Chancellor George Osborne has been accused of potentially aiding the wholesale privatisation of local government services, after the Treasury floated plans to ditch costly pension protection for outsourced public sector staff.

As the Cabinet Office this week put the finishing touches to the imminent Open public services White Paper, which prime minister, David Cameron, has warned would include a ‘presumption' firms and charities should be allowed to bid for most services, the Treasury announced a second initiative which could expedite an end to state control of many local services.