Court of Appeal dismisses British Telecom’s challenge to HM Treasury’s decision to index public service pensions

21/01/20

The Court of Appeal (Lord Justice Henderson, Lady Justice Nicola Davies DBE and The Master of The Rolls) has today dismissed an appeal by British Telecom seeking to establish that HM Treasury’s decision to implement full indexation of the guaranteed minimum pension payable to public service pensioners was unlawful.

In 2016, following the introduction of the new State Pension, the Treasury issued a public consultation concerning whether and, if so how, it should index GMP for public service pensioners. One of the purposes of the consultation was to explore possible impacts on private sector schemes which mirror public service schemes and determine whether such impacts should be taken into account when formulating the Government’s policy.

Under the terms of BT’s pension scheme, a decision to use the conventional legislative indexation mechanism would entitle one category of BT’s pensioners to equivalent indexation, at a cost to BT of about £120 million. In its response to the consultation, BT urged the Treasury to select an alternative legal mechanism that did not trigger any right to an increase under its scheme.

The Treasury decided that it would index pensions via the conventional mechanism and rejected BT’s proposals.  In so doing, the Treasury concluded that, even though the purpose of indexation was to price-protect public service pensions only, it nonetheless did not wish to prefer BT’s interests over those of its pensioners, nor did it wish to have to grapple with the potentially complicated legal issues that would have arisen had it adopted BT’s proposals.

The Court of Appeal dismissed BT’s appeal against the judgment of the Divisional Court refusing its claim for judicial review of the Treasury’s decision. BT advanced five grounds of appeal.  The Court of Appeal rejected the first two grounds and held that it was unnecessary to express a view on the remaining three. The first two grounds of appeal raised factual challenges to the conclusion of the Divisional Court concerning (i) the precise nature of the proposals advanced by BT during the course of the consultation, and (ii) the basis on which the Treasury rejected those proposals.  The Court of Appeal held that the Divisional Court had a proper and legitimate basis for reaching the conclusions it had and that those conclusions were in any event correct. The judgment is an important authority on the proper approach to appeals against findings of fact in judicial review proceedings.  

The judgment is available here.