BMA joins firefighters in threatening McCloud legal action

As Pensions Expert reported earlier this month, the Fire Brigades Union sent a letter to the Treasury signalling its intent to file for judicial review over the Treasury’s plans to have members foot the bill for the remedy. The plans themselves have been heavily criticised by the Public Accounts Committee.

The government refused to comment on ongoing litigation.

Though the government has said, as part of its reform of the cost-control mechanism, that it will waive ceilings where target costs are exceeded, as it does not want “members to be in a worse position than they would have been prior to the McCloud remedy being implemented”, it is “ultimately members who will pay these costs, and this process will be managed through the cost-control mechanism”.

It has tried to remedy one injustice – an unlawful act of age discrimination – with another, which has no reasonable basis. We will take the strongest possible action to resist it

Vishal Sharma, BMA

“HM Treasury wants members to pay to put this right — at an estimated cost of £17bn — despite this being its own mistake,” the PAC noted in October.

Now the BMA has joined in, writing both to the Treasury and to health secretary Sajid Javid making the same complaint. “We are preparing to go to court to stop them,” it said.

Broken promises?

“The dispute centres on a cost-control mechanism, which is part of the 2015 pension scheme to which many NHS doctors belong. The mechanism is meant to ensure that if a valuation of the scheme showed that the costs to the taxpayer and scheme members had risen or fallen outside a target rate, then steps would be taken to address the overall cost,” the BMA explained.

“If the scheme became too expensive to run, it might mean higher contributions from members. However, a valuation in 2016 found the opposite: there was a ‘cost floor breach’ — the cost of running the NHS Pension Scheme was significantly less than had been forecasted and, under the terms of the 2015 changes, this should have automatically triggered a process to reduce member contribution rates and/or increase pension benefits to bring the costs back within the agreed parameters.”

Though the government’s initial response to the 2016 valuation promised “improved pension benefits” for employment between 2019 and 2023, all this changed when the cost-control mechanism was paused in 2019 in response to the McCloud ruling.

Once the pause was lifted, the government said it intended to transfer the cost of the McCloud remedy to the 2016 valuation.

“If this were to happen, the improved benefits to members that had been previously agreed to be implemented would now no longer be honoured, as the McCloud remedy costs, if incorporated, would remove the cost floor breach,” the BMA said.  

“The BMA is challenging the government’s actions in both lifting the suspension of the cost-control mechanism and rolling in the costs of the McCloud remedy for the purposes of resuming the cost-control mechanism and reconfiguring the valuation of the scheme.”

BMA pensions committee chair Vishal Sharma said: “It is entirely wrong in principle that the government is passing the costs of remedying age discrimination, for which it and it alone was responsible, on to NHS Pension Scheme members. It is effectively trying to make NHS scheme members pay for its unlawful age discrimination.

“The cost-control mechanism in the scheme was designed to allow it to react to changing circumstances, but certainly not designed to accommodate a ruling such as McCloud.”

“The government’s actions are manifestly unfair. It has tried to remedy one injustice — an unlawful act of age discrimination — with another, which has no reasonable basis. We will take the strongest possible action to resist it,” he added.

Case unlikely to succeed

Irwin Mitchell partner Penny Cogher told Pensions Expert that the ‘letter before claim’ “is a first optional formal step in commencing legal proceedings. It is usually a prelude to the issuing of a claim form and the start of litigation”. 

She said: “Judicial review can be used to successfully challenge the decisions of public bodies on grounds of illegality, irrationality, procedural unfairness and/or failure to meet a legitimate expectation. Primary legislation (ie, acts of parliament) are typically not subject to judicial review.

“However, secondary legislation such as these directions can be challenged successfully if they are not compliant with the primary legislation.”

Though noting that the BMA is “ostensibly challenging the directions for being unlawful”, Cogher said it was “telling that their letter before claim does not explicitly state the grounds for legally challenging the directions”. 

“We can see that the Treasury’s solicitor may well respond by saying that the letter is deficient as a letter before claim as it does not explicitly set out the legal grounds for judicial review. The only way that the BMA or Fire Brigades Union would be successful is if they can demonstrate that the 2021 directions are incompatible with the primary legislation, and this is the details that they have not set out in their letter before claim,” she continued.

“Furthermore, as these directions were enacted on October 7, the BMA will have until January 7 2022 to launch a challenge as the limitation period for judicial review is very short.

“I would be surprised if this materialised into actual litigation as it seems the BMA’s prospects are limited. The challenge for the government will more likely be the court of public opinion, which is possibly what the BMA is really targeting,” Cogher added.

Mercer partner Mike Harrison was critical on Twitter, writing: “They know ‘the government’ doesn’t have any money, right?

“This would just be redistribution from other equally hard-working taxpayers, many of whom do not have generous defined benefit pensions at all.”