£1 in every £5 of council tax is used to fund local government pensions.
While the last TaxPayers’ Alliance 'Council Spending Uncovered' report revealed that £1 in every £11 of council tax is being spent on middle managers who earn at least £50,000 a year, its most recent study covers the alarming amount of council tax used for council employee pensions.
The alliance reveals for every £5 of council tax received by local Government, £1 is used to fund their pension schemes. Local authorities collectively spent £4.6 billion on employer contributions to the Local Government Pension Scheme and unfunded payments and added years benefits to local government employees, teachers and fire-fighters.
Moreover, the average amount spent on pensions by each individual council rose 13 per cent year-on-year to £10 million during the 2006/07 period.
Chairman of the TaxPayers’ Alliance, Andrew Allum, said: "It’s unacceptable that ordinary families and pensioners who struggle to pay inflated council tax bills see so much of their money spent on gold-plated council pensions that have all but disappeared in the wider economy.
"With pension costs jumping 13 per cent in one year, the problem is clearly getting worse and requires urgent attention. Councils should start correcting their own behaviour immediately, and the Government must face down union pressure and reform the outdated local government pension scheme as soon as possible."
The report highlights a number of other concerns, including "over-generous" local authority pension contributions and increased life expectancy of pensioners. It indicates that while there are currently almost four people of working age for every pensioner (aged 65+), this ratio will drop sharply to just over two people for every pensioner by 2056.
It also points out that the average band D council tax bill has almost doubled in the last ten years from £646 in 1997 to £1,268 in 2007. Despite this and despite cuts to some if its services, almost all local authorities say they are still short of council tax and that it needs to be increased in order for them to cut costs.
The alliance is calling for an urgent review of what it calls an "outdated" pension scheme, particularly in relation to the added years benefits for staff take early retirement.
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