Revealed: Scandal of the pensions hole created for police and fire officers

The massive and growing cost of police, fire and council pensions was hidden under the Tories. David Walker discloses that two forthcoming reports will confront taxpayers with the dizzy scale of pensions commitments made in their name.

Up to 25 pence of every pound of public money earmarked for fighting crime and protecting property against fire will soon be spent on the pensions of retired police and fire officers. That figure could rise to 50 per cent unless there are drastic and immediate reforms, say experts.

The money is being spent on meeting the gap between what current staff pay in contributions and payments to retired officers.

A report from a joint Home Office Treasury working party, delayed by the previous government, is due shortly, warning that even radical reforms could take 20 years to realise any savings. In the meantime "pay as you go" pensions will consume even greater proportions of fire and police budgets.

Police pension arrangements have become a scandal. The Local Government Management Board told the Home Office three years ago that ill health is regularly used "as a convenient if expensive way to dismiss inefficient officers by the back door". Since police officers qualify for bigger lump sums than other public servants, this often means the worse an officer the sooner they end up with more money.

The Association of Chief Police Officers has admitted that "the current position is that most of the people we are dealing with, suspected of corruption or dishonest, are immediately going sick". Most qualify for a pension.

In the fire service, the pathway to a golden future is to fail its stiff fitness tests, which immediately qualifies someone for ill health retirement, usually on full pension.

In theory the position of social workers, road sweepers and other council staff is better since they pay into proper pension funds. But a report from the Audit Commission to be published shortly will announce that council pension funds are committed to paying out more than their assets are worth and will recommend drastic restrictions on the rights of officials to take early retirement.

As few as a fifth of council staff reach the statutory retirement age. The rest retire early or leave with pension rights. The Commission will complain that retirement has been used as a more expensive substitute for redundancy.

But the arithmetic is worst in the fire service. Some 20 pence in every pound spent on fire protection in the capital goes on the pensions "gap". Experts fear it will widen leading to cuts in front-line staff, engines and stations. Some fear a boom in retirements as the prospect grows that rules on ill-health retirement will be tightened.

In some areas, such as London, there are already more retired fire officers than serving employees. Current staff pay 11 per cent of salary in pensions contributions but this is now nowhere near enough to pay for the pensions of retired fire staff which consume pounds 53m of its pounds 276m budget.

Tony Ritchie, Labour leader of the London Fire and Civil Defence Authority, warned recently said: "We may move towards being more a pensions authority than a fire authority."

The consequences of generous arrangements in the public service are only now being realised. The boom in fire service recruitment in the Seventies will shortly produce a large number of retirements.

The law prevents changes being made to pension expectations of staff currently in post. Even if police and fire pensions were reorganised it would take decades to see any savings.