THE government could have to make further cuts to public sector pensions because the outlook for the British economy has worsened, Lord Hutton, the former Labour minister, warned yesterday.
Hutton, who was work and pensions secretary in Gordon Brown’s government, said the calculations contained in his recently-published review of public sector pensions now appeared “too optimistic”.
“The ground underneath [my] estimates has changed radically and I’m afraid in the wrong direction so we cannot be sure that the costs will fall over time and that we get to a more sustainable balance.”
He added: “The events of the last couple of weeks have confirmed that change is going to be the order of the day now, if we’re going to remain competitive, successful as an economy.
“We could be heading for the rocks unless we make adjustments now.”
But Brian Strutton, the national secretary of the GMB trade union, said Hutton was only “considering one side of the equation”.
He added: “What he’s forgotten to look at is the government also announced an atrocious 710,000 job losses in the public sector and a further two years of pay restraint.
“That’s going to bring down the long-term cost of public sector pensions, and therefore I think Hutton’s own affordability test is still going to be met in the long-term.”
Hundreds of thousands of public sector workers staged a strike at the changes to their pensions last week.