Prime Minister Gordon Brown Brown has insisted that public sector pay rises be capped at 2%. Inflation has to be kept under control, he stresses, and public servants have to do their bit. He and Chancellor Alistair Darling have also floated the idea of three-year pay deals. So, in January, teachers were awarded an three-year deal – but an increase of 2.45%, with further rises of 2.3% in 2009 and 2010. But the police have seen their pay rise effectively limited to 1.9%, despite their review body recommending a 2.5% increase. So are some public sector workers paying an arbitary price for government overspending, or should they expect to show restraint in their pay demands, given their job security and generous pension rights?

Speaking at the Trades Union Congress in Brighton on September 12, Prime Minister Tony Blair gave a stern response to criticism that his public services reforms have led to a deterioration in service quality, and merely served to fill the coffers of private companies brought in to support health, education, local government, welfare and social services.

He said that his government would plough ahead with the marketisation of services, and argued that additional future investment should only go hand-in-hand with continued service reconfiguration.

But has the Labour government’s huge spending spree since 1997 actually achieved the ‘world-class public services’ that Blair seeks? Should he continue with the rapid pace of reform? Or should the government now slow the pace of change?

Britain is facing a demographic timebomb.

Our ageing society means that by 2050, there will be just 2.5 workers to every pensioner, compared with 3.5 now. Yet it is estimated that 11 million Britons are not saving enough for retirement – a savings gap of £30bn.

Meanwhile, the number of public servants entering many occupational schemes is falling at the same time that the cost of providing pensions across the health, civil service, local government, police, fire service and education sectors is rising. Low pension fund investment returns have also increased the cost to taxpayers.

The government is seeking answers to these problems, but the future direction of pensions policy is uncertain. In November 2005, the Pensions Commission will report back to ministers on how best to tackle the impending crisis.

Suggested solutions include: forcing people to work longer; compelling people to save more; more selective means testing; raising taxes to pay for better pensions; or a mixture of all of these.

But what does Public Finance’s informed readership think? What are the best solutions to state and occupational pension problems? And what or who is at fault for the failure to adequately address these before now?

Sir Peter Gershon’s all-encompassing review of Whitehall and local government efficiency, published alongside this summer’s Spending Review, has been touted as the most important undertaking of its kind since Labour came to power in 1997.

A wide-ranging look at where it is possible to slash the cost of running central and local government and how, Sir Peter’s study has identified up to £21bn worth of savings per year until 2008. Few departments, quangos or local authorities will be unaffected by the targets and every aspect of public sector life will now be reformed, from staffing levels and pay to IT systems, the use of public-private partnerships and other procurement practices.

But critics have dismissed Sir Peter’s figures as a sleight of hand on the part of the Treasury, which commissioned the study. They claim the use of terms like ‘non-cashable’ savings – an attempt to include estimates of qualitative improvements in services – means the government can manipulate the figures involved.

Political opponents, meanwhile, claim Labour could and should have gone further in identifying a higher level of Whitehall waste.

So Public Finance asks are the savings identified by Sir Peter realistic or too ambitious? Are they achievable and how? Or are the critics right in questioning the value of ‘non-cashable’ savings, which do not necessarily translate into hard cash?

And is Gershon right to rely on three sectors – health, education and local government – to produce the bulk of the savings?

Council tax increases for 2004/05 look set to be the lowest for almost a decade – around 5.7% for the average Band D property. However, these relatively low figures are the result of intense ministerial pressure to restrict local authority spending following last year’s 12.9% increases. Some councils have indicated they must now slash key services to meet their restricted budgets, while others have risked incurring the wrath of Deputy Prime Minister John Prescott by insisting on above average rises. One thing everybody agrees on, however, is that council finances are tight. The government’s Balance of Funding Review is assessing possible alternatives to the council tax, or complementary revenue streams for local authorities – such as further changes to business rates, a new tax based on income, or more local ‘user pays’ tariffs. So as the debate rages on, Public Finance asks: ‘Should the council tax be scrapped? And if so, what should take its place?’

The government may have reached an uneasy deal with the unions over a two-tier workforce in local government, but this has only served to highlight the problem of the role of the private sector in public services. One could argue that we are in danger of creating two-tier public services in general. The row over foundation hospitals are a case in point. Opponents argue that if some trusts can set their own pay levels, they will be able to poach the best staff, and the non-foundation hospitals will fall further and further behind in quality of care. The issue runs across the whole gamut of public-private partnerships. If the private sector is given an increasingly bigger role in the public sector – as the government says it wants to see – will that mean good services for those who can pay and the very basics for those who cannot? What do you think?

The government wants to see 50% of young people participating in higher education by 2010. But how is such a massive expansion to be financed? Public funding has not managed to keep pace with the growth in numbers so far. The past few years has seen the introduction of student loans, the abolition of the maintenance grant and the charging of up-front tuition fees. The debate continues to rage over how higher education is to be funded. Should students have to pay top-up fees? Or a graduate tax? Should young people be starting their working lives thousands of pounds in debt? Or should all education be paid for out of general taxation? Do share your views…

Firefighters do a tremendous (and dangerous) job. However, their current pay demand – if awarded – would drive a coach and horses through local authority budgets. And would a massive, inflation-busting pay award open the floodgates for huge rises for other deserving public sector workers? But would you risk your life for a basic wage of less than £22,000?

Local government minister Nick Raynsford published a consultation document that set out a number of different methods of calculating each of the block grants distributed under the Standard Spending Assessment. Any changes in grant allocation implies winners – and therefore losers. What do you think of the proposals? What factors should the government be taking into account when it makes its final decision?

With a beefed-up Office of the Deputy Prime Minister, with a specific brief to enhance the role of local government, some commentators are suggesting that the days of growing centralisation are over. Some cynics take a different view – and that Blair is merely finding a quiet political cul-de-sac for John Prescott. What do you think? Is local government heading for a renaissance?

Only two years ago, Tony Blair was telling an audience of venture capitalists about the 'scars on my back' gained from his attempts to reform the public sector. And it was only this year that anybody who opposed – or criticised – the Labour government's reforms was described as a 'wrecker'. So, how is a government that was elected on a a platform of support for the public services doing? What do you think?

Gordon Brown's Budget gave public services - and tthe NHS in particular - a multi-billion pound cash injection, primarily by raising National Insurance contributions. But is this the best way to raise funding? And will the extra monies make a real difference? What do you think?

It was hoped that Best Value would prove to be the most effective way to deliver improvements to public services. Instead, it seems to be faltering under a weight of bureaucratic wrangling. But if Best Value were to be replaced, what could take its place?

Labour has sought to position itself as friendly to local government – indeed, its recent white paper promises 'freedom and flexibility' for councils. Ultimately, this autonomy depends on how much financial power councils can wield. The government has opened the door to prudential borrowing and investment in money market funds, but do local authorities deserve an even longer financial leash? Should they also be able to levy a local income tax?

The National Health Service was, we used to the say, the envy of the world. But now, in 2002, hardly a day seems to go by when there isn't a news story about the parlous state of the service, whether it's hospital waiting lists, staff shortages, long waits in accident and emergency departments, or the fact that patients are being sent abroad to receive treatment. So what went wrong? And where do we go from here?