or email [email protected]


Lou Scales   05/11/2012 at 15:02

The figures are probably aggregates of many other things going on. Many L As have cut salary costs. However, a lot of interims have now been discharged and replaced by short contract and permanent. Their invoices would not have been counted in labour costs prevsiouly but as they tend to be mid or upper range posts they may have appeared to increase unit costs. Also a number of externalisation have taken place. Most of these employment costs are at the lower end of the salary ranges. In part the transfers to commercial firms will show as reduced levels of employment.

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