Fire Brigades Union v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Mr Justice Choudhury |
| Judgment Date | 10 March 2023 |
| Neutral Citation | [2023] EWHC 527 (Admin) |
| Docket Number | CO/4288/2021 |
| Court | King's Bench Division (Administrative Court) |
The King on the application of
The King on the application of
[2023] EWHC 527 (Admin)
Mr Justice Choudhury
CO/4288/2021
CO/4351/2021
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Andrew Short KC and Claire van Overdijk (instructed by Walker Solicitors) for the Claimants in CO/4288/2021
Fenella Morris KC and Jennifer Thelen (instructed by Capital Law Limited) for the Claimant in CO/4351/2021
Nigel Giffin KC, Richard O'Brien, Imogen Proud and Oliver Jackson (instructed by Government Legal Department) for the Defendants
Hearing dates: 31 January, 1, 2 and 3 February 2023 —
Contents
| Paragraphs | |
| Introduction | 1 – 2 |
| Parties | 3 – 6 |
| Background | 7 – 67 |
| Public Services Pensions Act 2013 | 22 – 23 |
| The CCM | 24 |
| 2014 Directions | 25 – 27 |
| Implementation | 28 – 32 |
| McCloud/ Sargeant | 33 – 38 |
| CCM Pause | 39 |
| Remedying McCloud | 40 – 45 |
| Challenge to the Pause – First JR proceedings | 46 |
| Lifting the Pause | 47 – 52 |
| Consultation on McCloud Remedy | 53 – 59 |
| Equalities Assessment | 60 – 64 |
| 2021 Directions | 65 – 67 |
| Legislative Framework | 68 – 94 |
| The 2014 Directions as amended on 24 November 2018 | 78 – 88 |
| The 2019 Pause Directions | 89 |
| The 2021 Directions | 90 – 94 |
| Grounds of Challenge | 95 – 97 |
| FBU Claim | 95 |
| BMA Claim | 96 – 97 |
| BMA Ground 1 | 98 – 151 |
| Outline of Claimants' submissions | 98 – 100 |
| Outline of Defendants' submissions | 101 – 103 |
| BMA Ground 1A – Discussion | 104 – 124 |
| BMA Ground 1B – Legitimate Expectation | 125 – 151 |
| FBU Ground 2 – Legitimate Expectation | 152 – 157 |
| Submissions | 152 – 153 |
| FBU Ground 2 – Discussion | 154 – 157 |
| FBU Ground 3 – Breach of Padfield principle | 158 – 163 |
| FBU Ground 1 – Breach of Art 6, fair trial rights | 164 – 174 |
| Submissions | 164 – 167 |
| FBU Ground 1 – Discussion | 167 – 174 |
| FBU Ground 4 – Discrimination | 175 – 195 |
| Submissions | 175 – 177 |
| FBU Ground 4 – Discussion | 178 – 195 |
| BMA Ground 2 – Failure to consult | 196 – 219 |
| Submissions | 196 – 197 |
| BMA Ground 2 – Discussion | 198 – 219 |
| BMA Ground 3 – Breach of the PSED | 220 – 247 |
| Submissions | 220 – 221 |
| BMA Ground 3 – Discussion | 222 – 247 |
| BMA Ground 4 – Failure to obtain and/or to take into account relevant information | 248 – 252 |
| Conclusion | 253 |
Introduction
The Fire Brigades Union Claimants (“ the FBU”) 1 and the British Medical Association (“ the BMA”) (together, “ the Claimants”), as identified in paragraph 3 of this judgment, seek judicial review of the decision of HM Treasury (“ HMT” or “ the Defendant”) to make statutory directions contained in the Public Service Pensions (Valuation and Employer Costs Cap) (Amendment) Directions 2021 (“ the 2021 Directions”) pursuant to a powers in connection with a Cost Control Mechanism (“ CCM”) contained in the Public Service Pensions Act 2013 (“ the 2013 Act”). The CCM is a mechanism intended to control changes in costs of public pension schemes and operates by modifying members' benefits (and/or contributions to such schemes) should the measured cost of future pension provision deviate from a set target. The Claimants contend that the modification of the CCM in the relevant schemes by the 2021 Directions so as to include within the CCM the costs of implementing what has been called “ the McCloud Remedy” following the decision in Lord Chancellor v McCloud & Ors, Sargeant and Ors v Secretary of State for the Home Department and Ors [2019] ICR 1489 (“ McCloud/ Sargeant”) is unlawful in that, amongst other things, it is: (i) based on a misconstruction of the 2013 Act; (ii) in breach of legitimate expectation; and (iii) indirectly discriminatory. It is claimed that, as a result, scheme members have been denied increases in benefits and/or reductions in contributions that would otherwise have been implemented. Although the two claims raise different grounds (overlapping to some extent), they were ordered by Heather Williams J to be heard together.
The FBU is represented by Mr Short KC with Ms van Overdijk. The BMA
is represented by Ms Morris KC with Ms Thelen. The Defendant is represented in both claims by Mr Giffin KC with Ms Proud, Mr O'Brien and Mr Jackson. I am grateful to all Counsel for their helpful and comprehensive written and oral submissions.Parties
The FBU is a trade union recognised for collective bargaining in the fire and rescue service throughout the United Kingdom. It has approximately 33,000 members. The Second and Third FBU Claimants, Joshua Dunn and Chloe Reid, are members of the Firefighters' Pension Scheme 2015 (“ the 2015 FFP Scheme”) created by the Firefighters' Pension Scheme (England) Regulations 2014 as amended in particular by the Firefighters' Pension Scheme (Amendment) Governance Regulations 2015 (together “ the 2015 Scheme Regulations”). Mr Dunn was born in 1990 and is of white British ethnic origin. Ms Reid was born in 1988 and is of black Caribbean ethnic origin. They both claim to be directly affected by the CCM.
The BMA is a trade union and professional body for doctors and medical students in the UK. It has more than 160,000 members, the vast majority of whom are members of the NHS Pension Scheme (“ the NHS Scheme”) created by the National Health Service Pension Scheme Regulations (“ the 2015 NHS Scheme Regulations”).
The First Defendant in each claim, HMT, is responsible for making directions that specify how the pension schemes created under the 2013 Act (including the FFP Scheme and the NHS Scheme) must be actuarially valued, and for making directions that specify how the CCM operates. The Second Defendant in the FBU Claim, the Secretary of State for the Home Department, is the responsible authority for the FFP Scheme; and the Secretary of State for Health and Social Care is the responsible authority for the NHS Scheme; although no independent, separate unlawful act is alleged against either of them.
The outcome of these proceedings will affect the operation of the CCM as it applies to other public service pension schemes. The organisations representing the members of those other schemes are interested parties in these claims as are the Ministers responsible for such schemes. These interested parties are named in Schedule 1 to the Claim Form and are not set out here.
Background
The background to the 2013 Act, the CCM and the 2021 Directions goes back to 2011 and the recommendations made in the report by the Independent Public Service Pensions Commission chaired by Lord Hutton (“ the Hutton Report”). Both sides have sought to summarise that background for the Court: the Claimants in a “Joint Narrative and Chronology”; and the Defendants in their skeleton argument and in a statement from Mr Henry Elks, Deputy Director for Workforce, Pay and Pensions at HMT. Whilst both sides have sought, naturally, to give a favourable view of events, the following summary, derived from both of the parties' summaries, strives to be more neutral.
The relevant pension schemes are statutory schemes which provide pension benefits to workers across the public service on a “defined benefit” basis. The number of members across all such schemes runs into the millions, including several million active members (i.e. employees who are still engaged in pensionable employment, accruing benefit entitlements, and in respect of whom employer and employee contributions are being paid).
Most of these schemes, including those at issue in these claims, are “unfunded” or “pay as you go” schemes. Rather than contributions being paid into a fund which is invested, the authorities responsible for the schemes, and ultimately the Exchequer, meet any excess of costs over member and employer contributions in a given year (or receive any excess of contributions over costs). In broad terms, employer contributions meet around 70% of the cost required to cover both the cost of accruing benefits, and the cost of changes in the cost of accrued benefits. The rate of employee contributions (as a percentage of their pay) is fixed at any given time. What employers need to contribute is assessed on the basis of periodic actuarial valuations.
The cost of funding such pension provision is huge. Total employer contributions, even in a single year, run into the tens of billions of pounds. The Hutton Report concluded that comprehensive reform of pension schemes was necessary to achieve:
“…reforms that can balance the legitimate concerns of taxpayers about the present and future cost of pension commitments in the public sector as well as the wider need to ensure decent levels of retirement income for millions of people who have devoted their working lives in the service of the public.”
The Hutton Report identified, amongst other matters, the need for a mechanism to manage the pressures on public service pension schemes and recommended that:
“…ministers should set a clear cost ceiling for these new schemes going forward – I suggest the percentage of pensionable pay paid by the taxpayer – with automatic stabilisers built into their design to keep future costs under more effective control. These stabilisers will mean that scheme members might need to increase their contributions, or take a smaller pension, the choice should be the subject of discussion with staff but an automatic default must be agreed. This will allow a new framework of public service pensions to be established which will be much more...
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