12-05-2025
Rayner's ‘mega councils' to cost taxpayers billions in pension payouts
Angela Rayner's 'mega councils' plan could lead to billions of pounds in gold-plated pension payouts for town hall bosses, a Tory peer has warned.
Labour wants to abolish more than 100 councils in the next four years to make local government more efficient.
But it means thousands of council staff could be in line for six-figure pension payouts if they are made redundant or choose to retire early.
If a council employee who is over 55 retires early, an automatic penalty of around 40pc of the pension built up so far is applied.
If they are made redundant, the council must pay the full sum without any reductions for early payment. This is on top of any severance payment.
Lord Fuller, a Conservative peer and former chairman of the District Councils Network, said the Government 'appeared to be sleepwalking' into a payout with 'multibillion-pound implications'.
He told The Times: 'The total cost of a pension for a 55-year-old senior council officer who joined after school could realistically reach half a million pounds. It only takes 2,000 people out of 1.8 million local government workers to be in that category to reach £1bn.
'The Government has made these announcements without any consideration of these pension costs. In their haste to decimate what's left of the Conservatives in the shires, they could be writing themselves another billion-pound black hole to be filled by already hard-pressed council taxpayers.'
England has 21 county councils and 164 district councils sitting below them.
Responsibilities are shared between the two tiers of local government. However, ministers believe the structure is inefficient.
Ms Rayner's plans involve merging county and district councils in some areas to create larger, single-tier unitary authorities.
A report by accountancy firm PwC, commissioned by the County Councils Network, estimated that unitary authorities could save between £20m and £25m a year.
While the report factored in one-off redundancy costs of hundreds of millions of pounds, it did not identify pension costs as an individual issue.
There are no government-held estimates of the costs, however, minutes from the local government pensions committee showed that officials acknowledged 'the numbers were indeed substantial'.
Cash-strapped local authorities have struggled to balance their budgets while keeping up with gold-plated pension contributions.
Almost £1 in every £4 raised in council tax is currently spent on funding the schemes, analysis shows. A Telegraph investigation earlier this year found 7,609 ex-council workers enjoyed a pension of more than £50,000 a year. Of those, 203 receive more than £100,000 – almost three times the UK's national average wage.
It comes as council tax was increased by an average of 5pc for the new financial year, with almost half of properties in England now facing bills of at least £2,000.
A government spokesman told The Times: 'This is speculation and no decisions on proposals have been made. Our ambitious reorganisation plans will be locally led, putting more money in working people's pockets and saving significant taxpayers' money to be reinvested in public services.'
