UK Politics

Public sector pensions change in Budget criticised

Ambulance Image copyright PA

Health and education will be squeezed by more than £1bn because of changes to the way public sector pensions are funded, figures seen by the BBC show.

It comes after George Osborne announced in the Budget that employers would have to contribute more to pensions for NHS staff, teachers and the police.

He said individual pensions would not be affected.

The Treasury said employers had three years to get ready for the changes and would be helped by low inflation.

The technical changes to the way public sector pensions are valued mean departments face contributing more to their overall cost from 2019 - effectively saving the Treasury around £2bn billion a year.

Extra cost

As a result, Commons library figures obtained by the Liberal Democrats show, the NHS will have to find an estimated £650m per year.

The changes will also see pension contributions for teachers rise by more than £400m, the Armed Forces by more than £300m and police forces by more than £100m.

BBC chief political correspondent Vicki Young said some ministers had asked for clarification over how the changes would impact on their budgets, but so far there had been no suggestion the extra cost would be shouldered by the Treasury.

The health and schools budgets are protected but both are already under pressure and this decision will add to the strain, she added - and the extra cost to the NHS would wipe out the real terms increase ministers have pledged for 2019-20.

'Sneaked through'

Lib Dem leader Tim Farron said the cuts were being "sneaked through" and would ultimately mean less money to spend on teachers, doctors, nurses and the police.

"It will mean the NHS, it will mean schools, it will mean the armed forces, it will mean the police," he told Radio 4's Today. "It takes that money directly out of the front line of those services."

Mr Farron said the cuts would be "intolerable" even if they served a justifiable economic purpose but Mr Osborne was acting solely to try and meet his self-imposed goal of a budget surplus by 2020. "He has chosen to set targets which are unnecessary."

Treasury officials admitted there would be an additional cost for public sector employers but they had been aware the changes were coming.

"We're committed to regular revaluation to ensure public sector pension costs are met," a spokesman said.

"The Budget announcement means employers have three years to prepare and we think they should be well placed to absorb extra cost of contributions - especially because inflationary pressures are significantly lower than expected when budgets were set at spending review."

The figures were revealed in the aftermath of the Budget as Mr Osborne faced criticism for cuts to some disability payments and questions over whether he would hit his fiscal targets.

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