TORY Business Secretary Sajid Javid in his opening statement to parliament yesterday outlined the assault that he is organising on Tata steel workers’ pensions, to provide a ‘sweetener’ for any proposed buyer.
The British Steel pension scheme has 130,000 members and a black hole deficit of £485m. The option that the government is considering is to base the scheme’s annual increase on the Consumer Prices Index (CPI) inflation measure, rather than the Retail Prices Index (RPI) measure currently used.
This will represent a massive £2 billion cut to the steel workers’ pensions. Considering the bulk of British pension schemes have black holes, there are growing fears that such measures will be rolled out to any other case that reaches a crisis point.
Making a statement to parliament on the steel industry, Javid told the House: ‘What we can do is listen to Tata, listen to the bidders and work with everyone involved to remove potential barriers to a sale.
‘For example we are today launching a consultation on options which deliver clarity and security for British Steel pension scheme members.’ The consultation will last for four weeks, bringing the results of the consultation after the June 23 In/Out referendum vote.
On Wednesday over a thousand steel workers marched on parliament demanding ‘save our steel!’ Angela Eagle, Labour Shadow Business Secretary, in responding to Javid’s statement to parliament, said: ‘I am surprised that the Business Secretary has failed to mention at all any of the details of the consultation paper on pensions which his government published today.’
She added: ‘Any resolution must protect the pensions of the scheme’s 130,000 beneficiaries, but it must also ensure that it avoids setting a potentially dangerous precedent for the millions of other occupational pensioners who currently enjoy RPI index rises.
‘The suggested move from RPI to CPI for the British Steel pension scheme risks setting a very worrying precedent for other occupational schemes and the House will note that this change is currently illegal.’
Iain Wright, chair of the Business, Industry and Skills Committee said: ‘May I push the Business Secretary that steps taken could set a dangerous precedent whereby companies abdicate their responsibilities to the members of their pension schemes. Is this deal purely for steel or is the government extending it to other strategically placed industries?’
Frank Field, Chair of the Work and Pensions Select Committee, said: ‘The secretary of state must be aware that there are thousands of other schemes covering millions of members. Those schemes are equally difficultly placed at the current time. I am sure he will find it difficult to gate this to just one scheme.’
David Mowat, Tory MP for Warrington warned: ‘The secretary of state’s consultations represent an important potential point of principle change here. Could he tell the House whether or not the the change of the indexation alone will put the fund into surplus? If it is still in deficit after this change is there not the possibility in future of a PPF referral, which will mean a double whammy on the workforce?’
Schemes which fall into the PPF or Pension Protection Fund get severely cut. PPF was set up to pay compensation to workers when the company they work for becomes insolvent and cannot pay their pension. The repayments are capped at 90%. As a result, workers lose at least 10% of their original pension.
Labour MP for Bolsover Dennis Skinner told parliament: ‘Is the minister aware that the last Tory government to deal with a major occupational pension fund was the Major government way back in 1994 when they privatised all the pits. They then did a deal with the detested UDM in order to get the thing on the pension fund settled.
‘The result was chaos. The net result was even worse after that because it meant that the government was able to get its hands on billions of pounds from the miners’ pension fund. Then at the end when me and my honourable friend were calling for a little bit of state aid to save the last remaining pits, this lousy rotten Tory government wouldn’t find a penny.’
In a joint statement by the steel trade unions, Community, Unite and GMB, they said that to avoid the ‘unmitigated disaster’ of the pension scheme being referred to the Pension Protection Fund (PPF), that they will ‘work constructively with the UK Government and the scheme trustees to deliver the best possible deal for our members’.
