Council Pensions Swallow 16 Percent of Tax Revenue

Six English councils—Somerset, Windsor and Maidenhead, Trafford, Birmingham, Newham, and Bradford—devoted £270 million to staff pension contributions in 2024-25, equivalent to 16 percent of the £1.7 billion they collected in council tax that year. These same authorities secured government approval to exceed the council tax rise cap, imposing increases of 7.5 to 10 percent on households for 2025-26. The disparity reveals how local governments prioritize defined-benefit pensions over fiscal restraint, directly hiking costs for residents amid national pressures.

The Local Government Pension Scheme (LGPS) underpins this expenditure. It guarantees inflation-linked, lifelong payments to over two million retirees, with 2.1 million active workers contributing and 2.5 million deferred members awaiting benefits. Councils fund the bulk, with rates far exceeding private sector norms: Windsor and Maidenhead at 32 percent of salaries, Birmingham at 27.2 percent, and even the lowest, Bradford, at 16.2 percent—over five times the eight percent minimum for private auto-enrolment.

These contributions stem from actuarial valuations every three years, designed to cover current and future liabilities. Yet the councils applied for steeper tax hikes than approved: four sought 10 percent, Bradford 15 percent, and Windsor and Maidenhead 25 percent. Official figures confirm the pension outlay consumed a significant slice of tax income, contradicting claims that such costs draw solely from broader budgets.

Fiscal Pressures Mount

England’s council tax base faces a projected £9.4 billion rise by 2029, with overall increases expected to hit 26 percent. This trajectory compounds the burden on households already navigating stagnant wages and rising essentials. The six councils’ actions exemplify how local authorities, starved of central funding, extract more from taxpayers to sustain legacy commitments like the LGPS.

Reform UK’s Richard Tice labels the setup a “scandal,” pointing to overpayments, high management fees, and underperformance in the scheme. A Telegraph probe earlier this year exposed 7,600 council retirees receiving over £50,000 annually, including 203 with six-figure sums. Five councils nationwide allocate more than half their tax revenue to pensions, underscoring a national pattern where public sector entitlements eclipse service delivery.

Defenses from the Local Government Association highlight recruitment challenges, with nine in ten councils struggling to retain staff. The LGPS, they argue, bolsters careers in local government and ranks as the most robust public scheme, with employer rates lower than other public sectors. Birmingham’s council insists pensions draw from total resources—£4.387 billion in 2025-26, where tax forms just 12 percent—while Bradford pegs the contribution at 2.6 percent of overall income.

Systemic Entitlements Persist

These explanations sidestep the core issue: pension generosity persists across political cycles, untouched by reforms that private sectors endured post-2008. Governments since the 1990s expanded public pensions without matching fiscal safeguards, leading to deficits that local bodies now offset through tax hikes. The result locks in intergenerational inequity, as working-age taxpayers fund retiree benefits without equivalent protections.

Accountability remains elusive. No mechanism penalizes councils for breaching caps or overcommitting to pensions; instead, central government grants exceptions, perpetuating the cycle. Labour’s recent £45 million revival of councillor pensions, funded largely by ratepayers, mirrors this inertia, regardless of ruling party.

This episode exposes deeper institutional decay. Councils, intended as efficient service providers, function as pension silos, draining resources from roads, schools, and social care. Ordinary citizens bear the cost through eroded purchasing power, while public sector retirees secure inflation-proofed security unavailable to most.

Britain’s local governance model, once a pillar of community administration, now exemplifies fiscal capture by entrenched interests. The £270 million pension drain across six councils signals a broader unraveling: promises of controlled taxes yield to unchecked entitlements, eroding trust and solvency. Without structural overhaul, taxpayers face endless extraction, documenting the steady hollowing of public institutions.