News analysis: Tata Steel workers turned out en masse to vote overwhelmingly in favour of strike action following a breakdown in negotiations on the planned closure of the British Steel Pension Scheme.
Workers in the Community trade union – which represents a variety of sectors including steelworkers – balloted nine to one in favour of strike action (88 per cent) with slightly more than three-quarters (76 per cent) of the union’s 6,000 Tata members taking part.
The GMB union and the construction workers' union UCATT also reported landslide majorities in favour of strike action ahead of a further result from Unite, due on Friday.
Tata began formal consultation with unions in November when the company proposed a cap of 1-1.75 per cent on future increases in members’ pensionable pay and the withdrawal of the scheme’s early retirement provision, in an attempt to keep the defined benefit section open.
However, negotiations hit deadlock in March when the company announced plans to close the scheme to future accrual on the basis that proposed changes to member benefits would have unfairly disadvantaged younger scheme members, who would have had to bear most of the impact of the changes.
Negotiation breakdown
A spokesperson from Community said negotiations with the company had completely broken down.
The unions might be better placed focusing their energy on getting a good deal for the new scheme and recognising that what they’ve got they keep
Hugh Nolan, JLT
“[Tata’s] position hasn’t changed, they’ve offered some mitigation measures some of which came out during the original discussions, but there has been no further dialogue,” the spokesperson said.
“We’d like Tata to come back to the negotiating table and work out a way to address the challenges faced by the scheme, but also retain the benefits that are extremely important to our members.”
On Monday, MP members of the All Party Parliamentary Group on Steel walked out of a meeting with Tata Steel representatives after the company's chief executive Karl Köhler failed to attend.
Present at the meeting, Tom Blenkinsop, MP for Middlesborough South and East Cleveland and chair of the Steel APPG, said in a statement: “The pensions dispute is a matter of such serious concern to our constituents that we expected a full discussion about the issues and principles at stake. It was clear that only the CEO of Tata Steel could provide the answers to our questions, but he only sent his spokespeople.”
A Tata spokesperson said: “Regrettably, MPs from steel constituencies decided not to meet us at Westminster meeting which they had invited us to. It meant we were prevented from explaining how we are trying to develop an affordable and sustainable pension scheme.
“We are putting in every effort to reach a fair and balanced way forward.”
Covenant tensions
The Pensions Regulator's revised DB code, published last year, placed a greater emphasis on the strength of the sponsor alongside an appropriate funding plan.
In an open letter to employees ahead of last week's ballot, Tata chief Köhler said: “We have to change the pension scheme in order to deal with a shortfall as high as £2bn which is not sustainable and which would damage the long-term prospects of the company in the UK.”
We’d like Tata to come back to the negotiating table and work out a way to address the challenges faced by the scheme but also retain the benefits that are extremely important to our members
Community union spokesperson
In response to the ballot result, a Tata spokesperson said the result was “disappointing” given the competitive alternative pensions arrangements the company said had been proposed.
“Despite most final salary schemes having been closed, the company originally proposed to maintain final salary pension provision, but the company’s proposal was rejected by the unions,” said the spokesperson.
“The shortfall of up to £2bn faced by the pension scheme is not the fault of the company or its employees but it can only be addressed if the company and its employees work together."
Hugh Nolan, chief actuary at consultancy JLT Employee Benefits, said Tata’s proposals were in line with the private sector exodus out of DB pension provision over recent years.
“They will outlast the unions – they’re pushing for something that is pretty much standard now in the UK for pension provision,” he said, adding: “For me, the unions might be better placed focusing their energy on getting a good deal for the new scheme and recognising what they’ve got they keep.”
Nolan also said the closure of the scheme would be crucial to the survival of the company in a competitive global market.
“In terms of business planning and affordability this is absolutely a prerequisite for Tata,” he said.
Nolan added: “[In] a tight, cost-controlled environment, they can’t keep bearing a 20 per cent cost on pensions, they can’t a have a £2bn deficit on their company, it makes no business sense.”
