Open Letter to John Hutton published in Daily Telegraph – How do you sleep at night?

by Dr. Ros Altmann

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Dear Mr. Hutton

Your evidence at this weeks Public Administration  Select Committee was breathtaking.  Your heartless dismissal of the plight of tens of thousands of people whose company pensions were taken away from them, by laws which you were responsible for, beggars belief.  MP after MP, even your Labour colleagues, looked incredulous as you attempted to defend your rejection of the Parliamentary Ombudsman’s verdict of maladministration.
 
The Government’s behaviour on this issue is an absolute disgrace.  As a nation, we should be ashamed that people are being treated in this way. 

After the Maxwell scandal, Government introduced new laws and funding rules which it said would improve protection and ensure schemes had enough money to pay all members’ pensions, whatever happened to the employer. 

However, the Ombudsman discovered that this was never actually the intention.  The new funding rules were only designed to give workers a 50/50 chance of getting their full pension, if the scheme wound up.  After 1997 Government created huge new risks, which had not been there before.  On wind-up, trustees no longer had discretion to divide the assets fairly and the law could give all the assets to those already drawing pensions, leaving long-serving members with no pension at all.  These were not private schemes any more, the Government effectively took them over once they started winding up.  Indeed, many members have lost their state pension rights too and have actually ended up worse off than if they had never put a penny into their company scheme at all.  But none of the official material mentioned these risks.

This scandal is now far worse than Maxwell.  With the Maxwell debacle, the 32,000 pensioners did receive their pensions, but here are perhaps 100,000 being left to beg for justice. How do you sleep at night?  

Government encouraged these people to contribute to their company schemes, week after week, putting out official information which lulled them into believing they were safe.  They were not allowed to hold any other pension and were denied any opportunity to provide for their families in the event of wind-up.  Yet you say Government has no responsibility to make good their losses.   

None of the MPs on the Committee agreed with your arguments.  For example, if people should not have relied on the official information  - why was so much taxpayers’ money spent on producing it?  Apparently the DWP materials cost £60million a year.  People knew the official materials were ‘general guides’ – that is why they were ‘guided’ by them.  The fact that the small print said they were not a complete statement of the law is no excuse either - no-one would expect such material to be a complete statement, but they were so incomplete that they did not offer any guidance on the most important issue. It is simply not true that the leaflets made clear people needed to take professional advice before deciding to put money into their company scheme – have you actually read them? 
Even after assuring Parliament that all DWP leaflets would be thoroughly checked, comprehensive and complete, they were not.  Even after introducing new internal guidelines requiring all materials to be accurate, with no significant omissions, they failed to mention the risk of wind-up. 

The truth is that there was clear maladministration in the official information.  As Alistair Darling said in 2000 ‘The public rely on Government information and they are entitled to be reassured that leaflets are accurate and comprehensive’.

People who read the Government information just believed it.  Members with weak employers would not have felt safe, if the Government had not led them to believe they were.  Government endorsed the employer pensions promise.  Members would not think to themselves, ‘well surely the taxpayer can’t underwrite the pension promises of my employer’.  They would think, ‘if the Government tells me that my pension is safe because the law has been changed to make sure it is, then it must be true’. 

Why are you refusing to recognise reality?  Why are you denying the obvious maladministration that everyone has pointed out to you?  If these injustices are allowed to stand, will you just do this again?  That is an overwhelming public interest argument for pursuing this.

Indeed, you have actually already created more injustices with the Financial Assistance Scheme.  You claim it offers significant help, but it is riddled with unfairnesses.  In fact, your announcement to Parliament about the extension of the scheme was itself misleading.  The FAS does not pay 80% of members ‘expected’ pension, as you told the House.  For many, it will pay more like half the expected pension and those in the so-called 50% band will probably get less than a third of their ‘expected’ pension.  Also, if your priority really was to provide as much help as possible to those closest to retirement, why have less than 100 people received any payments at all?  There are thousands who need their money now and yet, even two years later, they are still waiting for help.  Some have already died. This FAS seems more like a political mechanism to placate backbench disquiet than a genuine attempt to alleviate hardship. 

You have already admitted that it would only cost around £3billion to compensate those affected by this disaster.  The Treasury has taken well over £3billion out of schemes every year since removing dividend tax relief in 1997.  Why not use some of this money to provide compensation?

I sincerely hope MPs will stand up to you to ensure justice for their constituents is properly achieved in the end.  The recent pensions White Paper aims to encourage people to take personal responsibility for their retirement income.  Unless government compensates people who did just that, but were so badly misled, who will trust any Government’s word on pensions in future?

As the Ombudsman herself said to you ‘it’s maladministration – get over it’!  You need to move forward and address the consequences of that maladministration, before you destroy the credibility of your department and the Government even further.


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