High Court rules “irrational” pensions minister had no power to reject Parliamentary Ombudsman report

Bindmans Press Release
22nd February 2007

Pensions campaigners celebrated today as High Court Judge Mr Justice Bean condemned the Work and Pensions Minister John Hutton’s rejection of a Parliamentary Ombudsman report into occupational pensions as “irrational” and outside his powers.

The campaigners’ lawyer John Halford commented:
“the government had been caught red-handed in an act of constitutional vandalism intended to deprive thousands of working people of justice.”

The Ombudsman’s report found that DWP leaflets that had encouraged the public to join and stay in company pensions schemes were “maladministrative” as they had failed to mention the most important risk: that non-pensioner members would lose out if the schemes were wound up voluntarily or as a result of insolvency. When hundreds of schemes were wound up in the 1990s up to 125,000 people were left with a fraction of their pension, only then discovering that their money was unprotected. The Ombudsman went on to recommend that the Government should make arrangements to restore the lost benefits, describing its Financial Assistance Scheme (which to date has paid less than a thousand people) as inadequate. In March 2006 both her report and recommendations were rejected by Mr Hutton. In the first test case of its kind, that decision was challenged by four of the affected scheme members - Henry Bradley, Andrew Parr, Rob Duncan and Tom Waugh – all of whom belong to the Pensions Action Group.

Mr Justice Bean today ruled that rejection was unlawful and irrational, scathingly describing attempts to excuse the omissions in the DWP leaflets as “minute textual analysis” of a kind that:
“can in my view only give comfort to those who consider that it is unwise to believe anything one reads in a government publication.  It is particularly ironic when applied to a leaflet whose back cover boasts that it has been awarded a Crystal Mark for clarity by the Plain English Campaign. PEC 3, especially page 15, gives the clear impression that following the enactment of the new law scheme members can be reassured that their pensions are safe whatever happens. I have no doubt that this is what it was designed to do. I agree with the Ombudsman that it was inaccurate and misleading.”

He added:
“I do not consider that it is necessary to go through each item of official information which was scrutinised by the Ombudsman.  It is sufficient to say that in my view her finding that official information was “sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading” was well open to her on the evidence.  Indeed, in the case of leaflet PEC3, I consider that no reasonable Secretary of State could rationally disagree with that view.  I therefore quash the rejection by the Secretary of State of the Ombudsman’s First Finding of maladministration.”

The judge went on to hold that the minister’s decision not to consider restoration of the lost pension benefits would have to be reconsidered, as the political environment would be different once maladministration was admitted. He found against the campaigners in relation to their other arguments.

The campaigners are represented by John Halford, a partner at leading public law solicitors Bindman and Partners, who said today:
“The government had been caught red-handed in an act of constitutional vandalism intended to deprive thousands of working people of justice. Mr Hutton sought to take a sledgehammer to one of the most important checks and balances on government power: the independent Ombudsman’s ability to reach a definitive view on whether any citizen has suffered the effects of government maladministration.  This Court has today stopped from taking place. Tens of thousands of people have awaited this ruling. They continue to suffer extreme financial hardship and the associated stress because they invested in pensions they believed were safe having been told as much by that very Department. That this case has to be brought at all is an absolute scandal. We hope the government will now – very belatedly - do the right thing by those it misled and offer meaningful compensation for what they have lost.”

Dr Ros Altmann of the Pensions Action Group said:
“So, there we have it.  The Government must accept its guilt in misleading the public about the safety of their pensions.  DWP denials of any wrongdoing have yet again been ridiculed.  Will Ministers now agree to own up to their mistakes and pay proper compensation to those who have lost their life savings in pension schemes that the Government said were safe and protected by the law?  So far, our shameless, heartless leaders have just ignored every wake-up call and prolonged this dreadful injustice. This is the third damning indictment of the Government’s behaviour over this pension scandal – a scandal created by Ministers who keep claiming that those who lost their pensions cannot be helped any more because taxpayers’ money has to be spent wisely, but who meanwhile vote themselves huge pensions at taxpayers’ expense.”

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