As a rule of thumb, taxpayers should expect the information provided by government to be transparent, accurate and timely. It’s an important principle. How else can we hold ministers to account? I know from speaking to politicians on select committees that MPs themselves are frustrated at the complexity of public sector accounting.
Vince Cable reported to us earlier this month that debates around the finance bill each year are very difficult to follow. This lack of accountability is building an unbridgeable divide between the public and private sectors. I am beginning to detect a real resentment that only radical action by policymakers can resolve.
Take pensions. There are four basic principles of good pensions housekeeping: affordability, sustainability, transparency and accountability. Demographics and poor stock market performance have tested these principles thoroughly in the private sector, resulting in the collapse of final salary schemes. But in the public sector much of the provision is unfunded.
The actuarial assumptions made by the government are so optimistic that most people can have no confidence that the public sector pensions deficit is ‘only’ £650 billion reported by ministers; Watson Wyatt have calculated it stands at over £900 billion while others have suggested a figure over £1 trillion.
Let’s be clear. This is a debt which will have to be paid by future taxpayers. Yet we are not sure about the scale of the liability. Each year there is a gap between what public sector employees pay into their pensions and what is paid out to retired public sector workers. I do not believe this is a sustainable position.
So what is the solution? I am of course not calling for cuts in the pension provision of front line public servants. But I am persuaded by the CBI’s call for an independent commission to look at how we address the issue of public sector pension provision for the long term. It seems likely that higher paid public sector workers will need to share in the burden of repaying the cost of the financial crisis.
When one third of Council Tax payments goes towards paying the pensions of local government officials it is time to get a grip on this issue.
Above all, we need much greater transparency of financial information and a simpler way of measuring and reporting public sector liabilities. Only then will we be able to address this issue in a way which is fair and proportionate to employees across our economy.