TAXPAYERS TO BAIL OUT COUNCILS

Council tax payers will have to pay an extra £20 in 2006 to meet the pension demands of local government employees. They are already facing increases of 10% or more in the first rises in council tax after the General Election. Figures leaked showed that the cost of paying the guaranteed and inflation-proofed pensions will rise to £3.75bn in 2005. This is an increase of nearly £250m on the previous year. Most of such costs are picked up by national and local taxpayers.

Contributions by local government staff meet only a fraction of the total. Critics say this means that local tax payers, some of them with little or no pension provision, are funding generous schemes based on final salaries for council workers. The £250m extra costs faced by council tax payers will mean their bills will go up by around 1.5%, or roughly £20 for someone paying the average tax for a benchmark band D home.

News of the extra bill comes as the Government and councils continue to hire bureaucrats at an extraordinary pace, all with guaranteed pensions. In recent months State organisations have been taking on workers at the rate of 560 a day, five times that at which private companies are recruiting. Six-figure salaries have become the norm for senior officials, even though their jobs are cushioned from the risk faced by private sector executives.

Many of the appointments appear to council tax payers as obscure or unnecessary, such as 'strategic' executives and equality officers, 'five-a-day coordinators' to encourage the eating of fruit and vegetables and 'real nappy' officers. Average contributions to their pension schemes represent around 19% of the value of their monthly salaries.

The terms are so generous that local authorities have a £30bn gap to make up between the value of the scheme and the cost of paying out the inflation-linked pensions. Council tax bills, which have gone up by 70% since Labour came to power in 1997, went up by only 4% in 2005 because Chancellor Gordon Brown handed £1bn extra from the Treasury to councils.

But local government leaders have warned that there will be no similar bailout in 2006 and that as a result council tax bills are likely to go up by 10% or more. Extra pension payments would mean a further 1.5% on top of that. Brown's £100bn stealth tax on pension funds and falling stock markets have squeezed companies so that two-thirds of final-salary plans have been replaced for new workers by less costly stock market-based schemes. These provide much lower pensions and are less reliable. (Source: Mail on Sunday)