Conservatives repeat TaxPayers’ Alliance distortion on local authority pensions
The Conservative Party have just issued a press release headed “Town hall pensions now costing local taxpayers nearly £300 a year”. It’s not on their website yet.
In it they say:
Analysis by Conservatives estimates that the yearly cost is now equivalent to £281 a year by council tax paying household in England and Wales. By contrast, the average council tax per dwelling is £1,175 – so the equivalent of a quarter of every bill effectively bankrolls pension costs.
This claim that a quarter of council tax goes to paying local authority pensions is a straight repeat of one made by the TaxPayers’ Alliance. It was misleading then, and just as misleading now.
Local authorities have more than one source of income. Council tax makes up 24%, with business rates, government grant and charges for services also making major contributions.
It may be mathematically accurate to say that £281 is about a quarter of £1,175 but it is meaningless. A bit more simple maths teels you that the cost of local authority pensions is 6% of total council income. As the TUC’s Brendan Barber says:
“Given how labour intensive good local services are, this is not unreasonable. Local authority staff – who all have votes – will be shocked at this distortion of the facts.”
When the Poll Tax was introduced, the then Conservative government took the political decision to reduce the target funding level in the Local Government Pension Scheme from 100% to 75%. The legacy of that decision is one reason for the deficit in the LGPS.
UPDATE: The GMB union have looked at the annual LGPS report. This is what they say:
Local Government Pension Scheme Has Positive Cash Flow Of £3-4billion More In Income Than Expenditure Consistently Every Year Which Means It Is A Well-Funded And Sustainable Scheme.
Employee contributions in particular have gone up by 15% to just under £2 billion a year new figures show
Official statistics released today by the Department for Communities and Local Government on the Local Government Pension Scheme (LGPS) in England show that cash flow into the LGPS remains very strong, with income exceeding expenditure by over £4billion for the year, maintaining the pattern of previous years.
Employee contributions in particular have gone up by 15% to just under £2billion a year. Official statistics show that the funds’ stock market value has fallen by nearly 20% in the year to April 2009 – to just under £100 billion. GMB estimate that this loss will have been recovered as the stock markets bounced back this year.
Commenting on these figures, GMB National Secretary, Brian Strutton said, “The key point is that the underlying health of the Local Government Pension Scheme remains strong. The very positive cash flow of £3-4billion more in income than expenditure consistently every year means this is a well-funded and sustainable scheme.
“Employees are to be congratulated for upping their contributions as this is helping their pension fund weather the current storm. It is a positive example of a system that enables workers to save for their own retirement.
“The figures also show that the Local Government Pension Scheme is on a roller coaster ride going up and down with the swings in the stock market. Last year it was worth £120billion, the snap shot at the end of March showed £100billion, it’s now actually back up around £120billion.
“Although stock market fluctuations are not so important for a long term pension scheme like the Local Government Pension Scheme, the fall in investment income of 9% and the 9,300 redundancy leavers from the scheme shows the effect the recession is having. Although the fund lost value, it outperformed the stock market which saw a 29% fall in the same period.”