MAGGIE PAGANO: Desperate rush to save Tata is dangerous, damaging, disingenuous and reckless in the extreme
The Government’s decision to make a special case of Tata Steel’s pension fund to help save the business is dangerous, damaging to the rest of the pensions industry and reckless in the extreme. And disingenuous.
Finding ways of rescuing Tata Steel, keeping the steelworks operating and saving 15,000 jobs is the right thing to do. But not at any cost.
Tearing up existing pension legislation and making up new rules on the hoof is not the way to go about saving the steelworks, however desperate the Government is to do so.
![Finding ways of rescuing Tata Steel, keeping the steelworks operating and the 15,000 jobs, is the right thing to do. But not at any cost](http://web.archive.org./web/20170215140329/http://i.dailymail.co.uk/i/pix/2016/05/26/21/0A2888E600000514-0-image-a-1_1464294949976.jpg)
Finding ways of rescuing Tata Steel, keeping the steelworks operating and the 15,000 jobs, is the right thing to do. But not at any cost
If the £15billion scheme can be hived off for one employer, the danger is that every other business owner in the UK with a pension deficit could also make a special ‘emergency’ case; an ambiguous term at best.
There would be queues forming around Westminster in no time at all.
Not just troubled companies like BHS either but big beasts such as BAE, which also has a deficit shortfall and which could also claim emergency treatment in order to reduce their pension payouts; the aggregate shortfall in British defined benefit schemes is an astonishing £270billion.
As we know from tax, loopholes are there to be filled.
So it is no surprise that every leading pensions experts from ex-pensions minister Steve Webb to the City’s John Ralfe, has knocked the proposals to change the rules for Tata.
But you can also see why Tata, the unions and the workers are endorsing the rule-changes. They believe that if the Tata pension were hived off, its 130,000 steel pensioners will get a better deal than being shunted off into the lifeboat of the Pension Protection Fund, which is the usual route for funds in trouble.
Either way, it’s difficult for anyone to work out what the impact would be on their pensions as we don’t know the precise valuations.
Transferring the Tata fund into the PPF scheme would mean steel workers that have retired do get the full-amount but new retirees have a 90 per cent cap at £36,000.
However, it’s touted that if the Government can find new owners, the cuts would be slightly less. More worrying is that the new options are vague and unrealistic – they include selling the fund to a new employer, a bulk transfer to another insurer, help from Tata or the Government.
You don’t need to be a rocket scientist to work out that help from the Government is the most likely outcome, which means the taxpayer will be the one to stump up hundreds of millions of pounds.
Sajid Javid, the business secretary, must be at his wits’ end if this nonsensical plan is the best he can come up.
He’s risked crossing swords with ministers at the Treasury and elsewhere, and now the entire pensions industry.
Yet more intriguing is that none of the prospective bidders that I have spoken to say the £700million pension black hole is a deal-breaker so long as it is de-risked.
While they accept it is an obstacle, it is not insurmountable because they say Tata would be able to put its UK assets into administration ahead of a sale to a new buyer; allowing the fund to be taken over by the PPF.
That’s what the PPF, which looks after 11million pensions and 6,000 DB schemes, was set up to do in 2005. And doing well.
Javid’s proposal should be dropped as quickly as it appeared.
Let the bidding process get moving. Longer term, the Government must look again at defined benefit schemes; low-interest rates and longevity make it imperative.
Brexit breakthrough
Hurray for Steve Hilton. The PM’s ex-adviser is one of the few backers of Brexit who has been honest about how it’s impossible to judge what the economic impact of leaving might have on the country.
As he says, there are risks whatever we do and they are impossible to quantify.
Quite so. We need more honesty like this ahead of the vote, particularly as about a third of voters have yet to make up their minds. For once, it’s not the economy, stupid. It’s far more important than that.
But it’s Hilton’s latest remarks about the banking sector which should chill the City. In an excerpt from an interview to be published soon, Hilton describes the sector as ‘a stitched-up, corrupt cartel’.
What’s more, he says competition is the best way of regulating markets and that rather than radical reform after the financial crash, we have ended up with lots of bad regulation – and less competition; the worst of all worlds.
What the Government should have done is broken up big banks like RBS – particularly the small business banking bits.
Instead, nothing has changed; and that’s because the bank bosses are still behaving as oligopolists because they are. Like Nassim Taleb, the author of Black Swan, Hilton says bank bosses who were saved by the taxpayer should have had their pay pegged to public sector equivalents. He’s right.
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