John Hutton’s interim report on public sector pensions today will go down as one of the
most important moments in the public service reform story. John Hutton doesn’t just set out the principles for putting public services on a sustainable footing, although he does do that (by
explaining the inadequate levels of contributions into these schemes). More importantly, he confronts head-on the problem that public sector pensions pose for the opening up of public
services to competition.
One of the key reasons that many companies have waited on the sidelines of the public sector for years is the disparity between public and private pensions. Tony Blair’s Prime Ministerial demands for private companies to run existing public services foundered on the cost of the pensions for the staff that they would inherit. The Treasury has promised action on the pensions barrier for years and there has been some reform, as John Hutton notes, but nowhere near sufficient to allow companies into the market.
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