The CBI today (Thursday) welcomed Lord Hutton’s interim report on public sector pensions.

John Cridland, CBI Deputy Director-General, said:

“Lord Hutton’s report is a long-overdue first step to delivering sustainable pensions in the public sector. He rightly recognises the need to measure the cost of public sector pension benefits properly, and ensure that this cost is met by employers and their employees.

“Everybody needs to understand the true scale of pension liabilities being built up. Every year there is a £10 billion gap between what state sector employees and employers contribute and the value of the benefits that the Government promises for these contributions. Taxpayers cannot be expected to make up the difference.

“The CBI supports the principles which the Pensions Commission believes should be used to judge reform options, namely affordability and sustainability, alongside adequacy and fairness.

“It is good that Lord Hutton has said he will draw on international experience when considering alternative pensions structures. Countries like Sweden and Holland reformed their systems some 15 years ago, and the Swedish model of 'notional defined contribution' could provide guaranteed pensions without unpredictable taxpayer liability.

“But Lord Hutton is clear that traditional final salary defined benefit schemes are not a viable way forward.

“Lord Hutton has also recognised the unlevel playing field which exists for pension provision when private companies bid for work in the public sector. Currently, firms must meet the true cost of pensions, while the public sector receives a taxpayer subsidy. These rules are having a negative impact on the reform of public service delivery and need to be changed.”