But while the approach may be consistent, it is also consistently harsh. It may be consistently unreasonable. To the 75,000 or more people at the sharp end of this deeply unfortunate saga, it will feel as if salt is being rubbed into their already painful financial wounds.
Of course, the disgruntled 75,000 would not stump up for their legal fees if they appealed successfully. Moreover, if this were an action between two private parties you would not expect one side to indemnify the other regardless of outcome. But there is a tradition that the UK Government does offer indemnity in cases such as this, because decisions made by ministers on behalf of the public should be held up to scrutiny.
The 75,000 could finance an appeal themselves, or find benefactors willing to help. Indeed, they have garnered £15,000 already. This is enough to get the judicial review process started and represents a sizeable sum, considering that most contributors face a penurious retirement. But if the Government chose to contest the case at all levels, the bill could run to several millions of pounds and that would be well beyond the means of the 75,000. It is therefore unlikely, if the Government stands firm, that the appeal will make much headway.
If the 75,000 were obviously wasting everybody’s time, it would be possible to sympathise with the Government. But in light of the support given by the Parliamentary Ombudsman, it is clear that the Government has a case to answer.
That said, it is no foregone conclusion that the Government would find itself on the losing end of an appeal. It has argued that its leaflets that suggested final-salary pensions were “safe” offered generalist guidance only. This may well be persuasive. It could also argue that the literature was never designed to provide a guarantee and therefore should not be interpreted as giving one. The Government might successfully argue that there was no genuine connection between the leaflets and the decisions taken by the 75,000. If it was brave it might also argue that it is silly for anyone to assume government is infallible.
It is hard to avoid the conclusion that the Government has adopted its entrenched position purely and simply because it reckons it will just cost too much to pay compensation. Estimates about the cost vary widely because of uncertainties about the exact number of potential beneficiaries. It is probably about 75,000 but may be 125,000. The cost of replacing lost pensions will vary from individual to individual according to their ages and incomes. It might be as little as £150 million a year for 20 years. It could be five times as much — or £15 billion in total.
But by shying away from judicial scrutiny the Government is doing itself, the 75,000 disgruntled final-salary pensions savers, and the wider electorate, an unfortunate disservice.
Shell’s choice
SHELL does not need another cost headache after its embarassment in Sakhalin, where the numbers doubled to the apparent surprise and consternation of the oil company’s bosses.
Athabasca’s oil sands are different, but operating costs are on the up nonetheless. The gamble it took buying the sands at the bottom of the crude oil market to invest in what then seemed a white elephant still seems a good one. Over the past two to three years, it has been transformed into a golden mammoth. Even at costs per barrel of $20, Shell is in clover, daily producing 150,000 barrels of high-quality sulphur-free synthetic crude.
It is no small wonder that, over the past year, an army of prospectors has arrived in Fort McMurray hoping to stake out claims in Alberta’s muskeg wilderness. Or that a dearth of skilled labour is sending Shell to Europe and Latin America in search of welders and pipefitters. So intense is the competition that Washington has protested against plans by Chinese investors to export Alberta’s bitumen across the Pacific.
Shell now faces a hard choice. Should it bite the bullet and continue to spend, knowing that an oil price collapse could shred its profit margin? Or should it close its chequebook and face investor anger at a Shell left in the slow lane as the oil boom continues? Fortune may favour the braver course of action.
Mess at MPC
IT WAS hardly subtle. Jean-Claude Trichet, President of the European Central Bank, yesterday gave an unmistakable clue that interest rates are going to rise with a vow of “strong vigilance” against inflation. To ram the point home, he said that that the ECB’s August meeting, usually a sleepy affair held by teleconference, would take place in full in Frankfurt. With so much economic writing on the wall pointing to a rate rise, the ECB might have been best advised to get on with it.
In Britain, immediate rate rises do not look likely. But the Bank of England’s Monetary Policy Committee is down by two members, one from a vacancy that appeared back in March. Some may wonder whether decisions to hold rates come about because it is for the best. Some will think that the MPC feels obliged to sit on its hands because it is short-staffed.
City gossip yesterday suggested that David Miles, chief UK economist for Morgan Stanley, the investment bank, has been approached to fill one of the vacant MPC seats. Professor Miles would be an excellent choice. But whoever it is to be, it is vital that these appointments be made rapidly.
Gordon Brown’s only comment is that he will make his pick “soon”. If white smoke does not rise from the Treasury in the next few days, this avoidable mess will start to impinge on the credibility of the way we set interest rates in Britain.
Bag of tricks
WHEN Ireland introduced a plastic bag tax in 2002, the stated aim was to reduce litter and help the environment. It worked, and even produced a bit of revenue for the Dublin Government. The reason for Brussels’ plan for a tariff on plastic bags imported from China and Thailand is not quite so noble. It wants to defend French (and British) bagmakers from unfair competition. Coming just days after tariffs on leather shoes from China and Vietnam, however, it is likely to fuel suspicion in Beijing that this is disguised protectionism.
