We will set out in several future
letters what we feel that Government should consider doing to reduce
Governments recurrent expenditure, which has been excessive especially during
the PPM Government’s last four year term.
In 1999 the Government in which we
were ministers introduced the new defined contribution pension scheme (i.e.
both government and civil servants to contribute) for new civil service
recruits. This replaced the very expensive defined benefits scheme, which
continued for civil servants then employed.
This has saved government a large
sum of money and since there were no new entrants in the last 10 years to the
old defined benefits pension scheme, the cost to government should reduce each
year if properly funded. However it was anticipated that new civil servants
would pay one half of the contribution by a reduction from salary and existing
civil servants would be phased in to contributing an amount, which would equal
one half of the contribution after a few years.
This has not yet happened but
appears to be under consideration and Government pays the full contribution to
pensions, which defeats the original purpose of the defined contribution
scheme. This is a large expenditure. We are aware of the large number of
election votes that civil servants have. Our government in the early 1990s did
reduce the number of civil servants so we know the political difficulties
We recommend that Government (and
statutory authorities and subsidiary companies where staff are not contributing
one half) consider as early as possible employing all new civil servants and
employees on condition that they contribute one half to their pension. We
further recommend that Government enter into talks with the Civil Service (and
statutory authorities and subsidiaries where necessary) to introduce a phased
contribution by existing civil servants to their pension.
Once the contribution to pensions
by civil servants begins it will reduce Government recurrent expenditure by a substantial
amount and will continue to reduce expenditure in future years.