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Good start, Ed, but what about Public Sector pensions?

Good start, Ed, but what about Public Sector pensions?

It is one of the joys of being on the opposition that you can actually speak some of the hard truths that one is prevented from mentioning if you actually have power. This freedom is what Shadow Chancellor Ed Balls indulged in when he announced that he would include pension spending in the overall welfare benefits cap on the basis that it constituted 66% of the entire spending on benefits. An eminently sensible idea but he forgot about the power of the grey vote.

They were particularly incensed and quickly manned the barricades in a way that puts the revolutionary young to shame. The grey brigade are quick to spot any attack on their lifestyle whilst the young, who have to pay for it, are easily distracted into thinking that it’s more important to throw eggs at Simon Cowell than consider future bills that are being prepared for you by the elderly.

However, in this case the grey brigade was off-target. The government have to get spending under control, if the economy is ever to wake up from the coma it is currently in, but it’s not the state pension that remains the real problem.

Public sector pensions sail along, blithely untouched by the debates raging around other spending and they are building up into a huge liability for future generations. No doubt the powers that be, all of whom will benefit from the taxpayers largesse, are happy to keep the argument raging around the state pension. If it ever got to the stage where the scale of this liability crystallised in the public consciousness, action would have to be taken and they would all be among the ones to lose out.

This is an area that, if the Shadow Chancellor really wanted to tackle the issues of future spending, he would start shouting about. On this issue, however, his silence is deafening. Perhaps it hasn’t occurred to him that taxpayers would rather contribute to the state pensions payments, on the basis that they will all benefit from them in the future, than contribute to the small section of society working in the public sector that is being guaranteed a luxurious lifestyle in the future without having to actually save significant amounts for it.

There is a need to face up to the fallacy of over-promising in the area of pensions. But it is not the state pension that is the real problem. Taxpayers who’ve worked hard are entitled to a decent basic living standard in their old age. The problem remains the huge amount of taxpayers’ money that is required to provide defined benefit solutions for the public sector on a scale that the private sector have long since realised is unsustainable.

As the private sector leave the defined benefit arena behind with its ponzi-style approach to funding, the public sector needs to be brought under the same disciplines. Why new entrants can’t be brought under the same rules as the private sector is with auto-enrolment is beyond me. It certainly would be a dramatic demonstration of the principle that we’re all in it together, but don’t hold your breath for it to happen.

Tom Murray

Twitter: @TomMurrayDublin or @Exaxe

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