The Carson appeal was heard by the Appellate Committee of the House of Lords which was made up of: Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, and Lord Carswell.
Carson argued that she was being unfairly treated. She says she had paid the same National Insurance Contributions (NICs) as a United Kingdom resident and therefore she should receive the same pension. She is supported by associations of expatriate pensioners in South Africa and elsewhere. Lord Hoffman said:
Carson’s case is typical of over 400,000 United Kingdom pensioners living abroad in countries which do not have reciprocal treaty arrangements under which cost of living increases are payable. Arrangements exist for countries within EEA countries (European Union countries, Norway, Iceland and Liechtenstein) and a number of other countries such as the United States (“treaty countries”). However, there are no such treaties with South Africa, Australia, New Zealand and many other countries”.
Carson complained that she was being unfairly treated, since she had paid the same National Insurance] Contributions as a United Kingdom resident and therefore she should receive the same pension. She is supported by associations of expatriate pensioners in South Africa and elsewhere. Whilst the case had generated a good deal of passion. Lord Hoffman stated that:
The sense of grievance may be understandable but it is not justified. There is nothing unfair or irrational regarding the different treatment of people living abroad”.
Lord Hoffman agreed that there was no doubt that Carson was being treated differently compared to a pensioner who has the same contribution record but lived in the United Kingdom or a treaty country, but that in and of itself is not enough to amount to discrimination. Carson agreed that she could have no complaint if the United Kingdom had rigorously applied the principle that the UK state pension is for UK residents only and not payable to UK pensioners who had moved abroad, or who had, like her, relocated for work purposes. Lord Hoffman stated that it was unnecessary for the UK Government to try to justify the sums paid since it distracted attention from the main argument.
Lord Hoffman dismissed Carson’s appeal.
In Lord Rodger’s opinion, the fact that Carson gets less by way of pension does not constitute unlawful discrimination contrary to Article 14. He dismissed Carson’s appeal.
Lord Walker stated that he could understand Carson’s dissatisfaction at this state of affairs, but, in his opinion, she was not misled concerning what her entitlement would be. He believed that this was an issue of macro-economic policy which was within the responsibility of the UK government, and therefore he dismissed Carson’s appeal.
In Lord Nicholls’s opinion, Carson’s complaint would need to be specifically covered as a Convention right in Article 14 of the Convention (Prohibition of Discrimination) and on a ground stated in article 14. If this was true, then does Carson’s difference in treatment, i.e. alleged discrimination stand up to scrutiny? Sometimes, where the position is not so clear, a different approach is called for, in which case the court’s scrutiny may best be directed at considering whether the differentiation has a legitimate aim and whether the means chosen to achieve the aim is appropriate and not disproportionate in its adverse impact. Lord Nicholls had decided this was not the case and dismissed Carson’s appeal.
Lord Carswell had a dissenting opinion. Whilst it had been made clear in the Supreme Court that as far as UK law is concerned the difference in the way different cohorts of pensioners are treated is in accordance with the law, Carson and her fellow “frozen” pensioners can only hope that their appeals to logic and a sense of fair play will eventually prevail, contrary to their experience to date.
Lord Carswell considered the impact of the European Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”), as brought into play by the Human Rights Act 1998 and whether it was unlawful for the Government to operate legislation which has such an effect, and Carson had been discriminated against. The UK Government maintained that her case could not be compared to other, similar cases, and therefore she had failed to demonstrate discrimination. Lord Carswell stated that other judgments had missed the fact that Carson’s financial position cannot be directly compared with those of pensioners either in the United Kingdom or in other countries, since exchange rates, inflation rates and the cost of living vary between these countries, therefore her case could not be directly compared with theirs and that accordingly she had not been discriminated against. He stated that:
A broader approach might more readily yield a serviceable answer which corresponds with one’s instincts for justice”.
Lord Carswell stated that Carson and other pensioners who reside in countries in which their pensions are not uprated are unquestionably treated differently, to their disadvantage, by reason of their residence in those countries. It is a fallacy to use variation in exchange rates or the relative cost of living in different countries when comparing Carson, and other “frozen” pensioners compared with pensioners residing in the United Kingdom or in countries where pensions are uprated. That makes little sense. If some of them are not paid pensions at the same rate as others then that would, in his opinion, constitute discrimination for the purposes of Article 14. If the UK Government had submitted reasons of economic or state policy to justify the difference in treatment, then Lord Carswell would yield to its decision-making power in those fields. It has not done so. On the contrary, the reasons for the policy lie wholly in the cost of uprating. It is stated in paragraph 11 of the memorandum by the Department of Social Security (DSS) memorandum to the House of Commons Social Security Committee in the session 1996-7:
Agreeing to additional expenditure on pensions paid overseas would be incompatible with the government’s policy of containing the long term cost of the social security system to ensure that it remains affordable”.
The UK state pension was becoming too expensive to continue paying at the “full rate” to everyone who had paid into the social security system, so the UK Government had to find some means of keeping down the cost, and in so doing, deprived one cohort of pensioners from receiving the annual uprating.
However, Lord Carswell stated, once the UK Government started uprating the UK state pension for some pensioners living abroad, then there can be no justification for paying some and not others and less than their peers in the UK.
Lord Carswell therefore allowed the appeal and declared that regulation 3 of the Social Security Benefits Up-rating Regulations 2001 (SI 2001/910) is unlawful.
The judgment of the Law Lords was 4 to 1 in favour of the UK Government. The legal system had, by now, been exhausted, but that was not the end of the road…..