Public-sector unions lose battle to halt changes to pension increases

UNIONS representing millions of workers have lost their Court of Appeal battle against a UK government decision to change the way public-sector pension increases are calculated.

Three appeal judges in England yesterday refused to overturn a High Court majority ruling last December, which backed the government’s approach.

The case relates to Work and Pensions Secretary Iain Duncan Smith’s decision to use the consumer price index (CPI) instead of the, normally faster-rising, retail price index (RPI) to measure price increases influencing pension upgrades.

The unions say the CPI route will see the value of pensions cut by up to 20 per cent over a normal retirement, costing every affected worker thousands of pounds.

They accused the government of unlawfully attempting to reduce pension costs in the battle to cut the UK’s financial deficit.

Their appeal was dismissed by Master of the Rolls Lord Neuberger, sitting with Lord Justice Maurice Kay and Lord Justice Sullivan.

The judges unanimously ruled the government decision valid, dismissing the union argument that it was unlawful because the “driving force” behind it was the national economy.

The unions are now considering whether to attempt to take their case to the Supreme Court, the highest court in the land.

The change from RPI to CPI is expected to save almost £6 billion a year by 2014.

Lord Neuberger said: “The government clearly believed that the state of the national economy was grave, and that any savings which could properly be made should be made – and made as soon as possible.”

The judge also said: “Provided that the Secretary of State acts rationally and takes all appropriate – and no inappropriate – matters into account, it is a matter for him which index he chooses.”

The Pensions Secretary “must seek to identify a rational basis for making his estimate”.