Brown hints he will throw out pensions deal

The Chancellor declared that "a lot of work still has to be done" on the agreement with the trade unions last month, under which new teachers, health workers and civil servants would see their retirement age raised to 65 but existing staff would still retire at 60.

His statement was welcomed as "highly significant" by business leaders but created further confusion over the Government's pensions policy.

Downing Street and the Department of Work and Pensions insisted yesterday that the deal with the unions would not be unpicked. The unions, who called off a strike when the deal was struck, renewed their threat of industrial action.

Mr Brown fuelled speculation that he wanted to reopen the agreement reached with the unions by Alan Johnson, the Trade and Industry Secretary. Although within the remit set by the Cabinet, it appears to contradict a key proposal in tomorrow's report by the Turner commission on pensions - to raise the age at which people qualify for the basic state pension from 65 to 67 in return for more generous payments.

Answering questions at the CBI conference in London, Mr Brown said the deal would be part of the debate about pensions that would follow the publication of the report by Lord Turner of Ecchinswell, the former CBI director general. Mr Brown told the conference that he and Tony Blair wanted to build a long-term consensus on pensions. "The issue is not reform versus the status quo. There must be reform. The debate ahead will show that the issue is how best we achieve the right reforms, reforms which are sustainable, fair and affordable," he said.

The Chancellor is worried that the public sector deal will prove too expensive in the long run and may have to be reopened for workers now in their twenties and thirties.

But Mr Blair's official spokesman said: "We reached agreement a month ago and the Government's view is that it's better to stick to agreements you have reached, rather than tear them up within a month." Asked about the deal in the Commons, John Hutton, the Work and Pensions Secretary, said: "We have no plans to revisit that."

John McDonnell, who chairs the Campaign Group of left-wing MPs, said: "Any attempt by Gordon Brown at the behest of the CBI and the bosses to tear up the public sector pensions deal will be met with resistance across the Labour and trade union movement."

Brendan Barber, the TUC general secretary, said: "We made an agreement. We are now talking about seeing the agreement honoured. If the Government suggested that they were actually going to walk away from a deal, that would be a hugely important problem and then, of course, the possibility of disputes could come back on to the agenda."

Employers warned of a "two-tier" pension system. John Sutherland, the CBI president, said: "It cannot expect private-sector employees to work until 67 to finance the early retirement of public-sector employees who retire on inflation-proofed final salary pensions at 60. In an era when society as a whole can no longer afford such schemes it is totally unacceptable."

David Laws, pensions spokesman for the Liberal Democrats, called for a separate commission on public sector pensions. He said: "The Government's existing deal on public sector pensions is neither sensible nor affordable, and it will look even less plausible on Wednesday when Lord Turner recommends a higher state pension age."