James Daley: Hutton can't win this pensions battle

The Government is teed up to get yet another deserved kick in the teeth next week, over its treatment of the 125,000 people who lost their pensions when their employers went bust.

A report from the Public Administration Select Committee, due out in a few days' time, is expected to deliver yet another damning indictment of the Government's regulation of pensions in the late 1990s and early 2000s - laying the blame for these people's losses firmly at its door.

For those who are not familiar with the tale, this is a story about many thousands of people who lost most or all of their life savings when their employers became insolvent - in spite being told by the Government that their pensions were guaranteed.

In many cases, they lost everything simply because they agreed to work an extra couple of years with their company. Several, who spent the last few years of their lives campaigning for justice, died without seeing a penny of their pension in retirement.

The Government's failure was on many levels. Not only were its regulations inadequate but its own literature told workers that their final salary pension schemes were "safe and protected by law". In reality, there was no such protection - and when the worst happened, it refused to accept any responsibility.

Although John Hutton, the Secretary of State for Work and Pensions, has had his hands tied financially by the Chancellor, he has done his own reputation no good recently by continuing to try to defend the indefensible.

When the Parliamentary Ombudsman found the Government guilty of maladministration earlier this year, he not only refused to adhere to her demand that full compensation be paid but also decided to set off on a crusade to bring ever more heartache to the victims of this sorry scandal.

In a letter to The Daily Telegraph earlier this month, Hutton callously dismissed the ombudsman's findings, backing himself up with a string of inaccuracies and half-truths.

The Government never - as Hutton now claims - advised all those in final salary schemes to take proper financial advice when signing up to company pensions. However, those who did ask the Government for guidance, were reassured that their pensions were safe.

Furthermore, while Hutton is right to say that no literature produced by his department ever claimed that final salary schemes were guaranteed, it did say that they were "safe and protected" - tantamount to the same thing. But worst of all has been Hutton's assertion that the creation of the Financial Assistance Scheme (FAS) - set up to provide some limited assistance for the victims of this crisis - has been some great act of philanthropy. In fact, the FAS and the way it has been administered has been an insult.

Although the Government boasts that the FAS provides 80 per cent of lost pensions to those who were within three years of retirement in May 2004, even those who qualify for help are set to lose much more.

The FAS caps payments at £12,000 a year, when many were due much bigger sums. There is no tax-free lump sum, no indexation, no life assurance - and while the Government has moaned about the cost being £15bn over the next 60 years, this does not reflect the fact that a substantial amount will be paid back in taxes.

I have no doubt that Hutton will pull off another Houdini next week, escaping unscathed no matter how many rings the Public Administration Select Committee runs round him. But the Government can only lose this battle one way or another in the long run.

Most of the victims of this scandal are hard-working, honest, Labour voters who paid their taxes and saved for 45 years, only to be deserted by the party they voted for when they needed its help.

A number of Labour backbenchers have joined forces with the opposition to raise the pressure, and there is a judicial review of the ombudsman decision in the pipeline. Hopefully, victory for the victims is only a matter of time. So why can Hutton and Brown not bring themselves to do the right thing now?