In April 2008, workers at the Grangemouth oil refinery in Scotland held a 48-hour strike over the issue of pensions. About 1,200 employees took part in the strike, which also forced the closure of the Forties pipeline which supplies oil and gas to British and international markets. The Grangemouth workers are seeking to protect their existing pension scheme, arguing that the company can afford to sustain both new and existing members.
Workers at the Grangemouth oil refinery on the east coast of Scotland staged a 48-hour strike in April 2008 over plans by the chemicals company INEOS to change its pension scheme arrangements. The strike began in the early hours of Sunday 27 April and involved about 1,200 employees who are members of the trade union Unite. INEOS said it could take up to three weeks for Grangemouth to reach full plant capacity, although this claim was disputed by the trade union.
The temporary closure of the plant, which refines around 10% of the UK’s petrol, also forced the closure of the Forties pipeline, since the nearby Kinneil production plant, which is owned and operated by BP, cannot function without power and steam from Grangemouth. The Forties pipeline carries over 725,000 barrels of crude oil and 80 million cubic metres of gas ashore daily, supplying Britain and international markets. The offshore energy industry body Oil and Gas UK has estimated that the dispute could cost the economy more than GBP 50 million (about €63.57 million as at 19 June 2008).
Background to dispute
INEOS, which acquired Grangemouth from BP in 2005, insisted that it has been ‘bending over backwards’ to avert the dispute. The company proposed suspending all changes to the existing pension scheme, including the introduction of employee contributions; it agreed to engage in a three-month period of discussion if the trade union conceded to avert any strike action. However, this offer was rejected by Unite on the basis that the company still planned to close the defined contribution (DC) pension scheme to new members from 1 August 2008. Although the company says that this would not affect existing employees, the trade union contends that introducing a money purchase scheme for new staff will make it more difficult to protect the existing scheme due to the diminishing number of new members. Unite argues that the pension fund is in surplus, financed at 120% of the required value, and can afford to sustain current and new members.
Differing positions of parties
The National Officer of Unite, Phil McNulty, claimed that:
The Grangemouth workers are having to strike to defend their existing pension scheme which, despite the fact it is well-funded and in profit, their hugely rich employer, INEOS, wants to close.
The trade union argued that GBP 16 million (€20.35 million) a year is needed to maintain the pension fund, while the plant makes up to GBP 3 million (€3.82 million) a day in profits alone. Unite added that INEOS had already made moves to reduce its contributions to the pension scheme and had introduced other detrimental changes, such as financial penalties for early retirement. The union also contended that although the existing scheme is non-contributory on the part of employees, this is reflected in their relatively lower salaries compared with other companies in the oil and petrochemicals sector. It claims that the Grangemouth workers are paid GBP 6,000 (€7,635) a year less than workers at other refineries, and that the changes proposed by INEOS would reduce members’ payouts by an average GBP 10,000 (€12,725) a year.
For its part, the company claims that a quarter of the salary bill is already going into the pension fund at Grangemouth. It insists that changes are needed to help secure a proposed GBP 720 million (€916 million) of new investment for the plant. As the Human Resource Manager for INEOS, Ian Fyfe, highlighted:
The union doesn’t seem to understand that by taking this action, INEOS Capital, who run the company, have choices to make about where they put their money.
Mr Fyfe added:
We need this huge investment to make this thing profitable for the long term. They’ve got a choice: they can say “we’ll put that money in Norway, or France or Germany, and not Grangemouth”. We’ve assessed that without this investment, huge amounts of this plant will close down and we’ll lose 650 jobs.
Commentary
A series of talks between the company and trade union took place in May 2008 ‘with a view to resolution’ of the dispute. In the meantime, no further strikes are planned. However, with fuel prices at their highest in years and the threat of strikes across the public sector (UK0804029I), the dispute has come at a bad time for the government. Secretary of State for Business, Enterprise and Regulatory Reform, John Hutton, travelled to central Scotland on 29 April to meet officials from INEOS and Unite, as well as representatives from the oil and gas industries. Meanwhile, speaking on behalf of the government opposition Conservative Party, Member of Parliament (MP) George Osborne claimed that a new Conservative government would consider reforms to employment law as a matter of ‘urgency’. Mr Osborne also blamed government taxation changes for prompting companies to end final-salary pension schemes.
James Arrowsmith, IRRU, University of Warwick