Council had a moral duty to provide pension guarantee

IN response to Alan Furness’s letter (News Guardian, September 1) regarding the granting of a pension guarantee for Wallsend Hall Enterprises (People’s Centre).

Councillors were initially asked to provide pension guarantees in respect of five organisations which provide services in North Tyneside.

Pension legislation is clear. Without local authority guarantees, all the organisations would have to recover their deficits within just two years (likely leading to their failure through insolvency).

With guarantee support, however, all the organisations would have 22 years to recover their deficits – a far more achievable target.

Four of these organisations operate across the north east and so were granted joint guarantees with the other Tyne and Wear authorities, (to cover pension deficits totalling £4.322m).

These were accepted with general party consensus and provided for a potential liability of £779K.

Wallsend Hall Enterprises (People’s Centre) works solely within North Tyneside, thus the request was for provision of a sole guarantee for a pension deficit of £166K.

This was met with both objections and allegations from Conservative members as well as abstentions from Liberal Democrats.

The historical context is that the council believed it had provided a guarantee way back in 1992. It was only during the 2010 pension audit the documentation was found to be missing, albeit there is historical proof of the council’s intention to provide it.

The choice for councillors thus became to either ‘ratify’ what was thought to be in existence (giving the organisation the same ability to recover its deficit as the others) or to refuse to provide the guarantee and risk the organisation failing.

What was completely overlooked by the objectors was that, if the organisation failed, the liability would have to be paid by the Tyne and Wear Pension Fund and its contributors.

North Tyneside Council, as a contributor to that scheme, would have had to write a cheque for over £30K and the other councils would have had to do likewise.

The council had a moral duty to provide this guarantee. Both to correct the historical error, as well as to prevent other councils being left to foot much of the bill for that past mistake.

Elected members are the guardians of the public purse and it is a duty that we take extremely seriously. But we are also the guardians of North Tyneside’s reputation.

To have chosen to avoid an historic, and I believe moral liability, would have been opportunistic in the extreme and demeaned us in the eyes of many.


Collingwood Ward