CommentIsLinked@LDV: Vince Cable – Our next test of courage: to cut public sector pensions

Over at the Daily Mail, Lib Dem deputy leader Vince Cable argues that the vast scale of government debt means we must tackle public sector pensions. Here’s an excerpt:

Gordon Brown’s continual squirming and denials can’t conceal the truth: public finances are in a truly terrible mess. People know that nasty spending cuts and tax increases are on the way. They want political leaders to be frank and spell it out. What, when and how?

They will not be convinced by George Osborne’s alternative: to win an Election and then get Ministers round a table behind closed doors to decide what the painful cuts will be. His message seems to be like the South Sea Bubble or some of today’s property clubs: ‘Invest in the project and we shall tell you the details in due course.’

The public want to be part of that debate. They should be.

We know what happens when fat cats are asked to clean up the cattery. There is some arbitrary figure for public spending cuts. The good is cut with the bad. Politically invisible groups such as the very old and the mentally ill, and unpopular groups like young offenders, take the biggest hit.

Investment is cut, not bureaucracy. An army of consultants is hired at vast cost to give advice while lowpaid workers are fired or their jobs contracted out. And if the numbers don’t add up, taxes go up as well.

This crisis is too deep for cynical games. Britain has lost the windfalls that kept public spending at unrealistic levels: North Sea oil revenue and the tax take from the housing bubble and the banking casinos.

The British State will have to downsize. Here is a starting list of candidates for the axe: the Trident replacement; the NHS IT scheme; the ID card; other databases like Contact Point; ‘baby bonds’; and tax credits, which extend way beyond the low paid.

You can read the article in full HERE.

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  • Just for the record, virtually no public sector worker will retire on 2/3rds final salary (unless they pay in extra themselves/or decline the lump sum). The standard deal – which is a good one for public sector workers – is half final salary, plus a 1.5x final salary lump sum.

    But what to do about it? Vince deserves full marks for raising the issue, but not many marks for saying what he would do.

    I think the best option is to raise the retirement age to that of the state pension, so that people contribute for (slightly) more years, and have (slightly) fewer years in retirement. The combination of these two things has a big effect on the overall cost.

    In contrast if we reduce the pensions of many people there is a danger that we push people (particularly women) back into poverty, which would not be desirable.

  • My understanding is that there already is an agreement in olace for new entrants to the pension scheme to have a later retirment age and to make higher contributions.

    I think we should be encouraging more private companies to have decent pension schemes not looking to make the public sector pension scheme worse because it looks good in comparision to the poor pensions shcemes many companies now offer.

  • Peter: you are right, but it is still odd that 30-something female civil servants are allowed to retire at 60. That will be costly one day.

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