Abraham: Found official failings

The government has been strongly criticised after refusing to act on an ombudsman's call to compensate the estimated 85,000 people who lost their company pensions because of maladministration.

An investigation into the security of final salary occupational pensions by parliamentary ombudsman Ann Abraham identified a range of serious errors by government bodies.

But the recommendations for redress were all but comprehensively rejected by the government which said it would not be paying out any compensation beyond that already offered to people through the Financial Assistance Scheme.

Compensation for those who lost their occupational pension when their company went bankrupt is estimated to cost around £5bn over 40 years.

But the ministers insisted they would not provide redress, saying taxpayers could not be expected to pick up the bill.

And the prime minister has backed the decision, saying it is simply not possible to fund the shortfall in payments.

The move has prompted the Commons public administration committee to say it would now launch its own investigation into the government's conduct.

And both the Conservatives and Liberal Democrats said the report was a "damning" indictment of the government.

The government was also warned it faces a continuing court battle because of their failure to compensate those who had lost their pensions.

Failings

Official information was found to be "inaccurate, often incomplete, largely inconsistent and therefore potentially misleading".

Department for Work and Pensions decisions, first under the Tories and later under Labour, were also criticised.

And the government ignored its own role in creating public uncertainty.

Abraham said the government should pay compensation to those who lost out as a result of its maladministration and offer a public apology.

She also suggested that consolatory payments should be paid as recognition of the "outrage, distress, inconvenience and uncertainty" caused to victims.

Injustice

But responding to the criticism, the prime minister defended the government's decision to make no direct offer of compensation.

Tony Blair told MPs on Wednesday that it was impossible to offer a £5bn commitment on behalf of the taxpayer when the reason for the pensions loss was the collapse of the pensions schemes themselves.

"We simply cannot do that," he said.

Blair pointed to the review of the financial assistance scheme which was underway and suggested "that may be able to help some people".

"But it has to be understood that in the end if we were to stand liable for the whole of the financial loss it would set a precedent of extraordinary financial proportions for this government and any other," he added.

Liability

Work and pensions secretary John Hutton also said public money could not be used to compensate for failed schemes.

"I don't think that the taxpayer can be held liable for the failure of these private pension schemes. Absolutely not," he told BBC Radio 4's Today programme.

And he dismissed the ombudsman's finding that the advisory leaflets were inaccurate.

"I don't think there is any evidence that the leaflets were inaccurate or incomplete in the way that the parliamentary ombudsman has indicated," he said.

"Neither has she established as a fact that there is any evidence that people relied exclusively or alone on the leaflets that we did produce as a basis for their investment decisions.

"I think that the leaflets were accurate. They all came with a very clear message attached to them that they were not a full explanation of the law and they were for general guidance only."

Logic

Pensions minister Stephen Timms added that while the government had sympathy for those who had lost out on pensions, he would not accept there had been maladministration.

"We have studied the report carefully but we reject its findings of maladministration. It simply does not make the case," said Timms.

"For the report to assert that the taxpayer should make good all such losses - however they arose - is a huge and unsustainable leap of logic.

"Responsibility must fall on those companies whose schemes were, or are, being wound up and to the trustees who, with the benefit of professional advice, were responsible for protecting members' interests."

Not satisfied

The ombudsman has presented the report to parliament, a move undertaken when she is not satisfied that injustice caused by maladministration has been or will be remedied.

"Government has a unique responsibility in these matters," said Abraham.

"Government set the pensions policy framework and took upon itself the responsibility of providing information for the public.

"The maladministration which my investigation has uncovered caused injustice to a large number of people who, as a result, lost the opportunity to make informed choices about their future."

Parliament

Tony Wright, chairman of the public administration committee, said the new report was the second time in a year ministers had failed to accept recommendations from the ombudsman.

"The report is very long and the issues raised need careful consideration but it is obviously a source of great concern that these powers are being used again so soon," he said.

"I am sure my  committee will wish to consider the matter."

Labour MP Frank Field, a former welfare reform minister, said the recommendations would have to be accepted in letter and spirit in order to restore public confidence in pensions.

"Failure to do so will entrench the widespread cynicism amongst voters that governments cannot  be trusted," he warned.

Damning

Shadow work and pensions secretary Philip Hammond said the report was "a damning indictment of government maladministration".

"There has been a failure here across several government departments and over a number of years," he said.

"A culture of complacency has been allowed to develop and continues to this day.

"The ombudsman has said that the government have a unique responsibility in these matters.

"But now this Labour government are denying all responsibility, and refusing to apologise."

Pointless

Liberal Democrat pensions spokesman David Laws said the government's response raised questions about the entire ombudsman system.

"The ombudsman's report is a damning account of the government's mishandling of occupational pensions, and the government's response beggars belief," he said.

"To reject the ombudsman's recommendations out of hand after she has described the government's handling of occupational pensions as inaccurate, incomplete, unclear and inconsistent is staggering.

"What is the point of having an ombudsman if the government simply tramples over her recommendations in this way?

"Thousands of people had looked to the parliamentary ombudsman for justice, but the chancellor and the secretary of state seem determined to ignore her recommendations and hope that the problem will simply go away.

"The government must accept that adequate compensation must now be paid to those who have lost their pensions."

Victims

Michael Leahy, general secretary of the Community union which has been campaigning on behalf of the victims of the Allied Steel and Wire pensions collapse, said he was "extremely disappointed and angry" by the government's response.

"The ombudsman's report has highlighted the misery and despair that the loss of the pensions that they were told were guaranteed has caused the members of the two ASW pension schemes and the estimated 85,000 similarly affected.

"Community has always believed that the root cause of the pensions scandal that has seen an estimated 85,000 people losing their expected pension because of their employer's insolvency is because successive governments failed to adequately implement the [European Union] insolvency directive from 1983 onwards.

"That is why we shall fight this all the way in the courts to win back the pensions that our members and their families were told were guaranteed."