The time bomb

The Government has admitted that its estimate of the liability for public sector pension commitments has risen to more than £620 billion, from the previous official estimate last year of £530 billion, an increase of 17%. (When you bear in mind that other reputable experts have put the estimate as between £960bn and £1,025bn, the real figure is likely to be higher than the Government admits.)

What is this liability? It is the lump sum that would have to be invested at present rates of return to finance the "pensions" of the public sector. There will be no investment of course, it is purely notional, as the pensions are largely funded out of future taxation, - taxing young Peter to pay the pensions of old Paul.

So the future has been further mortgaged by Brown as Chancellor, there will also need to be found huge lump sums eventually to buy the hospitals and other structures built by private industry but not yet paid for.

It is little wonder that Brown is now cutting back on the spending on public services, but this is because he has seriously underestimated the growth in annual expenditure and debt which has to be revealed in the Budget statements, even if with spin. These other huge future commitments he is leaving for someone else to clear up.

Public sector pensions are still "final salary" based and indexed to inflation, unlike the private sector which has had to close down most of such schemes since the pension raids By Brown. Public pensions are still in many cases available for retirement at 60. (There was a time when such advantages were acceptable because of the generally poorer salaries in the public sector. This is no longer true.) They are also largely unfunded - paid for out of taxation.

The "burden" has been greatly increased in the last 8 years or so, with large increases in public sector salaries (e.g. doctors') and a vast increase in the civil service and other areas. We not only have to meet their salaries as they work now, we have to pay them larger pensions when they retire, and indexed until they die.

Clearly, if money were not so short, we should consider setting up a fund out of budget surplus.

We should also consider abolishing perks such as retirement at 60, as the Old Age pensionable age has been raised.

Above all, we have to do something to reduce the size of the swollen public sector, - we may not want to impoverish doctors and others, but we surely need to do something about the vast increase of about 500,00 "pen pushers" in the civil service.