BT Pension Scheme Trustees -v- UK Statistics Authority (High Court) – 1 September 2022

On 1 September 2022, Mr Justice Holgate rejected on all grounds a claim for judicial review by the trustees of the BT Pension Scheme, Ford Pension Schemes and Marks & Spencer Pension Scheme (“the Schemes”) against the UK Statistics Authority (“UKSA”) and the Chancellor of the Exchequer.

The claim arose from the UKSA’s decision under s.21 of the Statistics and Registration Service Act 2007 (“SRSA”) to change the methods used to compile the Retail Prices Index (“RPI”).

Background

Since 2016 the UKSA has treated the Consumer Prices Index including housing costs (“CPIH”) as the UK’s main measure of inflation. It is common ground that because of flaws in the methodology of RPI that index produces inflation figures about 1% higher than CPIH. As RPI in its current form has an upwards bias, the UKSA decided several years ago that it should no longer be used as the UK’s measure of inflation, but retained solely as a “legacy index” because of its use in commercial contracts.

RPI is used for a wide variety of purposes, including price regulation, setting interest rates on student loans, wage negotiations, and annual adjustments of certain tax thresholds and liabilities. It is also used in contracts, for example, as an adjustment for rents in leases and index-linked pension benefits.

The UK Government introduced index-linked gilts (“ILGs”) in 1981. They are all linked to RPI.

ILGs issued between 1981 and 2002 contained a clause allowing holders to redeem early if “a fundamental change” is made to RPI which is materially detrimental to holders. It is because of these gilts that section 21(3) of the SRSA gives the Chancellor a power to veto such changes. As the last of these gilts matures in 2030, the Chancellor’s veto will cease to apply in practice then.

ILGs issued since 2005 do not have this early redemption power. Instead they have a “cessation clause” which, in the event of RPI ceasing, allows the Chancellor to select a replacement index, taking into account the interests of HMT and gilt-holders.

Following a critical report from the House of Lords Economic Affairs Committee, the UKSA decided to align RPI to CPIH in February 2019 (“the RPI Decision”) .

In March 2019, the UKSA asked the Chancellor (then Philip Hammond) to consent to the RPI decision. His successor, Sajid Javid, responded in September 2019 refusing to consent to the proposed alignment change to RPI before February 2025. He also refused the UKSA’s proposal to repeal its obligation under the SRSA to publish RPI at all. He did however promise to consult publicly on how and when to change RPI.

Consequently, the UKSA and HMT carried out a joint consultation from March until August 2020 on both the methods for aligning RPI with CPIH and whether the Chancellor should give that consent between 2025 and 2030. Following closure of the consultation, in October 2020 the Chancellor (Rishi Sunak) wrote to the UKSA to say that, having considered the responses submitted in the consultation, he would not consent to the change to RPI before the maturity of the final “old-style gilts” in 2030. The full outcome of that consultation was published in November 2020 (“the Consultation Response”) (see our Alert for details).

The claim

The Schemes challenged the following decisions:

• the RPI Decision
• the decision of the Chancellor in March 2020 to withhold his consent under section 21(3) of the SRSA to the RPI Decision being implemented before 2030 (the “Timing Decision”), and
• the decision of the Chancellor that the government would not pay compensation to the holders of ILGs because of the UKSA’s decision to align the RPI with the CPIH from 2030 (the “Compensation Decision”).

The claim was lodged after HMT and the UKSA published the Consultation Response in which UKSA confirmed that from February 2030 it would adopt the RPI Decision, and the Chancellor confirmed the Timing Decision and announced the Compensation Decision.

The Schemes argued that:

• the RPI Decision of the UKSA falls outside the scope of the power to amend under section 21(1) of the SRSA and is therefore ultra vires
• the UKSA failed to have regard to the impact of its RPI Decision on legacy users or wrongly decided that it was not entitled to have regard to that consideration. As a result, the UKSA failed to comply with the Public Sector Equality Duty (“the PSED”) under section 149 of the Equality Act 2010
• in relation to the Compensation Decision, the Chancellor failed to have regard to the interests of legacy users and to comply with the PSED
• the UKSA was under a duty to consult the public on its RPI Decision and failed to do so when that proposal was at a formative stage. It failed conscientiously to take into account representations made by legacy users such as the Schemes
• the Chancellor was under an obligation to consult with legacy users on the issue of compensation and failed to do so. The Chancellor failed to give consultees any information on compensation to enable them to give due consideration and to respond on that issue. The Chancellor failed to take conscientiously into account such concerns as were raised by consultees.

Judgment

The Court rejected all of the claimants’ contentions. It held as follows:

• as a matter of law the UKSA does have the power under the SRSA to amend RPI in the way proposed. Its objective, under section 7 of the SRSA, is to promote and safeguard the quality of official statistics.
• under the SRSA the UKSA should promote and safeguard the quality of official statistics. In relation to RPI the UKSA is essentially concerned with its statistical quality and its fitness to be used as a measure of consumer price inflation. Parliament has not authorised it to balance competing interests (it was common ground that changing RPI would create winners and losers)
• before reaching the Compensation Decision the Chancellor was amply briefed by his officials on the effect of the RPI Decision on legacy users and the PSED.

The court also confirmed that there was no legal obligation on the UKSA to consult and there was no legal basis for the Schemes’ assertion that the Chancellor was legally obliged to consult on whether compensation should be paid to legacy users.

Private law claim

The Schemes also brought a private law claim in the event of the court deciding that the RPI Decision is lawful. They submitted that the effect of implementing the RPI Decision in 2030 will be that the RPI will cease to be published and so the “cessation clause” in ILGs issued from 2005 onwards will be triggered. On that basis, the Chancellor would be obliged to select a replacement index for RPI. The Court rejected this claim because RPI will still continue to be published.