The Great British Rake-off - Public Sector Pensions In The Spotlight

31st October 2021

Read this report you may understand why a public sector pension is worth its weight in gold. However the government in not accounting for it properly the costs are being added to public debt for the future. Can this continue?

This week, the Institute of Economic Affairs published a short paper on public sector pensions - The Great British Rake-off. This is not a policy document; but rather an analysis of the quality of government financial reporting - something the IEA rarely does. But despite the somewhat technical nature of the content, the paper reveals a complex and confusing muddle at the heart of the government's reporting of a simple question, namely: how much do public sector pensions cost ?

The answer, astonishingly, is that they cost about twice what the Government tells everyone they cost - around 60 per cent of salary, rather than the 30 per cent that is generally promulgated. This matters a great deal - the difference between 30 per cent of pay and 60 per cent of pay in the public sector is about £57bn of Government spending.

Spending which no-one knows about. But it is real spending, and each year it's added to the government's debt. It is a scandal, and one which is very, very hard to get Ministers and MPs to get to grips with. But it is creating a huge intergenerational transfer from young to old, and also a huge divide in retirement between the former public employee ‘haves', and the rest of the economy's ‘have nots'. Reform is urgently needed.

Read the full report HERE