London, (IANS) The trustees of the pension scheme behind Tata Steel have backed the UK government’s plan to restructure its benefits, despite warnings that such a move would set a dangerous precedent.
Allan Johnston, the chairman of the board of trustees of the British Steel pension scheme, said he welcomed the government’s decision to consult on changes to the scheme and that it would be a better outcome for members than entering the Pension Protection Fund (PPF).
The pension scheme is seen as a major hurdle to a rescue deal for Tata Steel UK, which employs 11,000 people. The latest figures show it has liabilities of almost pound 15 billion and the deficit has ballooned to pound 700 million.
Tata Steel is evaluating bids for the business but is also seriously considering keeping it. The government believes if it can significantly restructure the pension scheme then Tata Steel can be persuaded to keep the business, writes The Guardian.
Sajid Javid, the business secretary, said the trustees had asked the government to make the scheme exempt from legislation in the 1995 Pensions Act.
“The scheme’s trustees have come forward and asked us to look at current legislation,” Javid told MPs. “The scheme trustees have put forward this proposal and it is only right that we consider it.”
However, Angela Eagle, the shadow business secretary, said the plans “risk setting a very worrying precedent” and questioned whether the government can ensure that any changes to pension laws are “safely ring-fenced”.
Javid has said the government is willing to offer hundreds of millions of pounds to a buyer and is looking at ways to restructure the pension scheme by reducing its liabilities by billions of pounds.
The government is proposing to cut the scheme’s liabilities by benchmarking it against the consumer price index (CPI) rather than the retail price index (RPI) and spinning it off into a new financial vehicle. It has launched a month-long consultation into the changes.
In a statement, Johnston said trustees supported government plans. He said: “The trustee of the British Steel pension scheme welcomes the government’s decision to consult on changes to the law applying to the scheme.
“The trustee will be writing to members over the coming days to make clear its belief that, with government support, it should be possible to modify benefits so as to allow the scheme to remain outside the Pension Protection Fund indefinitely and on a low-risk basis. Although this 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.”
Tata Steel also backed the proposals, saying they would “significantly improve the funding position and risk associated with the British Steel pension scheme”.
Trade unions representing steelworkers said entering the PPF would be an “unmitigated disaster” because of the cut to workers’ benefits and welcomed the consultation.
However, they warned that Tata Steel still has “significant legal, social and moral responsibilities” to its workers.
Ministers have been warned not to rush into far-reaching changes to pensions law in an attempt to save Tata’s UK steelmaking assets.
The Liberal Democrat former pensions minister Steve Webb said the government was “going down a very dangerous path” in seeking to change the law.
Meanwhile, Jean-Claude Juncker has promised that the EU will “step up” its measures to defend the steel industry against dumping.
The European commission president said the issue would be part of any decision on granting China “market economy status”, something Britain had pushed for vocally but which the steel industry has warned could further inhibit its ability to compete.
Juncker’s words came after the prime minister, David Cameron, said he could still offer “no guarantees” about the future of the Port Talbot site in south Wales, which is one of a number threatened by Tata’s decision to sell its British assets.
The Indian company was expected to announce a shortlist of companies bidding to purchase its UK arm after a board meeting on Wednesday but failed to do so. Eight companies are thought to be in the running.
It is believed that one option on the table is for Tata to take on investment support offered by the British government and maintain its operations.