Cash-strapped local authorities have left themselves open to multi-million pound liabilities because they failed to re-rate staff pensions when making equal-pay settlements.
Under changes made to Local Government Pension Scheme (LGPS) rules four years ago such payouts must be factored in when calculating employees’ entitlement to retirement income because they represent back-pay rather than compensation - as some councils had tried to argue.
However, so far only North Lanarkshire Council has taken action to comply with the rules after being ordered to do so by the Scottish Public Pensions Agency (SPPA) in 2016.
Having spent the past two years calculating how much it and the affected women would have to pay in backdated pension contributions, North Lanarkshire is now facing a bill of up to £8 million in order to meet its obligations. That equates to around six per cent of the £130m it has already paid out to settle equal-pay claims.
The affected women will have to pay an average of just over £700 each to backdate their own pension contributions, but could see the amount of retirement pay they are entitled to increase by thousands of pounds a year as a result.
It is understood that no other local authority has looked at the issue despite the SPPA writing to all public sector bodies to draw their attention to the rule change in 2016.
In that letter the Scottish Government executive agency stressed that “equalisation legislation to compensate persons who have wrongly been underpaid would not deliver full compensation if the employees’ pensions did not reflect what the circumstances should have been had they received the correct pay in the first instance”.
That letter went to the secretary general of the Convention of Scottish Local Authorities (Cosla) and the chief executives of all 32 local authorities in addition to the bosses of agencies such as VisitScotland and Strathclyde Passenger Transport Authority.
Despite this, the SPPA said that it has not engaged with any other local authority over the pension issue and only became involved with North Lanarkshire because it had been consulted “as a result of an internal dispute resolution procedure appeal”.
A spokesman for Audit Scotland, which has oversight of all local authority spending, said the body did not know if any other council was looking to re-rate pensions for those it has either already settled with or is in the process of agreeing settlements with.
He added that the onus is on other councils to follow North Lanarkshire’s lead.
“There are highly complex issues around implementation of equal pay as our [2017 report Equal Pay in Scottish Councils] made clear and we will be monitoring progress on its recommendations,” he said.
“In the light of the SPPA ruling, local authorities must treat claims as back pay and therefore agree the pensionable elements with claimants as part of any settlement.”
A Cosla spokesman said it could not comment on settlements made by its member authorities, but added that “obviously, it is right and proper for councils to determine payments in accordance with the pension regulations and settlements on the basis of the timing of agreements and the applicable rules in place at that time”.
According to the Audit Scotland report, local authorities paid out a total of £750m between 2005 and 2016 to compensate mainly female workers who for years had been paid less than their male counterparts for work of equal value.
The figure is almost exactly equal to the reduction in council funding over the past five years. According to a report issued by the Scottish Parliament Information Centre last month, real-terms total funding for local authorities fell by 7.1% - the equivalent of £744.7m - between 2013-14 and 2017-18.
The Audit Scotland report did not make clear how much of the equal-pay total was paid out after the 2014 change to the pension regulations.
Meanwhile, the total sum paid out in settlements is expected to rise considerably because a third of all claims filed - including all of Glasgow City Council’s - were still outstanding as at September 2017.
Glasgow, which is Scotland’s largest local authority and the second biggest in the UK after Birmingham City Council, is expected to have to pay hundreds of millions of pounds to settle with its equal-pay claimants, with some estimates putting the total bill at over £1 billion.
The lawyers and unions acting for the Glasgow claimants have confirmed that they will be demanding the council includes backdated pension contributions in its settlements.

Glasgow - Council Bosses' 'Golden Goodbyes' (25/05/18)

Here's a great story from Politics Home highlighting a scathing report from two parliamentary committees at Westminster which have accused bosses at Carillion of being "too stuffing their mouths with gold to show any interest in the welfare of the workforce".  

Now that's exactly how I feel about senior officials at Glasgow City Council who have walked away with eye watering Exit Packages worth £1.389 million (see post below dated 07/05/18) while low paid workers lower down the food chain have had to fight through the courts for 12 long years just to enforce their rights to equal pay.

You would think that Glasgow's MSPs might be interested in having a similar inquiry into what's been going on in Scotland's largest council.

Because not only have senior officials have been presiding over discriminatory, 'unfit for purpose' pay arrangements since 2007, several of their colleagues were granted big boosts to their pensions through the ward of 'added years'.

Just last year, Glasgow's outgoing director of finance, Lynn Brown, was gifted the sum of £120,000 to access her pension early.

Yet since then the City Council has come over all 'mean spirited' in negotiations to settle the long-running equal pay dispute with 12,000 of its lowest paid employees. 


Carillion bosses ‘too busy stuffing mouths with gold’ to prevent firm’s collapse, say furious MPs

By Matt Foster - Politics Home

The directors of doomed construction giant Carillion were “too busy stuffing their mouths with gold” to save the firm from its spectacular collapse earlier this year, a hard-hitting joint report by MPs has said.

More than 2,000 jobs have been lost since the construction firm’s collapse - Credit: PA

Carillion - which was mired in debt and owed billions to its suppliers - went bust at the start of the year, with more than 2,000 staff laid off so far.

The firm sank with one of the biggest pension deficits of any FTSE 350 company.

Ex-Carillion director says Brexit and snap election led to firm’s collapse

Downing Street lobby briefing on customs union and Carillion job losses

MPs accuse Carillion of trying to 'wriggle out' of pension contributions

A scathing joint report from two Commons committees brands the company’s collapse “a story of recklessness, hubris and greed” and blasts company bosses for misrepresenting the reality of the business as they ramped up dividends and treated long-term obligations like pensions “with contempt”.

The report accuses Carillion’s board of directors of being “both responsible and culpable” for the company’s failure, despite presenting themselves as “self-pitying victims” of “unforeseeable mishaps”.

The MPs tear into the company’s former finance director Richard Adams - who sold all of his shares just months before the firm’s collapse - and its “misguidedly self-assured” ex-chief executive Richard Howson over the company’s nosedive in fortunes.

They also dismiss former chairman Philip Green as an “unquestioning optimist” who failed to challenge bad decisions, and urge the Insolvency Service, which is probing Carillion’s downfall, to consider disqualifying the trio from serving as directors again.

Work and Pensions Committee chairman Frank Field said Carillion’s collapse was “a disgraceful example of how much of our capitalism is allowed to operate”.

He fumed: “Same old story. Same old greed. A board of directors too busy stuffing their mouths with gold to show any concern for the welfare of their workforce or their pensioners. They rightly face investigation of their fitness to run a company again.”

Mr Field urged ministers to bring forward “radical reforms to our creaking system of corporate accountability”, adding: “British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion.”


Rachel Reeves, chair of the Business, Energy and Industry Strategy Committee meanwhile trained her fire on audit firm KPMG, which vetted Carillion’s accounts for almost two decades before its collapse.

She said it and other members of the so-called 'Big Four' group of accounting giants - PwC, Deloitte and EY - should be "in the dock for this catastrophic crash".

Ms Reeves warned: "They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems. The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.”

The committee is urging the Government to refer the accounting giants to the Competition and Markets Authority or risk “a crisis of confidence in the audit profession”.

Labour’s shadow business secretary Rebecca Long-Bailey went further, however, calling for the “cabal of four big auditors” to be “broken up”.

She said: “Millions racked up in debt, thousands of workers losing their jobs and pensions, and supply chain business at risk of collapse, because not only did the corporate auditors fail to hold Carillion's misbehaving managers to account, but because the Government looked on in ignorance at the same time, proceeding to award contract after contract to a firm which had issued numerous profit warnings,” she said.

A government spokesperson welcomed the joint report and said ministers would “respond fully in due course”.

They added: “Our priority has been the continued, safe running of public services and to minimise the impact of Carillion's insolvency. The plans we put in place have ensured this. “