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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Cockburn, R (on the application of) v Secretary of State for Health [2011] EWHC 2095 (Admin) (29 July 2011)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2011/2095.html
Cite as: [2011] ACD 122, [2011] EWHC 2095 (Admin), [2011] Pens LR 367

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Neutral Citation Number: [2011] EWHC 2095 (Admin)
Case No: CO/1268/2010

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
29 July 2011

B e f o r e :

THE HON. MR JUSTICE SUPPERSTONE
____________________

Between:
The Queen on the application of
IAIN COCKBURN
Claimant
- and -

SECRETARY OF STATE FOR HEALTH
Defendant

____________________

John Cavanagh QC and Nicholas Randall
(instructed by Messrs Manches LLP) for the Claimant
James Eadie QC and Ivan Hare (instructed by the Treasury Solicitor) for the Defendant
Hearing dates: 12 and 13 July 2011

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Supperstone :

    Introduction

  1. Mr Iain Cockburn, the Claimant, is the widower of Dr Clare Cockburn, a General Practitioner. Dr Cockburn became a member of the NHS Pension Scheme ("the Scheme") in August 1982. She retired from the NHS owing to ill health in November 2006 and died in February 2007. On her death the Claimant became entitled to a widower's pension under the Scheme. In these proceedings he seeks judicial review of the level of his entitlement to that pension under Regulation G7 of the National Health Service Pension Scheme Regulations 1995 ("the 1995 Regulations"). It is accepted by the Secretary of State, the Defendant, that Regulation G7 treats him differently from how he would be treated were he a woman. His late wife's pensionable service before 6 April 1988 is discounted when it would not be, in relation to a husband's service, were he a woman. On the basis of Dr Cockburn's pre-1988 service, the Claimant would be receiving an additional entitlement of approximately £3,200 per annum were he a surviving widow.
  2. The parties are agreed that the Claimant's entitlement to a survivor's pension falls within the ambit of Article 1 of the First Protocol to the ECHR. The Claimant alleges that this difference of treatment is unlawful gender discrimination contrary to Article 14 ECHR. The claim is defended on two grounds: first, that it is out of time for the purposes of s.7(5) Human Rights Act 1998 ("HRA"); and second, that Regulation G7 has an objective and reasonable justification, in particular as part of the progressive realisation of gender equality against a background of legitimate historical protection for the weaker economic position of widows.
  3. On 8 October 2010 Holman J granted permission to apply for judicial review, expressly reserving the time limit point under s.7(5) HRA for the substantive hearing.
  4. Legislative history and framework

  5. The Scheme is the occupational pension scheme for employees and self-employed general medical and dental practitioners who work in the NHS. Currently it has in excess of 1.3 million active members. It was introduced in 1948 to provide employees in the then new NHS with a pension. Basic widows', but not widowers', pension cover was included in the package of benefits provided from inception at 5 July 1948.
  6. In 1975 provision was first made for widowers. The National Health Service (Superannuation) (Amendment) Regulations 1975 introduced a dependent widower's pension which enabled a female member to nominate her incapacitated husband to receive a widower's pension on her death. This provision became Regulation 18 of the National Health Service (Superannuation) Regulations 1980 ("the 1980 Regulations").
  7. In 1989 the non-dependent widower's pension was introduced by the National Health Service (Superannuation) (Amendment) Regulations 1989 ("the 1989 Regulations"). The widower's entitlement was calculated on the basis of his wife's service from 6 April 1988. The 1989 Regulations inserted a new Regulation 18A to the 1980 Regulations which provided:
  8. "Widower's pension in respect of service after 5 April 1988
    18A-(1) The widower of a person in respect of whom there is a period of contributing service after 5th April 1988 (including a period added as a result of an election under Regulation 25 made after that date) shall, in relation to that service, be entitled to receive from the Secretary of State an annual widower's pension or, as the case may be, a limited pension and such widower's or limited pension shall, subject as aforesaid, be payable in like circumstances and calculated in like manner as a widow's pension under Regulation 14 or a limited pension under Regulation 16 as the case may be."
  9. The National Health Service Pension Scheme Regulations 1995 ("1995 Regulations") consolidated the 1980 Regulations and the arrangements for widower's pension cover remained unchanged. Regulations G1-G6 provide that a widow's pension is to be calculated on the basis of her husband's entire pensionable service, including pre-April 1988 where relevant. By contrast Regulation G7(3) provides:
  10. "When calculating a widower's pension, any part of a member's benefit that is based on pensionable service before 6th April 1988 will, subject to paragraphs (4) and (5), be disregarded."

    Members subject to the 1995 Regulations are classified as the "1995 Section".

  11. The National Health Service Pension Scheme Regulations 2008 ("the 2008 Regulations") introduce as from 1 April 2008 a new section of the Scheme. This provides pension entitlement for a member's surviving spouse on the same basis for men and women. Existing members of the NHS Scheme remain in the 1995 section unless they leave the Scheme or decide to move their accrued rights to the "2008 Section". It is accepted by the Defendant that the option of moving to the 2008 Section is not open to those, such as the Claimant, who are already in receipt of a pension.
  12. Article 1 of the First Protocol to the ECHR provides:
  13. "Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No-one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
    The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
  14. Article 14 of the ECHR provides:
  15. "The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status."

    Factual background

  16. Mr Robinson, who works for the Department of Health's NHS Pensions and Employment Services Team, in his first witness statement in "An introduction to Occupational Pension Schemes" explains the funding of benefit changes. At paragraphs 20-21 he states:
  17. "20. Often, benefit improvements will only be applied to future service of current employees, as these are the benefits that are still being funded. The benefits already accrued by past service of current employees and by previous employees are expected to be paid for by earlier contributions.
    21. In terms of funding, the cost of future service improvements is an ongoing charge, while the cost of past service improvements is an up front capital charge. When a [Defined Benefit] scheme [which the Scheme is] makes detrimental changes to benefits, it may only apply these changes to future service. If a past service benefit improvement were to be made in the [Scheme], the operation of 'cost sharing' between employees and employers in regulations, would result in an increase in the contribution rates of current employees."

    The Scheme is unfunded and benefits falling due are paid from tax revenue at that time.

  18. Mr Robinson confirmed that he reviewed the records held by the Department of Health covering the history of the Scheme and development of widowers' pension cover. During the whole of the period between 1948 and 1973 he was able to find only one reference to extending the basic 1948 NHS PS widows' pension cover to widowers. The reason for the general lack of focus on widowers' benefits, in his view, may lie in the demographic and societal differences at the time, identified in the papers that he had seen in the case of R v Secretary of State for Work and Pensions, ex parte Hooper [2005] 1 WLR 1681. Mr Robinson said that he found examples during 1973-4 of the first serious representations from the General Medical and Dental Practitioner interests about the routine provision of widowers' pension cover in public service schemes. There appears to have been little enthusiasm amongst the public service schemes for the routine provision of widowers' pensions, for a number of reasons:
  19. The position of the Health Departments was that any change must be for all Scheme members, not just doctors and dentists.

  20. During the period 1979-1981 there was increased pressure across public service schemes for an extension to widowers' pension cover. The Government had accepted in principle that widowers' pension should be introduced into public sector superannuation schemes, but only "when resources permit". However staff representatives wanted the extension of widowers' pension benefits to be introduced without additional employee contribution charges, and based on service from 1972, the point from which widows' pensions were available without deduction from a married man's retirement lump sum. Mr Robinson noted (at paragraph 71) that the Health Departments were concerned that this breached two major Government principles for the introduction of scheme improvements:
  21. From April 1980 there was continuing correspondence about widening widowers' pension cover. GPs and their representatives continued to be the main correspondents, but the Departments indicated that any move to improve benefits could only be made by increased contributions and then the change would need to apply across the board.
  22. Universal widowers' pensions were introduced from 6 April 1988 across the public service pension schemes. The Social Security Act 1986 required widowers' pension cover based only on the member's Guaranteed Minimum Pension, but the Scheme, in common with several other schemes, went further and equalised widows' and widowers' pensions at half the rate of the member's pension for service from 6 April 1988. Since the costs of the new cover would build up gradually from 1988, the Health Departments were able, Mr Robinson said, to agree to the provision of the new cover at no extra cost to Scheme members. Mr Robinson added the following:
  23. "78. JSCC ["Joint Superannuation Consultative Committee"] discussed the widower's pension arrangements extensively, and staff representatives again saw backdating of the arrangements (to at least 1972) as highly desirable. However the Governments continuing general presumption against retrospective changes and the lack of agreement in the [Scheme] on any increase in the contribution rate to pay for the improvement, led to the new cover being confined to service from 1988.
    79. Staff representatives' unwillingness to accept an increase in the general contribution rate on this account appeared to be because they believed the Government alone should pay for equalisation of widower's pension cover and in due course might come to do so. It is my understanding that it may also have been because equalisation, was simply not seen to be the highest priority facing [Scheme] members. This may in part have been because of the general expectation at that time that most women would survive their husbands."
  24. According to Mr Robinson the Health Departments remained concerned, however, about those female members for whom an all-service widower's pension would be particularly important, and decided to provide a separate purchase facility. Regulation 18B inserted into the 1980 Regulations by the 1989 Regulations gave the female member an option to elect to purchase additional service to increase the pension payable to her widower under Regulation 18A, the election to be made no later than 30 June 1989. However less than 300 applications were received out of a potential 515,000 members at the relevant time.
  25. In 1991 the Scheme, in common with other public service schemes, introduced an optional facility for members to invest Money Purchase AVCs with a private sector provider to produce "top-ups" to main Scheme benefits. The investment fund produced was typically used to buy an annuity on retirement to increase the member's personal pension, however it could also be used to purchase additional dependants' pensions, including increased widower's pension. In the event, take up of the MPAVC dependants' facility was also very low.
  26. Correspondence about the lack of widower's pension for pre-1988 service continued at fairly regular intervals and in the early 1990's, there was a further significant scheme review, leading up to the March 1995 "Restructuring Package" and further consolidation of Regulations. There were renewed calls during the Review for widower's pension cover to be backdated at least to 1972. Mr Robinson said (at paragraph 86):
  27. "However, the costs of backdating widower's pension cover remained high and the monies available for other sought-after benefit improvements (e.g. larger death gratuities) were limited."

    He continued:

    "87. Backdating of cover to 1972 would in any event have remained counter to the Government's general presumption against retrospective change. Staff representatives were also still unprepared to resolve that difficulty by agreement to an increase in the all-member contribution rate to pay for the equalised widower's pension cover. The result was that it could not form part of the 1995 restructuring package."
  28. The 1995 Regulations consolidated the 1980 Regulations and the arrangements for widower's pension cover remained unchanged.
  29. The Scheme underwent significant changes on 1 April 2008 when the NHS PS Regulations 2008 came into force. All new entrants joining the Scheme are required to join the "normal pension age 65" Section of the Scheme from 1 April 2008, although existing members at that date (and "returners" whose break in service is less than five years) may remain in the "normal pension age 60" 1995 Section.
  30. The funds available to the 2008 "Review Partners" were limited to a fixed proportion of the sum released by the public service schemes' move to a normal pension age of 65 for new entrants. Doctors' representatives in particular again pressed strongly for the backdating of widowers' pension cover. However, following extensive discussions, staff representatives refused to agree the allocation of any of the improvement funding available to the Review, for the backdating of widowers' pensions. Mr Robinson notes:
  31. "97. In a closing stages report on the (2008) NHS PS Review, giving the 'staff side' view on the financial framework set for the Review by Government and Scheme managers, Hilary Salt, independent actuary to the Review, recorded the following extract on behalf of staff representatives:
    '… The current Scheme incorporates elements of discrimination in its benefit provision, which are morally objectionable, most notably the denial of dependants' pension to unmarried partners and the limitation of dependants' pensions for widowers to pension rights earned after 1988. They believe the costs of remedying these injustices should be paid through higher employer contributions. They should not be paid by Scheme members, whether collectively out of pension age savings or individually by affected individuals having to sacrifice part of their own pension or pay extra contributions.
    Staff side partners believe that all savings arising out of any increase in the normal pension age should be re-invested in improving other benefits of the Scheme. If this is not the case then the Review will amount to a pay cut for NHS staff and important opportunities will be lost to remedy deficiencies in the Scheme and to make changes that will provide real encouragement in the form of better pension to those who extend their careers in the NHS…'
    98. For these reasons, managers were unable to change 1995 Section provisions restricting a widower's pension to service from 6 April 1988…"
  32. In section D of his first witness statement headed "The impact of retrospective changes to the NHSPS" Mr Robinson at paragraphs 112-118 sets out the rationale for the Government's presumption against retrospective change in pension schemes and the rationale for the Government's allowing retrospective changes which are paid for. As for the former, he states:
  33. "112. For the whole of the period during which widows' and widowers' benefits have been under consideration in the NHS PS (that is, from the early seventies to date), Scheme managers have determined policy within a broad framework, which acknowledges the Government's strong presumption against retrospective change in the public service schemes. However, this does not mean that managers have accepted the presumption as a rigid, unvarying rule precluding all such changes. Ministers can and must exercise discretion, giving due consideration to the merits of any arguments in favour of retrospective change, and there may be situations in which very good reasons can be advanced for making an exception."

    As for the latter, he states:

    "115. The Government has said that it may be able to agree to retrospective changes, which improve benefits for 'active' members (i.e. benefits that have yet to be paid), if the members who benefit pay (collectively) the extra contributions required to cover the full cost of the improvement."
  34. The current estimated costs of providing widowers' pensions in respect of service before 6 April 1988 for active, deferred and pensioner members in the Scheme and a number of the other larger public service schemes are given at paragraph 118 of Mr Robinson's first witness statement:
  35. NHS Scheme (E&W) £730-905m
    NHS Scheme (Scotland) £100-120m
    Teachers' Scheme £1350m
    Teachers' Scheme (Scotland) £140m
    Classic Section of the
    Civil Service Pension Scheme
    £400m
    Police Pension Scheme (E&W) £55m
    Police Pension Scheme (Scotland) £5m
    Local Government (E&W) £675-900m16
    Local Government (Scotland) £110-135m
    Armed Forces Pension Scheme
    1975 Section
    £30-35m
    TOTAL £2.965bn-4.045bn
    16 (Current estimate of costs as calculated by DH's actuarial advisers based on the relative costs for NHSPS and LGPS as at 1985)

  36. Mr Andrew Blake, head of the Pensions Department at the BMA in his first witness statement dated 5 October 2010 accepts that other NHS staff representatives voted against a revision of the policy of not back-dating widowers' pensions. Nevertheless, he says this should be seen in the context of the overall negotiations in which those NHS staff representatives prioritised other matters of greater importance to their members. It is his understanding that the other NHS staff representatives are broadly speaking supportive of the BMA's position.
  37. By letter dated 17 May 2011 the Claimant's solicitors requested an explanation from the Defendant as to the basis upon which the cost of retrospective equalisation of the NHS Scheme and of all public sector schemes had been made, or for the Defendant to set out the assumptions that had been relied upon in arriving at the estimates.
  38. Mr Robinson responded in his second witness statement to this request. He stated that he supplied the cost estimates after taking advice from the NHS PS Scheme Actuary, that is the actuary appointed from time to time by the Secretary of State to provide advice in connection with the Scheme, which office is currently filled by the Government Actuary's Department. He had sought and obtained further information from the Scheme Actuary ("SA"). The most up to date data available for the Scheme assessment were those provided by the NHS Business Services Authority for the purposes of the actuarial valuation as at 31 March 2008. Mr Robinson referred to the data on which these estimates were based and the way in which they were used to arrive at the estimates provided. At paragraph 15 Mr Robinson stated:
  39. "Based on the data, assumptions and approach explained above, the SA has estimated the cost of retrospectively providing widowers' pensions for service before 6 April 1988, as between £730m and £905m. The lower figure assumes life expectancy of current beneficiaries to be in line with apparent recent Scheme experience, which… does not constitute the SA's best estimate, since the experience data is not reliable. The higher figure assumes life expectancy for all widowers in line with the assumptions adopted for the actuarial valuation at 31 March 2008 and this represents the SA's best estimate of the costs."

    Mr Robinson explained that the Department's earlier cost estimate of £500m referred to in the Defendant's "Summary Grounds of Resistance" was based primarily on 1999 valuation data and methodology, with an allowance for pay increases up to 2004. Factors which have resulted in the capital cost increasing since the previous estimate are first, the assumptions have changed, notably life expectancies are now higher; and second, the term to expected payment of benefits has reduced. This means the discounted value of those cash flows (i.e. the capital costs) has increased due to the passage of time.

  40. Mr Robinson confirmed that, with the exception of the Local Government Pension Schemes (LGPS) in England and Wales, representatives for the other large public service pension schemes provided the wider costs of widowers' pension retrospection. The SA (based on the relative costs for the Scheme and Local Government Pension Schemes ("LGPS") as at 1985) provided the estimate of LGPS costs. Mr Robinson stated that although he is not in a position to provide the same level of data and rationale in relation to the cost of providing widowers' pensions in respect of service before 6 April 1988 for the other large public service schemes, he has no reason to believe that the costs applied by those schemes are unrepresentative. The other schemes had, at the relevant time, broadly similar pension arrangements and, save for the exceptions listed in paragraphs 110 and 111 of his first witness statement, similar public service policies and arrangements in relation to the introduction of widowers' pension cover. Further, all of the other schemes share their authority and basis in the Superannuation Act 1972. Accordingly any ruling in favour of the Claimant is, in Mr Robinson's view, likely to extend well beyond the confines of the Scheme.
  41. Mr Blake in his third witness statement stated that the Scheme is presently in "surplus" in the sense that current contributions received are greater than benefits paid. This surplus is presently in the region of £2.0 billion per year and by 2015/16 it is forecasted to have returned approximately £10.7bn in total. Mr Blake suggested therefore that the Scheme would be able to meet even the greatest estimated cost of retrospective widowers' pension equalisation. Mr Robinson, responding to this suggestion, in his third witness statement exhibited a letter dated 4 July 2011 from the Government Actuary's Department. Ms Sue Vivian, Chief Actuary, stated:
  42. "The use of the term surplus is inappropriate in this context. The Scheme has accrued liabilities (assessed at the actuarial valuation as at 31/3/04) of some £127bn. This represents the capitalised value of pension promises that have been made in the past to members of the Scheme but which have yet to be paid out. As Mr Blake acknowledges the Scheme has no assets put aside to meet those liabilities.
    The fact that current contributions made by members and employers are in excess of benefit outgo is somewhat irrelevant to the Scheme's financing. Contributions made by employers are mainly (with the exception of some private sector employers who participate in the Scheme) themselves funded by tax payers. The payment of contributions by the public sector employers is simply an internal budgeting mechanism used by Government to account for the cost of pension promises being made at that time by employers. A truer measure of the cash costs of financing the Scheme is the excess of benefits paid out over the contributions collected from members (and from the private sector employers who participate in the Scheme). On this measure the Scheme is running at a considerable 'deficit' of around £3bn a year."
  43. Between 1 October 2009 and approximately the end of 2011 members of the 1995 Section of the Scheme have an option to transfer their membership to the fully equalised 2008 section. The 2008 Section is a "normal pension age 65" scheme but, for members below the age of 60, a choice transfer is made on a "day for day service" basis, without loss or additional cost to the member. In his second witness statement Mr Blake made the point that this option comes at a price. In essence unless a Scheme member knows for sure that she or he is not going to retire until the age of 65, the financial benefits afforded to the Scheme member by the 2008 Section are less generous than the benefits afforded to the Scheme member by the 1995 Section. This means that if a Scheme member chooses to move to the 2008 Section, the benefit in relation to the period of service that will be taken into account for the purposes of the widower's pension is counter-acted by the significant financial disadvantages that will ensue from the transfer.
  44. Moreover, obviously at the time when a Scheme member has to choose whether to leave the 1995 Section and join the 2008 Section, she will not know whether she or her male partner will die first. Therefore, she is not in a position to form a view as to whether the advantage of being credited with pre-1988 service for widower's pension services is worth it in light of the potential disadvantages that will result from moving to the 2008 Section.
  45. At paragraphs 19-27 of his second witness statement Mr Blake identifies the main ways in which membership of the 2008 Section is less favourable than membership of the 1995 Section. Retirement age, the salary that is used for calculation purposes, voluntary early retirement, additional pension cover, and added years, are all considerations that led Mr Blake to conclude that "a move from the 1995 section is highly likely to be disadvantageous for, and unattractive to, a female Scheme member, even though one consequence would be that her pre-1988 service would be credited for widower's pension purposes" (para 28).
  46. Responding, Mr Robinson in his second witness statement agreed with Mr Blake that some members might find a switch of Scheme sections unattractive, whilst other members may find it entirely suitable to their needs. Mr Robinson agreed with Mr Blake that the majority of Scheme members (who joined, and are mostly still in, the 1995 normal pension age 60 Section) currently retire before age 65. However it seemed to Mr Robinson that the possible disadvantages, Mr Blake described, that may flow from a move to the (normal pension age 65) 2008 Section, will vary in proportion to the actual (not the potential) age of the member at retirement, and diminish significantly if the member always intended to work beyond age 60. A key issue for members making the NHSPS "choice" is the age at which they intend to retire. Members who always intended to retire at or close to age 60 will be the most significantly impacted by the factors Mr Blake described. Conversely, if a member intended to retire later than age 60 anyway, then the potential benefits of switching sections (including for female members the advantage of all service widower's pension cover) may be significantly increased. In conclusion Mr Robinson said at paragraph 46:
  47. "Review partners [during the 2008 NHSPS Review] decided that, taking into account the needs and context of the Scheme membership as a whole, 'free' all-service widower's pension cover should only be managed within the different cost environment of the 2008 Section of the Scheme. For members of the 1995 Section of the Scheme, the Review Partners did not support the use of monies (then available for scheme improvements) to provide all-service widower's pension cover. The main concern expressed was that this would amount to 'charging' current Scheme members more for an improvement that could only benefit past scheme members."

    GROUNDS OF CHALLENGE

    Issue 1: whether the claim is out of time for purposes of s.7(5) HRA

  48. The proceedings were issued on 28 January 2010. The Claimant challenges the application of the 1995 Regulations to his case. It is common ground that the material decision dates from February 2007, when Dr Cockburn died. Mr Eadie QC, for the Defendant, submits that being so the claim is out of time under s.7(5) HRA which provides:
  49. "(5) Proceedings under sub-section (1)(a) must be brought before the end of—
    (a) the period of one year beginning with the date on which the act complained of took place; or
    (b) such longer period as the court or tribunal considers equitable having regard to all the circumstances,
    but that is subject to any rule imposing a stricter time limit in relation to the procedure in question."
  50. Mr Cavanagh QC, for the Claimant, submits that the claim has been brought in time: first, because the infringement of rights complained of, namely paying the Claimant a smaller pension than he would have received in the same circumstances if he had been a female, is a continuing act; alternatively the fact that the infringement is continuing, and will continue for the remainder of the Claimant's life, is a reason why it is equitable to extend time under s. 7(5)(b).
  51. In Somerville v Scottish Ministers [2007] 1 WLH 2734 Lord Hope at paras 51 and 52 drew a distinction between an act complained of which is a continuing act of alleged incompatibility and a one-off act with continuing consequences.
  52. In my judgment the present case falls into the second of Lord Hope's categories. February 2007 was the date when the Claimant's entitlement arose and the date at which the application of the 1995 Regulations led to the discrimination of which he now complains. Accordingly the claim is out of time under s.7(5).
  53. However I take the view that it would be equitable to extend time. As Mr Eadie accepts, this claim raises a matter of public importance. It appears from figures provided by the Government Actuary's Department that there are some 600,000 beneficiaries of the scheme who are currently, or potentially, in the same position as the Claimant: their entitlement derives from a female member with some service pre-6 April 1988. I also take into account that the determination of the issue in the present proceedings is likely to impact on other public sector pension schemes (see para 27 above). It is not suggested that the delay has caused hardship to the Defendant or to third parties or detriment to good administration.
  54. Issue 2: whether Regulation G7 has an objective and reasonable justification.

    The legal test

  55. The relevant legal test under Article 14 is as set out by the European Court of Human Rights ("the European Court") in Stec v United Kingdom (2006) 43 EHRR 47 in the Judgment at paras 51 and 52:
  56. "51. Article 14 does not prohibit a Member State from treating groups differently in order to correct 'factual inequalities' between them; indeed in certain circumstances a failure to attempt to correct inequality through different treatment may in itself give rise to a breach of the Article. A difference of treatment is, however, discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised. The Contracting State enjoys a margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment.
    52. The scope of this margin will vary according to the circumstances, the subject-matter and the background. As a general rule, very weighty reasons would have to be put forward before the Court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention. On the other hand, a wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social and economic grounds, and the Court will generally respect the legislature's policy choice unless it is 'manifestly without reasonable foundation'."
  57. The burden of proof in relation to reasonable and objective justification rests with the Defendant.
  58. The Parties' submissions

  59. Mr Eadie submits that it was appropriate and justified to introduce in 1989 a change entitling non-dependent widowers' to survivors' pensions, but also to make that change prospective in the sense that it applied in relation to periods of service after 5 April 1988. He submits that it has remained just as appropriate and justified to maintain the position rather than introducing a retrospective change since that date.
  60. Before 1989, reflecting their disadvantaged socio-economic position, widows, but not widowers (with the exception of incapacitated husbands), had a pension. By the 1989 Regulations the non-dependant widower's survivor's pension was introduced. At that point gender equality, Mr Eadie submits, was realised. The change was prospective in that it applied in relation to periods of service after 5 April 1988. The complaint is that it was not made retrospective. It follows, Mr Eadie submits, that the essence of the Claimant's case is that when a material change is introduced which results in realisation of gender equality, the State is legally obliged to eradicate the past effects of past differences, even though those differences at the time were lawful. The equalisation has, if the Claimant is to succeed, to operate retrospectively as well as prospectively. That is the issue which Mr Eadie submits is at the heart of the present challenge. It is a very wide ranging principle that is being advanced. There is, he submits, no such principle.
  61. Mr Eadie submits that up to 1989 the position with regard to widows was comparable to the situation in Hooper. Women and widows were perceived to be a group in greater need in the context of the Scheme and men and widowers were considered less so.
  62. Mr Eadie submits that again in 1989 when equalisation was introduced it was a matter of judgment as to whether to make the change retrospective. As a matter of judgment the Secretary of State was entitled to conclude that the equalisation should be prospective. First, for the reasons given in Barber v Guardian Royal Exchange Assurance Group [1991] 1 QB 344 and Marckx v Belgium (1979) 2 EHRR 330 there may be good reasons for not changing past practices where differences justifiably existed. Second, there is nothing illogical about adopting the principle that past periods of service should not be taken into account when a change such as in the present case is introduced when conditions that existed in the past justified the need for different treatment. Third, the principle of retrospectivity without limitation could lead to real and significant problems. For many years there was a justifiable difference between men and women as the latter were a disadvantaged group; is it to be said that when equalisation is introduced there is a requirement to compensate the male group in respect of the earlier period? Fourth, it is legitimate and necessary for the interests of all current contributors who would have to fund the additional cost if the Claimant succeeds to be taken into account. The consensual element in the Scheme requires this to be done.
  63. Mr Eadie emphasised that at all times the same contributions made by members to the Scheme may have led to different benefits. As Mr Robinson explains at paragraph 16 of his first witness statement:
  64. "Since the employer provides an overall benefit package and funds the scheme as a whole and members pay a standard contribution according to their pay level, there is inherent 'cross-subsidy' in [Defined Benefit] Schemes. For some employees, the overall cost of the benefits paid to them will be higher than their contribution rate, and for some employees the overall cost will be lower. For example, the group of members who do not marry, or otherwise qualify for dependant benefits, will subsidise those who do. Similarly, the members who die soon after retirement will subsidise those who live longer."
  65. Further there has always been a relationship between the contributions paid and the benefits earned; contributions are paid for benefits available at the time they are paid. The funding scheme is that the benefits already accrued by past service of current employees and by previous employees are expected to be paid for by earlier contributions (see para 11 above).
  66. Mr Eadie submits, first, there is no legal obligation on the Government to impose an additional cost on current contributors to the Scheme.
  67. Second, it has been the uniform practice of Government, known to all, in relation to improvements to public service pension schemes that they will be paid for by current contributors or the taxpayer. If the present claim succeeds there is nothing current contributors could do to prevent the Government from operating that policy.
  68. Third, the present Scheme involves consideration of the consensual element and economic and social strategy. The Defendant must have regard to both elements. As for the consensual element, there is an obligation on the Government to consult with current contributors in relation to the benefits that can be provided pursuant to the scheme from the funds available. There has been consultation with staff representatives over the years. The evidence is clear. The majority of members of the scheme do not want to pay the price for the change the Claimant and other GPs seek. There is no evidence of support for the claim by 99% of current members and positive evidence against it. The staff representatives understand that a "higher employer contribution" to pay for this benefit would not be forthcoming.
  69. The only alternative is for the taxpayer to fund the improvement to the sum of £730m to £905m and that is plainly a matter of economic or social strategy. The impact of the change will be substantial, whatever the precise level of cost. Cost is a relevant consideration (see Carson and Reynolds v Secretary of State for Work & Pensions [2003] EWCA Civ 797). In this context it is unrealistic to view this scheme in isolation. The principle involved applies to other public sector pension schemes. It is therefore appropriate to take into account additional cost burdens that are likely to arise from the other schemes if the Claimant is successful in the present proceedings.
  70. Fourth, it is relevant to consider mitigation measures that have been put in place. Mr Eadie submits that multiple measures have been introduced over the years to cushion the blow for the equalisation measure not operating prior to 5 April 1988. These include the following: the introduction of a widower's pension for an incapacitated husband in 1975; the opportunity for a female doctor to allocate part of her pension to her husband; the facility to purchase pre-1988 service at a cost favourable to the employee (see Robinson first witness statement, at paras 80-85); and the 2008 transfer option.
  71. Mr Cavanagh accepts that the test for objective and reasonable justification as set out in paragraphs 51 and 52 of Stec (see para 38 above) is the correct test for the court to apply, however he submits that the application of the law to the facts and issues in Hooper and Stec does not provide any support for the Defendant's submissions in the present case.
  72. Each case depends on its own circumstances, subject matter, and background. The present case differs from Hooper and Stec in important respects in relation to these matters. The subject matter of the present case is a contributory occupational pension scheme in which benefits are paid by reference to final salary. The type of benefit in Hooper and Stec was different. Hooper concerned a state widow's benefit. As such it related to a matter which concerned general measures of economic and social strategy. An occupational pension scheme (which is deferred pay, see para 53 below), even in the public sector, is not a general measure of economic and social strategy. The Stec case concerned a non-contributory benefit funded by the tax payer. This was reduced earnings allowance ("REA"), which was a payment for individuals who had an industrial injury or injury at work which reduced their earnings power. The rule change in issue concerned traditional provisions aimed at withdrawing REA from those who were over retirement age. The sex inequality which resulted from the transitional provisions was linked to the different national pension ages for men and women (see paras 17 and 54 of judgment). It was for this reason that the European Court considered the matter on the footing that it concerned a general measure of economic and social strategy which was intimately linked to the state retirement age. Ms Freer explains in her witness statement the origins and history of widows' benefits. At paragraph 9 she deals with the Government's general social security policy objective. She states:
  73. "It is also important to understand the 1999 reform of bereavement benefits in the context of the Government's general economic and social security policy, which is based on the belief that social security benefits for people of working age (i.e. adults up to state pension age) are primarily there to support those unable to support themselves through work."

    This reasoning, Mr Cavanagh submits, has no application in relation to survivor's benefits in an occupational pension scheme.

  74. Mr Cavanagh refers to the egregious nature of the discrimination in the present case. The female member of the Scheme is contributing to the Scheme at precisely the same rate as the male member. The starting point therefore is a strong presumption in favour of equal treatment. In Parry v Cleaver (1970) AC 1 Lord Reid at 16A-B said, "the products of the sums paid into the pension fund are in fact delayed remuneration for his current work. That is why pensions are regarded as earned income". It follows that comparison with non-contributory benefits is wholly inappropriate. The present case is what Mr Cavanagh describes as the purest form of sex discrimination.
  75. Further Mr Cavanagh submits the different subject matter of the discrimination in Hooper meant that stereotypical assumptions had a relevance in that case which they do not have in the present case. The pool of persons affected by the rule in Hooper was the entirety of the male and female populations of retirement age. Mr Cavanagh submits that whilst it may be true that in 2000 which was the relevant time in Hooper, the likelihood was that elderly widows were less likely to have had a career than elderly widowers, it is not appropriate to make the same assumptions in relation to members of the NHS Pension Scheme. The assumption underpinning the consideration of women's pensions in Hooper was made clear by Lord Hoffmann at para 17:
  76. "…there has never been any social or economic justification for extending WP [Women's Pensions] to men under pensionable age. The argument for WP was that in the social conditions which prevailed for most of the last century, it was unusual for married women to work and that it was unreasonable to expect them to be equipped to earn their own living if they were widowed in middle age. This argument self-evidently did not apply to men… So the question in the case of WP is not so much whether there was justification for not paying it to men as whether there was justification for not having moved faster in abolishing its payment to women."
  77. Stereotypical assumptions, Mr Cavanagh submits, are of no relevance in order to assess the financial contribution of the female member to the relevant family unit. This financial contribution is capable of more or less precise quantification because the benefits paid will be linked to the salary and length of service of the relevant member. Further by definition, all female members of the Scheme were, or had been, working and economically active and a significant proportion of them were likely to be significant breadwinners for the family. It follows, submits Mr Cavanagh, that the discrimination in this case could never have been justified even under previous social mores. Mr Robinson in his first witness statement relies on the evidence of Ms Freer who provided a witness statement on behalf of the Defendant in Hooper but that evidence is out of date. The average pensionable pay for female members of the Scheme in 2008 was £22,994. Low paid women may be married to men who also have low earnings. The contribution of such women to family income cannot, Mr Cavanagh submits, be dismissed.
  78. The European Court decision in Wessels-Bergervoet v Netherlands [2004] 38 EHRR 37, Mr Cavanagh submits, makes clear that the Court does not only have regard to the aim of difference in treatment "at the time the relevant provisions were enacted, but also to its effects in the concrete case concerned" (para 52; see also Belfast City Council v Miss Behavin' Ltd [2007] 1 WLR 1420 at 1428G-1429B, per Lord Rodger). Mr Cavanagh submits accordingly the Defendant must show that the provision introduced in 1989 was still justified in 2007 (taking account then of current trends and the prospective long life of the provision). The Claimant is currently 56. It follows that he and others in a similar position may continue to suffer discrimination by reason of this rule for another 30 years or more. The ECJ has recently in Ingeniorforenigen I Danmark (Andersen) v Region Syddanmark (C-499-08) [2011] 1 CMLR 1140 emphasised the need to consider whether a generalised justification for discrimination actually works in relation to an individual claimant's circumstances.
  79. Mr Cavanagh submits, unlike in Hooper, the Defendant has not provided the court with any direct evidence about the demographic and societal differences between male and female members of the NHS Pension Scheme, whether in 1988, or in 2007, or at the present time. There is, submits Mr Cavanagh, no contemporaneous evidence to suggest that the Defendant ever considered whether the stereotypical assumptions that pervaded the wider field of social security should be applied to the circumstances of the NHS Scheme.
  80. Moreover, the discrimination in Hooper was different. It only applied to those who were already widowed in 2000. From 2000 onwards, everyone whose spouse died was treated the same in relation to survivor's benefit (because the benefit in question was abolished). The discrimination would, therefore, dwindle away. In both Hooper and Stec an obsolete entitlement was taken away and the court was concerned with a benefit that would not last long. The same does not apply in the present case where the concern is with a benefit that is still needed and it is now needed by men as much as by women. At the present time men and women very often both work. They pool their incomes for the family benefit. Survivor pensions may be as important to male survivors as to female survivors. Moreover it cannot be assumed that male members of a household are earning more than female members. It is accepted by the Defendant that throughout the course of their marriage Dr Cockburn's earnings were considerably higher than those of the Claimant.
  81. In 2008 by delegated legislation the Government introduced a wholesale change to the rules. Equalisation of benefits was made retrospective, not just prospective. Service pre-1988 is now to be taken into account for males as for females. That is clear evidence, says Mr Cavanagh, that by 2008 the Government had come to the view that direct discrimination should be eradicated retrospectively as well as prospectively. In Wessels-Bergervoet and in Zeman v Austria (App No. 23960/02, 29th June 2006) the European Court paid direct attention to the point at which State legislatures decided discrimination should cease. The 2008 Regulations are, Mr Cavanagh submits, the clearest indicator of the social changes that have taken place since the 1995 Regulations were made.
  82. Mr Cavanagh emphasised there is the "long-tail" effect of the discrimination. The discrimination applies, and will apply, to any widower whose spouse was a member of the Scheme prior to 5 April 1988, and would apply until that widower dies, however far into the future that may be. What that means is that the discriminatory impact of the 1989 Regulations change has already been felt for over 23 years, and may be felt for another 30-40 years into the future. The "long-tail" effect serves to emphasise quite how substantial the discriminatory effect of the rule in question is, and will be. Therefore even if, contrary to the Claimant's primary case, stereotypical assumptions about male and female working patterns at the time when the Regulations were introduced in 1989 have any validity, they cannot be relied upon to justify the rule during its period of operation.
  83. As to costs, Mr Cavanagh submits first, that the cost implications of retrospective equalisation are not relevant. The Defendant's argument assumes that the costs would have to be borne by current Scheme members. That would only be so if it is what the Defendant so decided. There is no duty or legal obligation that requires such a decision. That being so, in the circumstances it would be grossly unfair to burden current members with this cost. Second, the costs argument is double-edged. The more costly it will be, the more serious the Defendant must acknowledge is the discrimination. In any event the Defendant has provided a very vague estimate of the potential cost of the change. The Scheme is currently substantially in surplus, in the sense that current contributions exceed benefits paid. The excess of contributions over benefits is currently running at some £2bn per annum. The amount of the surplus substantially exceeds the most pessimistic estimate by the Defendant of the cost of the eradication of the discrimination. Third, the suggestion that if the Regulation G7 in the Scheme is declared unlawful that decision will affect like schemes and involve further substantial costs is an "in terrorem" argument that should not affect the proper outcome in the present case. Fourth, the "long-tail" problem will result in a "long-tail" bill and so it will have to be paid over a period of time.
  84. Finally Mr Cavanagh takes issue with the suggestion that the difference in treatment between married men and women is not as sharp as the Claimant has sought to depict. Many husbands who are not medically incapacitated are dependent on their wives. There is no reason why wives should have to purchase survivor's pension cover for their pre-1988 service. The fact that the Claimant's treatment under Regulation G7(3) is the same as that of any surviving civil partner under Regulation G10 of the 1995 Regulations or that of any surviving nominated partner's pension under Regulation G4 of those Regulations is not to the point.
  85. Discussion

  86. The Defendant's case is that Regulation G7 of the 1995 Regulations has an objective and reasonable justification, in particular as part of the progressive realisation of gender equality against a background of legitimate historical protection for the weaker economic position of widows. The Claimant does not accept there was such a historical background in the context of the NHS Pension Scheme or, if there was, that it justified the rule that became G7 when it was first introduced in 1989 or in 1995 or at the material time, for the purposes of this case, in 2007.
  87. The position prior to the 1989 Regulations

  88. Mr Robinson in his first witness statement sets out the history and rationale of NHS PS widows' and widowers' pensions and refers to the witness statement that Ms Freer provided on behalf of the Defendant in the Hooper case. In that context she remarked on:
  89. "…the gradual nature of the changes which have occurred to the position of women in society and in the workforce over the past 75 years, changes which have been least pronounced among older age groups."

    As Mr Robinson observes Ms Freer refers of course mainly to the Social Security reforms made under the Social Security Act 1986. However, it seemed to Mr Robinson, and I agree, that the case for change over time that Ms Freer describes in relation to social security widower's pension provisions, applies also to the equalisation of widower's pension cover provided in the Scheme from 6 April 1988.

  90. In Hooper Lord Hoffmann said at paragraph 32:
  91. "The fact the complaint concerns discrimination on grounds of sex is not in itself a reason for a court to impose its own judgment. Once it is accepted that older widows were historically an economically disadvantaged class which merited special treatment but were gradually becoming less disadvantaged, the question of the precise moment at which such special treatment is no longer justified becomes a social and political question within the competence of Parliament."

    The European Court in Runkee v UK [2007] ECHR 42949/98, agreeing with Lord Hoffmann in Hooper, said at paras 34-36:

    "34. The Court recalls that Art.1 of Protocol No.1 does not include a right to acquire property. It places no restriction on the Contracting State's freedom to decide whether or not to have in place any form of social security scheme, or to choose the type or amount of benefits to provide under any such scheme. If, however, a State does decide to create a benefits or pension scheme, it must do so in a manner which is compatible with Art.14 of the Convention (see Stec v UK [2006] ECHR 65731/01 at paras 54-55).
    35. Article 14 does not prohibit a Member State from treating groups differently in order to correct 'factual inequalities' between them; indeed in certain circumstances a failure to attempt to correct inequality through different treatment may in itself give rise to a breach of the Article. A difference of treatment is, however, discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised. The Contracting State enjoys a margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify different treatment (see Stec v UK [2006] ECHR 65731/01 at para 51).
    36. The scope of this margin will vary according to the circumstances, the subject matter and the background. As a general rule, very weighty reasons would have to be put forward before the Court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention. On the other hand, wide margin is usually allowed under the Convention when it comes to general measures of economic or social strategy. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the Court will generally respect the legislature's policy choice unless it is 'manifestly without reasonable foundation' (op cit, at para 52)."

    The court continued at para 39:

    "… any welfare system, to be workable, may have to use broad categorisations to distinguish between different groups in need (see, Mutatis Mutandis, Lindsay v UK, No.11098/84, Commission decision of 11 November 1986, Decisions and Reports 49, p.181)"

    The Court concluded its assessment at paragraph 41 as follows:

    "Given the slowly evolving nature of the change in women's working lives and the impossibility of pinpointing a precise date at which older widows as a class were no longer in need of extra help – a topic debated by Parliament on several occasions during the 1980s and 1990s, whenever reform was proposed – the Court does not consider that the United Kingdom can be criticised for not having abolished [Widows' Pension] earlier (see, mutatis mutandis, Stec v UK [2006] ECHR 65731/01 at para 64). Moreover, since it was decided to bring about equality through 'levelling down', it was not unreasonable of the legislature to decide to introduce reform slowly, by preserving the rights of women widowed before 9 April 2001 (ibid, at para 65)."

    Applying the approach adopted in Hooper and Runkee to the evidence in the present case (see in particular para 12 above), in my view the absence of the non-dependant widower's pension prior to the 1989 Regulations was objectively justified. There is no evidence that overall female members in the Scheme were in any different position to that of women in society and in the workforce as a whole.

    The position since the introduction of the 1989 Regulations

  92. It is the Defendant's case that equalisation was brought in by the 1989 Regulations. Mr Eadie submits that there is no obligation that when a material change is introduced which results in the realisation of gender equality the State is required to eradicate the past effects of past differences, even though those differences at the time were lawful. This is for a number of reasons. First, there is no such principle. Second, case law does not support it. Mr Cavanagh referred to the case of Willis v UK [2002] 35 EHRR 21 where a retrospective remedy was granted and to Zeman v Austria, but neither of those decisions nor any other authority to which he referred support the existence of any such principle. Indeed the principle underpinning the decision of the ECJ in Barber is to the contrary. The Court at para 44 of the judgment states: "… overriding considerations of legal certainty preclude legal situations which have exhausted all their effects in the past from being called in question where that might upset retroactively the financial balance of many contracted-out pension schemes." Similarly the European Court in Marckx at para 58 referred to "the principle of legal certainty, which is necessarily inherent in the law of the Convention as in Community Law [which] dispenses the Belgian State from re-opening legal acts or situations that ante-date the delivery of the present Judgment". There has been, Mr Eadie submits, no case in which discrimination has been held to be unjustified on the basis that the impact of all non-justifiable discrimination in the past has not been removed.
  93. It is not submitted on behalf of the Defendant that retrospectivity is never appropriate but if there is to be retrospectivity then any change with cost implications needs to be properly funded and before such a decision can be taken all relevant factors need to be properly considered. I agree with Mr Eadie that first, there is no principle that exists that required the same contributions in a pension scheme of this kind to lead to the same benefits. Second, there is nothing illogical or unreasonable in a state-run scheme about contributions buying very different benefits for men and women during a period where there is a need to correct factual inequalities. If widows needed to be favoured up to 1989 then it was reasonable for the scheme to favour them. Third, if that is so, there is nothing illogical or irrational about leaving that state of affairs in place when there is no longer a need to correct factual inequalities, but at that time changing the position prospectively but not retrospectively. Fourth, whether or not that is appropriate is just as much a matter of judgment as with other decisions that have an effect on other interests that are engaged. A broad margin of appreciation is enjoyed by the State.
  94. The relevance of cost to the justification argument is clear from the decision of the Court of Appeal in Carson and Reynolds v Secretary of State for Work and Pensions [2003] EWCA Civ 797, paras 71-73. Laws LJ said:
  95. "73. …In the field of what may be called macro-economic policy, certainly including the distribution of public funds upon retirement pensions, the decision-making power of the elected arms of government is all but at its greatest, and the constraining role of the courts, absent a florid violation by government of established legal principles, is correspondingly modest. I conceive this approach to be wholly in line with our responsibilities under the Human Rights Act 1998. In general terms I think it reflects a recurrent theme of the Strasbourg jurisprudence, the search for a fair balance between the demands of the general interest of the community and the protection of individual rights: Sporrong & Lonnroth (1982) 5 EHRR 35."
  96. There is an issue between the Defendant and the Claimant as to who will have to bear the costs of the change to the NHS Pension Scheme (and the other public sector pension schemes). Mr Eadie submits that the Government has made it clear over the years that if there is to be this change it will be the current members of the Scheme who will bear the cost. That being so, Mr Eadie submits, as a matter of fairness the Defendant is entitled to have regard to the fact that 99% of current members have indicated they oppose a change if they have to pay for it. In considering that matter the Defendant is entitled, it is said, to consider the extent of the cost. Mr Cavanagh submits that there is no legal obligation on the Secretary of State to impose the costs on current members, rather it is a cost that has to be paid in the ordinary way when measures are introduced to end unlawful discrimination. Mr Eadie retorts if they involve costs, as they do in the present case, and if current members are not to pay, then it is the taxpayer who has to pay. In either event, submits Mr Eadie, there is a socio-economic decision that has to be made by the Government as to where the cost burden is to lie.
  97. Mr Cavanagh submits that Health Trusts act as employer in relation to pay and pensions generally. The fact that Health Trusts are funded by the taxpayer does not convert decisions that they take as to what to pay their employees into general measures of economic and social strategy. This submission ignores reality. It makes no difference that the Health Trusts are involved. Government policy is that any change will have to be paid for by current members. The fact that the Trust is the employer makes no difference.
  98. Retrospective equalisation of survivor's benefits has been explored extensively and over many years with staff representatives in the JSCC and other bodies. I am satisfied on the evidence that it was and remains a matter of Government policy that improvements to public sector pension schemes are not given retrospective effect, and that if retrospection is to be introduced the cost of it would have to be borne by current contributors or the taxpayer. It was made clear to staff representatives that if there was to be the change to the NHS Pension Scheme that the GPs desired, the cost of it would fall on the current members. No doubt it was for this reason they did not support it.
  99. In my view the consensual element in the scheme required the Defendant as a matter of fairness to take into account that current members did not support the GPs' case for retrospective equalisation if they had to bear the cost and the extent of any such cost. Equally the Defendant had to take into account that if the cost was not to be borne by current members it would fall on the taxpayer. Both considerations were, in my view, relevant to the issue of justification. The question of who should bear the cost of retrospective equalisation in relation to the NHS Pension Scheme and like schemes across the public sector means that socio-economic issues were inevitably in play.
  100. Mr Cavanagh submits that whether or not the change should be made retrospectively cannot be determined by the opposition of those who do not support it. In this connection he relies on the decision in Coventry City Council v Nicholls [2009] IRLR 345. Preliminary issues arose in that case as to whether the Council could rely on three genuine material factors "GMF", which it argued explained and justified the difference in pay between the Claimants and their comparators, for the purposes of s.1(3) of the Equal Pay Act 1970. One GMF defence was that the Council submitted that it had sought to introduce single status to remove historic inequalities in pay, but the unions had continually frustrated their best endeavours. Although the Council had eventually unilaterally imposed a new pay system in 2005, had the unions been more constructive, any inequality resulting from the different pay arrangements would have been removed much earlier. Hence, even if the difference in pay had originally been on grounds of sex, this had been overtaken by a separate and distinct supervening cause: union intransigence.
  101. The Employment Appeal Tribunal held that the action of the unions could not constitute a valid GMF defence. Elias J (President) observed at para 30:
  102. "…we do not accept the premise underlying this argument, namely that the Council was disabled from putting the situation right. In our judgment, this is not a matter of fact. Ultimately the ability to remedy unequal pay was always in the Council's own hands – as they recognised by acting unilaterally in 2005. They could at any time have chosen to impose equality against the wishes of the unions if need be. They were not compelled to accept that they could do nothing in the light of the unions' hostile opposition."
  103. Mr Cavanagh submits that there is an obvious parallel with the present case. In so far as the Defendant is relying on the fact that the staff representatives over the years did not press harder for the introduction of widowers' pensions and for those pensions to operate retrospectively that does not assist the Defendant, just as union intransigence did not assist the Council in Nicholls.
  104. I reject this submission. First, as Mr Eadie points out, the legal and factual context is different in the present case. There is a difference between the Equal Pay Act regime that operated in Nicholls (see paras 8-12 of the judgment in that case) and the test for the purposes of Article 14 of the Convention. Direct discrimination can be justified only on a narrow basis under the EPA regime. Second, it is, in my view plainly legitimate under Article 14 for the Defendant to take into account the views of members of the Scheme in circumstances were, if Government policy is followed, they will have to bear the cost of any change.
  105. When addressing matters of economic or social strategy, national authorities are entitled to a broad margin of appreciation or discretionary area of judgment (Stec, para 52). In such cases, the authority's choices will be respected, even where they involve direct discrimination on grounds of gender, unless they are "manifestly without reasonable foundation". In my judgment the Defendant was fully justified in having regard to the cost of retrospective equalisation that on the basis of national policy was to be borne by current members of the Scheme in circumstances where over 90% of them were opposed to bearing that cost, and, in addition in having regard to the cost to the taxpayer, if that policy was not to be followed. Similarly the Defendant was entitled to take into account the estimated cost to the taxpayer of retrospective equalisation in relation to like schemes in the public sector.
  106. Mr Cavanagh accepted it was not illegitimate for the Defendant to take into account the cost to current members involved in changing the Rule and it was not illegitimate for the Defendant to take into account the cost of retrospectively changing like schemes. In my view they are both plainly relevant factors. Mr Eadie does not rely on cost per se, but in relation to the Scheme, on fairness to others in the Scheme.
  107. The costs of effecting the change are substantial. Mr Cavanagh does not dispute that is so. He submits that the estimate of the potential cost is a very vague estimate. I do not accept this. Mr Robinson has explained the reason for the difference between the first estimate of £500m and the most recent estimate of £730m-£905m. The current estimate is based on actuarial evidence. It is not challenged by the Claimant.
  108. Mr Cavanagh submits that the Defendant has ignored the fact that the NHS Pension Scheme is currently substantially in surplus, in the sense that current contributions exceed benefits paid. The excess of contributions over benefits is running at some £2bn per annum. The amount of the surplus substantially exceeds, Mr Cavanagh submits, the most pessimistic estimate by the Defendant of the cost of the eradication of the discrimination. I reject this argument. All that is demonstrated by the figures relied upon by Mr Blake is that the current "contributions" received are greater than the benefits paid out. It is plain that the Scheme has a very substantial deficit. It has no assets to cover its accrued liabilities which stood at March 2004 at some £127bn. I accept Mr Eadie's submission that a truer measure of the costs of financing the Scheme is to consider the cost of benefits paid out to members in relation to their contributions. When this method is adopted, the Scheme is currently running a deficit of around £3bn per annum.
  109. Mr Cavanagh argued that the cost of equalisation would create a "long-tail" bill that could be spread over time. I do not accept that as a matter of accounting this is correct for the reasons explained by Mr Robinson.
  110. Mr Cavanagh did not dispute that the retrospectivity principle, if applicable in the present case, may apply across the public sector in relation to pensions. His submission was that such an effect was far removed from the central issue in the present case and as such it was of miniscule relevance. I do not accept Mr Cavanagh's submission. The costs, albeit estimates, are very significant. The estimate of the Government Actuary, which again is not challenged, is approximately £2-3bn for the public sector pension schemes other than the NHS Scheme.
  111. Another factor that, in my view, the Defendant was entitled to have regard to when considering the issue of justification was that certain measures have been introduced over the years that provide some comfort for the group affected by the discriminatory measure. In this context it is important to bear in mind that Article 14 is concerned with the overall compatibility of a pension system with the Convention and not the facts or circumstances of the particular claimant (Carson at para 62). I accept that the difference in treatment between married men and women in relation to survivor's pension cover is softened by the following characteristics of the Scheme introduced over the years: first, the 1975 Regulations. Since 1975 a female member may nominate her incapacitated husband to receive a widower's pension on her death; second, the 1989 Regulations made provision for Dr Cockburn (and others in a similar position to her) to purchase survivor's pension cover for some or all of her pre-1988 service; third, members of the Scheme have always been entitled to allocate a part of their entitlements to their surviving spouse or to purchase added years of membership; and fourth, in 2008 the transfer "option" was introduced. Mr Eadie accepts that these measures do not provide a complete answer to any unjustified discrimination and Mr Cavanagh has identified the deficiencies in the measures as far as the Claimant and others in a similar position are concerned. Nevertheless in my view the Defendant is entitled to have regard to these measures when considering the issue of justification.
  112. The 2008 changes

  113. Mr Eadie accepts Mr Cavanagh's submission as to the need to look at the effect of legislation in the concrete case concerned (see para 56 above). Mr Cavanagh submits the 2008 changes are the best evidence of the social changes that had taken place by February 2007. I do not accept this submission. Mr Cavanagh can point to the fact that Parliament in 2008 introduced survivor's benefits to widowers retrospectively. However that came at a price as part of a package. It was as a result of a cost/benefit analysis that led the Claimant to reject the Defendant's suggestion that the Regulations were one of the mitigating measures because of their disadvantages.
  114. Mr Blake in his second witness statement explains why the option of transfer from the 1995 Section to the 2008 Section by a female Scheme member in order for her widower's pension to take account of her pre-1988 service "comes at a price". At paragraphs 19-27 of this statement Mr Blake sets out the ways in which membership of the 2008 Section is less favourable than the option of remaining in the 1995 Section. The most striking and obvious way concerns the normal retirement age which increases from 60 to 65. Other less favourable elements include the salary that is used for calculation purposes, the terms of voluntary retirement, additional pension cover and the purchase of "added years". These disadvantages led Mr Blake to conclude that "a move from the 1995 Section is highly likely to be disadvantageous for, and unattractive to, a female Scheme member, even though one consequence would be that her pre-1988 service would be credited for widower's pension purposes". Mr Robinson in his second witness statement at paragraphs 21-47 responds to the points made by Mr Blake. He agrees with Mr Blake that some members might find a switch of scheme sections unattractive, but he believes other members may find it entirely suitable to their needs. They agree that a key issue for members making their choice is the age at which they intend to retire.
  115. What is critical for present purposes is that during the 2008 NHS PS Review the cost of "widower's pension retrospection" to provide free all-service widowers' pensions in the 1995 Section as well as in the 2008 Section was explored. It was decided that, taking into account the needs and context of the Scheme membership as a whole, "free" all-service widower's pension cover should only be managed within the different cost environment of the 2008 Section of the Scheme. For members of the 1995 Section of the Scheme, the Review Partners did not support the use of monies (then available for Scheme improvements) to provide all-service widower's pension cover. The main concern expressed was that this would amount to "charging" current Scheme members more for an improvement that could only benefit past Scheme members.
  116. Conclusion

  117. In my judgment
  118. i) there was an objective and reasonable justification when introducing a change to the NHS Pension Scheme by the 1989 Regulations entitling non-dependant widowers to survivors' pensions to make that change prospective in the sense that it applied in relation to periods of service after 5 April 1988, and

    ii) an objective and reasonable justification to maintain that position, rather than introducing a retrospective change, has remained since that date.

  119. Accordingly this claim fails.


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