Feb 2009 27

Council Spending Uncovered II – No. 3: Pensions4

INCLUDING INFORMATION ON EVERY LOCAL AUTHORITY

  • Revealed for the first time: over 3,500 local councillors now take gold-plated local government pensions

  • Local Authority staff pensions cost £4.5 billion in 2007-08, excluding teachers and firemen 

  • Pensions cost 19% of council tax revenue – equivalent to £1 in every £5 of council tax raised 

  • Average council now spends over £9.8 million on employer pension payments – up 7% from last year

In February 2008, the TaxPayers’ Alliance (TPA) published the first ever examination of the growth of council spending on employer contributions to Local Government Pensions Schemes over the last decade in the 450-plus local authorities across the whole of the UK.
 
This year, against a backdrop of deepening economic recession and huge financial burden on taxpayers, the TPA can today reveal that these contributions have now topped a staggering £4.5 billion, even after excluding teachers and firefighters. That is equivalent to £1 in every £5 raised in council tax. The average council now spends £9.8 million on these contributions. Shockingly, whereas the pensions were traditionally for council staff, 3,527 currently serving local councillors are enrolled in the scheme, working out at an average of 9 per council. This represents a significant extra financial benefit for local politicians, a move away from their traditional voluntary role.
 
This report exposes the sheer cost of these pensions, and calls for urgent reform of the Local Government Pensions Scheme to bring the bill under control.
 
To read the full report, which includes detailed information on every local authority and calls for urgent reform of the Local Government Pensions Scheme, click here (PDF).
 
Key findings

  • In 2007/08, the average local authority spent £9.8 million on pension contributions, which is a 7% rise on 2006/07.

  • The total bill for Local Government pensions is £4.5 billion a year – equivalent to £1 in every £5 of council tax raised.

  • 3,527 councillors now take gold-plated local government pensions 

  • Report includes top 25 saints and sinners tables – listing councils with highest and lowest spend on the Local Government Pensions Scheme.

  • Topping the list of big spenders is Birmingham, who blew over £82 million on Local Government pensions. Also, near the top are East Sussex (£67,213,000), Lancashire (£65,650,000), Hampshire (£57,853,000) and Kent (£53,900,000).

  • Managing to cut their spending on employer pension contributions are North East Derbyshire, who cut their spending by 31%, King's Lynn and West Norfolk, who cut theirs by 28%, and Tubridge Wells, who reduced theirs by a quarter.

The full report can be downloaded here (PDF).
 
Maria Fort, Policy Analyst at the TaxPayers' Alliance said:

"Gold-plated public sector pensions place a stranglehold on council budgets. They are unjust, unsustainable and unfair to ordinary people, many of whom have had to postpone their own retirement or seen their private pensions reduced to nothing. Instead of jumping on the pension gravy train, councillors need to start representing the interests of their constituents by encouraging councils to be more prudent. It's high time the pensions apartheid was brought to an end. Public sector pensions need urgent reform, to make the system fairer for everyone."

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  • John Coles

    I can only say that you are doing a superb job in laying bare this peculation and wish to God that you had the ear of that contemptible little wimp, our Shadow Chancellor, Gideon Osborne.
    Best wishes to you.

  • Steve Robson

    BASIC RESEARCH – Just because one figure is 20% of another figure, it doesn’t follow that 20% of the latter is spent on the former; they have to be related. The spend of social care is about 150% of Council tax, so perhaps you should publish research showing that £7.50 of every £5 you pay in Council Tax is “wasted” on social care (wasted I guess unless you have a social care need).
    Many of these pensions payments will relate to staff providing services funded by grant and by charges. If the costs are saved and the staff remain after the pay cut, it will not lead to a equivalent cut in Council tax. YOU DO KNOW THAT.
    In addition, there are past commitments to fund and staff paid into these funds at times when employer contributions were nil to help out the Tories in the early nineties. I don’t see why these staff should not get their pension when at that time the scheme was actually ONLY funded by their contributions.
    And then of course, there is the raid by Gordon Brown, which you people never tire of raising. Local Government schemes were equally affected by this; there is no immunity.
    Ironically, I do think the Pension needs reforming, with much higher employee contribution rates, but your low quality research and “findings” driven by conclusions, as usual adds very little value, just more sensationalism and the warped use of statistics.

  • Call me Dave

    Guy’s, great work but you are still failing to make the moral argument. The issue for all of us, in the governments own words is that “public sector pensions remain fully affordable”. This will continue to be the governments response, regardless of how you express the cost whether actuals or percentages. I think you fail to grasp how powerful that statement is when read by the general public. Joe Soap thinks “well if it’s fully affordable we have bigger things to concern ourselves with”. They are of course wrong.
    The moral argument is touched upon but never appears to be pressed home – this is the one you can win, not the monetary one.
    Rest assured front line services will continue to be cut and / or council tax will continue to rise in order to maintain the status quo of pensions apartheid between the public and private sectors.

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