A recent appeal in the case against the bankrupt firms Nortel Networks and Lehman Brothers has put the UK government in the midst of a political nightmare. No matter which side government favours, they will still be seen as the ‘bad guys.’
Originally the Pensions Regulator stated that underpaid/unpaid pensions would take precedence over money owed to banks and other lenders when the two firms became insolvent. The amount in unpaid pensions is said to be £2.2 billion and banks feel they should be first in line to get their money.
On the other hand, those who had pensions and were counting on that money to live through retirement also need their money as well. In a second round of battles in the High Courts, the Pensions Regulator won in favour of pensioners.
It is expected that this will not be the end of the fight for who gets this money, banks or pensioners and that it will make it all the way up to the Supreme Court. The problem is, if the courts uphold the decision to pay pensioners first, it will be seen by banks as just one more reason not to lend money to some of these conglomerates.
On the other hand, if government sides with banks then citizens will see it as government siding with big business to the detriment of pensioners (voting taxpayers). This is one situation that will not be seen favourably no matter how the Supreme Court rules, even if it should get that far.
At a time when taxpayers are already upset with the state of the economy and all the cuts government has made, ruling in favour of banks would be the ultimate slap in the face. However, since the economy is as sluggish as it is and companies across the board are in need of funds to keep their doors open, it is necessary for banks to be willing to make loans to keep those businesses afloat.
No matter which way the wind blows, the UK government will be the loser on this one. There is no way around it.
