Public sector pensions must be brought “broadly in line with those offered to the private sector”, chancellor Alistair Darling has announced.
In his pre-Budget speech this afternoon, Mr Darling said by 2012 contributions by the state to public sector pensions will be kept capped, saving £1bn a year from 2012-13.
For the two years 2011-12 and 2012-13 there will be a 1 per cent cap on increases to public sector pay settlements, delivering savings of £3.4bn per year by 2012-13, he said.
He listed the announcements as part of “difficult choices” that he said “are essential if we are to stick to our plan to halve the deficit and protect the front line”.
Mr Darling said: “We have to be realistic, the spending environment will be tough over the next few years.”
In the speech, chancellor Alistair Darling said his pre-Budget report would deliver the vision of “building a fairer society and security opportunity for all”.
He said he was “confident that the UK economy will start growing by the turn of the year”. He is sticking to his previous Budget forecast of economic growth of 3.5 per cent in the UK in 2011-12.
But he said: “We can’t be complacent. We must continue to support the economy until recovery is established.”
He forecast public sector net borrowing as a share of GDP will fall every year and be more than halved by 2013-14.
This year, public sector investment reached a 30-year high, he said.
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Public sector pensions to be brought in line with private sector, Alistair Darling says