COUNCIL SPENDING UNCOVERED NO.3: PENSIONS

February 28, 2008 11:50 PM

INDIVIDUAL DATA PROVIDED FOR EVERY COUNCIL IN THE UK


Download Council Spending Uncovered No. 3: Pensions (PDF)


  • £1 in every £5 of council tax spent on local government pensions

  • 2006-07 saw a 13% rise on 2005-06

  • Average council spends £10 million a year on pensions

  • Total bill for Local Government pensions is £4.6 billion

The first two papers in the Council Spending Uncovered series - which investigates wasteful and frivolous town hall spending - revealed a £450 million local government publicity machine and that £1 in every £11 of council tax is spent on middle managers' pay. This third paper examines local government spending on pension contributions, which again is recorded in the annual accounts of councils across the country. Those accounts reveal the shocking burden of gold-plated local government pensions, and detail both that spending and how it is growing for every council in the country.


Public sector pensions are of course a controversial topic, but one that must be urgently confronted in order to avoid a future crisis. Against a general climate of demographic change and pension funding concerns, public sector pensions are particularly an area of risk to taxpayers due to their extremely generous nature and often unfunded liabilities. Local Government pensions are no exception. Given that pensions are supposed to provide security for our future it is a worrying irony that, unless urgently reformed, public sector pensions pose a serious risk to our financial wellbeing.


To improve the situation, the TaxPayers' Alliance calls: 1) for each council to cease the payment of added years benefits to staff who retire early; 2) for councils to collectively campaign for national reform of the pension scheme; 3) for Hazel Blears, Communities and Local Government Secretary, to reform the Local Government Pension Scheme.


Key findings


  • In 2006/07, the average local authority spent £10 million on pension contributions every year, which is a 13% rise on 2005/06.

  • The total bill for Local Government pensions is £4.6 billion a year.

  • £1 in every £5 of council tax is spent on pensions.

Andrew Allum, Chairman of the TaxPayers’ Alliance, said:

“It’s unacceptable that ordinary families and pensioners who struggle to pay inflated council tax bills see so much of their money spent on gold-plated council pensions that have all but disappeared in the wider economy.  With pension costs jumping 13 per cent in one year, the problem is clearly getting worse and requires urgent attention.  Councils should start correcting their own behaviour immediately, and the Government must face down union pressure and reform the outdated local government pensions scheme as soon as possible.”

It should be noted that:


- There has in the past been significant controversy over how much council tax is spent on pensions. Council tax is not the sole source of income for councils, nor is it earmarked for pensions, but all spending comes from the same pot - any savings made could be used to reduce council tax.


- The overall terms of the Local Government Pension Scheme are set by national Government, which is why we urge Hazel Blears to carry out radical reform of the scheme. That does not absolve councils from blame, however, as each has the opportunity to reign in their payments and to lobby the government for reform.


- Frustratingly for those who believe in accountability and transparency, local authority accounts can differ between councils and over time. That said, this is the most comprehensive and up to date study of the issue.

INDIVIDUAL DATA PROVIDED FOR EVERY COUNCIL IN THE UK


Download Council Spending Uncovered No. 3: Pensions (PDF)


  • £1 in every £5 of council tax spent on local government pensions

  • 2006-07 saw a 13% rise on 2005-06

  • Average council spends £10 million a year on pensions

  • Total bill for Local Government pensions is £4.6 billion

The first two papers in the Council Spending Uncovered series - which investigates wasteful and frivolous town hall spending - revealed a £450 million local government publicity machine and that £1 in every £11 of council tax is spent on middle managers' pay. This third paper examines local government spending on pension contributions, which again is recorded in the annual accounts of councils across the country. Those accounts reveal the shocking burden of gold-plated local government pensions, and detail both that spending and how it is growing for every council in the country.


Public sector pensions are of course a controversial topic, but one that must be urgently confronted in order to avoid a future crisis. Against a general climate of demographic change and pension funding concerns, public sector pensions are particularly an area of risk to taxpayers due to their extremely generous nature and often unfunded liabilities. Local Government pensions are no exception. Given that pensions are supposed to provide security for our future it is a worrying irony that, unless urgently reformed, public sector pensions pose a serious risk to our financial wellbeing.


To improve the situation, the TaxPayers' Alliance calls: 1) for each council to cease the payment of added years benefits to staff who retire early; 2) for councils to collectively campaign for national reform of the pension scheme; 3) for Hazel Blears, Communities and Local Government Secretary, to reform the Local Government Pension Scheme.


Key findings


  • In 2006/07, the average local authority spent £10 million on pension contributions every year, which is a 13% rise on 2005/06.

  • The total bill for Local Government pensions is £4.6 billion a year.

  • £1 in every £5 of council tax is spent on pensions.

Andrew Allum, Chairman of the TaxPayers’ Alliance, said:

“It’s unacceptable that ordinary families and pensioners who struggle to pay inflated council tax bills see so much of their money spent on gold-plated council pensions that have all but disappeared in the wider economy.  With pension costs jumping 13 per cent in one year, the problem is clearly getting worse and requires urgent attention.  Councils should start correcting their own behaviour immediately, and the Government must face down union pressure and reform the outdated local government pensions scheme as soon as possible.”

It should be noted that:


- There has in the past been significant controversy over how much council tax is spent on pensions. Council tax is not the sole source of income for councils, nor is it earmarked for pensions, but all spending comes from the same pot - any savings made could be used to reduce council tax.


- The overall terms of the Local Government Pension Scheme are set by national Government, which is why we urge Hazel Blears to carry out radical reform of the scheme. That does not absolve councils from blame, however, as each has the opportunity to reign in their payments and to lobby the government for reform.


- Frustratingly for those who believe in accountability and transparency, local authority accounts can differ between councils and over time. That said, this is the most comprehensive and up to date study of the issue.

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