MILLIONS OF British public sector workers will face pension curbs once a review is completed in September, British prime minister David Cameron made clear, but existing entitlements will not be touched.
The warning came as the highly respected Institute of Fiscal Studies said the budget produced on Tuesday by Chancellor George Osborne would hit the poor hardest.
Defending the decision to impose a two-year pay freeze on public sector workers earning more than £25,000 a year, Mr Cameron said the alternative was job losses.
“I’m not trying to hide it from you. All I say is this, we basically have a choice. We either have to have pay restraint like what we’re talking about or we’re going to lose jobs.
“And I think it is better to ask people in the public sector who work very hard, whose work we value, but to say we’ve got to have two years of this pay restraint in order to hold on to jobs,” he said in a television debate with members of the public last night.
Mr Cameron said decisions on pension entitlements would not be made until after the review conducted by former Labour work and pensions secretary John Hutton was completed.
However, he did clearly indicate his thinking: “The truth is – and we’ve got to confront this truth, if we don’t do anything about it, there’s going to be a massive great bill that we’ll have to pay through taxes or public spending cuts.”
Many people in the private sector have already lost final salary pension schemes, or they have had to contribute more to hold on to the entitlements they have, said Mr Cameron, who was joined by deputy prime minister Nick Clegg.
“For the future, there may be changes to pension arrangements that affect existing [public] employees, but the rights they have accrued so far, no one would touch those,” said Mr Cameron.
Facing questions from public sector workers, the Liberal Democrat leader said private sector workers had seen their entitlements go down dramatically in recent years because of stock market losses.
In its verdict on the budget, the Institute of Fiscal Studies said the treasury had not taken into account the impact of welfare cuts to come before declaring Tuesday’s budget as socially progressive.
IFS economist James Browne said the progressive elements included in Mr Osborne’s documents were attributable to reforms introduced by the previous Labour government.
“If you look at reforms due to be introduced in 2013 and 2014 – benefit cuts announced yesterday for those years and subsequent years going forward – they hit the poorest hardest and indeed keep on hitting them more and more every year.
Labour’s work and pensions spokeswoman, Yvette Cooper, said: “The IFS have confirmed today exactly what we thought yesterday. That George Osborne’s budget was a typical Tory budget, unfair and hitting those on lower incomes hardest – so much for we’re all in this together.”