Council leaders have been quick to dismiss fears of a council pensions crisis, after the Tax Payers’ Alliance reported that UK authorities had a combined pension deficit of £54bn last year.

TPA researchers have long called on ministers to tackle what they see as the soaring costs of town hall pensions, claiming last year that £1 out of every £5 of Council Tax ‘was spent on employer contributions to the Local Government Pension Scheme (LGPS)’.

The lobby group’s latest research, published on 13 April, reveals that the combined pension fund deficit across the 101 LGPS funds fell to £54bn in 2010-11, from a record high of £91bn in 2009-10. However, the TPA suggests that ‘even after a recovery, the latest combined deficit has still increased from £51bn in 2008-09’.

Researchers claim that Birmingham City Council is the authority running the largest pension deficit, estimated at £1.3bn in 2010-11, while 13 other local authorities appear to be running deficits in excess of £500m.

But the Local Government Association moved quickly to play down talk of a gaping ‘black hole’ in town hall pensions that could engulf taxpayers. Recent evidence suggested that the LGPS is currently ‘cash positive’ – meaning more money is currently going into the LGPS than is being paid out.

Sir Steve Bullock, the LGA’s workforce board chairman, said the TPA’s latest figures were merely a ‘snapshot’ of the funds’ financial health taken in the aftermath of the recession. ‘[It] is a spurious way of gauging the viability of a pension scheme and this year-old figure has no relevance to the actual cost of local government pensions,’ he said.

‘The fact that the nominal deficit fell by £37bn in just a year shows that we are getting it right and that the supposed ticking time-bomb is already being defused. We will continue to work to ensure the ongoing viability of local government pensions,’ Sir Steve added.

Local government ministers, employers and trade unions are currently discussing ways to ease the cost of the LGPS on taxpayers, including proposals to increase staff pension contributions and to adjust accrual rates.