I have been back and forth on the issue of whether the public sector has it better or worse than the private sector (at average wage levels, not the high end).
During the debate about the additional cost of pensions to the Treasury rising. The note by Stephanie Flanders brings some fascinating addtional thinking to the debate. Firstly, the cost to the Treasury is not the target: it can be reduced by increasing the size of the civil service, for example. The important piece appears to be the promises we are making to the public sector and the cost to the country of making them.
What the OBR is saying is that every year we, as taxpayers, are giving the five million or so people who work in the public sector rock-solid guarantees of future pension payments which, on the open market, would cost them at least Â£26bn a year.
In exchange for those promises, the individuals themselves are contributing Â£4.4bn, and their government employers are contributing Â£12.6bn – meaning a net subsidy by the Treasury of at least Â£10bn a year.
Ask the average employee in the public sector how much his pension is worth, he or she is unlikely to say that it is worth another 30-40% of their gross salary. But that is almost certainly what it would cost a private-sector employer to offer a pension on the same terms.
That does seem amazingly generous given the number of ways in which the environment might get more challenging: fewer people in work means the non-funded pension system will creak as in France; higher interest rates may require greater subsidy.