The shadow of public sector pensions (Lawrence Kay, Policy Exchange)
The threat of serious financial difficulty hangs over the government. All the parties have said that they will cut the deficit as soon as they think practicable. But to really put the public finances in good shape for years to come they will need to deal with the problem of public sector pensions. The state has a liability of around £1 trillion in the pension promises it has made to public sector workers, and needs to work out whether it wants to keep being so generous towards them. The central issue in this choice is whether the government wants to keep incentivising its staff to stay in the public sector by offering them generous pensions, or if it would prefer to risk more fluid staff movements by having total remuneration packages that are more up-front and akin to those offered in the private sector. One of the next government's main pension policy problems will thus significantly affect the public finances over the long-term and depend on its idea of what working for the state should mean. There is much thinking to do.
