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Nice work if you can get it

Gordon Brown should make a principled stand on public sector pensions.

In the media frenzy that has surrounded the ascension of Gordon Brown to the highest office in the land one factor has gone unnoticed – that in the fortnight since his coronation he has already done enough to earn a pension pot worth £1m.

Brown has actually done quite a lot for low earners, which is why it is ironic that the person whose reforms could lead to the reduction of state retirement provision for many of the poorest working people in the country should be getting so rich quite so quickly. But sitting in Number 10 for just one day guarantees a pension of half of final salary for life.

Many in the debate about the future of public sector pensions take the view that two thirds of final salary from age 60 for 40 years service is already too generous.

The idea that Brown could be on to £63,000 a year for the rest of his days if he loses a snap autumn election seems too generous by far.

The role of prime minister is one of just two great offices of state that benefit from this juiciest of perks, the other being the Speaker of the House. Half of final salary is paid for the rest of the office holder’s days regardless of how long they hold office, and in the case of the prime minister, whether or not they were voted into the post.

Until 2003 there were three jobs that benefited from this nice little earner. The office of Lord Chancellor also used to benefit but four years ago Charles Falconer was appointed to the post, which had been part of the judicial make-up of the nation for 1,400 years, with the express task of abolishing it. Thankfully he did the decent thing and decided to forgo the pension as he was only technically in the post for about six months.

The issue of Brown’s grace-and-favour pension reflects the economic and political forces he and those around him will face in dealing with the spiralling cost of public sector pensions. To say it is a crisis in the making is putting it mildly – the figures are staggering.

The current best estimate of the liability of all UK taxpayers to public sector workers’ pensions is now between £720bn and £1trillion. This sum is never quantified by government number crunchers and it does not appear on the balance sheet of UK plc.

Some analysts estimate that the cost to the Treasury of paying annual pensions to former civil service staff will soon hit £76bn a year and overtake the cost of the NHS in the not too distant future.

At a local authority level, a programme for Channel 4 found three years ago that 26 per cent of council tax, much of it paid for by pensioners, was going to fund local authority pensions.

It was no surprise that the Government deal with the public sector worker unions back in 2005 ducked the main issues that the private sector is being asked to face – namely working longer and getting a smaller pension.

The problem public sector pensions presents to politicians was highlighted at an event organised last week by the Sunday Telegraph and Friends Provident where one of David Cameron’s policy bods made the sort of naive foot-in-mouth gaffe that will have left Conservative central office fuming. Michael Johnson, a policy adviser to the Conservatives, told a room full of journalists that he had been trying to get Cameron to put his head above the parapet on the issue of public sector pensions for some time but that he had not done so because of the effect of the party’s popularity in an area ‘where the Tories aspire to gain votes’. Put another way, he is too scared of the backlash to tell it as it is.

Johnson should be congratulated for pointing out the extent to which the issue has become a political taboo. But coming back to Brown and his £1m windfall, maybe a way of showing some fresh thinking from a fresh government would be to forgo the handout.

Part of the problem with reform of public sector pensions is that everyone tasked with considering whether to limit them is getting one themselves. By taking a principled stand on his own state pension arrangements Brown would at least have a leg to stand on when he eventually comes to address the issue anew, as he surely must.

John Greenwood is editor of Corporate Adviser.

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