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Tata Steel: Government warned over pension cut plan Tata Steel: Government warned over pension cut plan
(35 minutes later)
The government has been warned that a plan to cut pension benefits to help save Tata Steel's UK operations could take ministers down a "dangerous path".The government has been warned that a plan to cut pension benefits to help save Tata Steel's UK operations could take ministers down a "dangerous path".
Ex-pensions minister Steve Webb urged caution over "rushed changes" he said could have implications for workers "well beyond the steel industry".Ex-pensions minister Steve Webb urged caution over "rushed changes" he said could have implications for workers "well beyond the steel industry".
A £485m pension deficit has been deterring potential buyers of Tata. A £485m pension deficit has been deterring potential buyers of Tata Steel's UK business.
Ministers are considering changing the measure used for British Steel pension increases to cut its liabilities. A consultation on the pension scheme's future has been launched by ministers.
The government is expected to propose basing the scheme's annual increase on the Consumer Prices Index (CPI) inflation measure, which is usually below the current Retail Prices Index (RPI) measure. It includes a "full range of options that consider whether and how the scheme could be separated from the existing sponsoring employer and whether it will be necessary to reduce the benefits within the scheme," the Department for Work and Pensions said in a statement.
Some union leaders are likely to support the proposals, the BBC understands. One option is to base the scheme's annual increase on the Consumer Prices Index (CPI) inflation measure, which is usually below the Retail Prices Index (RPI) measure currently used.
The plan has been supported by some union leaders and the British Steel Pension scheme.
Tata Steel is looking to sell its loss-making UK business. It has had seven expressions of interest and a shortlist is expected soon.
'Pension security risk'
Former Lib Dem pensions minister Steve Webb said: "The government is going down a very dangerous path.
"Everyone has huge sympathy for steel workers and for efforts to protect jobs, but rushed changes to pension rules risk driving a coach and horses through the pension security of hundreds of thousands of workers well beyond the steel industry."
There has been a suggestion that the new rules would stipulate that a company could only change their pension liabilities in an emergency. But, speaking to the BBC, Mr Webb said the term emergency was "ill-defined" and that companies could create them artificially in order to reduce their pension payouts.
"Once there's a loophole that says you can walk away from promises you've made. Other [companies] could walk away," he said, adding that he thought there could also be legal challenges.
'More generous''More generous'
However, the trustees of the British Steel Pension Scheme welcomed the move, saying it was better than the alternative, which would see the scheme fall into the Pension Protection Fund (PPF).
"Although this [government move] would entail future pension increases being cut back from their current levels, benefits would be more generous than those provided by the PPF for the vast majority of Scheme members," said Allan Johnston, chairman of the British Steel Pension Scheme.
But Mark Turner of the Unite union cautioned that he wanted to see the detail.But Mark Turner of the Unite union cautioned that he wanted to see the detail.
"We don't want to make changes if they're going to be detrimental to the rest of industry," he told the BBC."We don't want to make changes if they're going to be detrimental to the rest of industry," he told the BBC.
The trustees of the British Steel Pension Scheme welcomed the move, saying it was better than the alternative, which would see the scheme fall into the Pension Protection Fund (PPF).
"Although this [government move] would entail future pension increases being cut back from their current levels, benefits would be more generous than those provided by the PPF for the vast majority of Scheme members," said Allan Johnston, chairman of the British Steel Pension Scheme.
In total the British Steel pension scheme has 130,000 members, although it is not clear how many of those would be affected by the plan.In total the British Steel pension scheme has 130,000 members, although it is not clear how many of those would be affected by the plan.
Further details are expected when Business Secretary Sajid Javid makes a statement later in the House of Commons.Further details are expected when Business Secretary Sajid Javid makes a statement later in the House of Commons.
'Pension security risk'
Former Lib Dem pensions minister Steve Webb said: "The government is going down a very dangerous path.
"Everyone has huge sympathy for steel workers and for efforts to protect jobs, but rushed changes to pension rules risk driving a coach and horses through the pension security of hundreds of thousands of workers well beyond the steel industry."
The suggestion is that the new rules would stipulate that a company could only change their pension liabilities in an emergency. But, speaking to the BBC, Mr Webb said the term emergency was "ill-defined" and that companies could create them artificially in order to reduce their pension payouts.
"Once there's a loophole that says you can walk away from promises you've made. Other [companies] could walk away," he said, adding that he thought there could also be legal challenges.
Owen Smith, the shadow work and pensions secretary, said steel workers' pensions "must be protected".
"If these reports are accurate, the secretary of state for work and pensions should come to the House to explain precisely what is being proposed, including how current and future steel pensioners will be affected and what precedents might be set by any changes to hard-won pension protection legislation," he added.
Analysis: Simon Jack, BBC business editorAnalysis: Simon Jack, BBC business editor
The pension fund and its deficit have been a source of unease for the current owners Tata and a deal-breaker for any would-be buyers.The pension fund and its deficit have been a source of unease for the current owners Tata and a deal-breaker for any would-be buyers.
Reducing its burden will make a sale easier and may even convince Tata to hang on to its UK steel business.Reducing its burden will make a sale easier and may even convince Tata to hang on to its UK steel business.
Any such change would be very controversial as it would set what some would see as a dangerous precedent.Any such change would be very controversial as it would set what some would see as a dangerous precedent.
The move is evidence of the business secretary's sense of urgency to resolve an industrial crisis which has put 10,000 steel workers' jobs in imminent danger.The move is evidence of the business secretary's sense of urgency to resolve an industrial crisis which has put 10,000 steel workers' jobs in imminent danger.
The BBC understands that union leaders have accepted that this proposal is a better deal than seeing the pension scheme shunted into the lifeboat of the Pensions Protection Fund, which can see some members lose 10% of their payout immediately and see lower increments in future years.The BBC understands that union leaders have accepted that this proposal is a better deal than seeing the pension scheme shunted into the lifeboat of the Pensions Protection Fund, which can see some members lose 10% of their payout immediately and see lower increments in future years.
Who are the potential bidders?Who are the potential bidders?
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The rise and fall of Britain's steel industryThe rise and fall of Britain's steel industry
When asked about the proposal to cut the pension deficit, Business Minister Anna Soubry told Channel 4 News: "We have always said we would do everything we can to look at pensions. Owen Smith, the shadow work and pensions secretary, said steel workers' pensions "must be protected".
"The prime minister said 'no stone to be unturned' and that is exactly what has been done." "If these reports are accurate, the secretary of state for work and pensions should come to the House to explain precisely what is being proposed, including how current and future steel pensioners will be affected and what precedents might be set by any changes to hard-won pension protection legislation," he added.
Welsh First Minister Carwyn Jones told the programme that there were better ways of dealing with the scheme than putting it in the Pensions Protection Fund, which would take on the deficit, but would also result in members losing some of their benefits.
"The UK government has more levers it can pull than we can with its control of the tax system and pensions legislation," he said.
Business Secretary Sajid Javid and Mr Jones visited Mumbai on Wednesday to meet Tata executives.
It was thought the company might announce a shortlist of bidders, but Tata would only say that bids were still under "active consideration".
Are you a steelworker? Are you the holder of a British Steel pension? Tell us your views. Email haveyoursay@bbc.co.ukAre you a steelworker? Are you the holder of a British Steel pension? Tell us your views. Email haveyoursay@bbc.co.uk
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