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Ex-Labour cabinet minister John Hutton has been appointed by the Conservative-Lib Dem coalition to head a commission into public sector pensions.

Chancellor George Osborne said the projected rise in the cost to taxpayers of public sector pensions was "unsustainable" and must be tackled.

Mr Hutton's review would come up with "early steps" by September, with full proposals in time for 2011's Budget.

The chancellor said Mr Hutton would be "clear and unbiased" in his review.

Mr Osborne added that Mr Hutton's involvement meant that the proposals would have had cross-party input.

In a Treasury statement, Mr Osborne said: "We must consider options for reform that are fair to the taxpayer and to people who work in the public sector.

"I am delighted that John Hutton has accepted my invitation to chair the Commission. John is an experienced public servant, who I know will bring a clear and unbiased analysis to bear on this complex and important issue."

Former Work and Pensions Secretary Mr Hutton said: "I welcome the opportunity to lead a root and branch examination of both the short-term and longer-term options for reform to public sector pensions.

"I am determined that this work should be conducted openly and transparently and that our conclusions will be underpinned with a comprehensive analysis and evidence-base."

The Office for Budget Responsibility report last week suggested that the difference between the amount paid into and paid out of public sector pensions would more than double over the next four years to £9bn.