Row as Labour minister joins 'pension cuts' body

(PA)

John Hutton, a former Labour Cabinet minister, has been appointed to head a commission that will look for ways to cut the cost of pensions for public sector workers.

The choice of the former Work and Pensions Secretary is a sign of the Government's anxiety to take some of the political sting out of the highly contentious issue of the pensions paid to former public employees, which are relatively more generous than most of the pensions for people who have worked in the private sector.

A report last week from the Office for Budget Responsibility forecast that the total paid out annually in pensions to former public employees could more than double in than four years, to £9bn. Pension rights already accrued by public workers will be respected, but Mr Hutton's commission will suggest reforms that will make public sector pensions "sustainable" in the long run.

This follows a warning last week from the Deputy Prime Minister, Nick Clegg, that it would be "unfair" to expect private-sector workers who had seen their pensions schemes hit "to keep paying their taxes into unreformed gold-plated public sector pension pots".

Announcing the appointment, George Osborne, the chancellor, told BBC1's Andrew Marr Show: "He is a man with real intelligence and knowledge in this area. I think he's going to bring a cross-party perspective to what is a national problem and means that this is not going to be done a partisan basis.

"Having John Hutton on board chairing this independent Pensions Commission, will mean that we can approach this issue of public sector pensions in a fair and equitable way."

There were appeals not to make retired public employees bear the cost of the recession. Brendan Barber, general secretary of the TUC, said: "Any objective look at public sector pensions will find they are affordable and sustainable. While no pension scheme can be set in stone forever, the real problem in Britain is the collapse of private sector pensions."

While Mr Hutton's appointment was welcomed by the Tories, it produced an explosion of rage from John Prescott, the former deputy Prime Minister, about ex-Labour ministers who "collaborate" with the new regime. Mr Prescott opened fire on his blog yesterday at Mr Hutton, who quit the Commons at the election, and the Labour MPs Kate Hoey, sport adviser to the London mayor, Boris Johnson, and Frank Field, heading a Government inquiry into poverty.

Mr Prescott wrote: "I was surprised to see Lib Dems used by Thatcherites like Cameron and Osborne to provide cover in the Treasury for their heartless programme of cuts. But that pales into insignificance now Labour ministers – Labour ministers – have decided to collaborate. They've turned a Con-Lib Government to a ConLibLab one and made themselves human shields for the most savage and heartless Tory policies in 20 years. Policies that will hit the poorest and most vulnerable the hardest – the very people Labour was founded to protect. I would ask if they can live with their conscience but I'd question whether they had one."

Alistair Darling, the former chancellor, had "no problem" with the principle of a commission to look at public sector pensions – and Mr Hutton would ensure it was independent. "What I do have a problem with is a Government that I think is ideologically driven is using the present circumstances as a cover for what they would have done anyway, using the Liberals to front it all up," he added, speaking on the BBC's Politics Show.

Ed Balls, a contender for the Labour leadership, said: "Public sector workers across the country will be deeply concerned to have a review of their pensions sprung upon them on a Sunday morning – without proper consultation. They will be particularly worried given the comments by David Cameron and Nick Clegg in recent days about their desire for cuts to public sector pensions. The Government must make clear that the findings have not been pre-empted."