Ed Miliband’s £1.5bn pension giveaway might be his most reckless decision yet

Labour has already lost the plot with this gift to retired miners

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“For decades, it has been a scandal that the Government has taken money that could have been passed to the miners and their families. Today, that scandal ends, and the money is rightfully transferred to the miners.”
Triumphant words from Ed Miliband, the energy secretary, as he etched his name into mining folklore by handing back £1.5bn to members of the Mineworkers Pension Scheme (MPS).
For those who spent decades underground, it’s a momentous victory after a 30-year fight with governments of both colours. The remaining 112,000 members will see their pensions instantly jump 32pc, around £29 a week on average.
For Labour, it’s a sure-fire vote winner and a shot across Reform UK’s bow in the next battle for Britain’s Brexit-leaning northern heartlands.
But it’s also controversial and potentially reckless, because that money was protecting the taxpayer from paying decades of miners’ pensions. In giving it back, Mr Miliband just torched the last remaining insurance policy for a pension scheme some say is already in trouble.
Worse still, it potentially sets in motion an end game where miners lose their pensions altogether.
The story began with British Coal’s privatisation in 1994. The MPS struck a deal that would see the Government guarantee miners’ pensions are paid, even if the scheme itself went bust. In return, any surplus would be split 50:50 – netting the state £4.7bn in pure profit so far.
The £1.5bn itself was in the government-owned “Investment Reserve Fund” within the MPS, an emergency pot in case the scheme started struggling.
The miners argue they have simply got their own money back. Critics say that half of your profit is the price you pay for the kind of pension guarantee that would cost much more for a private scheme.
Some schemes in nationalised industries, such as British Telecom, received a Crown Guarantee for free. Nevertheless, the MPS’s guarantee still enabled higher-risk investments, maximising profit.
Morally, I fully support returning the money. The miners shed blood, sweat and tears in conditions most people couldn’t spend 30 minutes in, let alone 30 years. It was dark, dangerous and dusty – the labour backbreaking. Many have lifelong health problems, others lost their lives underground.
I am also from Doncaster, a working class town, now city, with a rich mining heritage. I grew up immersed in the “Thatcher screwed the miners, destroyed an industry and remorselessly ripped the heart out of communities” narrative. Any dissenting views were instantly and furiously dismissed.
But growing up surrounded by groupthink also inspired me to look for alternative views. It’s why I think there are serious questions for Mr Miliband to answer.
The MPS is independently valued every three years. The 2017 and 2020 valuations are publicly available, and one expert recently expressed concern over their results.
For example, the scheme claimed to be just £225m in deficit in 2020, but pensions consultant, John Ralfe, says the true figure is £1.9bn. This would mean it was almost £2bn short of the amount it needed to pay its pensions.
This year, the scheme claimed the 2023 valuation shows a £1.1bn surplus. However, Mr Miliband’s department refuses to publish it.
Given the taxpayer is responsible for any shortfall, and the insurance money has just been jettisoned, we’re entitled to see it. As one MP said, what have they got to hide?
The scheme also closed in 1994, meaning no one has joined or paid in for 30 years. This makes it much easier to calculate its pension promises. So why does it still have 85pc of its money in riskier investments like private equities, hedge funds and property, rather than safer options like bonds?
If it hasn’t already, the scheme should have moved into safer investments and permanently removed that burden from the taxpayer. This would be particularly helpful at a time when inflation has risen again, the cost of living is high and Rachel Reeves is hiking taxes with one hand and snatching the winter fuel payment with the other.
So why hasn’t it? The likely answer is simple – the government guarantee. It’s like borrowing £100 in a casino with the promise that you can keep half of any winnings, but the debt is wiped clean if you lose it all. Why stop, when the worst that can happen is you’re back where you started?
Despite the high proportion of risk in its assets, Mr Miliband has seen fit to give away the money. To do so, he must have one of two things: a cast iron conviction that the scheme will always make its payments, or a devil-may-care attitude to taxpayers’ wallets. I for one would like to know which.
Some miners argue that they have earned this perennial taxpayer support. Many believe they will never need it anyway.
Yet this confidence could return to haunt them if it turns out to be misplaced. They’ve already pledged to continue fighting for the end of surplus sharing. For this to happen, the Government will want something in return – and all that’s left is ending the guarantee.
Many miners would be delighted, and why not, if the scheme genuinely has a big surplus? They would finally keep 100pc of their own profit. Labour could simultaneously bank the profit and end its obligations. Everyone wins.
But what if the scheme is actually in deficit? What if its assets start losing money? Or both? This would lead to a shortfall and with no government guarantee, pensions would be affected. If the scheme takes a massive hit in the stockmarket, they could be decimated.
The miners fume when it’s incorrectly called “taxpayers’ money”. They’re right to. But this doesn’t change the fact it was a vital buffer for the taxpayer. We’re entitled to a detailed explanation for why it was given away.
The 40,000 ex-miners in the separate British Coal Superannuation Scheme will be interested too, since that £2.3bn Investment Reserve Fund isn’t being returned. “Injustice” only goes so far, it seems.
As the wait for answers continues, Labour will doubtless see £1.5bn as a vote-winning drop in the ocean.
But “out to sea” is exactly where Mr Miliband has ruthlessly cast taxpayers, who have no idea how long they’ll be there, which storms are coming and what the damage might cost.
Meanwhile, he’s joyfully riding the crest of a wave – and using the taxpayers’ final lifeboat to do it.
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