Back to Home Page

In analysis of the Carson judgment we have to note that two different propositions were being examined.

1. That there had been a breach of Article 1P (as Laws named it)
2. That there had been a breach of Article 1P when taken along with Article 14

At first sight, and to a logical mind, it is clear that we have suffered discrimination, and that arguments about the nature of our property are beside the point. But we must think not with a logical mind, but with a legal mind, for law has a logic all its own.

Article 1P by itself

The reason that the crown will not concede that we have an entitlement to the upratings is that the legislation says that we do not. All other reasons advanced are ex post facto.

The fact that the law is discriminatory does not enter into the thinking at this stage. But it is clear that the arguments advanced to defend freezing offer no explanation for applying them selectively.

For example, the argument that the NIF is a pay as you go fund is advanced as a justification for the freezing, whereas it is in fact only a defence against our claims. If freezing were abolished tomorrow, it would still be a pay as you go fund. Pensioners have never claimed that there is a little pot of gold with their name on it, waiting to be claimed. In painting this image the DWP is setting up and demolishing a man of straw.

Similarly, the claim that the rates of contribution have never included provision for payment of upratings overseas is an attempt at justifying freezing. Apart from being a poor attempt, it is no part of the "reason for freezing". When the scheme was founded, the Government Actuary of the day did not sit down and make an allowance for the non-payment of pensions or upratings overseas. Contributions are now set in such a way as to preserve the financial integrity of the scheme. So in some ways it is true that the contributions do not (not "never did") provide for upratings. But this is a consequence of the method used – projection of gross benefits and receipts based on recent annual figures.

To test whether the argument holds water, one needs to look at the progression of contribution and benefit rates, and whether these (particularly contributions) were disturbed when the major expansions of the unfrozen populations occurred. But the overlay of political decision making may very well render it impossible to derive any reliable figures.

So we come back to this. The legislation says that we do not get the uprating. The judge says that Carson never had the right to the upratings while living in South Africa. Therefore the increment in pension was not part of her possessions, and therefore she was not deprived of the right to quiet enjoyment of her possessions.

Article 1P with Article 14

When we put these two together, the question of whether we have property rights in the upratings is no longer considered. The first question is "are pensions property?"

To put this in the formal language of the Michalak case:

(i) Do the facts fall within the ambit of one or more of the substantive Convention provisions (for the relevant Convention rights see Human Rights Act 1998, section 1(1))?

Laws answered "yes". where contributions are exacted as a price of entitlement the contributor should be afforded a measure of protection: it has, so to speak, cost him something to acquire the benefit.

Question (ii) was also answered in the affirmative:

(ii) If so, was there different treatment as respects that right between the complainant on the one hand and other persons put forward for comparison ("the chosen comparators") on the other?

It was an uncompromising and unequivocal "yes". There is no contest as to (ii).

(iii) Were the chosen comparators in an analogous situation to the complainant’s situation?

In view of the uncompromising answer to question (ii) it is difficult to see why the judge went on in question (iii) to come to what appears to be an opposite conclusion. One can only agree with Drabble that Burnton (and now Laws) confused questions (iii) and (iv). They were inventing reasons why you could not compare the frozen pensioner with the chosen comparators. If you cannot compare them, then you cannot give a definitive answer to question (ii).

In introducing the argument in relation to economic conditions Laws was looking at justification. He was in fact justifying an answer that you could not compare those living in frozen countries with other expatriate pensioners. In fact the different treatment seems to arise because in the case of frozen pensioners one should take into account different economic conditions, whereas for their non-frozen expatriate brethren economic conditions are irrelevant. What Laws was saying that you can not compare frozen pensioners inter se, and therefore you can not compare them with indexed pensioners.

This argument does not seem to have been advanced by the DWP. In fact it has never been advanced by them as the ground on which they decide whether to enter into a reciprocal agreement. In all the explanations we have received they tell us that they consider the relative cost and benefits (to the UK) of entering such an agreement.

Here is a quote from an email received from Jan Spiller of the DSS in March 2000:

You are correct that over time, the UK has concluded agreements with some 30 countries which provide for payment of upratings. However, the main purpose of a reciprocal agreement is to provide a measure of co-ordination between social security schemes for workers moving between the UK and the other country. Whether the UK enters into an agreement with another country depends on factors such as the number of workers moving between the two countries and the scope for reciprocity between the two social security schemes. A further consideration is the extent to which the advantages to be gained from an agreement outweigh the cost of negotiating and administering it.

Perhaps there is little scope for reciprocity in the case of poor Asian nations. But there is in the case of Australia. Indeed Australia uprates pensions for all its pensioners irrespective of residence, on the same basis as pensioners resident in Australia.

Both judges had the grace to admit that they could be wrong, and that the correct answer to question (iii) should be "yes".

The following table makes it clear that there are only two groups of countries - indexed countries and frozen countries.

It can be seen that the economies of indexed countries, as measured by the Gross National Income per head are just as disparate as are those of the frozen countries

We need now to go on to question (iv) If so, did the difference in treatment have an objective and reasonable justification: in other words, did it pursue a legitimate aim and did the differential treatment bear a reasonable relationship of proportionality to the aim sought to be achieved?

The "legitimate aim" is claimed to be the need to devote limited resources to relieve the plight of the poorest pensioners in Britain. Wile this is a laudable aim, it has to be examined in the light of a reasonable relationship of proportionality.

The annual cost of unfreezing pensions is said to be £400 million. Laws quoted a much bigger figure, which seems to contemplate payment of back-pay for the years of freezing. Pensioners have never sought this. But even if they did, the £3 billion would be a once-only cost and not an annual charge on the revenue. To get this into proportion one needs to consider the annual increase in the National Insurance surplus, which is £2.5 billion. So the £3 billion deficit would be wiped off in little more than a year. In the light of the annual surplus, the annual cost of unfreezing is tolerable, and well within the limits of error in the annual projection methods of the Government Actuary.

Fear was expressed that to unfreeze pensions would place a burden on other pensioners, since pensions are paid out of a limited pool of funds.

When widows’ benefits were extended to widowers there was a considerable increase in the number of beneficiaries, probably not quite double since the superior longevity of females probably means that there are fewer new widowers than widows in any financial year. Nevertheless the increase in the number of new beneficiaries was large enough to justify a reduction in benefit levels. This did not engender any protests, since only new widows were aware that they were getting less than widows who had been bereaved at an earlier date.

But in the case of age pensioners the increase in the indexed population consequent on abolishing the freezing regime would be on nothing like this scale. 96% of pensioners live in indexed countries, including UK; 4% live in countries where pensions are frozen. There are 24 times as many indexed pensioners as there are frozen ones. Abolishing the freezing regime would increase the number of unfrozen pensioners by 1/24th. This would not have much discernible effect on the annual growth in surplus, and need have no effect at all on the level of pensions.

The reason for making this final statement is as follows:

Under the Act, the Secretary of State must calculate the rise in the cost of living each year and apply the resulting percentage to the declared rate of pensions. In practice, of recent years, this percentage has been applied only to SERPS pensions, graduated retirement benefits, and Civil Service and similar pensions. The increase in the Basic Pension has been a much greater percentage since the debacle year when the weekly pension increased by only 75 pence. One can only conclude that the Basic Pension has been increased not for economic reasons but for purely political ones.

This is amply illustrated by figures taken from a report by the Government Actuary. The report, made in November 2000, considered the cost of the out-of-line increase in the basic pension. This was the year of the 75 pence, and the budget proposal included an increase of the pension from £67.50 to £72.50 as from April 2001, and another jump from April 2002.

If the usual percentage had been applied, the basic pension would have been £69.75 from 2001, an increase of £2.25. Instead, the government adopted an electorally popular decision to increase it by £5, an extra £2.75 over and above the rate of inflation.

This extra £2.75 per week cost £1.3 billion in 2001, which rose to £1.9 billion in 2002 in the actuary's projections - including the proposed additional increase of £3 in 2002.

This overturns the idea put forward by Laws JJ that there was a fixed pool of funds from which the uprated pensions would have to be paid, and that £400 million would have a devastating effect on the NIF.

If the government had shown some restraint and made the initial increase £4 instead of £5, it would still have won the 2001 election handsomely, and it would have saved well over £400 million, with a like figure in the future outgo of the NIF.

One more quote from the Government Actuary's report

The projections which are shown for 2000-01 in this report indicate that with the current joint employee and employer Class 1 contribution rate of 20.25%, income will exceed expenditure by £4.0 billion in 2000-01.

Back to top of page

Back to Home Page