Press Coverage - 29 June 06

The Guardian

29th June, 2006, Phillip Inman

MPs fear constitutional crisis in pension battle

The government risked sparking a constitutional crisis if it continued to refuse to pay compensation to 85,000 workers who lost their pensions when their companies went bust, MPs warned yesterday.

MPs on the public administration committee told the work and pensions secretary, John Hutton, that his battle with the parliamentary ombudsman - who recommended the government pay compensation to workers - took parliament into uncharted waters.

In a damning report last year the ombudsman, Ann Abraham, accused ministers of maladministration in publishing "inaccurate" information about the safety of company pensions. She detailed how statements in pension literature told workers their occupational pension plans were "safe" and "guaranteed".

The government denied any wrongdoing and contested her findings in a report published last month.

Yesterday Ms Abraham sent a memo to the committee accusing the government of failing to address the basis on which she found that maladministration had occurred. She accused ministers of making selective use of the evidence in her report and providing an unbalanced view of the role of government in the system of final salary occupational pension provision. In conclusion she said: "I am concerned that the government's response to my report, together with what appears to me to be an emerging attitude amongst government officials and ministers in relation to my findings of maladministration, has serious implications for the constitutional position of my office."

The committee chairman, Tony Wright, asked Mr Hutton why he had risked a constitutional crisis when he refused to agree with the ombudsman's findings. He said it was for the ombudsman to determine maladministration, not the government.

Mr Hutton said there was a precedent in the Barlow Clowes case, which, despite subsequent agreement to offer compensation in a case of fraud, disputed the findings that the government was to blame.

http://politics.guardian.co.uk/labour/story/0,,1808423,00.html

Simon Bain in The Herald 29th June, 2006

Ombudsman: pensions crisis looms

SIMON BAIN June 29 2006

Ann Abraham, the parliamentary ombudsman, has launched an unprecedented attack on the government for rejecting her highly critical report urging compensation for 80,000 victims of pension funds that collapsed due to government maladministration. In an explosive memorandum yesterday to the Public Administration Committee, the ombudsman accused the government of misrepresenting her findings and concluded: "I am concerned that the government's response to my report, together with what appears to me to be an emerging attitude amongst government officials and ministers in relation to my findings of maladministration, has serious implications for the constitutional position of my office."

The MPs' committee set up its own inquiry after the government snubbed the ombudsman for a third time, after previously rejecting her findings of maladministration in its over-payment of tax credits, and in certain immigration cases. Ministers delayed publication of the pensions report last year, and then peremptorily dismissed its findings by claiming that it would take £15bn of taxpayers' money to compensate the victims. But when the formal response of the Department of Work and Pensions was published earlier this month, it emerged that the real cost would be closer to £3bn spread over decades.

Abraham's evidence says: "My report does not suggest that the redress for the undoubted injustice suffered by many thousands of pension scheme members should be paid for wholly by the taxpayer. However … only the government can organise a proper remedy for the losses sustained by those who complained to me."

Abraham was yesterday in attendance at the committee as it grilled the work and pensions secretary John Hutton, who resolutely refused to concede a point, despite its chairman, Dr Tony Wright, opening proceedings by asking Hutton "why the government had triggered a constitutional crisis".

Hutton is already facing a judicial review of his decision, in a case brought this month by the Pensions Action Group with the help of unpaid advisers and lawyers. According to Abraham, the government's response "fails to address the basis on which I found that maladministration had occurred, makes selective use of the comprehensive and detailed evidence set out in my report, provides an unbalanced view of the role of government in the system of final salary occupational pension provision, and misrepresents what my report says about the causes of financial loss."

In no previous case had the government both rejected findings of maladministration and refused to consider righting the injustice sustained, nor had an injustice remained un-remedied in any previous case, which meant there was "no precedent for the government's response to my report", Abraham said.

The DWP's position was, in effect, that its published information on pensions "cannot be expected to meet the standards previously set by public bodies or to conform to standards of good administration", Abraham said.

The DWP "continues to assert that it can be the final arbiter of complaints about its own actions", a position which "goes to the heart of the system of independent scrutiny of executive action that parliament has established" and which undermined trust in government.

http://www.theherald.co.uk/business/65022-print.shtml

Observer, Jill Insley, 11th June 2006

Hutton has produced dodgy dossier on pensions compensation

Two months ago Pensions Secretary John Hutton rejected recommendations by the Parliamentary Ombudsman, Ann Abraham, that the government should compensate 85,000 employees who lost their pensions in the collapse of 400 firms. Although Abraham said the government had provided them with leaflets that were 'inaccurate, incomplete, unclear and inconsistent', Hutton claimed that the fault lay with the employers, and compensation would cost taxpayers a total of £15bn.

But the Department of Work and Pensions has now published its full response to the Ombudsman, and pensions expert Dr Ros Altmann has spotted an anomaly. Tucked away in the annexe is the real cost of compensation - £2.9bn to £3.7bn in total, or £100m a year. The huge difference is because Hutton was quoting 'cash terms' - the projected amount including inflation over 60 years, whereas government expenditure is usually calculated in today's money.

Altmann points out that all pension payments made to the victims of these defunct schemes would be subject to tax, and that the compensation would make them ineligible for means-tested state benefits - so the net cost to the Treasury would be even lower. Who caused this disaster is almost immaterial now. The government is expending a lot of energy trying to sort out the pension system so that the current working population can afford to retire. Much will depend on us saving for ourselves. If the government wants us to do that, it must restore faith by helping those who have been failed by the old system.

http://observer.guardian.co.uk/cash/story/0,,1794816,00.html