The last 10 years has seen council tax double, and yet nothing has improved. Indeed, services have become worse in many areas, and cuts have left people without meals on wheels, adequate policing or regular bin collections.

These massive tax rises have caused suffering and hardship for millions of people – especially families and pensioners who find themselves charged on the notional value of a property utterly unrelated to their actual income.

Politicians have all too easily forgotten that the money pouring into council coffers does not materialise from thin air. It is squeezed out of ordinary taxpayers, many of whom genuinely struggle to pay their council tax.

All the extra money councils asked for 10 years ago has been given to them – and more – but services are still struggling. Where has all the money gone?

The TaxPayers' Alliance has studied the accounts of nearly every council in the country to answer just that question. The findings were shocking.

On average, councils now spend £1m on publicity, paying through the nose to put glossy leaflets that hardly anyone reads through front doors across the land.

A boom in middle management has also swallowed huge amounts of money. There are now nine times as many middle managers – those earning £50,000 or more – than there were a decade ago. The focus simply hasn't been on getting more bin men or police officers; instead, councils have recruited an army of human resources managers, PR men and consultants whose pay now costs £1 in every £11 of council tax.

The third area we examined is pensions – the big beast of council spending. Successive governments have promised to reform the outdated and risky Local Government Pension Scheme, but little genuine change has been achieved. The LGPS offers local council staff pension settlements far more generous than those generally available in the wider economy,
and much more generous than
can actually be funded from
pension contributions.

The result is that councils spend a vast amount on employer pension contributions. We have discovered that £4.6bn is paid into the LGPS by councils every year – enough to cut council tax by 20 per cent. That is a staggering figure, which explains where some of the money has gone. Beyond that, future payment commitments mean not only do today's taxpayers pay heavily to fund pensions, but taxpayers as yet unborn will continue to foot the bill in future.

The gold-plated pensions given to local government staff are taking a heavy toll on ordinary taxpayers and local council finances.

No wonder councils struggle to balance the books when they face such a massive bill. No private company could afford to commit itself to such a scheme, so why should councils do so with taxpayers' money?

The responsibility for this mess lies at the doors of three different parties: the Government, public sector unions and councils themselves.

Central Government controls the overall terms of the Local Government Pension Scheme, and only Hazel Blears, the Communities and Local Government Secretary, has the power to change the fundamental scheme. The terms of the pension deal must be made more realistic, and brought in line with the funded schemes more common in the wider economy. We hear endless rhetoric from Ministers about the importance of us all planning for the future. It is time for them to do so with public finances, and public sector pensions in particular.

The public sector unions will undoubtedly stand in the way of these much-needed reforms – they threatened strike action last time the Government raised the issue, and there is nothing to indicate they have woken up to the need for change.

If necessary, the Government must be prepared to face down the threats of strike action. This problem threatens all our futures – not just taxpayers and those who need better council services, but the pension-holders themselves, who will be in a sorry state when the money runs out.

Finally, it would be wrong to let councils off the hook. While the Government does bear much of the blame, each council can improve the situation immediately.

For example, there is a widespread practice of paying "added years benefits" to employees who retire early, effectively meaning that people who retire at 50 can have their pension artificially topped up with taxpayers' money to pay out as if they had worked to 60 or 65. It is dishonest of councils to be so generous with taxpayers' money – people should get the pension they have saved for.

This practice should cease immediately.

Councils have also singularly failed to campaign as a group for reform on this topic. The Local Government Association is meant to represent councils nationally, so it is time they spoke up about this burden crippling local government.

Pensions are meant to provide security in our old age, but this particular pension deal threatens all of us with a very uncertain and impoverished future.

It is time for the scheme to be modernised, and for local government to adopt up-to-date, properly funded pension schemes. Unless things change, all our futures look very worrying indeed.


Matthew Elliott is chief executive of the TaxPayers' Alliance.