Public spending, pay and pensions

Boileau, Bee; O'Brien, Laurence; Zaranko, Ben

doi:10.1920/re.ifs.2022.0219

Cited by 5 publications

(6 citation statements)

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“…Public sector pensions are considerably more generous than what is available in virtually all of the private sector, and a far greater share of overall public sector remuneration is deferred compared with the private sector. In the face of recruitment and retention challenges in many public services, last year's IFS Green Budget concluded that there is a strong case for rebalancing public sector remuneration away from pensions and towards pay (Boileau, O'Brien and Zaranko, 2022). This could be done in an actuarially fair way, such that the overall generosity of the package is unchanged, but is composed of higher up-front pay and lower pension payments in retirement.…”

Section: Public Sector Pension Reformmentioning

confidence: 99%

Public sector net worth as a fiscal target

Zaranko

2023

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Key findings1. The government has made a welcome investment in the development of a wider set of measures of the public sector balance sheet. There have been numerous calls for the UK to adapt its fiscal rules to place weight on a particular one of these balance sheet measures, public sector net worth. This is a statistical measure that aims to summarise what the government owns and what it owes: it captures both the government's assets (financial and non-financial) and its liabilities. It attempts to provide a broader and more comprehensive picture of the public finances than commonly used measures of debt and borrowing.2. UK public sector net worth is relatively low by international standards. This is driven by the UK having unusually low levels of public sector assets and unusually high public sector pension liabilities. We should be careful, though, not to equate public sector net worth with the country's net worth, and should not over-read into such comparisons (which partly reflect different boundaries of the state and the precise set of assets and liabilities included). Nonetheless, the UK's position at the back of the international pack is often pointed to by proponents of a public sector net worth target.3. This is a debate worth having. Public sector net worth is a valuable addition to the set of information about the financial position and assets of the government, and to the set of measures estimated by the Office for National Statistics (ONS) and forecast by the Office for Budget Responsibility (OBR). Recent improvements in the 1 The chapter benefited from conversations with and comments from several civil servants, to whom the author is extremely grateful. All errors are the author's own. Public sector net worth as a fiscal target  The Institute for Fiscal Studies, October 2023 2 quality and timeliness of public sector net worth measures have the potential to contribute to better policymaking.4. In particular, there are reasons to suppose that a public sector net worth target might be preferable to a simple target for public sector net debt. Most obviously, by capturing a more comprehensive range of liabilities and assets, it can provide a more complete picture of the impacts of government action (or inaction). This is particularly advantageous when the government is considering asset purchases (such as nationalisations) or asset sales (such as of the student loan book), when a narrow focus on debt can be particularly misleading and/or unhelpful. 5. More generally, a public sector net worth target could helpfully strengthen the incentive for governments to focus on investing in high-quality projects where the value of assets created is expected to exceed the cost of financing, and could provide a framework for holding the government to account when it promises to 'borrow to invest' (often under the implicit assumption that such investments will pay for themselves). It could also encourage decision-makers to think more about how well public sector assets are managed and maintained, and to confront ...

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Section: Public Sector Pension Reformmentioning

confidence: 99%

Public sector net worth as a fiscal target

Zaranko

2023

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“…We do not consider employer pension contributions, which are an important part of remuneration, particularly in the public sector; nor do we consider employee pension contributions, which will affect workers' take-home pay. See Boileau, O'Brien and Zaranko (2022) for detailed analysis accounting for many of these issues.…”

Section: Introductionmentioning

confidence: 99%

“…Note that these averages for each sector do not take into account differences in hours worked in each sector and the differing composition of the workforces in a number of dimensions. For more detailed comparisons of hourly pay of equivalently qualified workers in the public and private sectors, and the differences in their compensation in the form of pension contributions, seeBoileau, O'Brien and Zaranko (2022).…”

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confidence: 99%

Recent trends in public sector pay

Cribb,

O'Brien

2024

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for their thoughts and comments. They also gratefully acknowledge the support of the ESRC Centre for the Microeconomic Analysis of Public Policy (ES/T014334/1) and are grateful for funding from the abrdn Financial Fairness Trust (grant 202309-GR000090) and the Nuffield Foundation (grant GE /FR-000024370). The abrdn Financial Fairness Trust funds research, policy work and campaigning activities to tackle financial problems and improve living standards for people on low-to-middle incomes in the UK. It is an independent charitable trust registered in Scotland (SC040877). Visit www.financialfairness.org.uk. The Nuffield Foundation is an independent charitable trust with a mission to advance social well-being. It funds research that informs social policy, primarily in Education, Welfare and Justice. It also funds student programmes that provide opportunities for young people to develop skills in quantitative and scientific methods. The Nuffield Foundation is the founder and co-funder of the Nuffield Council on Bioethics, the Ada Lovelace Institute and the Nuffield Family Justice Observatory. Visit www.nuffieldfoundation.org.

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“…Most pension schemes around the world have their roots in public sector schemes that were designed with the intention of making public service attractive and shifting some of the cost of public sector employment into the future (Boileau et al, 2022;Palacios & Whitehouse, 2006). While pension coverage has now been expanded to encompass the private sector, important differences between these two types of pension schemes persist in many countries, both developed and developing (Boileau et al, 2022;Palacios & Whitehouse, 2006;Whitehouse, 2016).…”

Section: Introductionmentioning

confidence: 99%

Sustainability of the Public Servant’s Pension Scheme in Sri Lanka

Shyama,

De Silva

2023

Sri Lanka Jnl Econ. Res.

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Despite the global trend towards defined-contribution pension schemes, many public service pensions continue to follow defined-benefit structures, imposing a significant fiscal burden. This paper analyses the main public sector pension scheme in Sri Lanka in a context where the population is ageing rapidly and the government faces strong fiscal constraints. The study aims to forecast the costs of the Public Servants’ pension scheme and quantitatively evaluate policy options for improving fiscal sustainability. The study extends the model of Rannan-Eliya et al. (1998) using detailed data on the number and age structure of pensioners as well as information on public sector wages, inflation, and GDP growth. The model’s output is validated using observed pension costs from 2016-2022, and projections and policy simulations are carried out for 2023-2027. The study finds that expenditure on the scheme is estimated to increase by 6% annually and 10% over the next five years in real terms. Reducing the generosity of pension payments, raising the retirement age, suspending gratuity payments temporarily, and reducing the replacement rate for new retirees result in significant reductions to the annual pension bill, although the latter two options are unlikely to be politically feasible.

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Public spending, pay and pensions

Cited by 5 publications

References 0 publications

Public sector net worth as a fiscal target

Public sector net worth as a fiscal target

Recent trends in public sector pay

Sustainability of the Public Servant’s Pension Scheme in Sri Lanka

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