Time to end the turmoil at Grangemouth

Published on Friday 25 April 2008 22:56

YESTERDAY the oil refinery at Grangemouth, which produces 10 per cent of the UK's petrol and diesel supplies, was shut down in anticipation of tomorrow's strike by 1,200 workers belonging to the Unite union. This is the first time the plant, which traces its origins back to 1924, has been completely off-line. It will take three weeks to bring it back to full production.

Tonight, it is also expected that the pipeline connecting the giant Forties oil and gas field in the North Sea to Grangemouth will also be shut down, sharply curtailing UK fossil-fuel supplies. A fifth of British gas supplies could be cut if the pipeline shuts.

What can possibly be worth such disruption? The core of the dispute is over pensions. The existing workforce at the refinery have an index-linked, final salary pension scheme funded wholly by the company – though the union claims there is a quid pro quo in lower wages. Ineos, the private company which owns Grangemouth, says this scheme is too expensive. This is a view held by most UK companies since Gordon Brown scrapped special tax arrangements for final salary pensions in 1997. Since then, most firms have been forced to close these schemes to new entrants.

At Grangemouth, Ineos proposes making the workforce contribute 1 per cent of salary each year, rising in successive years, till the maximum contribution is 6 per cent. By phasing in the contribution, the cash would actually come out of annual wage increases. It is understood that the union has accepted this proposal. However, Unite is refusing to agree to the pension scheme being closed to future workers.

There we have it: this dispute, with its consequences for industry and ordinary households, is not about the existing 1,200 workers at Grangemouth. It is about Unite being seen as standing up for the principle of single salary pension schemes. In other words, this dispute is political rather than industrial – something the unions should have left behind in the 1970s.

It is true that the collapse of private single salary pensions may well be seen as Gordon Brown's biggest error. The unions are right to complain about the end of what was probably the best private occupational pension system in the industrial world. However, bringing Grangemouth to a halt 11 years after Gordon Brown made his mistaken tax changes is hardly the most appropriate way of raising the issue. Indeed, it smacks more of Unite – which was only formed last year from a merger of the T&G and Amicus – seeking an excuse to get national publicity for its pensions stance.

Nor is Ineos completely blameless. The company has been too openly provocative in its dealings with Unite. Britain's energy system should not be treated as a political football by either side in this dispute. Unite has made its point. The future of private pensions should now be discussed in the appropriate forum – parliament. And the specific issues at Grangemouth should be dealt with round the negotiating table.