Blair U-turn in bid to stave off pensions revolt

Tony Blair moved to stave off the biggest backbench rebellion of his career by promising yesterday to find a "solution" for thousands of workers who lost their pensions when their companies became insolvent.

Tony Blair moved to stave off the biggest backbench rebellion of his career by promising yesterday to find a "solution" for thousands of workers who lost their pensions when their companies became insolvent.

In his second U-turn this week, the Prime Minister said the Government hoped to find a way to help the 60,000 people who worked for companies such as Allied Steel & Wire (ASW), Dexion and United Engineering Forges and who are facing retirement in penury after their companies went bust. A total of 294 MPs, 206 of which are Labour, had threatened to stage a revolt unless the Government backed down and offered compensation.

Mr Blair said yesterday the Government was "considering actively the position of people particularly in circumstances where they have been forced to contribute to an occupational pension and then find that literally all the money they have invested yields absolutely nothing for them". In response to questions from Labour's Tony Lloyd, Mr Blair said: "I think that is a very particular and special case and we are looking at what we can do, and I hope very much in the context of the debate at the moment."

While sympathising with their plight, the Government has so far refused to provide any help for the workers. Only those who have already retired get their pensions paid in full if the company goes under. People can be on the cusp of retirement, having contributed to their pension schemes for 40 years, and find up to 90 per cent of their pension promise is lost.

The Government has, however, pledged to introduce a new pension protection fund, funded through levies on companies, to bail out company schemes. It will not be introduced until next year and will not be retrospective.

The fund is part of a Pensions Bill, which is before Parliament and is due for its third reading in a few weeks. Kevin Brennan, Labour MP for Cardiff West, had vowed to table an amendment to force the Government to include workers already suffering and had the support of many Labour backbenchers.

Yesterday's comments from Mr Blair were seen as throwing down a gauntlet to Gordon Brown, the Chancellor, who is thought to be against giving compensation. Derek Wyatt, MP for Sittingbourne and Sheppey, said: "This augurs very well as it is clear that his antenna is working and we are closer to solution than we had hoped. The PM was fully aware that we would table an amendment and he would be defeated by his own Government. He didn't want to suffer another top- up fees disaster."

The Government has also been lobbied by unions. Michael Leahy, general secretary of the ISTC union, which represents many workers at ASW, said: "The Prime Minister's words are very welcome. This seems to suggest that our members who lost their pension through no fault of their own may now have their pensions restored."

Some of the workers who were affected also took heart from Mr Blair's words. Andrew Parr, 61, who considers himself "one of the lucky ones" to have only lost 70 per cent of his pension when Allied Steel & Wire went bust in 2002, said: "The Government has consistently told us not to get our hopes up. These words are a big step forward from that and are grounds to get our hopes up."