HERE is a true horror story: the black hole in the UK's public sector pensions. This colossal hidden deficit will starve British industry of investment and impoverish the wealth-creating portion of the economy for decades to come. While New Labour likes to talk about equality, a vast gulf is opening up between the retirement rules and provisions in the public and the private sectors. And the private sector has to fund the lot.
More than 5m state workers participate in open final salary pension schemes; thanks to the decline of defined benefit occupational schemes, only half a million private sector workers are members of plans that remain open. Local and central government run their schemes for National Health Service workers, teachers, the civil service, the army, police and fire service on an unfunded basis. This means none of these vast liabilities is provided for in national accounts.
Contributions are not saved and invested, but spent. This is far worse off-balance-sheet hanky- panky than that carried out by the banks, which have been so heavily criticised by the prime
minister for shoddy accounting.
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