British Coal 'entitled' to share pounds 1bn surplus: Major backs use of pension fund

THE Prime Minister has defended the Government's suggestion that British Coal should use pounds 481m from the staff pension scheme surplus to fund redundancies.

In a letter to the British Association of Colliery Management, John Major revealed what may be the corporation's legal strategy when a court decides whether its proposal is legal.

Mr Major wrote that under the rules of the staff superannuation scheme, the company is entitled to a share of the estimated pounds 1bn surplus. 'The issue that has arisen is whether in these circumstances British Coal can take a 'holiday' on additional contributions to the scheme in respect of early and enhanced pensions, extending the range of the 'holiday' that the corporation is already taking on standard contributions.

'It is entirely proper, indeed essential that British Coal should explore this possibility. A high proportion of British Coal's contributions are funded by Government grant and it must be right that British Coal should consider whether it needs to make payments at the expense of the taxpayer into a fund that is heavily in surplus.'

Since 1987, BC has used its share of the surplus to take contributions holidays. But last month the corporation withheld payment of a pounds 109m instalment of pounds 481m owed to a fund to finance enhanced pensions for a previous redundancy package.

The trustees of the fund are fighting the plan and the British Association of Colliery Management has accused the Government of using pension fund assets to finance the subsidy to the industry which won support for its pit closure programme.

In his letter of 10 May, Mr Major wrote: 'I am very concerned that members and pensioners of the staff scheme have been caused unnecessary anxiety by the way in which this issue has been presented in parts of the media. As you recognise, staff scheme pensions are not at risk.'

John Meads, BACM's general secretary, denied that there had been any inaccuracies in the association's correspondence or in briefings to MPs and the press. He added: 'You appear to take the attitude that, as there exists a large 'piggy bank' of money somewhere near the coal industry, British Coal - or rather the Government who will be the ultimate financial beneficiary of British Coal's actions - is entitled to raid it. That is what we mean by 'immoral', and I stand by that word.'