Public Pensions: unaffordable, or just unpopular with the Coalition?


David Cameron and his Lib Dem allies keep telling us that public sector pensions are “unaffordable”. A pity then that the cross-party Public Accounts Committee (PAC), but Coalition MPs are in a majority, seems to think this is nonsense. In a report issued last month, the say the public sector pensions problem has already been stabilised:

“Government projections suggest that the 2007-08 changes are likely to reduce costs to taxpayers of the pension schemes by £67 billion over 50 years, with costs stabilising at around 1% of Gross Domestic Product (GDP) or 2% of public expenditure. This would be a significant achievement.”

This morning the influential Institute for Fiscal Studies also said that the total cost of public pensions was set to stabilise or even decline as a proportion of national wealth.

So much for “unsustainable” – what the Coalition clearly means is that they don’t like them, which is rather different.

The government is apparently about to refute the PAC conclusion, although whether they are going to disagree with the facts or simply say that stabilising at 1% of GDP or 2% of public spending is still too high is unclear. What is already clear is that their policy suggests that what they are really after is “rolling back” state employees pensions along with the rest of public spending. Whether they will be honest enough to say so remains to be seen.

The PAC report went on to say:

“We would … encourage the Treasury to publish a clear measure or benchmark of affordability which indicates the level of spending on public service pensions it considers sustainable. Officials appeared to define affordability on the basis of public perception rather than judgement on the cost in relation to either GDP or total public spending.”

For ‘public perception’ read ‘Tory-supporting tabloid headlines’.

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About Colin Talbot

Professor of Government. Universities of Cambridge and Manchester, England.
This entry was posted in Whitehall. Bookmark the permalink.

3 Responses to Public Pensions: unaffordable, or just unpopular with the Coalition?

  1. Michael King says:

    Great points as always Colin :)
    There’s a common divisive undercurrent to all of these programmes it seems to me Colin and I wonder whether you’d agree? So, without out know all of the details of the financials, this is being presented to me by politicians as “those guys have got it better than everyone else and that’s just not fair (aka sustainable)”. So it comes over as though Public Sector employees can retire at 43 with 2/3 final salary – I exaggerate to make the point. So they can save money on on PS pensions because things like retirement age give them an excuse, a reason why another part of society have got it easy, therefore it’s their fault not the government’s.
    This makes my skin crawl. It was a feeling common to the student fees too for me. Again, without knowing all of the details I have to look to various sources (trusted and otherwise), and the message coming from the government was divisive: those students have got it too easy, what’s the point of a degree in botanic arc welding?!, they should pay their own way, etc etc. Same point for me, we all know costs have to be managed and with rights go responsibilities, but I don’t expect my government to be achieving this through division, rather I expect, God forbid, that we could all be in this together. I want my society to be culturally rich and I expect the leaders of the country not to drag us down into such disappointing division.
    Michael

  2. Davy Jones says:

    Another great blog, Colin

    As I have mentioned in my blog on the same subject (http://davyjonesconsultancy.co.uk/node/17) the Hutton report on Pensions itself had a table on page 23 showing the same thing. This table shows the proportion of our Gross Domestic Product that goes on paying public sector pensions. THIS FIGURE IS SET TO FALL PROGRESSIVELY OVER THE NEXT 50 YEARS. Currently the figure is around 1.9%. This goes down to around 1.8% by the end of this decade, to 1.7% by the end of the following decade, and lower each year till it reaches just 1.4% in 50 years time. There is no public sector pension crisis. Pensions are being cut for ideological reasons.

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