FORMER Labour cabinet minister John Hutton has been appointed by the coalition government to lead a commission into public sector pensions.
Announcing the appointment, chancellor George Osborne said it was “unsustainable” to expect taxpayers to cough up for public sector pensions.
Hutton, a former secretary of state for work and pensions, will be asked to find ways to make public sector pensions more affordable.
According to Treasury figures, the total cost of unfunded public service pensions in 2010-11 is estimated at a staggering £25.4bn – more than twice the cost of child benefit.
The chancellor believes it is unfair for taxpayers that work in the private sector to fund public sector pensions, especially when their own pensions are increasingly meagre.
Only a third of private sector employees now get pension contributions from their employer. For those that do, the average contribution is 10 per cent – almost half the 18 per cent that public sector workers enjoy.
And according to figures in the recently-released Office for Budget Responsibility report, the gap between the contributions made by public sector workers and the payout they eventually get is set to more than double over the next four years to £9bn.
Hutton will also be asked to examine ways to encourage people to save more for their retirement and to work for longer.
He will present interim findings in September ahead of a comprehensive spending review, before delivering the final report in time for the 2011 Budget.
“Reform of public sector pensions is a huge challenge for both the public finances and the public sector workforce. I welcome the opportunity to lead a root and branch examination of both the short-term and longer-term options for reform,” said Hutton.
LORD JOHN HUTTON
JOHN HUTTON might sit on the Labour benches in the Lords, but he agrees with George Osborne on at least one thing: in the run up to the Labour leadership election of 2006, he told BBC political editor Nick Robinson that Gordon Brown would be a f***ing disaster as Prime Minister.
In truth, the chancellor and Hutton are politically closer than it first appears. The former business, work and pensions, and defence secretary was always on the right wing of the Labour party. He counts the likes of Alan Milburn, John Reid and Tony Blair as his closest allies and is a long-standing advocate of public service reform.
When Brown seized the party leadership and with it the premiership in 2007, Hutton stayed on as a cabinet minister. But he became increasingly disillusioned as Brown turned away from the New Labour project in favour of greater centralisation. After stepping down as a cabinet minister in June 2009, he kept his reservations to himself; that loyalty likely helped him secure a peerage in Brown’s dissolution honours list.
Osborne has picked an ex-Labour minister for this job precisely because he wants to be bold. The kind of radical reforms he expects Hutton to come up with could never be sold to the public sector by a Tory.