FactCheck: 'Gold-plated pensions'
Updated on 29 February 2008
The Tories bemoan the "soaring price of gold-plated town hall pensions". The Taxpayers' Alliance says £1 in every five of council tax money goes on them. FactCheck investigates.
The claim
"£1 in every £5 of council tax [is] spent on local government pensions."
Taxpayers' Alliance, press release, 29 February 2008
The background
It's an accusation guaranteed to get sections of the press salivating with indignation - and touch a nerve with private sector workers fearful about their own pension fund.
On the day after it was announced that council tax - an unpopular levy at the best of times - is likely to rise by an average of 3.9 per cent across the country in April, campaign group the Taxpayers' Alliance put out a report claiming that a fifth of it was being funnelled into local government pension funds.
Shadow local government secretary Eric Pickles weighed in to the row, saying that the government was "adding insult to injury by making hard-working families and hard-pressed pensioners pay towards the soaring cost of gold-plated town hall pensions".
But council budgets are a complex business, with income coming from a number of sources and spending varying across the country. Has the Alliance done its sums right?
The analysis
The Alliance gathered details of the 2006-07 accounts from every council in the country. They worked out from these that the total spending on pensions was £4.6bn.
This figure covers the amount that employers paid out - it doesn't take into account contributions by the workers themselves.
In the same period, councils raked in £22.2bn in council tax. So do the maths, and it looks like just over 20 per cent of taxpayers' cash is going on pensions.
But this distorts the whole picture of council funding. For starters, councils get the bulk of their cash - around 75 per cent - from central government.
Total council spending in 2006-07 was £106.34bn. In relation to this, the £4.6bn spent on pensions starts looking much smaller - more like four per cent than 20 per cent.
The money also provides a bunch of services such as schools, libraries, rubbish collection and street lighting.
Council workers aren't just the town hall bureaucrats that Eric Pickles' comments suggest.
Next let's look at the figure given for pension contributions. Is the £4.6bn number reliable?
The Local Government Association - which speaks for councils - said some councils disputed individual figures. For example, there were some issues over the inclusion of pension payments for bodies that had now been privatised.
But these would be pretty small change compared to the overall picture.
Perhaps more significantly - particularly when the Taxpayers' Alliance is calling for the government to make changes to the pension payments - the scheme started to undergo a shake-up in April 2007.
Although the figures show the most recent complete year data available, the scheme should cost councils less in future.
For starters, a clause which allowed workers to retire on a full pension at 60 is being phased out. In the old days, the "rule of 85" meant a 60-year-old could retire on full pension, so long as their age plus the number of years they have worked tots up to 85.
The scheme is also being changed so that employers will contribute less, and employees will contribute more.
From April 2008, workers will, on average, be putting in an extra 0.5 per cent of their pay. And employers will be paying an extra 1.3 per cent less of the overall payroll than under the old scheme.
Finally, let's look at who the pension money is going to. Council workers aren't just the town hall bureaucrats that Eric Pickles' comments suggest.
In fact, there are 1.6 million of them, doing about 800 different jobs - anything from dinner ladies, street cleaners, museum workers and park staff.
The verdict
Public sector pay - and pensions - are a balancing act. On the one hand, taxpayers like to feel they are getting value for money. On the other, the Government needs to pay enough to attract and retain staff.
It's fair enough to say that £4.6bn was paid into council pension schemes in 2006-07.
But to say that this means a fifth of council tax funds are being splurged on the scheme misrepresents the nature of council spending. It's disingenuous to take any one thing that councils spend, and use it as an argument to slash council tax by that amount.
FactCheck rating: 4
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Every time a FactCheck article is published we'll give it a rating from zero to five.
The lower end of the scale indicates that the claim in question largerly checks out, while the upper end of the scale suggests misrepresentation, exaggeration, a massaging of statistics and/or language.
In the unlikely event that we award a 5 out of 5, our factcheckers have concluded that the claim under examination has absolutely no basis in fact.
The sources
Taxpayers' Alliance, Council spending Uncovered No 3: Pensions
A fifth of your council tax is paying for 'gold plated' pensions at the town hall, Daily Mail, 29 February 2008
Local Government Association
Local Government Pension Scheme: proposed changes
Statistical Release: Local Government Pension scheme funds, England: 2006-07
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