EXCLUSIVE: Senior Treasury source alleges ballooning civil service pension cost ‘deliberately hidden’

Figures seen by The Slog suggest that 12% of the UK’s debt liability is down to 600,000 Whitehall Mandarin pensions.
And a source we’ve trusted for years says this was no ‘mistake’.
Today, The Slog begins a campaign to try and unearth why nearly half of everything Britain owes is down to public sector and civil service pension liabilities – and how this came to be presented as a difference of opinion between those calculating the liability….whereas in fact there seems to have been a deliberate attempt to hide the pension amounts being paid to civil servants….especially senior Mandarins.

As it happens, there was an excellent piece by Philip Aldrick on the Torygraph website Friday; along with many other terrifying things, it showed that the UK’s national debt is now £78,000 for every household in the country.

In my previous incarnation as not born yesterday, I believe I was among the first to point out that the public sector/civil service pension liability alone is up there at around £2.3 trillion. The ‘real’ national debt – £4.8 trillion – you may also recall suddenly jumped by a trillion once the Cleggeroons took office. This too appears to have been a result of outright lying by the previous Government.

Outgoing New Labour had the audacity to suggest that this was a deliberate exaggeration by the incoming Coalition, but now the official figures are out – as I reported earlier this year – the scale of Civil Service lies and government obfuscation are there for all to see. These are made all the more reprehensible by the scale of our problem here in the UK.

A Slog piece back in June tried to put that fiscal hole into an understandable perspective, by imagining the UK as a small business where the owner had a huge mortgage and not much income. But it was even more starkly illustrated by the news on Thursday that the UK’s deficit fell last month, yet the debt still increased. Greece’s problem is intractable because the Athens government left deficit cuts too late; had the Brownites fixed a deal with the LibDems, we’d be heading in exactly the same direction right now.

What the British public has not yet been told is that out of the £78,000 owed by every British domicile, fully £36,000 is down to under a fifth of the working population….and an obscene 24% of that, we understand from figures shown to us, involves an estimated 600,000 adults….or just 1% of the UK population.

But how did this pension double-up happen – and why is nobody in a dock anywhere?

In 2003, when asked the question directly, the Treasury lied: ‘Projections of future expenditure on public service pensions are taken into account in the Treasury’s long-term fiscal projections. They are sustainable’ it replied. But in that same year, Matthew Young, a project director at the economics think tank Adam Smith Institute told the Daily Telegraph that “The Government’s recruiting frenzy and the fact public sector wages are rising at twice the rate of private sector pay has made the situation far worse”.

Most of us reporting on politics and government are used to bare-faced lies masquerading as estimates, but in this particular instance we believe there was a concerted conspiracy on the part of the Sir Humphreys to not just lie about sustainability, but also about how much pension money taxpayers would have to stump up on their behalf. The mendacity chiefly involved the level of entitlement – and it is by no means a new development.

On September 22nd 2006, The Times reported that the Institute of Economic Affairs (IEA) had revealed ‘The £1,025 billion figure that the (IEA) report gives as the liability is equivalent to 80% of gross domestic product, and is more than double the size of the national debt…..it is double the Treasury’s figure of £530billion .’

The fiction continued well into 2009. But in June 2010, another quango, the Centre for Economic and Business Research (CEBR) came up – without collusion – at almost exactly the same level of inaccuracy: the CEBR has pointed out that the national debt does not include certain expensive liabilities, such as the cost of civil service and town hall pensions, and projects funded under the Public Finance Initiative (PFI).

The PFI AT £43 billion was Brown’s scam as Chancellor: he simply forced Treasury officials to take it off-balance sheet. Had he been the finance director of a plc, Gordon Brown would’ve gone to prison for carrying out such a blatant disguise of debt liability.

But the balance undeclared once again adds up to an almost exact doubling of the civil service pension liability.

So how could estimates have been consistently 100% different between one source and another? The answer, astonishingly, seems to be that the Treasury under-declared both the size of the fund and the rate of taxpayer contribution that would be required….by the pretty obvious ruse of calling half the amounts something else.

A recently retired former senior Treasury official tells us, “It really was very cleverly worded and yet utterly brazen. The nomenclature used was ‘unfunded pension contributions’. Most people shown it assumed it meant contributions paid by the pensioners themselves. This proved not to be the case. It simply meant that the monies had not been invested. The final sum due would be grabbed out of the current tax accounts – regardless of real market performance. It is as near as you could get to robbing the taxpayer directly.”

Events in recent years support the Slog’s Treasury source fully. In March 2009, Lord Oakeshott, the LibDem peer universally respected for his financial skills, led attempts to set up an enquiry to expose this practice – about which he had been tipped off. It was opposed by the hierarchies of both main Parties. Our source continues:

“They opposed it because they knew perfectly well what was going on: but it wasn’t their money, so they didn’t care. And the last thing thing they needed was an army of Mandarins getting all pre-menstrual about it. On top of the expenses scandal, many (MPs and ministers) felt that for this to come out would blast them out of the water forever.”

The Mandarins’ trade unions, in fact, gave the expected response to the CEBR allegations – and its recommendation to get tough about the recipients’ real entitlement to the full amount. They claimed all kinds of ‘averages’ and ‘equivalents’, but as Liam Halligan wrote in the Daily Telegraph yesterday,

‘Many former state workers command annual pensions exceeding £20,000 – or even £100,000 in the top echelons of the civil service – and are set to draw such pensions for more than 20 years, paid for out of current taxation. That simply cannot be sustained’.

Just so we are absolutely clear about this, The Slog is suggesting two further probabilities in addition to those beginning to appear in the national press. First, that the real size of liability was deliberately kept away from the eyes of public accounts committees for many years. And second, when the practice came to light, at some point down the line politicians of both Parties willingly colluded in the cover-up.

As of now, I don’t think the onus is on us to prove that conclusively: although anyone ready to sue Sloggers’ Roost is happy to try, and watch the evidence come out in Court. I think the onus is on the politicos and Sir Humphreys to offer a credible explanation as to how the clear fact of hidden liability came about. And in the immediate term, the first thing we need is an explanation from Theresa May as to why the police have not as yet been asked to get involved.