Written evidence submitted by Mr Gareth John Hughes and Mr Emlyn Davies (MPS0030)

Question1: How was agreement on the surplus sharing arrangement reached at privatization?

The MPS was introduced in 1952. The Rules of the Scheme set out in detail the benefits payable to members. Contributions before April 1975 were paid on a flat rate basis, with members paying no more than 20p per week. Benefits payable in respect of membership before April 1975 were therefore relatively small. After 1975 the contributions members paid and the benefits that were earned were both linked to the salary that a member received, providing a higher level of benefits as a result of the higher contribution paid. The contributions paid by a member did not cover the full cost of providing the benefits, so British Coal paid the “balance of the cost of the benefits”. British Coal’s contributions went up or down over time based on the amount needed to pay benefits. In the late 80s and 90s, many pension schemes found that their investments had performed better than expected and they had more money than was needed to pay the benefits due to members. MPS surpluses were used to give Scheme members additional benefits and to reduce the level of contributions paid by the employer. Following privatisation of the coal mines at the end of 1994, the Scheme was closed to further contributions. The Government took over the role as Guarantor for the Scheme from British Coal. The Scheme had a surplus in 1994 and 50% of this surplus was used to enhance members’ pensions immediately, with the other 50% being payable to the Guarantor. The Guarantor agreed to leave its share of pre-privatisation surpluses in the Scheme as the Investment Reserve. This was to be paid to the Guarantor over a 25-year period to 2019, but this was extended to 2029 following the additional Actuarial Valuation in March 2013

Question 2: How have variations in the terms of the Scheme since 1994 affected pensioners?

Since October 1994, retired mineworkers have been complaining that they are far behind other similar schemes in regard to payments considering the time spent contributing into the scheme. There are many miners who depend on their disability/compensation payments to ensure that they are kept out of the poverty trap (We must bear in mind that the national pension payments alone are poverty fodder in themselves).

31st Oct 1994 was the day when democracy was swept under the carpet, a day when the men and women of the mining industry had no say on how their pension scheme was handled. I think the so called 50/50 sharing deal was well thought out but not with the mineworkers in mind, rather with the exchequer in mind. The leader of the Mineworkers Pension Trustees Mr. Arthur Scargill was kept busy thus being distracted in the courts with Mr. James Cowan vice chair of British Coal the leader of the appointed trustees. Secondly the government insisted that a National Union of Mineworkers trustee step down in favour of a Union of Democratic Mineworkers trustee. This now meant that the government had the upper hand and could dictate matters unopposed. A democratic decision was not carried out and an act of democracy should have seen both Union of Democratic Miners and the National Union of Mineworkers adjourn and take the unsigned agreement to an emergency conference to debate this important document.

The probability that the 50/50 agreement might have been signed illegally was first noticed when Mr. Bleddyn Hancock was granted a judicial review of the 50/50 sharing deal in a court of law. The government refused to hold discussions unless the judicial review was withdrawn. The government () then reneged on the deal.

Question 3: Do the terms of the surplus sharing arrangements remain fair?

The terms of the surplus sharing arrangements have never been fair as no member of the Scheme can remember being balloted as mentioned in the answer to question (1)

The guarantor has never put a penny into the scheme but will gladly take the fruits of the retired miner’s labour.

The government of 1992/93/94 endeavoured to make sure that the work they had designed and implemented could never be undone. Time after time we retired miners were being told that the deal was fair and honest, and the guarantee arrangements would never be reversed and would carry on till the last pensioner standing, their guesstimate 2070 but we believe 2038 would be nearer the truth. Retired mineworkers have been complaining that they have paid income tax on their share of surpluses while the government has not and will never pay any tax on their share of surpluses. This is unfair making the share top heavy in favour of the exchequer. At the time of writing this letter it is estimated that mineworkers have paid under the PAYE system of taxation £59.2 million back to the exchequer in the last 12 months.

It is now becoming obvious that the government/guarantor will never commit to the 31 October 1994 guarantee, as the last 9 financial crashes since the 1960s including the 3 crashes since 1994 resulted in the taxpayer paying out to the Scheme.

Much of what mineworkers know today about how the pension schemes were manipulated is the result of work done by Cannock Chase Retired Miners & Officials Pensions Association. Below are some of the assumptions made by the above association. Between 1987 and 1995 British Coal did not pay any employer contributions into the Mine Workers Pension Schemes (MPS) (BCSSS) which benefited them as employers by approximately £1.136 billion. When its representatives and others voted to consequently close the schemes to new contributors, they also took the decision to allow 50 per cent of any surpluses to be taken by the Government (so we are told). This was calculated to eventually result in the Government receiving more than £8 billion from both the MPS and its associate, the BCSSS pension scheme. This scenario was forecast by its own actuaries in 1995 and compounded later by their actions between 2002 and 2005 when the fund was used to cover a coal industry deficit for that period estimated as being worth a further £390 million, which it then recovered with interest amounting to £540 million. It then added a further £229 million as representing 50 per cent of the remaining surpluses at that time - the depletion of those funds in this way is extraordinary, particularly as the industry was facing financial problems and merely was borrowing its own money. We call for an urgent review of those practices and the use of those pension assets in such an unacceptable manner”.

Since 31st October 1994 retired miners have fought to get at the truth only to be thwarted by copy & paste replies by government ministers, with no real answers as to how the 50/50 agreement of 31st October 1994 got passed by the mining unions of the day. Where was the democratic process so beloved by in the run up to the great coal strike of 1984/85? John Major’s government should have insisted on an open and democratic. process whereby the miners who had worked in some of the harshest and health damaging environments on Earth would have a say on how their pensions were to be handled.

Governments of the past and present have pulled every trick in the book trying to stall pensioners queries—is this fair? None of the pensioner campaigners can boast of a university education but boy can they campaign.

Here are selections from a report named: Facts and Figures by Jack Snape NACODS ex Trustee 2006:

Page 2 paragraph one “In March 2004 the Chairman of the Committee of Public Accounts, Edward Leigh, stated in a letter to Michael Fabricant M.P. "The National Audit Office have examined further material provided by the Cannock Chase Retired Miners & Officials Pensions Association and it does not raise any new issues about the way the department have acted!

A question on page 2: We ask again and again! "How much will the Government receive over 25 years?—" ARE THEY TOO EMBARRASSED TO PUBLISH THE AMOUNT? Page 2 Second paragraph: Also in 1996 the schemes valuation of the new bonus augmentation fund was £840m. In 1997 the schemes valuation showed the total Accumulated Funds was reported as being £9,888m. The Investment Reserve Fund has grown to £892m. The Government had received £75m from the 1995 surplus. A new surplus of £806m was revealed. £408m of that to go to the Guarantors Fund.

Page 2 third paragraph: At the 2000 valuation, the total accumulated value of the funds was £l8,404m. The Investment Reserve Fund had grown to £l .245m and by now the Government had received £398.1m from 1995 - 1997 valuations plus £80m from the Investment Reserve Fund, a Total of £478.1m. A new surplus of £l,098m was revealed, £549m of which went into the Guarantors fund.

Page 2 fourth paragraph: In the 2003 valuation the value of the total accumulated funds had dropped to £8.828m, (due to stock market collapse, and Gordon Browns raid on pension funds in his 1997 budget costing the BCSSS alone £40 m a year) a deficiency of £259m was revealed in the Guarantors fund. The first deficiency since that fund was formed in 1996, and the first time since 1986 that no surpluses had been announced in the BCSSS scheme!

An aside by the author of this submission to the BEIS COMMITTEE I hold no single political party to account as both conservative and New Labour Governments are equally to blame for this ongoing fiasco.

To maintain solvency £259m was transferred from the Investment Reserve Fund. Reducing it's value from £906m to £686m, but it was made clear that this transfer was only a loan, and that the Investment Reserve Fund would have the first call on all future surpluses, until the £259m loan plus Investment Returns over the intervening period was repaid.

Also the 2003 valuation revealed a £171m deficiency in the Bonus Augmentation Fund which put STANDSTILL into effect. However this fund still paid special replacement bonuses, equal to the RPI increases, until the next valuation (2006). This automatically increased the liabilities of this fund which was already in deficit.

Page 2: paragraph 8: By 2005 ( when the 2006 valuation started ) the Investment Reserve Fund had grown from £686m remaining in the fund (after the £259m transfer) to £2940m (as reported in the 2005 accounts), a growth over two years of 37%. Therefore it can be assumed if the debt to the Investment Reserve Fund increase by that percentage it would have taken approximately £355m to repay the debt at that time, revealing the Investment Reserve Fund to £l,295m. Page 2: paragraphs 9 & 10: However it is reasonable to assume that since the Stock Markets have improved over the last year, the value of the Investment Reserve Fund has grown by a similar amount. Increasing the debt and liabilities on all future surpluses.

Also in 2005 the tenth and final payment to the Government from the valuation was made. A total payment over ten years of £480.1m. (all from the £259m Guarantors share of the 1995 valuation).

Question 4: What changes, if any, would the Scheme’s beneficiaries like to see to the scheme?

(a)The number one change, universally agreed upon, would be for the government to rescind the law that makes changes to the scheme irreversible.

(b)The government should insist that all pension schemes members be balloted concerning any major decisions relating to the scheme. MPS elected trustees should have full control of surpluses. Hold Annual General Meetings thus giving the members their own voice.

(c) It is now believed that the beneficiaries would like to see an end to the 50/50 split and the whole money being returned to the beneficiaries. Mineworkers are angry that over the decades since 1994—*******miners have perished not having seen justice done and the money returned to the scheme after their deaths have not materialised as an increase in pensions for those of us still alive today.

(d) Many beneficiaries would like to see the scheme wound up and assets redistributed to them as they are now mostly old and infirm. They fear that the mineworkers pension campaign will outlive them all and assets remaining will be harvested by the exchequer.

(e) Be more open and transparent.

March 2021