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Mine all Mine

Tom Feinson
Negotiation Coal Agreement [Converted]
© Adobe Stock


In 1994, as part of the privatisation of the coal industry, the government committed to protecting mineworkers’ pensions. In return (kudos to the government) as part of the agreement the government was to get 50% of any surplus to the scheme. On the face of it, this sounds like a pretty sensible contingency agreement, sometimes described as the trading of opinions. I assume, based on the agreement that the unions stated an opinion that the pension fund would not be able to meet obligations, whilst the government took an opposing point of view. If so, both parties attempting to predict the outcome of a future event represents an argument of opinion that could go on for some time. Better to construct an agreement that recognises the other party’s inhibition, and rewards your opinion if you are subsequently proved right.

Tangentially, it’s also worth recognising risk as a key value driver. People tell us that it’s all about the money but in truth, for most of us risk mitigation is as - if not more - important. This agreement demonstrates that the union were, at the time, prepared to give up the potential for more money in return for financial security.

Back to the point. 30 years later there is a problem: one party is very unhappy with the agreement and the other, frankly, delighted. In July 2023 the Business, Economic and Industry Strategy Committee (BEIS) concluded that participation in the pension scheme had dramatically reduced since 1994, for obvious reasons, which had substantially reduced government risk. However, the price for taking that risk had not been recalibrated accordingly. The BEIS committee recommended a review of the scheme and the sharing arrangements. The government had made £4.4bn since the introduction of the scheme.

The unions argue that the government have a moral obligation to the change the terms of the agreement and that they should not benefit off the backs of miners and their widows. Returning the money would see an increase of £14 per week to the average pension of £84 per week.

The government, on the other hand, are of the view that an agreement is an agreement and both parties freely entered into it and have benefited from it. A BEIS spokesperson says "Mineworkers' pension scheme members are receiving payments 33% higher than they would have been thanks to the government's guarantee and scheme members have received bonuses in addition to their guaranteed pension."

The unions are saying that, whilst this may have been a sensible arrangement 20 years ago, it isn’t now. Is it even true? Interestingly the pension trustees, when offered, preferred to keep the existing arrangement rather than lose the guarantee in return for keeping all the surplus. If the desire is to get the money and keep the guarantee then it’s doomed to fail. You can’t have your cake and eat it.

One lesson to draw from this is to build parameters for change into contingency contracts, recognising that they should be balanced to benefit both parties.

The broader question is whether there is a moral obligation on a party to renegotiate the terms of an agreement that they are not contractually obliged to, simply because circumstances have rendered it unfavourable to the other party.

Classically, the answer would be that people and organisations must be motivated to negotiate: they need to see it as being in their interest.

What’s your take? I’d love to hear your perspective.

Tom Feinson
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