George Osborne accused of 'back door' raid on NHS and other spending areas

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George Osborne has been accused of mounting a multibillion "back door" raid on the NHS and other areas of Government spending despite pledging to protect them from cuts.

Technical changes to the way public sector pensions are valued mean that departments face contributing more to the overall cost from 2019 - effectively saving the Treasury around £2 billion a year.

The reduction in the "discount rate" - the theoretical return on investments - will hit all "unfunded" schemes in the public sector, including those for the NHS, the army, police, teachers and civil servants.

The impact of the move was revealed in the detailed documents accompanying the Budget. It is separate from the extra £3.5 billion of cuts Mr Osborne demanded of departments by 2020 - from which the NHS, schools, defence and international aid are protected.

Liberal Democrat education spokesman John Pugh said: "By announcing a change to the discount rate on public sector pensions - without any consultation - they are effectively removing a further £2 billion from public services and transferring it to the Treasury to give the illusion of a surplus: a political con trick that can only further damage public services.

"This Government have consistently failed to explain to taxpayers and public servants how the resources it allocates match the commitments it makes, despite the promise to do so.

"Unfortunately for the Chancellor, his smoke and mirrors on the pension contributions can't hide the fact that the cuts are significantly worse than his headline announcement."

Jonathan Clifton, of the ippr think-tank, said: "The Chancellor has once again promised to protect the headline amount of funding that goes to schools and health - but he is loading more pressure on to these services via the back door."

Dave Penman, general secretary of the FDA union, which represents senior civil servants, said: "By announcing a change to the discount rate on public sector pensions - without any consultation - they are effectively removing a further £2 billion from public services and transferring it to the Treasury to give the illusion of a surplus: a political con trick that can only further damage public services."

According to the Red Book, the discount rate is being reduced from 3% above CPI inflation to 2.8% from 2019. 

The figure is reviewed every five years, and reflects the Government's estimate for the rate of economic growth over the medium term.