Hutton to head pensions inquiry

Chancellor George Osborne has warned that the "unsustainable" rise in the annual bill for the "gold-plated" schemes – set to more than double to 9bn by 2015 – must be tackled.

He had been tipped to announce measures in his emergency Budget on Tuesday as part of a tough package of spending cuts and tax rises to tackle the UK's 155bn deficit.

But the Chancellor said the issue would be put to an Independent Pensions Commission headed by Mr Hutton, the former Work and Pensions Secretary who retired as an MP at the election and who was awarded a peerage in the dissolution honours list

His appointment will be seen as an attempt to temper trade union outrage over any move by the Tory/Liberal Democrat coalition Government to reform the generous pension packages.

Mr Osborne also made clear that already accrued rights would not be affected.

However, the general secretary of the Rail, Maritime and Transport union, Bob Crow, has called for an emergency meeting of the TUC to plan a campaign of industrial and political action against expected cuts in the pay and pensions of public sector workers.

The review is due to come up with "early steps" by September and longer term reforms by the time of the next Budget in spring 2011.

Mr Osborne said: "The long-term sustainability and affordability of public sector pensions is crucial for sustainable public finances both in the UK and internationally.

"We must consider options for reform that are fair to the taxpayer and to people who work in the public sector.

"I am delighted that John Hutton has accepted my invitation to chair the Commission. John is an experienced public servant, who I know will bring a clear

and unbiased analysis to bear on this complex and important issue. "

Mr Hutton said: "Reform of public sector pensions is a huge challenge for both the public finances and the public sector workforce.

"I welcome the opportunity to lead a root-and-branch examination of both the short-term and longer-term options for reform to public sector pensions.

"I am determined that this work should be conducted openly and transparently and that our conclusions will be underpinned with a comprehensive analysis and evidence-base."

The Treasury said the Commission's remit would be to make recommendations on how the pensions "can be made sustainable and affordable in the long-term, fair to both the public service workforce and the taxpayer, and ensure that they are consistent with the fiscal challenges ahead".

Cabinet Office Minister Francis Maude hailed Mr Hutton's appointment, stating: "We know that we have got to do something different with public sector pensions for the future – not at all affecting accrued rights, which have got to be protected and will be protected – but actually for the future."

Labour former Deputy Prime Minister John Prescott accused Mr Hutton and other ex-Labour Ministers of acting as "human shields" for Tory cuts and hit out at Labour "collaborators".

Frank Field was recruited by the Government to examine anti-poverty policies and Kate Hoey is sports commissioner for the Tory London Mayor Boris Johnson.

"Now we have the unedifying spectacle of John Hutton, Labour's former Work and Pensions minister, chairing a

new Independent Pensions Commission with the obvious aim to dismantle state pensions," Mr Prescott wrote on his blog.

"They've now 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."