That's the way the money goes... number 1

This week the Taxpayers Alliance published their discovery that a major part of the council taxes we pay goes not on services but on salaries and pensions of council workers.

One pound in every five paid in council taxes goes on providing pensions for council staff, a rise of 13% on the previous tax year. On average councils spend £10 million a year on pensions. Nationally the figure is £4.6 billion.

Why is this so high?

In part it is because councils have been encouraging early retirement by "buying in" contributions of employees.

In part it is because councils have created a large number of highly paid middle management posts, some with exotic titles. The result is that one pound in every eleven spent by the council is on these salaries. These, and those for all employees, lead to final salary pensions, - something which is disappearing from private firms because they are so expensive and long lived. These pensions are largely unfunded, that is that the pensions are met out of council taxes. Like the old age pension, current taxpayers pay for those who have retired.

There are two sources of concern here:

1) Partly because central government has added duties to councils without financing them entirely, and the money is often ring-fenced, council taxes must face the burden of salary and pension increases. This is at a time when council taxes are assuming the proportion of 10% of income after after income tax, and with very high fuel costs are beginning to cripple families on modest incomes.

2) This is a time bomb waiting for future trouble, if the economy turns down, with council taxes high, plus green taxes, and energy costs high, then more citizens could find themselves destitute.