Council tax bills rise to cover gold-plated public retirement funds

Published by: Mail Online

Council tax may have to rise under controversial plans to plug the black hole in public sector pensions. 

Bob Holloway, who runs the pension scheme for local government workers, has warned the gold-plated final salary schemes are no longer sustainable because people are 'refusing to die'. 

Local authorities are facing a £50billion shortfall in their pension pots after recklessly investing taxpayers' money in shares and hedge funds.Golden years at a high cost: Councils face a £50bn shortfall in their pension pots. The respected Public Service Journal reported that officials are considering a number of ways to tackle the deficit, including raising council tax.

Other options to shake-up public sector pensions include increasing employee contributions, raising the retirement age or cutting public services.

Another proposal could mean public servants receiving pensions based only on career-average earnings rather than their final salaries. Mr Holloway warned that 3.5million public sector workers - including care home staff, dinner ladies, binmen and council officials - will have to share the 'pain'.

He said urgent reform of public sector pensions was urgently need to tackle concerns about a 'pensions apartheid' between state and private sector workers. Around 90 per cent of public sector workers to retire on gold-plated final salary pensions while only five per cent of their private sector counterparts enjoyed such benefits.

Mr Holloway said: 'The Local Government Pension Scheme is under threat, something has to happen - things may even happen before a general election. 'If MPs' very generous pensions change, as has been indicated, then other public sector schemes may well receive some pain as well.‘There will need to be something more major than a sticking plaster. Unfortunately, people are refusing to die.’

City accountants PricewaterhouseCoopers has warned that there will have to be large council tax increases, as much as £2,000 per household, to plug the pensions shortfall. Public sector workers also enjoy early retirement packages and holiday entitlement which is the envy of the private sector.

But Britain's top mandarin Sir Gus O'Donnell has warned that public services face sweeping cuts as the Government tries to rebalance the country's finances. Under new proposals launched yesterday, nearly half a million civil servants could see an end to bumper pay-offs worth an average £60,000. At the moment, some civil servants are entitled to as much as six years in severance pay - dubbed 'rewards for failure' by critics - depending on their length of service.

But from January next year, this will be curbed to a maximum of two years. In some cases, civil servants could get as little as 24 weeks pay. Gordon Brown has ordered the crack-down amid mounting public anger over the pay and perks enjoyed by public servants.

The new proposals are part of a drive to cut civil service running cost by £500million over the next three years. The Tories tonight condemned the Government for failing to tighten its belt and reduce pension payments.

Conservative Party Chairman Eric Pickles said: 'While we recognise the good work the civil service does it is unacceptable for the government to be paying people off with whopping bonuses while we are in the grip of a recession. 'The country is crying out for Labour to be responsible and  prudent. Instead we have a government that is recklessly wasting taxpayers money.'

A spokesperson for Communities & Local Government last night insisted that there were no plans to raise council tax to pay for the pensions deficit. He said: ‘The opposite is true - we've put in even greater protection for council tax payers. ‘No changes have been proposed. There is simply an informal consultation going on with scheme administrators. 

‘The Government will continue to make sure the LGPS remains fair, solvent, protected against risk, and affordable to the taxpayer.’