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Islington Tribune - by ROISIN GADELRAB
Published:19 December 2008

Council tax rise fear as Town Hall pensions cash gap grows

Deficit nears £400m but finance chief says: We’ve 25 years to put it right

A RISING Town Hall pensions deficit – now nearing £400million – could force increases in council tax and sales of buildings.
Islington Council’s Lib Dem finance chief Councillor John Gilbert has played down the likely impact of the growing cash gap, saying the Town Hall has 25 years to make up the difference.
He said: “By hook or by crook we’ll have to do that. It’s certainly ‘doable’. But there’s no immediate need to do anything. The local government pensions scheme is protected by law.
“The council has to pay the pensions so either the investment returns have to improve or we’ll have to put more money into the scheme and we can do that either by raising council tax or from capital receipts by selling council assets. Neither of these are attractive options because we want to use our resources for residents.”
He added: “Most pensions schemes are underfunded. It’s not necessarily such bad news because they are paid out over a long period of time so the fact that we don’t have enough money now isn’t necessarily a problem. The stockmarkets have gone down so we can expect it to be worse now but we’ll look at it again in 2010.”
In the council’s accounts published in May, the pensions deficit – the difference between how much is in the coffers and how much will have to be paid out to current and former staff – stood at £333million.
But since then the economy has gone into freefall, bringing down the value of pensions investments. The deficit has now risen to nearly £400 million.
The figures emerged at Islington Council’s pension fund annual meeting last week.
Economist Dr Jennifer Sharpley, who was present, afterwards criticised the lack of information in the pensions report.
She said: “There were no figures on the deficit. The council is hiding behind a lack of transparency and accountability.”
Vaughan West, branch secretary of the GMB union, which represents local government workers, said: “Very crudely, if they had to pay everyone tomorrow this is what they would have to pay.
“I’m not concerned that people won’t get their pensions – the scheme is laid down in an act of Parliament and the liability is not immediate.”
He added: “There’s a long-term worry that if there are huge deficits there may be moves on a national level to try to renegotiate the pensions scheme.
“At some point they will have to make it up and that will have an effect on a number of things, including council tax bills, and services.”
Former financial journalist Leo Chapman said: “If they keep paying these gold-plated pensions the residents will have to foot the bill.”

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