Cutting public sector pensions by 5pc ‘could pay for five new

Cutting public sector pensions by 5 per cent could pay for the construction of five new hospitals, analysis has revealed.

A cut of only 1 per cent would pay for 13,000 more NHS nurses, while a 5 per cent decrease could alternatively pay for the resurfacing of all of Britain’s motorways.

That is according to analysis from the TaxPayers’ Alliance campaign group and comes in the wake of reports the Government is considering offering civil servants less generous pensions in return for higher salaries.

Civil servants currently enjoy generous pensions upon retirement that rise each year in line with inflation.

But the pensions bill for the public sector now stands at about £2.6 trillion – having recently overtaken the size of the entire UK economy for the first time.

It poses difficult questions for Sir Keir Starmer and Rachel Reeves, who are grappling with economic turmoil in bond markets and pressure from public sector workers for further pay increases.

Darwin Friend, the head of research at the TaxPayers’ Alliance, said: “The flabbergasting cost of public sector pensions is an enormous millstone around the neck of the state, taking away billions that could be put to much better use.

“For a long time now these retirement schemes have been overly generous, particularly given they are completely unfunded and come out of the contributions of taxpayers rather than a clearly defined pot.

“It’s time for the Government to radically reform public sector pensions by moving all new employees onto a defined contribution scheme, rather than gold-plated defined benefit schemes.”

Under proposals reportedly under consideration, millions of public sector workers such as teachers, nurses and doctors would be offered higher salaries in return for lower pensions.

Unions are reportedly split on the proposals, while the Treasury has not yet given a considered view.

Nurses walk along a hospital corridor — Millions of public sector workers such as nurses and doctors could be offered higher salaries in return for lower pension – sturti/E+

The National Education Union, which represents about half a million teachers, has described the proposals as a choice between “poverty now or in retirement”.

A spokesman for Unite, one the UK’s largest trade unions, called it “nothing more than rearranging the deckchairs on the Titanic” and called for more spending on public services.

It is hoped that the scheme will solve recruitment problems in Britain’s public services by attracting and retaining staff without crippling the nation’s finances.

A member of the Unite union on a picket line in Rotherham in September 2023 — A Unite spokesman called proposals ‘nothing more than rearranging the deckchairs on the Titanic’ – Lucy North/PA

The idea has been mooted under previous governments without materialising.

The scheme has drawn criticism from economists who warn that more needs to be done.

Prof Len Shackleton, an Institute of Economic Affairs editorial and research fellow, said: “It’s not something a government should enter into to grab a quick headline. The whole area of public sector pay and conditions needs rethinking, and the power of unions reduced. I can’t see this under the current Government.”

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