Conservative proposals to reduce the deficit (part 3)

• Capping public sector pensions. We will cap public sector pensions at £50,000 per year.

Ah yes, time for some grandstanding. Now it has to be said that there are very few retired public sector employees who are fortunate to receive a pension in excess of £50,000. The standard civil service pension traditionally allowed for one-fortieth of the best of your last three years worth of salary for each year of service, capped at forty years, i.e. to receive £50,000, your final salary would need to be £100,000, or its equivalent at the time of retirement.

There have never been very many civil servants on that sort of salary. Indeed, you would need to be a member of the Senior Civil Service to be in that pay range. In the days when the Inland Revenue had a London Region, we certainly didn't have more than five of them, and my entire area of the Department these days (Corporation Tax Operations) has none.

For the record, at the end of 2008, the number of civil servants, or full-time equivalents was:

• 225,400 at administrative grades
• 217,500 at executive grades
• 31,900 at Grades 6 and 7
• 4,700 in the Senior Civil Service

i.e. less than 1% of the Civil Service are at grades likely to attract a pension in excess of £50,000. To make matters worse, just 16% of civil servants retire at or above their normal retirement age, and over 60% retire to pursue other careers.

So, given that the pay scales for the Senior Civil Service do not fall wholly above the £100,000 mark either, the number likely to receive such a pension is small, if irritating. However, like expenses for MPs, the system of civil service pay has relied on an unwritten assumption that pay is kept down in favour of perks.

There is another factor as well, which has led to the perceived burden of public sector pensions, i.e. the reduction of the retirement age to 60 in the late 1980's, which reduced staffing numbers quite effectively, at the cost of increasing exposure to pension costs by five years at a stroke. It was one of those decisions that achieved a short-term favourable headline at an appalling cost, and was taken by, yes, you're right, the Conservatives.

Now, if the Conservatives want to cut the costs of senior civil servants, they may want to ask the question, "why has the number of Senior Civil Servants increased by 35% since 2000?". Answer that question, and you might have some savings...