October 27, 2016

Tata Steel: UK Government warned over pension cut plan

The government has been warned that a plan to cut pension benefits to help save Tata Steel’s UK operations could take ministers down a “dangerous path”.
Ex-pensions minister Steve Webb urged caution over “rushed changes” he said could have implications for workers “well beyond the steel industry”.
A £485m pension deficit has been deterring potential buyers of Tata.
Ministers are considering changing the measure used for British Steel pension increases to cut its liabilities.
The government is expected to propose basing the scheme’s annual increase on the Consumer Price inflation measure, which is usually below the current Retail Price measure.
Unions are likely to support the proposals, the BBC has learned.
In total the British Steel pension scheme has 130,000 members; it is not clear how many of those would be affected by the plan.
Further details are likely to emerge later when the government announces a consultation on the proposals in a written statement to the House of Commons.

‘Pension security risk’
Former Lib Dem pensions minister Steve Webb said: “The government is going down a very dangerous path.
“Everyone has huge sympathy for steel workers and for efforts to protect jobs, but rushed changes to pension rules risk driving a coach and horses through the pension security of hundreds of thousands of workers well beyond the steel industry.”
Owen Smith, the shadow work and pensions secretary, said steel workers’ pensions “must be protected”.
“If these reports are accurate, the secretary of state for work and pensions should come to the House to explain precisely what is being proposed, including how current and future steel pensioners will be affected and what precedents might be set by any changes to hard-won pension protection legislation,” he added.

Analysis: Simon Jack, BBC business editor
The pension fund and its deficit have been a source of unease for the current owners Tata and a deal-breaker for any would-be buyers.
Reducing its burden will make a sale easier and may even convince Tata to hang on to its UK steel business.
Any such change would be very controversial as it would set what some would see as a dangerous precedent.
The move is evidence of the business secretary’s sense of urgency to resolve an industrial crisis which has put 10,000 steel workers’ jobs in imminent danger.
The BBC understands that union leaders have accepted that this proposal is a better deal than seeing the pension scheme shunted into the lifeboat of the Pensions Protection Fund, which can see some members lose 10% of their payout immediately and see lower increments in future years.
When asked about the proposal to cut the pension deficit, Business Minister Anna Soubry told Channel 4 News: “We have always said we would do everything we can to look at pensions.
“The prime minister said ‘no stone to be unturned’ and that is exactly what has been done.”
Welsh First Minister Carwyn Jones told the programme that there were better ways of dealing with the scheme than putting it in the Pensions Protection Fund, which would take on the deficit, but would also result in members losing some of their benefits.
“The UK government has more levers it can pull than we can with its control of the tax system and pensions legislation,” he said.

Business Secretary Sajid Javid and Mr Jones visited Mumbai on Wednesday to meet Tata executives.
It was thought the company might announce a shortlist of bidders, but Tata would only say that bids were still under “active consideration”.
Earlier this month Tata said there had been seven expressions of interest in its UK business. Among those reported to have put their hats in the ring are Greybull Capital, which has already bought Tata’s long products operations.
The management buyout vehicle, Excalibur Steel, which is led by Stuart Wilkie, the head of Tata’s UK strip steel unit based in south Wales, is another.
Sanjeev Gupta’s Liberty House, which has acquired two of Tata’s smaller mills, has also expressed an interest.
While they have submitted independent bids, it is thought there is potential for them to work together.
Others said to be in the running include JSW Steel, which is India’s second biggest steel producer, China’s Hebei Iron and Steel Group, and Endless, one of the UK’s largest turnaround specialists, based in Leeds.

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