In another of a line of recent cases arising from decisions on the allocation of resources following the Government's spending review, the High Court has rejected a judicial review challenge to amendments made to the Civil Service Compensation Scheme (CSCS).

Key points

  • Although the court found that provisions reducing the entitlement to some benefits on redundancy and early retirement did constitute an interference with the claimants' property rights, such interference was found to be justified.
  • The case shows the courts' reluctance to interfere in Government decisions relating to the allocation of resources, absent exceptional circumstances such as unfairness amounting to an abuse of power.

The spending review and the CSCS

The previous administration was already considering proposals to amend the CSCS before the 2010 general election. Its proposals were the subject of a successful legal challenge, R (Public and Commercial Services Union) v Minister for the Civil Service [2010] EWHC 1027 (Admin), in which it was held that the then government had failed to obtain the consent of all the unions to the changes – this being necessary because of a power of veto contained within the Superannuation Act 1972, under which the CSCS is made.

Following its spending review after the 2010 general election, the Government decided that the size of the civil service would have to be cut and the cost of severance terms for departing civil servants reduced. It took the view that the CSCS, in its then current form, was (in the defendant's words) absurdly generous and unaffordable.

The claimant trade unions together represented some 300,000 of the 600,000 public servants to which the CSCS applied. In the face of strong opposition from the first claimant to any new proposal to reduce entitlements under the CSCS, the Government decided to act. In order to put pressure on the unions to negotiate on changes to the CSCS, it introduced the Superannuation Act 2010, containing provisions which would have imposed a cap on benefits payable under the "old" CSCS. The 2010 Act also removed the unions' power of veto. In tandem with that process, it invited the unions to negotiate on changes to be reflected in a new version of the scheme. Negotiations with the claimants failed, the 2010 Act was passed and the defendant promulgated the new CSCS. The claimants brought judicial review proceedings.

The grounds of challenge

By way of illustration of the impact of the changes, the defendant provided evidence that for one category of departing civil servant, the level of compensation payable under the new scheme would be around 40% lower than the payment that would have been received under the old scheme.

The principal ground of challenge to the new CSCS was that its provisions constituted an unlawful interference with the claimants' rights under Article 1 Protocol 1 European Convention on Human Rights (A1P1). Subsidiary grounds were (i) that the measures amounted to a breach of the claimants' legitimate expectations to receive benefits; (ii) that the changes were ultra vires the statutory powers; and (iii) that the claimants' Article 11 ECHR (freedom of assembly and association) rights were breached.

In addition to challenging the new CSCS, the claimants sought a declaration that the provisions in the 2010 Act were incompatible with A1P1.

The court's findings – A1P1

The judgment of McCombe J focuses on the alleged breaches of A1P1. Having considered a number of authorities from Strasbourg, the judge concluded that the claimants' rights under the old version of the CSCS were capable of being "possessions" for the purposes of A1P1, and that there had been interference with those possessions. As is often the case where A1P1 is involved, the main focus of the arguments was whether or not the interference with the claimants' property rights could be justified.

Was the interference justified?

Under A1P1, an interference with property rights may be justified if it is (i) in accordance with the law (ii) in pursuit of a legitimate aim in the public interest and (iii) strikes a fair balance between the persons affected and the community as a whole.

In considering the second part of this test, the court emphasised that, where political, social and economic issues are concerned, the decision-maker will generally be accorded a wide margin of appreciation in relation to whether a measure is "in the public interest" and will not interfere unless it is manifestly without reasonable foundation. The court rejected the claimants' argument that the defendant had to show that the measures adopted were strictly necessary to achieve their aim – in other words, that a less intrusive measure would not have sufficed.

The court then considered the question of proportionality. Did the new scheme impose an "excessive and disproportionate burden" or was the interference with scheme members' rights a proportionate one within the limits of what could be afforded? In considering these questions, McCombe J again emphasised the court's limited role in this type of case, noting that it was not for the court to interfere with the Government's assessment of spending priorities. One significant factor in the court's reasoning was that the defendant had engaged with the claimants during negotiations, and alternatives had been considered and rejected. The court accepted that the defendant had thought carefully about the relative costs of its chosen course of action as against alternatives, had made a sensible assessment of the costs involved and their budgetary implications. On that basis, the reduction in benefits was "reasonable and commensurate" and did not go beyond what was reasonably necessary to achieve the legitimate aim.

The remaining grounds of challenge were also rejected.

Comment

The court's judgment in this case makes clear its view that "the allocation of public resources is a matter for ministers." Cases involving alleged breaches of property rights arising from such decisions are notoriously difficult as the measures can almost always be justified as being in the general public interest. Having said that, since the Government began to take these decisions in the light of its spending review, there have been some successful challenges – see for example the case of R (Luton Borough Council) v Secretary of State for Education [2011] EWHC 217 (Admin) which we covered in our ebulletin of 15 March 2011. That challenge, to the decision to halt the Building Schools for the Future scheme, succeeded because the failure to consult the claimants had been so unfair as to amount to an abuse of power. This illustrates the point that in general, challenges based on procedural unfairness have greater chances of success than those more concerned with the merits of a decision. Having said that, in the Luton case the court was at pains to emphasise that the threshold for interfering in this sort of decision was very high. It seems likely that the courts will be faced with more of these challenges as the Government continues to implement its economic policies.

Public and Commercial Services Union & others v Minister for the Civil Service [2011] EWHC 2041 (QB)