We need transparency and a system fair for all

With these pension funds billions of pounds in the red, and the capital's economy in a deep recession, Londoners are rightly worried about what this huge funding gap means for their council tax bills at a time when they are already struggling to make ends meet. The vast deficits identified by the Standard are worrying enough.

But this newspaper's probe is just scratching the surface of the public sector pension problem Britain faces.

Beyond the black hole that exists in local authority pensions, the taxpayer is also on the hook for liabilities in other public-sector schemes, which independent experts estimate to be anything up to £1 trillion.

Public servants - nurses, teachers, police officers and firefighters - carry out extremely important jobs, often under very difficult circumstances, and have a right to expect a decent retirement. But as life expectancy continues to rise we face a growing "pensions apartheid" in Britain. Despite the vast scale of these liabilities, there is a total lack of transparency in accounting for public-sector pensions, which must be addressed urgently. Murky accounting practices mean taxpayers are unclear about the true cost of public-sector pensions, and public-sector staff have no idea how valuable their pension promises really are.

Britain's public finances are in a parlous enough state already. By 2012 our national debt will reach £1 trillion - and that's before adding in the pensions liability. On top of that, as things stand, the unfunded public-sector pensions which workers have been promised are equivalent to over £40,000 for every family in Britain. And according to the Pensions Policy Institute, unfunded public-sector pension costs are set to grow by 40 per cent by 2027/28: more quickly than any other area of state spending for which long-term projections are available.

So what should we do about it?

First, we should be clear that public-sector workers deserve security in retirement, and that is why all pension rights that have already been accrued should be protected. It would be wrong for an opposition party to propose any detailed reforms to public sector pension schemes without full consultation with everyone involved.

But there are commitments we can make in advance of seeing the books. We will look again at the very generous pension benefits that MPs enjoy. David Cameron has promised the final salary scheme for MPs will be closed to new members, with new MPs moving onto a new defined contribution scheme similar to those in the private sector.

Second, we will address the woeful lack of transparency in the system. We will set up an independent office for budget responsibility, which will carry out a comprehensive audit of all off-balance sheet liabilities, including public-sector pensions.

With these measures in place, a Conservative government will be able to begin a sensible debate on the way forward - a way forward that is fair and sustainable both for public sector employees and for taxpayers.