Reform’s war on waste may have found its most profligate target yet – local government pensions.

For years, they have been seen as safe and stable pots set up to pay the final salary pensions of local government workers.

And unlike most public sector pensions, they are supposed to be fully funded – meaning payments to retirees are not taken from general taxation.

All of which makes them inherently boring. Yet with a collective worth of £400bn, the impact of what they invest in is huge.

In fact, the Local Government Pension Scheme (LGPS) is easily the biggest gold-plated pot in the UK.

It is also one of the biggest in the world, with assets under management on course to climb to £1tn by 2040.

However, LGPS has been dogged by years of underperformance and high investment fees, which are now attracting fierce scrutiny from Reform as part of its war on waste.

Meanwhile, Rachel Reeves believes that when it comes to pension pots, big is beautiful.

The Government outlined plans last year to consolidate 80 or so local authority schemes into eight “megafunds” run by professional teams.

The Chancellor believes that investing at scale could bring higher returns.

The problem is, however, that the track record of many of these schemes shows they have been doing exactly the opposite.

Questions over poor performance have led to Richard Tice, Reform’s deputy party leader, spearheading an audit of the 13 councils where the party either has an outright majority of councillors or is the biggest party.

He claims that what he found is nothing short of negligent.

“It was actually a friend who said you need to look at the pension schemes closely,” he tells The Telegraph. “So, we scratched the surface. And the first thing I saw was the fees, and I knew they were completely out of kilter.”

He says part of the problem is the array of “woke” investments focused on net zero instead of profits.

The situation has been compounded by years – perhaps decades – of underperformance that Tice says is unacceptable.

“Enough is enough,” he says.

Reform struck an electoral breakthrough earlier this year when it secured the largest number of seats in May’s local elections, handing it control of 10 English councils, including Kent, Staffordshire and Lincolnshire.

It is also the biggest party in Leicestershire, Warwickshire and Worcestershire.

Controlling these councils means influence over roughly £66bn in pension assets.

Reform estimates that the 13 schemes on its radar have underperformed by an average of £1.24bn a year over the past five years. And this is against a conservative benchmark of passive funds that invest in stocks and bonds.

Tice also blames funds for failing to take advantage of the sizeable discounts often available to large investors, which he says is leading to an overpayment of fees estimated at £265m a year.

In total, Reform believes that councils across the country could be losing taxpayers up to £10bn every year because of poor investments and a lack of accountability.

Years of underperformance have also coincided with a funding crisis at local councils that has pushed several close to bankruptcy and left the rest struggling to deal with a debt pile of more than £120bn.

Chronic underfunding has led to a crisis in social care, while increasing numbers of children with autism and ADHD are piling pressure on councils to fund extra provision such as taxis and tailored support plans.

Meanwhile, council tax bills across most of the country continue to rise by the maximum of 5pc.

While it would be wrong to suggest officials should raid pension pots to plug holes in day-to-day spending, Tice believes that smarter investing would deliver handsome dividends for both savers and public services.

Councils readily admit they’ve underperformed.

For example, Staffordshire pension fund’s annual report shows it underperformed its benchmark in four out of five categories last year, including recording a negative return for cash against a benchmark of 5.2pc.

Kent’s pension fund underperformed in five out of seven asset classes, including negative returns in property and shares, while Lancashire county’s pension fund is also lagging behind targets on a five-year basis.

Sometimes the differences compared to the benchmark are small. But as any bank manager will tell you, compound returns matter. Years of losses quickly add up.

Previous analysis by the Centre for Policy Studies (CPS) warned of a “lost decade” of underperformance at the LGPS in the 10 years to 2016, with growth outperformed by most major UK and global equity and bond indices.

“Passive investing would have been more rewarding,” warned a report by pensions expert Michael Johnson.

It also reported that councils handed over fees worth £4.5bn over the period amid a system of “dysfunctional governance” that was “devoid of accountability”.

Johnson said: “The inability to challenge the fund managers suggests a dangerous cocktail of incompetent amateurism, indifference, inertia and an abject lack of curiosity.

“Meanwhile, scheme members and taxpayers’ contributions continue to be innocuously eroded by unnecessary, high and recurring fees and costs.”

And therein lies the rub.

Tice, who spent decades working in the private sector, says he has no problem with generous remuneration to reward success.

However, he believes the current system is rewarding failure, with the highest-paid director at one big local government investment manager receiving a pay package worth £587,000 last year – which is more than three times the Prime Minister’s salary.

Many of these firms have also hard-wired net zero goals into their investment mandates.

Kent, for example, has set interim carbon reduction targets of 43pc by 2030 and 69pc by 2040 for its equity portfolio, limiting the types of shares it can buy.

Staffordshire, meanwhile, has set itself a target to achieve a portfolio of assets with net zero carbon emissions by 2050.

This has pushed managers to increasingly invest in zero-carbon. Derbyshire pension managers, for example, sank more than £50m into BlackRock’s Global Renewable Power Fund. The only problem is BlackRock wrote down much of these investments following the collapse of renewable firms Northvolt and SolarZero

A government drive to get these pools to invest in more infrastructure has also delivered mixed results. Government has been wanting to merge LGPS pools further for more than a decade, with George Osborne, the former chancellor, calling for six major pools, investing in infrastructure to “get Britain building”.

But in some cases, investments have ended up in places as far flung as Australia, with the Lancashire county pension fund pumping money into green buildings in some of the country’s biggest cities.

Desire for a diverse portfolio has also led pension funds to amass a dazzling array of properties dotted across Britain, with little rhyme or reason.

For example, Derbyshire’s fund owns Premier Inns in Manchester and Birmingham, a Tesco in Saxmundham and an Odeon cinema in Bristol. Kent has a cash and carry in Battersea, London, while Staffordshire owns a Greggs in Birmingham and a McDonald’s in Bury St Edmunds.

Tice wants to bring local council pension investing back to basics, starting with tackling the high fees.

Reform wants to form its own pool of pension assets handled by its own City manager. Most of the money would go into stocks and bonds, with up to 10pc reserved for local infrastructure such as social housing.

“For too long, these council pension funds have been seen as a soft touch by everybody,” Tice says. “And nobody has called them out until I’ve come along.”

He is hoping to win the argument by convincing pension committees to rethink how they invest the money. But he’s also prepared to play hardball.

“If councils decide not to go down this route, then we will be challenging them all the way through, and ultimately, we’ll legislate,” he says.

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