R (Fire Brigades Union) v HM Treasury

This Court of Appeal dismissed the appellants' challenges to the Public Service Pensions (Valuations and Employer Cost Cap) (Amendment) Directions 2021. Key legal principles applied were: (1) statutory construction of the Public Service Pensions Act 2013 (notably sections 11 and 12) permits Treasury directions to treat the McCloud remedy costs as part of the ‘costs’ relevant to the cost control mechanism (CCM), including costs of connected legacy schemes; (2) inclusion of those costs as ‘member costs’ was not an improper purpose; (3) the decision to include McCloud costs did not give rise to unlawful indirect discrimination because any disparate impact stemmed from the unchallengeable design of the McCloud remedy and, in any event, HMT’s justification (including intergenerational fairness and sustainability of taxpayer exposure) was within the permissible margin of appreciation; (4) no common-law duty to consult (in the Gunning sense) arose and the Public Sector Equality Duty (section 149 of the Equality Act 2010) was satisfied on the facts; and (5) the application of section 31(2A) of the Senior Courts Act 1981 did not lead to denial of relief. The Judge’s factual findings and evaluations on discrimination, consultation and PSED were open to him on the evidence and were upheld.

The appeals arose from judicial review claims brought by the Fire Brigades Union and the British Medical Association against Treasury directions amending the actuarial valuation and employer cost-cap directions to include the estimated costs of the McCloud remedy in the cost control mechanism (CCM) for public service pension schemes. The background was the replacement of legacy public sector pension schemes by reformed schemes under the Public Service Pensions Act 2013, the introduction of an employer cost cap mechanism and this Court’s earlier judgment in the McCloud litigation finding unlawful age discrimination in transitional protection. The McCloud judgment required a remedy which gave rise to substantial additional costs (the ‘McCloud Remedy costs’).

The claimants sought judicial review of the 2021 Directions on multiple grounds: (i) improper statutory construction and purpose (that Treasury lacked power to treat McCloud costs as member costs within the CCM under sections 11 and 12 of the 2013 Act); (ii) indirect discrimination contrary to the Equality Act 2010 (section 19) and breach of the Public Sector Equality Duty (section 149); (iii) failure to consult in a lawful manner before making the Directions; and (iv) breach of legitimate expectations and other public law grounds. The High Court (Choudhury J) dismissed the claims; the present appeals challenged specific aspects of that dismissal.

The Court of Appeal reviewed the statutory language and legislative context, emphasising that the schemes are largely unfunded (pay-as-you-go), that the 2013 Act expressly contemplates valuation of connected legacy and new schemes, and that ‘costs’ is an undefinied but broad term. The court concluded that Treasury could lawfully include the McCloud Remedy costs within the CCM as member costs or costs in the nature of member costs. On discrimination, the court held that the principal driver of any differential impact was the statutory cut-off embedded in the McCloud remedy and not the neutral PCP of including the remedy costs in the CCM; and, even if there were disparate impact, HMT’s aim (protecting taxpayers and sustaining affordability while remedying unlawful discrimination) fell within legitimate social/economic policy choices and was proportionate in the circumstances (applying the authorities on justification). On consultation and PSED, the court found no binding common-law duty to consult beyond the statutory consultation architecture and held that the equality assessment carried out (EIA 2) and the decision-making process met the statutory duty of ‘due regard’ on these facts. The court therefore dismissed both appeals.

Appeal dismissed. The Court held that (1) Treasury lawfully construed and exercised its directions-making powers under the Public Service Pensions Act 2013 to include the McCloud remedy costs within the CCM as member costs; (2) that choice was not an improper purpose; (3) the inclusion did not give rise to unlawful indirect discrimination for the reasons stated (the causal source of differential effects lay in the remedy design and, in any event, HMT’s justification was proportionate); (4) no common-law duty to consult in the Gunning sense arose and the published equality assessment and process satisfied section 149; and (5) the s.31(2A) threshold did not preclude dismissal of relief.

Appeal from the High Court of Justice, King’s Bench Division (Administrative Court), Choudhury J, [2023] EWHC 527 (Admin). The appeals concern two judicial review claims originally heard in the High Court and appealed to the Court of Appeal (this judgment).