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BT challenge to pension indexation decision dismissed

28/11/18

The Divisional Court (Lord Justice Hamblen and Mrs Justice Whipple) today dismissed a claim by BT for judicial review of a decision by HM Treasury to make a direction indexing the guaranteed minimum pension (GMP) of public sector workers who retire between December 2018 and April 2021.

In 2016, following the introduction of the new State Pension, the Treasury issued a public consultation on how it should index GMP for public service pensioners. Among the questions posed were how various options would impact on private sector schemes and whether such impacts were relevant. Under the terms of BT’s pension scheme, a decision to use the conventional uprating mechanism would entitle one category of pensioners to equivalent indexation, at a cost to BT of about £120 million. BT therefore urged the Treasury to select an alternative legal mechanism that did not trigger any right to an increase under its scheme.

The Treasury decided, first, that in principle GMP for public service schemes should be indexed using the conventional legal mechanism and, second, that BT’s interests did not justify deviating from that course. BT challenged the decision arguing that the “in principle” decision was irrational and unfairly discriminated between BT and its commercial rivals; and that the decision not to adopt one of its alternative mechanisms was taken on the basis of misdirection that it would have engaged scheme members’ property rights under Article 1 of Protocol 1 to the European Convention on Human Rights (A1P1).

The Court dismissed the challenge holding that the irrationality and discrimination challenges were unarguable and that there was no error in rejecting BT’s proposed alternative mechanism. As to the latter, the Court held that: (1) BT’s consultation submission had never identified this mechanism as a standalone solution; (2) all of BT’s suggestions were on a true construction of the decision documents properly rejected for policy reasons separable from the legal ones; (3) BT’s suggested mechanism would have been ultra vires; (4) even if intra vires it would have involved the use of a statutory power for an improper collateral purpose; and (5) if it were necessary to decide the point, BT’s proposed mechanism would in any event have engaged the A1P1 rights of scheme members.

The Court also refused BT permission to apply for judicial review of a fresh decision by the Chancellor of the Exchequer, taken shortly before the hearing, that he continued to agree with the original decision notwithstanding an error in the original summary of legal advice. The fresh decision showed that it was highly likely that the outcome would have been the same even had the error not been made; and there was nothing improper in inviting the Chancellor to reconsider in those circumstances.

The judgment is here.

Martin Chamberlain QC and Tim Johnston, instructed by the Government Legal Department, appeared for HM Treasury.