Jeremy Warner's Outlook: Deckchair response to Titanic pensions crisis

Trinity Mirror
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The Independent Online

Now let's get one thing absolutely clear. Whatever else you care to call the £400m of public money the Government is promising to make available to help thousands of workers who have lost out in pension wind-ups, please don't call it compensation. It's definitely not compensation nor does it set a precedent for the hundreds of other worthy causes that would seem to have an equally valid claim on the public purse. OK, so this is not exactly what Andrew Smith, Secretary of State for Work and Pensions, said yesterday in his climbdown on the Pensions Bill, but it's close enough.

Now let's get one thing absolutely clear. Whatever else you care to call the £400m of public money the Government is promising to make available to help thousands of workers who have lost out in pension wind-ups, please don't call it compensation. It's definitely not compensation nor does it set a precedent for the hundreds of other worthy causes that would seem to have an equally valid claim on the public purse. OK, so this is not exactly what Andrew Smith, Secretary of State for Work and Pensions, said yesterday in his climbdown on the Pensions Bill, but it's close enough.

From the start, the Government's main concern in dealing with this issue has been to avoid setting a compensation precedent. As ever politics have eventually conquered principle. Faced with certain defeat when the Pensions Bill returned to the Commons next week, the Government has caved in and there is now to be at least some relief for the 60,000 workers deprived of all or part of their pensions because their companies went bust with underfunded pension schemes.

The moral case for compensation has always been a powerful one, for the Government deliberately encourages people to provide for their old age, and up until 1988 many companies made it a condition of employment to join the pension scheme. Yet the Government has no legal liability, and to pay up when there is no obligation raises the question of how many other deserving causes ought to be compensated by the taxpayer. What about the victims of Equitable Life? As the responsible regulator, the Government is culpable in its collapse, so the legal case for compensation would on the face of it seem greater.

Mr Smith can insist all he likes that the £400m he has wrested out of the Treasury to plug the gap isn't compensation and doesn't set a precedent, but the truth of the matter is that it is very obviously both of these things. In his short press release on the climbdown yesterday, Mr Smith was deliberately vague on who would qualify for the money and on what terms. Four hundred million is not nearly enough fully to make up the pensions even of those who have already fallen victim to corporate insolvency. Given that other companies will almost certainly fail before the new industry funded compensation scheme set up by the Bill comes into force, the final bill is likely to be very considerably higher.

For the time being, there are more questions than answers. According to one outside estimate, the £400m promised may do little more than substitute for the benefit the Government would in any case have had to pay to ensure these people stayed above the breadline. If that's true, then the Government has bought off the backbench rebellion with smoke and mirrors.

Rarely has the old expression of rearranging deckchairs on the Titanic been more apposite than when applied to the Government's pensions policy. Seven years ago Labour came to power determined to solve Britain's pensions deficit once and for all. If anything it has made the situation worse. Private pension provision is declining, not increasing, and with occupational pension schemes now available to little more than half the workforce, with many of their beneficiaries in the tax-funded public sector, a potentially catastrophic long-term pensions crisis looms. For most relatively low paid workers it is not worth saving into a pension even if they could afford to because they only deprive themselves of benefit by so doing.

Belatedly, the Government has recognised the need for a long-term policy framework to address the pensions problem by setting up the Pensions Commission. Whatever policy recommendations its chairman, Adair Turner, comes up with they are unlikely to prove popular, which is why he has been instructed to confine his interim report, due for release in September, to analysing the nature of the problem rather than suggesting solutions. Britain's progressively ageing population means that the ratio of dependents to working population will grow steeply over the years ahead, making higher taxes and/or the introduction of compulsion into pensions savings pretty much inevitable.

The sooner the Government acts, the better it will be for future generations, yet whatever solution is eventually alighted upon, it is bound to hurt people's pockets in the short term. It has therefore been easy for the Government to shelve the difficult decisions that need to be taken. The time for the Government to have acted was when it first swept to power with an overwhelming parliamentary majority seven years ago. It is questionable that the dying regime that Labour is likely to be after the next general election will have the political courage or authority to push through the necessary degree of reform. Nothing the Government has done on pensions policy so far gives any reason for optimism.

Trinity Mirror

Up until yesterday evening, Piers Morgan was not so much Teflon man as brass neck man. During a meteoric tabloid career, the pugilistic editor of the Daily Mirror has managed to survive a whole string of hanging offences, not least when he bought shares in an obscure technology stock called Viglen just before the Mirror's City Slickers share tip column recommended that readers fill their boots. If he could survive that one, you might have thought a few concocted pictures would be a mere bagatelle. There was no reason to believe he wouldn't brass neck it out again, the more so as the pictures, though fake, may have told an underlying truth.

But what made this latest episode more than just another passing squall in the rough and tumble of Fleet Street's hall of shame is that the City all of a sudden decided to take an active interest. Normally, an editorial misjudgement would be regarded as an operational matter for the company's management to deal with as it saw fit.

In this case, a number of Trinity Mirror's largest institutional investors picked up the phone to Sir Victor Blank, the chairman, and muttering darkly about "reputational risk", gave him an earful. There had to be grave concerns, they told him, about any company that could allow its internal processes to slip to such a degree that no adequate steps were taken to authenticate pictures of such weighty import.

The full story has yet to emerge, but it was apparently Sly Bailey, the chief executive, who pushed most vigorously for a swift execution at yesterday's emergency board meeting. Ms Bailey had personally approved the purchase and use of the pictures, so her position is a particularly intriguing one. Was she misled over the procedures used to authenticate the images? Or had she simply assumed too much of Mr Morgan? Whatever the truth, she's gambling that decisive action will be enough draw a line under the affair and allow the company to move on.

It may not be so easy. At the very least the episode has raised renewed doubts about the strategic sense of combining trophy national newspaper assets with Trinity Mirror's hinterland of regional titles. Operationally, the company has always struggled to make the two act as one. Ms Bailey has been no more successful in integrating them than her predecessors. Yet she has gone to great lengths to convince the City that there is some purpose in keeping the two under one roof. Now this.

Still, provided her hands are clean and she moves rapidly to restore the Mirror's credibility, this is not an insurmountable crisis for Ms Bailey. She's still relatively new in the job and her relationship with Mr Morgan, only an editor but an enormously powerful figure within the company, has from the start been an uneasy one. Insiders say she regards Mr Morgan's departure, brilliant tabloid editor though he was, as more of an opportunity than a loss. We will see.

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