Mineworkers’ Pension Scheme

Justin Tomlinson Excerpts

Thursday 16th May 2024 Commons Chamber

[The Minister for Energy Security and Net Zero (Justin Tomlinson)]

It is a pleasure to serve under your chairmanship, Madam Deputy Speaker. I pay tribute to the hon. Member for Ashfield (Lee Anderson), with whom I have worked closely over many years. It is clear that his personal experience and long track record put him in the best position to continue to fight the good fight, on behalf of not just his constituents but people who worked in this sector. I was struck by his willingness to engage across the political spectrum, finding time for the hon. Member for Barnsley East (Stephanie Peacock) to contribute. She has an impressive track record of raising the issue, having secured a BEIS debate and other debates responded to by former Ministers.

While I am only freshly returned as a Minister, in the whirlwind of a mere three weeks I have been lobbied by many people on the subject, including my hon. Friends the Members for Bolsover (Mark Fletcher), for Mansfield (Ben Bradley), for Bassetlaw (Brendan Clarke-Smith) and for Sedgefield (Paul Howell), and the hon. Member for Easington (Grahame Morris) has been increasing my parliamentary question response rate. I recognise the importance of the scheme, and the strong feelings on the different options that have been and could be considered.

[Grahame Morris]

I thank the Minister for giving way; he is being very generous, which is completely in character. I do not think any of us wants a pat on the back. What we want is the issue resolved. In common with the previous debate about the Women Against State Pension Inequality Campaign, the issue is the age demographic. My poor mother is 88. Many miners and their widows are coming to the end. We need to resolve this in the interests of justice, and the BEIS Committee’s report from 27 April 2021 gives us that opportunity.

[Justin Tomlinson]

As I said, I recognise the strength of feeling and I want to set out the Government’s position on where there are opportunities to look further.

It is right that we acknowledge the hard work of coalminers over decades and their contribution to national prosperity, which is exactly what the hon. Member for Ashfield did so well. Since privatisation, the Government have recognised the need to support former coalfield areas through initiatives such as the Coalfield Regeneration Trust. Over the past 25 years, successive Governments have invested over £1 billion in former coalfield areas. The UK Government are committed to levelling up across the whole of the United Kingdom to ensure that no community is left behind and investing in places that need it most, including former coalfield communities. I again credit the hon. Member for Ashfield on how hard he worked to secure the significant levelling-up funds that have reached his constituency.

[Grahame Morris]

I am grateful to the Minister for giving way again—I do not mean to be a nuisance, I promise. It is all very well for Ashfield, which has had £200 million or £300 million. Easington has had nothing. My community of Horden, which bid for levelling-up funding, is in the top 1% most deprived communities in the country. I hope the Minister is not suggesting that £4.8 billion of the miners’ money can legitimately be used by the Government for other purposes, such as regeneration in coalfield or other areas. That is their money. If the reserve investment fund alone was redistributed, it would give them almost £900 a month directly in their pockets.

[Justin Tomlinson]

I can confirm that the hon. Member is never a nuisance, but, again, I would reflect on the ability to lobby and secure levelling-up funds, and those who do well are directly benefiting their communities. Specifically, this involves a range of projects, including the £20 million to deliver two capital regeneration projects that will revitalise town centres, including in Ashfield.

The Coal Authority has been working with public and private sector partners for a number of years to develop the use of heat in water contained in the former coal mining infrastructure as a resource for heat networks and large space heating. Current schemes are heating multiple homes and businesses at discounts of at least 5% below prevailing market rates for heat.

The Coal Authority estimates that 25% of properties are located on former coal mining areas. Mine water heat can offer a homegrown and sustainable source of heat, boost local economies and also create more local green jobs.

The Government’s commitment to mining communities is also demonstrated through the continued guarantee given to the mineworkers’ pension scheme. The scheme remains a significant undertaking. It has more than 130,000 members, pays pensions at an annual cost of over £600 million and has assets in excess of £7 billion. The scheme is managed by the trustees; the Government’s role is as guarantor. My officials meet the trustees to discuss the operation of the scheme regularly.

When the scheme was set up in 1952, members contributed no more than 20p per week, and benefits were relatively small. From 1975, contributions and benefits were linked to members’ salaries and British Coal made up the difference. At privatisation, the Government took on the guarantor role previously played by British Coal. The scheme had a surplus in 1994, and 50% of this surplus was used to enhance members’ pensions immediately—

[Grahame Morris]

That is an interesting chronology. Will the Minister inform the House when the Government stopped paying into the scheme? There was a substantial increase when superannuation came in in 1974, matched by British Coal. Is it not correct that, after 1984, the Government made no contribution to the contribution holiday?

[Justin Tomlinson]

The hon. Member is passionate to speed ahead. I urge him to be a little more patient. We are exploring all of these points, and I am getting to them—fear not.

The other 50% was payable to the guarantor. The Government of the day agreed to leave their share of surpluses in the scheme as the investment reserve. This acts as a buffer against a future deficit.

The arrangements for sharing scheme surpluses were agreed between the trustees and the Government in their role as guarantor to the Mineworkers’ Pension Scheme in 1994. At that time, all parties believed the equal sharing of surplus to be a fair agreement. That predates all of us. The guarantee ensures that: a member’s guaranteed pension, including inflation increases, will always be paid; and a member’s total pension, including bonus pension, will not fall in cash terms.

The scheme has been a success and it is to the credit of the scheme’s trustees that they have invested in such a way as to enable those returns, and we know as politicians that decisions on pensions and pension reserves are not always as successful as this. But it is the guarantee that makes higher returns possible. Without the guarantee, the trustees would have to invest far more cautiously so as to avoid losing money and risk being unable to meet scheme obligations. In a former role in the DWP, I have also been responding to debates where pension schemes have failed, and we cannot lose sight of that.

We have seen this scenario with many other pension schemes. Few equivalent schemes have been able to generate surpluses and fewer still are able to use those surpluses to improve member benefits. The presence of the guarantee allows the trustees to invest in a way that targets high returns and generates bonuses for members. The trustees acknowledge the importance of the guarantee and the ability to generate the bonuses that it creates.

The scheme website states that a typical member’s pension today is around 33% higher in real terms than it would have been had they received only their actual earned pension up to privatisation. I welcome this success and believe that it would be unwise to tamper with such a fruitful arrangement.

I acknowledge the 2021 Select Committee report and its recommendations. However, like my predecessors, I cannot agree to implement them. This is a question of balance, and I recognise that there are strongly held different viewpoints, but like the trustees, the Government recognise the importance of the guarantee and are committed to it. All scheme members will continue to receive their full pension entitlement. That commitment is unwavering. Implementing the report’s recommendations would shift the balance of risk to the taxpayer in a way that the Government consider would be disproportionate.

The Minister at the time of the report met the trustees, following publication of the report, to hear their views. She set out that any changes to the surplus sharing arrangements would need the trustees’ agreement to give up the guarantee, which the trustees declined. The Minister then invited the trustees to put forward any further proposals to changes to surplus sharing, emphasising that the guarantee would need to form part of any discussions. To date, none has been received. The Government have agreed some scheme changes, though, including additional protections for bonus pensions, and changes to mitigate potential unfair impacts of recent inflation changes. I stress that we are also open to further suggestions.

[Stephanie Peacock]

I was pleased to have worked with the trustees and the then Minister on the issue of bonuses. I appreciate the arguments that today’s Minister is making, and no one underestimates how important the guarantee is, but does he acknowledge that members of the mineworkers’ pension scheme have to date paid £4.8 billion for that guarantee?

[Justin Tomlinson]

Absolutely, but nobody knew how this would go when the deal was struck. At the time the deal was struck, it was deemed to be fair, but like many other pension schemes it could easily have gone the other way. If it had, we would not now be having a debate to say, “Well, we need to excuse the taxpayer.” It was a fair deal at the time, and we seek to ensure that it continues to overdeliver.

[Lee Anderson]

The Minister said that it was a fair deal at the time. I was working down the pit at the time. I assure him that nobody I worked with thought that it was a fair deal; we thought that it was forced upon the trustees. It was, “Take it or leave it.” It has proved not to have been a fair deal. As I said, when the last miner dies, billions of pounds will go to the Treasury. We have received a 50% surplus in return. Does the Minister think that is fair—yes or no?

[Justin Tomlinson]

That presumes the investments will continue to return at the rates they have; they could just as easily go the other way, which I suspect is why the trustees were reluctant to release the guarantee. However, to be clear, I remain open to exploring options for improvements to the scheme, and would welcome any suggestions that the trustees wish to make. The door is firmly open.

Future outcomes are not known. Any market volatility could impact future scheme valuations, and the guarantee will provide even greater value should market conditions make it harder to generate returns. If there is a deficit in the future, members will still see their guaranteed pensions increase by RPI, and will continue to receive bonus pensions to ensure that their total pension does not fall in cash terms. If the investment reserve that the Government leave in the scheme to act as a buffer is exhausted, funds from the Government will be found to ensure that payments continue to be made to scheme members. To be absolutely clear, that commitment from the Government is unwavering.

Question put and agreed to.