Prospect has written to members of the Treasury committee warning of a potential £5bn shortfall in the delivery of frontline services because of looming changes to the valuation of public sector pension schemes.
The union is urging the committee to question Treasury ministers about the potential impact of the changes.
A technical change to the discount rate used in the valuation of public sector pension schemes could reduce funding for schools, hospitals and other public services by nearly £5bn a year from April 2020.
It could also lead to the Prime Minister’s promise of additional funding of £1.25bn a year to cover “a specific pensions pressure” for the NHS being made redundant.
Garry Graham, deputy general secretary with responsibility for Prospect members working in the public sector, said: “This manoeuvre has every appearance of being a Treasury fiddle in order to balance spending commitments like the PM’s pledge to increase NHS funding with their own fiscal rules.
“Changing the discount rate for valuing public sector pensions could pave the way for back-door cuts to public services of up to £5bn a year if the Treasury does not compensate public services for the effect it will have on their budgets.
“Not compensating public service employers for this change would make a mockery of the PM’s spending commitment on the 70th anniversary of the NHS and render her promises completely invalid and utterly misleading.
“I have written to the Chair of the Treasury committee to ask her to question Treasury ministers over this because it is Parliament’s job to hold the government to account.”
The change to the discount rate used to value public sector pension schemes was announced in a written ministerial statement to the House of Commons by the Chief Secretary to the Treasury on 6 September.
Even though the real cost of these pension schemes is falling, the technical change to the discount rate could increase transfers from public sector employers to Treasury by up to £6bn a year from April 2019.
The Treasury has committed to returning most of those transfers in 2019/20 but has made no commitment in relation to £4.75bn a year of transfers from 2020/21 onwards.
Read more about the government's decision to review the public sector pension cap here: https://www.prospect.org.uk/news/id/2018/September/7/Prospect-warns-no-good-reason-review-public-sector-pension-cap