The High Court has rejected a claim by public sector unions that the Government’s decision to switch indexation for future pension increases from RPI to CPI was unlawful.
In the June 2010 Budget, Chancellor George Osborne (pictured) announced the decision to switch the measure for pension inflation to the consumer price index, which, on average, tends to be lower than the RPI.
The move, which took effect from April this year, has also been applied to some private sector schemes which do not have RPI-linked pension increases hard-wired into their rules.
Last month six public sector unions launched a judicial review challenging the decision.
The unions argued that the change was not permitted under social security legislation and “reneges on assurances given by successive Governments that RPI would apply”.
However, two of the three judges backed the Government, meaning the unions’ challenge was quashed. However, all three judges agreed with the unions’ claim that the decision to switch to CPI was motivated by deficit reduction.
A spokesperson for Thompsons Solicitors, which acted on behalf of the unions, says: “While the High Court’s split ruling is disappointing, the unions are pleased that their main argument, that the chancellor was motivated by deficit reduction when he made the switch, was accepted.
“It is encouraging that one judge agreed that this was illegal. We have instructions to lodge an appeal urgently on behalf of the unions.
“At a time when public sector employees are being forced to bear the burden of the financial crisis, the unions will not allow this unfair and, in our view, unlawful breach of the contracts of millions of workers to rest.”