More redundancies means less paying members in the pension scheme

News that the Local Government Pension Scheme is losing members in droves is hardly surprising considering the job losses in the sector in the past year. Nor is it much of a surprise that neither the DCLG- which issued the figures - or the unions or employers have shouted it from the rooftops; after all, fewer members making contributions means less income coming into the scheme and more pressure on the funding level which is not helpful to the current delicate negotiations about reducing the LGPS's costs to the public.
The DCLG says the number leaving the scheme because of redundancy in the year ending last March was up 40% to more than 17,600. The number of former staff entitled to deferred benefits is also up. Many of these will be ex-employees who have left before retirement, either voluntarily or through redundancy. Not only do they cease to contribute but their deferred pension sits as a cost in the scheme ready for when they retire.
While the scheme's assets rely heavily on stock market performance for their income, a reducing number of paying active members is bad news. On top of this the town hall unions, in their campaign to prevent the government from forcing the LGPS to increase contribution levels, has already issued warnings that staff on average salaries - above the threshold for increased contributions - will quit the scheme because of its extra costs.
Another figure to bear in mind is the number of early retirements triggered by cutbacks. These in effect become another burden on the pension fund. A decade ago the Audit Commission issued a warning about councils using the pension fund as a means of managing out staff. In those days it could afford it; now it cannot.

The impact of quantitative easing

What is the difference between quantitative easing and public spending? Or for that matter what is the difference between QE, public spending and the billion pounds that Messrs Pickles and Osborne together found down the back of their sofas for weekly bin collections and freezing council tax?
There will undoubtedly be a technical argument - that the billion pound bung was 'found' in Whitehall from money already collected in taxes and simply unallocated and therefore does not count as extra public spending on the balance sheets. And QE is directed at banks and bonds. But the principle remains the same. The economy is stagnating, liquidity is tight, consumers are cutting their spending and the government wants to get things moving by injecting more cash into the economy. The effect of £75 billion of electronic money created to purchase bonds issued by the Treasury is aimed at stimulating spending. The £800m announced by Osborne to hold down council tax is aimed at not further deflating consumer demand through tax rises.
Would it have been better instead not to have imposed such a severe spending round for the public sector in the first place in particular local government which has caused job losses and further depressed the economy? And would it now not be better for the Treasury to revisit its spending plans for the next two years and alleviate some of these cuts, especially in the more depressed regions like the north and Midlands?

The Osborne council tax freeze bung

Perhaps the Conservatives should take up the emblem of a sofa for their annual conference backdrop in Manchester this week judging by how useful said item of furniture has proved in the past few days. First Eric Pickles found £250m down the back of the DCLG sofa for his favourite pet project of weekly bin collectiions. Now George Osborne has discovered another handy sofa in the Treasury behind which he has extracted £800m to fund a second year of council tax freeze.
No wonder people get cynical about politicians. Firstly, this billion pound bung just happens to coincide with the Conservative Party conference. Secondly, I thought we were supposed to be broke. Thirdly, where has this money come from and don't tell me it's from that hoary old chestnut 'Whitehall efficiency savings'? And fourthly, maybe it was always there from the start, deliberately kept back for a rainy day. For George Osborne in opposition always maintained that he would freeze council tax for two years - then made it only one year in his last Budget, thereby allowing himself the room to 'announce' another year.
Furthermore it is just more nails in the coffin of localism. If councils can't even decide on their bin collections or their council tax levels then what powers do they really have in the end?