OBR serves up donkey drop for ConDems

The Office for Budget Responsibility report published yesterday has had some wide reporting in the media based not least on the apparent rise in public sector pension costs: essentially, the amount spent on so-called unfunded schemes is to rise from £3.1bn now to £9.4bn by 2014-2015 (Table 4.8). This appears to be the first time we have seen a forecast made so far into the future (although, unfortunately, the OBR has not, it would appear, had sufficient time to explain its workings).

Clegg grabbed the opportunity to put the boot into public service pensions with full speed – and, ahead of the review of public sector pensions, it looks as though the conclusions are already being formed. You’d almost think that the OBR had produced such a donkey drop on purpose. Hmm: so much for independence (despite ‘independence’ being written into the URL, I’m not fooled…)

What we have to remember, of course, is that this £9.4bn is a net figure – i.e. it is the balance of (in this case) expenditure over income – and we know neither the absolute dimensions of such figures nor how they are changing over time. Expenditure will be changing, as people are living longer and as pensions in payment are indexed in association with inflation, while income will also be changing. In particular, during a period of public sector cutbacks and a period of the restraint of wage growth, it would be no surprise to find out that income was static, or even falling. It would also be no surprise to find out that expenditure was, as a result of the likely increase in the number of pensioners receiving a pension, and because of the rise in the value of indexed pensions, steaming ahead.

By itself, of course, in these times expenditure rising faster than income is not an argument for the further reform of employees’ public sector pensions – though that little fact appears to have whooooshed over the heads of most media commentators.

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