Clegg criticises 'gold-plated' public pensions ahead of Budget

Nick Clegg has slammed “unreformed gold plated” public sector pensions after a report revealed taxpayer spending on the schemes will more than double by 2014/15.

The deputy prime minister was speaking after a pre-budget forecast report by the Office for Budgetary Responsibility revealed taxpayer spend will increase from £4bn to £9.4bn over the next five years.

Clegg said: "Private sector workers have already seen final salary schemes close, while returns from defined contribution schemes fall. So can we really ask them to keep paying their taxes into unreformed gold-plated public sector pension pots? It's not just unfair - it's not affordable.

"As we face up to living within our means, we cannot ignore a spending area which will more than double within five years."

The OBR report said changes in demographics will cause net public service pensions expenditure to increase year-on-year, by an average of 20% in real terms from 2009/10 to 2014/15.

However, the Trades Union Congress said the report does not make clear a main cause of the increased net cost of public sector pensions is the government decision to freeze public sector pay.

General secretary Brendan Barber says: "The cost of public sector pensions they talk about is the difference each year between how much it costs to pay pensions to staff who have already retired and the contributions that current staff and employers are making - even though contributions are to pay tomorrow's pensions not today's.

"As ministers have decided to freeze pay, contributions - a straight percentage of pay - are also frozen. As pensions rise with inflation, inevitably the gap between pensions and contributions will grow even though the cost of pay and pensions will fall as the freeze bites."

Earlier this week, independent policy think-tank The Work Foundation called for the government to shift the burden of public sector pension contributions from the state to employees in the June 22 emergency budget (PP Online June 14).

The coalition government has already promised a review of public sector pensions (PP Online, May 20).