BMI Pension Fund Compensation

Debate between Cathy Jamieson and Mark Lazarowicz

Wednesday 17th December 2014 Westminster Hall

[Mark Lazarowicz]

I agree. That is precisely my point.

I ask the Minister to take a number of steps and, if she is not prepared to agree to them today, perhaps she will at least consider them and come back to hon. Members at a later stage.

First, it is right for the Government to ask HMRC to review the application of the tax rules in this case. The trustees of the BMI pension fund did lobby for the rules applying to the then annual allowance limits and the lifetime allowance rules to be disapplied in the case of the BMI scheme, because of the special circumstances of the scheme. I should not have thought that it was impossible for it to review the rules, given the special circumstances, notwithstanding the legislation that applies to pensions more generally.

Secondly, if HMRC will not review the position, I ask the Government to consider legislating to make a change for this particular case. Again, the Equitable Life scheme is a model that can be followed.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Will my hon. Friend provide some clarification to help me with questions that I may later ask the Minister? I recall that he questioned a former Exchequer Secretary about this issue in Parliament, who offered to set out more detail in writing. Did my hon. Friend receive that information? Would anything that came out of that be helpful in this debate?

[Mark Lazarowicz]

The Minister sent me a letter that I think was received by all hon. Members who wrote to him about the issue. It was helpful, but I do not think it added anything particular with regard to the concerns that I am raising.

Thirdly, if the Government are not prepared to change the legislation, I ask them to consider making an additional one-off payment to the BMI pension fund scheme to allow payments to pension fund members to be topped up, to at least allow for the fact that tax has been taken off. A parallel to that is VAT on church buildings: although taxes were increased by the Government, a compensation scheme was set up to pay those churches, allowing them to pay the tax back to the Government. Things like that can be done when the Government want to.

Fourthly, I ask the Government to move ahead as quickly as possible with the proposals to allow an increased cap in the Pension Protection Fund for those with long service in the pension scheme. I am aware that this is a matter for the Department for Work and Pensions and that the relevant Minister has been pursuing it, but I hope that the Minister here today will urge her colleagues in that Department to introduce those changes speedily, to ensure that there is at least some benefit, hopefully to members of the BMI pension fund scheme, and to others, who are losing out because of the cap in the Pension Protection Fund provisions.

At a time of financial pressures, it might be said that it cannot be a priority for the Government to find money to top up pension payments to a group of workers who will have been relatively highly paid during their work life and will still receive a relatively high pension compared with the average paid for by the safety net of the Pension Protection Fund. I can see that argument being made. There might be those who are cynical and will say that, whereas millions were affected by the Equitable Life scheme, only a few hundred people spread across the country are affected here and that, bluntly, that is not going to make a difference in the general election next year. Indeed, that would be cynicism, because there is a matter of justice here: these people contributed to their pension over many years and are now going to receive much less than they expected.

To give an example of the sums lost, let me mention my constituent who raised the matter with me, no doubt because he is so concerned about what has happened. Even allowing for the Pension Protection Fund guarantee, he is facing a shortfall of £700,000 on his pension fund. He will receive about £134,000 from the Lufthansa scheme, so when allowing for the tax taken off the Lufthansa compensation, he will still be almost £600,000 worse off.

Let us bear in mind that the employer did not go bust, and the Pension Protection Fund had to bail out the pensions, as it was set up to do. In fact, the previous major shareholder sold his shareholding at a profit that some have estimated to be in excess of £200 million. He sold it to Lufthansa, which then sold the entire company—or most of it, to be precise: of course, bits of it were disposed elsewhere—to IAG. Lufthansa and IAG are both international airline companies whose fortunes go up and down but, bluntly, in most years their profits number in the hundreds of millions and billions of pounds and euros. These companies have not gone bust.

In the middle of all this activity, where some people and companies are making lots of money, the long-standing former staff of BMI are losing large parts of a pension for which they worked all their working life. Of course, through the levy they are paying to the Pension Protection Fund, other companies are paying the costs of compensation going to the scheme’s members, because the pension fund members are no longer receiving it from pension funds and, therefore, from the companies by which they were employed.

As I have said, there appears to be a similar development in the case of Monarch Airlines. Indeed, there is no reason in principle why this type of arrangement could not apply to other company pensions and to people at any income level, not just those who happen to be higher paid, as with members of the BMI pension fund.

Clearly, there is something wrong here, both in respect of the individuals affected by this case and what is happening more generally with regard to how the Pension Protection Fund scheme is used, and particularly in this case. The situation needs to be remedied. The Government need to act, not just for these pension scheme members, but to ensure that this practice is not taken up increasingly by other companies that see a way of escaping from their pension obligations when they choose to restructure or in other ways change the nature of their business and dispose of parts of their operations.

I have taken some time today, but this is an important issue, not just for those affected by these developments, but more widely. I hope that the Government will respond positively to the points that I have made.

Oral Answers to Questions

Debate between Cathy Jamieson and Mark Lazarowicz

Wednesday 6th November 2013 Commons Chamber

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

6. What recent discussions he has had with Ministers of the Scottish Government on household and business energy bills.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

7. What recent discussions he has had with Ministers of the Scottish Government on household and business energy bills.

Scotland Bill

Debate between Cathy Jamieson and Mark Lazarowicz

Tuesday 15th March 2011 Commons Chamber

[Mark Lazarowicz]

Indeed. One thing that my hon. Friend and I share on this issue is consistency. He has been consistent in his opposition to PR; I have been consistent in my support for it, so at least we share something in this debate, unlike the Liberal Democrats.

No party can assume that it knows what the vote will be in five, 10, 15 or 20 years’ time, but the attraction—as my hon. Friends and others see it—of first past the post might diminish dramatically if, let us say, the Scottish National party at some stage got 35% of the votes in the Scottish parliamentary elections under that system. That could quite easily give it an absolute majority of seats, which no doubt the SNP would claim as a mandate for independence. Those who suggest that first past the post will always benefit Labour, or any other party, are making a serious mistake if they maintain that position.

[Cathy Jamieson]

So far the debate seems to have centred on what is best for the political parties. Does my hon. Friend agree that one of the problems with the voting system we now have for local government, for example, is that people feel that they have lost the direct link with their elected representative? They prefer a system in which there is certainty; they know who to go to and do not feel that they are being passed from pillar to post.

[Mark Lazarowicz]

I agree. That is one reason why I do not support STV for the Scottish Parliament or local government, and I will come on to that point as it relates to the Scottish Parliament in a moment.

We should bear in mind some of the arguments made in 1997—those of us who have been around for some time can remember them—on why it was important that there should be a vote on the system of PR in the referendum on the Scottish Parliament, rather than putting a first-past-the-post system to voters. That is precisely because it was recognised, even by some people who were hostile to or sceptical about PR, that if the electors had been offered a choice of a Scottish Parliament with a first-past-the-post system, some might have voted against it because they would be concerned that one party in one part of the country might at some future stage dominate the Parliament, which would have undermined support for the yes vote in the 1997 referendum.