Public sector pensions face 'Fair Deal' cut

The Treasury could scrap civil servants' right to keep their pensions when their services are bought out by private sector companies.

David Cameron has proposed to allow private sector companies to bid for public services.

However, an interim report from the Independent Public Service Pensions Commission, published in October 2010, highlighted fears the nature of public sector pensions may deter all but the largest companies from bidding.

Under the Fair Deal guidelines introduced in the late 1990s companies buying up sections of the public sector must provide comparable pensions to the staff involved.

The commission warns this is "a barrier to non-public service providers, potentially reducing the efficiencies and innovation in public service delivery that could be achieved".

The Treasury says it is now considering scrapping the Fair Deal rules, meaning public sector workers could see their pensions slashed if their service is bought out.

A Treasury spokesperson says: "In line with John Hutton's recommendations in the interim report on public service pensions, the Treasury will shortly consult on a range of options on the Fair Deal policy."

Public sector unions have reacted with fury to the proposals. Brendan Barber, general secretary of the TUC, says: "This is a naked right wing agenda that takes us right back to the most divisive years of the 1980s.

"[The] proposal to privatise everything that moves is exactly the kind of proposal that voters would reject if put at an election.

"Public service workers should be very afraid. The real profits will come from attacking their terms and conditions, and will only entrench the longest decline in living standards for ordinary people since the 1920s."