On the go: The Business, Energy and Industrial Strategy Committee has called on the government to bring its approach to the Mineworkers’ Pension Scheme into line with its “levelling up” agenda, branding the current arrangement “antithetical” to that policy.
Since the scheme’s original sponsor, British Coal, was privatised in 1994, the government has had an arrangement with the plan whereby it guarantees that the value of mineworkers’ pensions will not decrease, in return for the government taking 50 per cent of any surplus recorded by the scheme.
However, since that arrangement was agreed, the government has received £4.4bn from the scheme. It is due to receive another £1.9bn, as well as 50 per cent of any future surplus, but it has yet to pay a single penny into the scheme itself.
The government has in the past argued that its guarantorship has enabled the Mineworkers’ Pension Scheme to pursue its successful investment strategy.
Then energy minister Claire Perry told the House of Commons in 2018 that members of the mineworkers’ scheme “receiving payments 33 per cent higher than they would have been had they received only their actual earned pension up to privatisation”.
In 2019, the governmentalso guaranteed that the bonus pension afforded to members as a result of good investment returns would increase in line with the retail price index.
However, neither pledge has been sufficient to bat away accusations, such as those made by former Labour MP Dennis Skinner in 2018 that the government is “stealing” pension money that properly belongs to scheme members.
The Business, Energy and Industrial Strategy Committee has now published a report on this matter, which concluded: “In practice, the government’s entitlement to 50 per cent of surpluses is not proportionate to the degree of financial risk it actually faces.
“Given that the scheme has continued to produce strong returns despite the 2008 financial crisis and the Covid-19 pandemic, there is little reason to believe the government will be required to pay into the scheme before it is wound up.
“Even if, in extremis, the government is required to financially contribute at some point in the future, realistically its contribution will not come close to the (at least) £6.3bn it is currently due to receive in total.”
The committee’s report also noted that the government failed to conduct due diligence before making the agreement in 1994, branding its failure to take actuarial advice “negligent”.
“There was no empirical analysis or evaluation to inform or support the 50:50 split, and it therefore remains arbitrary,” the report stated.
Committee chair Darren Jones MP has written to the chancellor of the exchequer, Rishi Sunak, asking for the government to give up its share of the surplus in order that its treatment of the mineworkers’ scheme be brought into line with the government’s “levelling up” agenda.
“I know that ‘levelling up’ and redressing the socio-economic disparities experienced by left-behind communities across the country is a key government priority. However, as my committee has concluded, the government’s current approach to the scheme’s surplus-sharing arrangements appear antithetical to this agenda,” he wrote.
“The vast majority of retirees live in former coalfield communities, which have never fully recovered from unemployment caused by the loss of heavy industries.
"The evidence we received suggests that the government relinquishing its legal entitlement to the £1.2bn Investment Reserve Fund, and instead distributing it to the scheme’s beneficiaries, would result in a £14 weekly increase for those on the average pension,” Jones explained.
“Given the already low income of the scheme’s members, you will appreciate the high value of each additional pound they receive and the higher social value and distributional effects this confers.”
He added that “owing to the age and low income of the beneficiaries”, the money is “more likely to be spent rather than saved”, thereby stimulating local economies in worse-off areas.
Jones asked the chancellor to provide him with an "assessment of how this proposal could meet the government’s ‘levelling up’ objective, how it might be appraised against the revised principles and strategic priorities set out in the Green Book, and what economic gain it might confer for former coalfield communities".
