If Labour gives £2.3bn of our cash to retired British Coal staff, it has truly lost the plot

Telegraph

2 days ago

How big is the black hole in Britain's public finances?
The respected think tank National Institute of Economic and Social Research (Niesr) has just forecast a £50bn gap, which the Chancellor will be forced to plug by lower spending or higher taxes.
Meanwhile, as Rachel Reeves tries to balance the books by saving every penny, her deputy, Darren Jones, Chief Secretary to the Treasury, casually told Parliament in July that he is 'considering proposals' to hand out £2.3bn of taxpayers' money to the 40,000 members of the British Coal Staff Superannuation Scheme (BCSSS).
He added: 'I will be looking at those issues in more detail over the summer, and I hope to say more in the autumn.'
What is this possible £2.3bn giveaway?
The BCSSS, for above-ground managers, and its sister scheme, the Mineworkers' Pension Scheme (MPS), for those below ground digging out coal, were set up after the coal industry was nationalised in 1947, at a time when it employed 700,000 people.
By privatisation in 1994, British Coal had shrunk drastically to just 13,000 staff. The BCSSS and MPS became stand-alone trusts, with the Government guaranteeing all pension entitlements, including annual inflation increases. In return, the Government receives half of any 'surplus' calculated at the three-yearly actuarial valuations, with the other half used to increase pensions.
The average BCSSS pension of £15,000 a year is over twice the average MPS pension of £7,000, reflecting much higher pay for British Coal managers compared to the miners.
The taxpayers' share of surpluses was also calculated at privatisation, which remained in both schemes as a reserve against poor investment performance.
The £2.3bn the Government is now 'considering' giving to BCSSS members is the taxpayers' share of surpluses at privatisation, which under the BCSSS rules will be paid back to the Government in 2033 – in only eight years' time.
The BCSSS trustees' argument for a £2.3bn giveaway is that last October, as revealed by Telegraph Money, the Government gave £1.5bn of taxpayers' money to the 112,000 MPS members, boosting their annual pensions by 32pc. This was all part of the rhetoric to end what Labour called an 'historic injustice' and fulfilled Labour's election manifesto pledge, repeated by Ed Miliband at the 2024 Labour Party conference.
The BCSSS Trustees' argument simply rests on ' the similarities between MPS and BCSSS'.
But the £1.5bn given away to MPS members didn't 'belong' to them in the first place. Just like the BCSSS' £2.3bn, it was the Government's share of surpluses at privatisation. Under the MPS rules it would have been paid back to the Government in 2029.
Since privatisation in 1994, all BCSSS and MPS members have received every last penny of the pensions promised to them, including inflation increases. More than that, under the rules set up at privatisation, half of valuation surpluses have been given to members as 'bonus' pensions.
To add insult to injury, after receiving the £1.5bn, the MPS trustees are now lobbying for all of any future surpluses to go to members, rather than half going to the Government.
And handing over the £2.3bn of taxpayer money to the BCSSS members would not be in exchange for giving up the Government guarantee. If that money is to be handed over, it should at least be on the understanding that BCSSS pensions become a defined contribution plan, entirely dependent on the performance of scheme assets like other private sector schemes.
But the trustees say they would 'not consider giving up the guarantee in exchange for the investment reserve… The guarantee does not form part of our discussions with the Government. It will remain in place, whatever decision the Government makes'.
This would be an extraordinary case of: 'heads BCSSS members win, tails taxpayers lose'.
As guarantor, the Government must step in to make payments if there is a future deficit. Once money is used to increase pensions the only way any future deficit to be plugged is for taxpayers to write a cheque. And because 85pc of BCSSS and MPS assets are in 'risky', that is, not index-linked bonds to match liabilities, any current surplus could easily become a deficit.
The Government, and specifically Mr Miliband, still have some serious explaining to do about the £1.5bn already handed over to MPS. If Labour hands over another £2.3bn of taxpayers' money – £3.8bn in all – then surely this government will lose any shred of fiscal credibility left.
Rachel Reeves should tell Darren Jones, in plain language, to stop 'considering' this proposal and say a polite 'no' to the BCSSS trustees, and the Labour MPs pushing it.