When Gordon Brown became Chancellor of the Exchequer, one of his first tasks was to raid the pensions of the private sector, something that has provided the exchequer additional income of over £10bn every year since. This put pay to many private sector, final salary schemes. Meanwhile the public sector, which of course includes politicians, have had no corresponding adjustments to their own final salary scheme pensions. So much for the Gordon Brown mantra of a “fairer Britain”, as with so many things he says, they are full of promise and have little or no substance.
The latest figures suggest that public sector pensions are worth more than 15 times those of private sector workers. So whilst the private sector has had to grasp the nettle and accept that final salary schemes are no longer sustainable, Gordon Brown, whilst he was at the treasury and now has prime minister has failed to deal with the issue. So lets put that in perspective. According to Ros Altman, one of Tony Blair’s own advisers, the average public sector worker will be entitled to a pension of £17,091, compared to the average private sector pension of just £1,086. Is this a fair Britain?
The public sector is invariable the first group of workers to vent their spleen about earnings. However, according to the Office of National Statistics, in 2007, the average public sector worker earned just under £26,000 per year, whilst the average private sector worker had to settle for a tad under £23,000. Unlike private sector pensions, public sector pensions are paid out of future tax revenues, not an annuity. This means that the treasury does not have to ‘purchase’ an annuity to pay for the pensions, nor do they have to include the liability on the treasury balance sheet. Even though the cost of these pension contributions are estimated to be £1 trillion. That’s right, more that twice the cost of the bailout or nearly 5 years worth of tax receipts. This is a scandal of monstrous proportions and yet Gordon Brown continues to swan around as if he is a financial genius. I would not trust him to hold my loose change!
Someone in the private sector would have to buy an annuity of £427,275 in order that they could benefit from the average pension of £17,091 enjoyed by the public sector. The average private sector pension scheme has a ‘pot’ of just £24,000! So they would be lucky to receive a pension of £1100 per annum. Given 1 in 5 of all workers are employed by the state, I doubt that my observations will curry favour with everyone, but it is a scandal and one that we shall all have to pay for.
If you thought Gordon Brown was taking this matter seriously, you would be wrong, here is a excerpt of what a treasury spokesman is reported to have said: “High quality pension provision is a key part of the remuneration package of public servants, aimed at maintaining a high quality public sector workforce. These pensions are fully costed and fully affordable.”
Gordon Brown may choose to ignore public sector liabilities of circa £1 trillion, but the taxpayers of this country cannot, nor can our children who will be expected to pay the bill for Brown’s largess. At a time when everyone must look closely at their liabilities and consider tightening their belts, the opposition parties need to push this scandal right to the top of the political agenda, given the costs are not sustainable in the short-term, let alone the long term. Given that we know MP’s final salary schemes are amongst the best in the world, we should, perhaps, not hold our breath for an investigation anytime soon.