Prohibition of discrimination (Article 14 of the Convention) and General prohibition of discrimination (Article 1 of Protocol No. 12 to the Convention)
II. RELEVANT NATIONAL AND INTERNATIONAL LAW A. Domestic law and practice 1. National Insurance contributions (NICs) 37. NICs are payable by employees and the self-employed who earn income over a set limit and by employers in respect of employees earning over a set limit. It is also possible for individuals who are not liable to pay compulsory contributions, because for example they are resident outside the United Kingdom, to make voluntary contributions to protect the right to certain social security benefits. The amounts paid by employees and employers depend on income. In the current tax year (2009 / 10), employees earning between GBP 110 and GBP 844 per week pay 11% of their income, with an additional 12.8% paid by the employer. The basic rate for the self-employed is currently GBP 2.40 per week and the voluntary contributions rate is GBP 12.05 per week. 38. The social security benefits paid for from NICs include contribution - based jobseeker ’ s allowance, incapacity benefit (now replaced by employment and support allowance), maternity allowance, widow ’ s benefit, bereavement benefit, retirement pensions of certain categories, child ’ s special allowance and guardian ’ s allowance. These benefits are financed on a “pay as you go” basis from NICs paid in the current year. If necessary, additional funding can be provided from money received in income tax and other forms of taxation, but this has not been necessary since 1998. NICs also partly pay for the cost of the National Health Service. 2. State pension 39. The basic State pension is, in the current financial year 2009/10, GBP 95.25 per week. To qualify for a State pension, it is necessary to have reached State pension age and to have paid or been credited with (or have a husband, wife or civil partner who has been paid or been credited with) NICs for a sufficient number of “qualifying years”. The State pension age is currently 65 for men and 60 for women. It will increase gradually for women from 2010, so that by 2020 it will be 65 for both sexes. At present, men need 44 qualifying years by the age of 65 to get a full basic State pension and women who reach the age of 60 before 2010 need 39 qualifying years. The Pensions Act 2007 reduced the number of qualifying years needed for a full basic State pension to 30 for people who reach State pension age on or after 6 April 2010. A percentage of the full basic State pension is payable to an individual without the full number of qualifying years. To get the minimum basic State pension (25%) it is normally necessary to have 10 or 11 qualifying years. 40. Individuals resident in the United Kingdom who do not have sufficient qualifying years to entitle them to a State pension may be entitled to non-contributory welfare benefits, such as means-tested income support and housing benefit. 3. Pension uprating and reciprocal agreements 41. Under section 150 of the Social Security Administration Act 1992, the Secretary of State is required to make an order each year to increase the basic State pension to maintain its value “ in relation to the general level of prices obtaining in Great Britain ”. 42. Although the basic State pension is payable to individuals resident outside the United Kingdom, non-residents are disqualified from receiving uprated pensions. Instead, unless or until they return to live in the United Kingdom, they continue to receive the State pension at the weekly rate applicable in the year in which they emigrated or, if they emigrated before reaching retirement age, at the rate applicable in the year in which they attained retirement age. A non-resident who returns to the United Kingdom for a short period receives the uprated pension while in the United Kingdom, but, when he returns to his country of residence, the pension reverts to its previous amount. 43. The exception to this rule concerns individuals who move to States which have concluded a bilateral reciprocal social security agreement with the United Kingdom which provides for the pensions paid to qualifying individuals to be uprated in line with United Kingdom inflation. 44. States enter into bilateral agreements to provide on a reciprocal basis for wider social security cover for workers and their families moving between the party countries than is available under national legislation alone. Each results from negotiations between the party States, taking into account the scope for reciprocity between the two social security schemes. In all cases the agreement establishes the social security scheme which is to be applied to persons moving from one country to work in the other. Generally, the scheme applicable is that of the country of employment. Whether a reciprocal social security agreement with another country is entered into depends on various factors, among them the numbers of people moving from one country to the other, the benefits available under the other country ’ s scheme, how far reciprocity is possible and the extent to which the advantages to be gained by an agreement outweigh the additional expenditure likely to be incurred by each State. Where an agreement is in place, the flow of funds may differ depending on the level of each country ’ s benefits and the number of people going in each direction. 45. Of the bilateral agreements entered into by the United Kingdom which cover more than liability for contributions, nearly all cover retirement pensions and widow ’ s/bereavement benefits. The majority also cover sickness, incapacity and maternity benefits. Some cover unemployment and child benefits. Where access to a benefit covered by the agreement is dependent on contributions, the agreement generally provides for aggregation of the contributions paid in each country. Each country then calculates a pro-rata pension based on contributions made in that country. Where access to a benefit depends on a period of residence, the agreement is likely to provide for residence in one country to count as residence in the other. Where benefit is paid in one country taking account of residence/contributions in the other, there is usually a provision for reimbursement of the former by the latter. Not all reciprocal agreements to which the United Kingdom is a party, therefore, involve the payment of pension uprating to United Kingdom expatriates. 46. The United Kingdom has reciprocal social security agreements providing for pension uprating with all European Economic Area (EEA) States and with Barbados, Bermuda, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia, Israel, Jamaica, Japan, Jersey and Guernsey, South Korea, Mauritius, New Zealand, Philippines, Turkey and the United States of America. Residents of the EEA countries and the countries listed above who qualify for a United Kingdom State pension receive the same level of uprating as United Kingdom residents; the uprating is based on the rate of inflation in the United Kingdom and no regard is paid to inflation in the country of residence. 47. All the above agreements were concluded between 1948 and 1992, and from 1979 onwards the agreements were to fulfil earlier commitments made by the United Kingdom Government. Since June 1996, the Government ’ s policy has been that future reciprocal agreements should normally be limited to resolving questions of liability for social security contributions. Agreements with Australia, New Zealand and Canada came into force in 1953, 1956 and 1959 respectively, but these did not require payment of uprated pensions. The agreement with Australia was terminated by Australia as from 1 March 2001, because of the refusal of the United Kingdom to pay uprated pensions to its pensioners living in Australia. 48. During the passage of the Pensions Bill through Parliament in 1995, amendments tabled in both Houses, calling for uprating to be paid to all expatriate pensioners, were defeated by large majorities. According to the Government, it would cost approximately GBP 4 billion (4 thousand million) to pay the backdated claims to uprating of all United Kingdom pensioners resident abroad in “frozen” countries together with an ongoing annual bill of over GBP 500 million ( 0.79 % of the GBP 62.7 billion spent in total by the United Kingdom in 2008/09 on pensions). B. Relevant international law 49. Article 69 of the 1952 International Labour Organization ’ s Social Security (Minimum Standards) Convention (“the 1952 ILO Convention”) provides that a benefit to which a protected person would otherwise be entitled in compliance with the 1952 ILO Convention (including old - age benefit) may be suspended, in whole or in part, by national law as long as the person concerned is absent from the territory of the State concerned. The above provision is echoed in Article 68 of the 1964 European Code of Social Security and Article 74 § 1 (f) of the 1990 European Code of Social Security (Revised ). 50. Part IV of the 1982 ILO Convention concerning the Establishment of an International System for the Maintenance of Rights in Social Security envisages that equal treatment of the nationals of the Contracting Parties in respect of social security rights, including the retention of benefits arising out of social security legislation whatever the movements the persons protected might undertake between Contracting States, may be secured by the conclusion of appropriate bilateral and multilateral agreements. Bilateral agreements are the most utilised method of coordination of social security laws and vary greatly in both personal and material scope. Some bilateral agreements cover only nationals of the Contracting Parties, while others apply to any person who has been covered by the social security systems of at least one of the Contracting Parties. They sometimes cover both contributory and non-contributory benefits; sometimes they are confined to contributory benefits only. 51. In April 2008 a Council of Europe initiative to draw up a new framework agreement for the coordination of social security schemes within the member States, to enable in particular the export of benefits throughout the Council of Europe region, was abandoned when it became clear that most countries preferred to maintain the present system of bilateral agreements (see CM(2008)71, paragraph 11, 17 April 2008). THE LAW 52. All the applicants complained that the failure to uprate their pensions violated their rights under Article 1 of Protocol No. 1 taken alone and in conjunction with Article 14. Six of the applicants also complained, under Article 8 of the Convention taken in conjunction with Article 14, that the failure to uprate their pensions had touched on their decisions to live with their families outside the United Kingdom in a discriminatory manner. Article 14 provides: “The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.” Article 1 of Protocol No. 1 provides: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” Article 8 provides: “1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.” I. ADMISSIBILITY ISSUES A. The Chamber ’ s conclusions 53. The Chamber declared the complaint under Article 1 of Protocol No. 1 taken alone inadmissible, on the ground that this provision did not guarantee the right to acquire possessions or to receive a social security benefit or pension payment of any kind or amount, unless provided for by national law. It declared the complaint under Article 14 taken in conjunction with Article 1 of Protocol No. 1 admissible and, without making any decision as to its admissibility, decided that it was not necessary to examine the complaint under Article 14 taken in conjunction with Article 8. B. The parties ’ submissions 54. The applicants submitted that their complaint under Article 1 of Protocol No. 1 had two limbs. Firstly, they claimed that the imposition of a residence condition on the right to receive uprated pension payments involved a deprivation or interference with the right to an uprated pension. Secondly, they complained that, without uprating, the year-on-year reduction in the value of the pension eroded the possession it represented. They claimed that the Chamber had been wrong to declare the complaint under Article 1 of Protocol No. 1 inadmissible. Moreover, they claimed that the Chamber had addressed only the first limb of this complaint. 55. The applicants accepted that, among them, only Ms Carson had brought domestic proceedings. However, they reasoned that once the House of Lords had found against her, there would have been no purpose in the other applicants attempting to pursue a domestic remedy. While it was true that the complaint under Article 14 taken in conjunction with Article 8 had not been raised in the national proceedings, the applicants should nonetheless be permitted to pursue it before the Court, since the Government had not previously challenged it on grounds of non-exhaustion and since the applicants were elderly and should not be required to wait any longer for a conclusion. 56. The Government submitted, firstly, that the application should be declared inadmissible for non -exhaustion as far as it related to the twelve applicants other than Ms Carson, since they had not brought any domestic proceedings. Secondly, they contended that in any event the complaint under Article 14 taken in conjunction with Article 8 should be declared inadmissible for non-exhaustion since it had never been raised before the domestic courts. C. The Court ’ s assessment 57. With regard, firstly, to the question under Article 1 of Protocol No. 1 taken alone, the Court considers that what the applicants refer to as the second limb of their complaint amounts to no more than a restatement of the first limb. There is no right under national law for a resident of a country which has not concluded a reciprocal agreement with the United Kingdom to have his pension increased annually in line with inflation in the United Kingdom. The Chamber ’ s decision to declare the complaint under Article 1 of Protocol No. 1 taken alone inadmissible was a final decision and this part of the application is not, therefore, before the Grand Chamber (see K. and T. v. Finland [GC], no. 25702/94, § 141, ECHR 2001-VII, and Šilih v. Slovenia [GC], no. 71463/01, §§ 119-21, 9 April 2009). 58. As regards the Government ’ s preliminary objections, the Court considers that it would be wrong to declare the complaint under Article 1 of Protocol No. 1 inadmissible as regards the twelve applicants who did not bring domestic proceedings. Once Ms Carson ’ s case had been rejected by the House of Lords, these applicants would have had no prospect of success before the domestic courts. 59. However, it considers that the complaint under Article 14 taken in conjunction with Article 8 should be declared inadmissible. The applicants do not contend that the available domestic remedies would not have been effective and Ms Carson pursued her complaints under Article 14 of the Convention and Article 1 of Protocol No. 1 through three tiers of the domestic courts, which gave considered and detailed judgments. In contrast, the issues arising under Article 14 taken in conjunction with Article 8 have never been raised before the domestic courts. 60. In conclusion, therefore, the Court rejects the Government ’ s preliminary objection as to the admissibility of the complaints of the applicants other than Ms Carson. It accepts the Government ’ s objection, however, as regards the applicants ’ complaint under Article 14 taken in conjunction with Article 8, which it declares inadmissible. II. ALLEGED VIOLATION OF ARTICLE 14 OF THE CONVENTION TAKEN IN CONJUNCTION WITH ARTICLE 1 OF PROTOCOL No. 1 A. The Court ’ s general approach 61. The Court has established in its case-law that only differences in treatment based on an identifiable characteristic, or “status”, are capable of amounting to discrimination within the meaning of Article 14 ( see Kjeldsen, Busk Madsen and Pedersen v. Denmark, 7 December 1976, § 56, Series A no. 23 ). Moreover, in order for an issue to arise under Article 14 there must be a difference in the treatment of persons in analogous, or relevantly similar, situations ( see D.H. and Others v. the Czech Republic [GC], no. 57325/00, § 175, ECHR 2007 -IV, and Burden v. the United Kingdom [GC], no. 13378/05, § 60, ECHR 2008). Such a difference in treatment is discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised. The Contracting State enjoys a margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment ( see Burden, cited above, § 60 ). The scope of this margin will vary according to the circumstances, the subject-matter and the background. A wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the Court will generally respect the legislature ’ s policy choice unless it is “manifestly without reasonable foundation” ( see Stec and Others v. the United Kingdom [GC], no. 65731/01 and 65900/01, § 52, ECHR 2006 -VI ). 62. The Court observes at the outset that, as with all complaints of alleged discrimination in a welfare or pensions system, it is concerned with the compatibility with Article 14 of the system, not with the individual facts or circumstances of the particular applicants or of others who are or might be affected by the legislation (see, for example, Stec and Others, cited above, §§ 50-67; Burden, cited above, §§ 58-66; and Andrejeva v. Latvia [GC], no. 55707/00, §§ 74-92, ECHR 2009). Much is made in the applicants ’ submissions and in those of the third - party intervener of the extreme financial hardship which may result from the policy not to uprate pensions and of the effect that this might have on the ability of certain persons to join their families abroad. However, the Court is not in a position to make an assessment of the effects, if any, on the many thousands in the same position as the applicants and nor should it try to do so. Any welfare system, to be workable, may have to use broad categorisations to distinguish between different groups in need (see Runkee and White v. the United Kingdom, nos. 42949/98 and 53134/99, § 39, 10 May 2007). As in the cases cited above, the Court ’ s role is to determine the question of principle, namely whether the legislation as such unlawfully discriminates between persons who are in an analogous situation. B. Whether the facts underlying the complaint fall within the scope of Article 1 of Protocol No. 1 63. The Court notes that Article 14 complements the other substantive provisions of the Convention and the Protocols. It has no independent existence since it has effect solely in relation to “the enjoyment of the rights and freedoms” safeguarded by those provisions. The application of Article 14 does not necessarily presuppose the violation of one of the substantive rights guaranteed by the Convention. The prohibition of discrimination in Article 14 thus extends beyond the enjoyment of the rights and freedoms which the Convention and Protocols require each State to guarantee. It applies also to those additional rights, falling within the general scope of any Article of the Convention, for which the State has voluntarily decided to provide. It is necessary but it is also sufficient for the facts of the case to fall “within the ambit” of one or more of the Convention Articles (see Stec and Others v. the United Kingdom ( dec. ) [GC], nos. 65731/01 and 65900/01, § 39, ECHR 2005 ‑ X, and Andrejeva, cited above, § 74 ). 64. The Chamber found that although there was no obligation on a State under Article 1 of Protocol No. 1 to create a welfare or pension scheme, if a State did decide to enact legislation providing for the payment as of right of a welfare benefit or pension – whether conditional or not on the prior payment of contributions – that legislation had to be regarded as generating a proprietary interest falling within the ambit of Article 1 of Protocol No. 1 for persons satisfying its requirements ( see the decision in Stec and Others, cited above, § 54). In the present case, therefore, the facts fell within the scope of Article 1 of Protocol No. 1. 65. The Grand Chamber agrees with this finding, which is not, moreover, disputed by the Government. C. Whether “country of residence” falls within the phrase “ or other status” in Article 14 1. The Chamber ’ s conclusions 66. The Chamber held that, in the circumstances of the case, ordinary residence, like domicile and nationality, was to be seen as an aspect of personal status and that place of residence, applied as a criterion for the differential treatment of citizens in the granting of State pensions, was a ground falling within the scope of Article 14. 2. The parties ’ submissions 67. The applicants submitted that the Chamber ’ s conclusion on this point was manifestly correct, for the reasons it gave. Its treatment of residence as an aspect of personal status was also consistent with the approach of “other pre-eminent constitutional courts”, such as the Supreme Court of Canada, which, in Godbout v. Longueuil (City) [ 1997 ] SCR 844, characterised an individual ’ s choice of place of residence as a “quintessentially private decision going to the very heart of personal or individual autonomy”. The applicants further submitted that it was artificial and inaccurate to treat an individual ’ s country of residence as a matter of free choice, since it might be driven by the need or desire to be close to family members. 68. Before the domestic courts, the Government conceded that Ms Carson ’ s foreign residence was a ground protected under Article 14 as falling within the phrase “or other status ” (see paragraphs 28 and 30 above). In their observations before the Court, however, the Government contended that place of residence was not within the concept of “other status”, since it was a matter of choice, rather than an inherent personal characteristic or deeply held conviction or belief. 69. The third - party interveners, Age Concern and Help the Aged, emphasised the importance of family support in old age and referred to research indicating that the existence of family ties outside the United Kingdom could be an important factor in the decision to emigrate. 3. The Court ’ s assessment 70. The Grand Chamber agrees with the Chamber ’ s conclusions on this issue. It has established in its case-law that only differences in treatment based on a personal characteristic (or “status” ) by which persons or groups of persons are distinguishable from each other are capable of amounting to discrimination within the meaning of Article 14 ( see Kjeldsen, Busk Madsen and Pedersen, cited above, § 56). However, the list set out in Article 14 is illustrative and not exhaustive, as is shown by the words “any ground such as” (in French notamment ) (see Engel and Others v. the Netherlands, 8 June 1976, § 72, Series A no. 22). It further notes that the words “other status” (and a fortiori the French equivalent toute autre situation ) have been given a wide meaning so as to include, in certain circumstances, a distinction drawn on the basis of a place of residence. Thus, in previous cases the Court has examined under Article 14 the legitimacy of alleged discrimination based, inter alia, on domicile abroad ( see Johnston and Others v. Ireland, 18 December 1986, §§ 59-61, Series A no. 112) and registration as a resident ( see Darby v. Sweden, 23 October 1990, §§ 31-34, Series A no. 187). In addition, the Commission examined complaints about discrepancies in the law applying in different areas of a single Contracting State ( see Lindsay and Others v. the United Kingdom, no. 8364/78, Commission decision of 8 March 1979, Decisions and Reports 15, p. 247, and Gudmundsson v. Iceland, no. 23285/94, Commission decision of 17 January 1996, unreported). It is true that regional differences of treatment, resulting from the application of different legislation depending on the geographical location of an applicant, have been held not to be explained in terms of personal characteristics (see, for example, Magee v. the United Kingdom, no. 28135/95, § 50, ECHR 2000- VI). However, as also pointed out by Stanley Burnton J (see paragraphs 26-28 above), these cases are not comparable to the present case, which involves the different application of the same pensions legislation to persons depending on their residence and presence abroad. 71. In conclusion, the Court considers that place of residence constitutes an aspect of personal status for the purposes of Article 14. D. Whether the applicants are in a relevantly similar position to pensioners receiving uprating 1. The Chamber ’ s conclusions 72. The Chamber held that, given that the United Kingdom ’ s social security and pension system was primarily designed to provide a minimum standard of living for those resident within its territory, the applicants were not in a relevantly similar position to British pensioners who decided to remain in the country. It was “hesitant ” to find an analogy between the positions of pensioners, such as the applicants, who did not receive uprating and pensioners resident in countries which had concluded bilateral agreements with the United Kingdom providing for uprating. In this connection, it noted that NICs were only one part of the United Kingdom ’ s complex system of taxation and that the National Insurance Fund was one of a number of sources of revenue used to pay for the social security and National Health systems. It did not therefore consider the applicants ’ payment of NICs during their working lives in the United Kingdom to be of any more significance than the fact that they might have paid income tax or other taxes while domiciled there. Moreover, even between States in close geographical proximity, such as the United States of America and Canada, South Africa and Mauritius, or Jamaica and Trinidad and Tobago, differences in social security provision, taxation, rates of inflation, interest and currency exchange made it difficult to compare the respective positions of residents. 2. The parties ’ submissions ( a ) The applicants 73. The applicants contended that they were in a relevantly similar position to United Kingdom pensioners with the same employment and National Insurance records but now living either in the United Kingdom or in countries party to a reciprocal agreement providing for uprating. 74. They adopted the dissenting views expressed by Lord Carswell in the House of Lords and Judge Garlicki in the Chamber and argued that pensioners in each group would have spent a significant part of their working lives in the United Kingdom; all would have made the same NICs for the purpose of obtaining the basic State pension; all would have become entitled to the same amount of basic State pension at pensionable age. The State pension was a true contributory, or earned, benefit in that the level of entitlement was directly related to the number of years over which contributions are made. The United Kingdom authorities had themselves chosen to make the State pension, unlike other welfare benefits, payable to individuals resident abroad. 75. Moreover, regardless of the country of residence, all pensioners would have an identical interest in maintaining their standard of living beyond retirement. There was no evidence of any differences in the social and economic conditions applying in the countries where uprating was paid and those where it was not, nor any evidence that the United Kingdom based its approach on the existence of such differences. 76. It would be wrong to place too great an emphasis on the provisions of the 1952 ILO Convention or the 1964 European Code of Social Security (see paragraph 4 9 above). Both instruments focused on social security systems in general, rather than on contributory pensions in particular; there was no suggestion that either instrument authorised the suspension of some benefits to some individuals resident abroad, but not to others and there was no evidence that the United Kingdom ’ s approach had been informed by either instrument. 77. Under national law, the existence of a reciprocal agreement was not a requirement for the provision of uprated pensions. The existing pattern of reciprocal agreements was arbitrary and seeking to define the class of comparators by reference to their residence in a country with which the United Kingdom had entered into a reciprocal agreement was circular and amounted to no more than a restatement of the differential treatment complained of. 78. Finally, the applicants submitted that no weight should be given to the concession made by Ms Carson ’ s counsel in the domestic proceedings (that Article 14 would not be breached if the State pension was payable only to United Kingdom residents : see paragraph 35 above ). As her counsel had also pointed out later in the same hearing, the fact was that the United Kingdom had decided to adopt a scheme whereby it paid a pension to expatriates in recognition of their contributions and, having adopted such a system, it was irrational not to pay the same amount to everyone. In any event, the concession had been made on behalf of Ms Carson but not the other applicants and had been expressly withdrawn for the purposes of the application before the Court. ( b ) The Government 79. The Government adopted the reasoning and conclusions of the domestic courts and the Chamber. The applicants could not claim to be in an analogous situation to United Kingdom residents. Most national systems of social security and taxation were tailored to the particular country and intended to be national in character, as was recognised by international law. In the United Kingdom, social security benefits, including the State pension, were part of an interlocking system of taxation and social welfare intended to ensure minimum standards of living for those who lived in the country. It was no doubt in recognition of the national character of social security schemes that Ms Carson ’ s counsel agreed in the course of the domestic proceedings that she could have no complaint if the Government had paid no pensions whatever to people who had gone to live abroad (see paragraph 3 5 above). 80. Moreover, even if it could be assumed that inflation was common to all States, it would be artificial to isolate the single factor of inflation from other factors, such as different rates of growth and fluctuations in exchange rates. It would be practically impossible, or at least extraordinarily onerous, to require the State authorities to conduct a cost - of - living/value - based comparison between people living in the United Kingdom and those living in different foreign countries and if a decision were made to pay something to those living abroad, it could not be a finely calibrated amount based on analysis of the cost of living and value of sterling in each country. 81. Focusing simply on the NICs paid by the applicants involved a misleading oversimplification. Contributions required to be made by earners, employers and others to the National Insurance Fund could not properly be equated with or compared to contributions made to a private pension scheme. The National Insurance scheme was a social - insurance scheme, based on a universal pooling of resources. Contribution liability was related to a person ’ s ability to pay rather than to expectation of future entitlement. Not all contributory benefits were payable to non-residents. 82. The Government further contended that the applicants were not in a position analogous to pensioners living in States with which the United Kingdom had entered into reciprocal arrangements. The differences with this comparator group were founded, as the domestic courts at each level recognised, on the fact of reciprocal arrangements either being or not being in place with the relevant foreign State. Those arrangements were concluded in each case on the basis of judgments as to whether the proposed package of arrangements represented an acceptable, advantageous position for the United Kingdom. The applicants ’ argument necessarily involved the proposition that if a bilateral treaty in the social security sphere were entered into and conferred advantages on some people in relation to one or more aspects of social security, those advantages would necessarily have to be conferred on all others, living in all countries. The result would effectively negate the power to enter into bilateral treaties of this kind. 3. The Court ’ s assessment 83. As noted in paragraph 61 above, the Court has established in its case-law that, in order for an issue to arise under Article 14, the first condition is that there must be a difference in the treatment of persons in relevantly similar situations. 84. The applicants ’ principal argument in support of their claim to be in a relevantly similar situation to pensioners who receive uprating is that they also have worked in the United Kingdom and paid compulsory contributions to the National Insurance Fund. However, in common with the national courts and the Chamber, the Grand Chamber considers that the applicants ’ argument misconceives the relationship between NICs and the State pension. Unlike private pension schemes, where premiums are paid into a specific fund and where those premiums are directly linked to the expected benefit returns, NICs have no exclusive link to retirement pensions. Instead, they form a source of part of the revenue which pays for a whole range of social security benefits, including incapacity benefits, maternity allowances, widow ’ s benefits, bereavement benefits and the National Health Service. Where necessary, the National Insurance Fund can be topped-up with money derived from the ordinary taxation of those resident in the United Kingdom, including pensioners (see paragraph 38 above). The variety of funding methods of welfare benefits and the interlocking nature of the benefits and taxation systems have already been recognised by the Court (see the decision in Stec and Others, cited above, § 50). This complex and interlocking system makes it impossible to isolate the payment of NICs as a sufficient ground for equating the position of pensioners who receive uprating and those, like the applicants, who do not. As Lord Hoffmann observed (see paragraph 3 5 above): “ ... from the point of view of the citizens who contribute, National Insurance contributions are little different from general taxation which disappears into the communal pot of the consolidated fund. The difference is only a matter of public accounting. ” 85. The Court does not, therefore, consider that the payment of NICs is alone sufficient to place the applicants in a relevantly similar position to all other pensioners, regardless of their country of residence. Moreover, in relation to the comparison with pensioners living in the United Kingdom, it cannot be ignored that social security benefits, including State pensions, are part of a system of social welfare which exist to ensure certain minimum standards of living for residents of the United Kingdom. The duty imposed on the Secretary of State in the Social Security Administration Act 1992 to review the sums specified for the various benefits covered by the Act, including the State pension, is to determine “whether they have retained their value in relation to the general level of prices obtaining in Great Britain” (see paragraph 41 above). The scheme of the primary legislation is, as the Court of Appeal said, “entirely geared to the impact on the pension of price inflation in the United Kingdom” (see paragraph 30 above). The essentially national character of the social security system is itself recognised in the relevant international instruments, the 1952 ILO Convention and the 1964 European Code of Social Security, which empower the suspension of benefits to which a person would otherwise be entitled for as long as the person concerned is absent from the territory of the State concerned (see paragraph 4 9 above). 86. Given that the pension system is, therefore, primarily designed to serve the needs of those resident in the United Kingdom, it is hard to draw any genuine comparison with the position of pensioners living elsewhere, because of the range of economic and social variables which apply from country to country. Thus, the value of the pension may be affected by any one or a combination of differences in, for example, rates of inflation, comparative costs of living, interest rates, rates of economic growth, exchange rates between the local currency and sterling ( in which the pension is universally paid ), social security arrangements and taxation systems. As the Court of Appeal noted, it is inescapable that the grant of the uprate to all pensioners, wherever they might have chosen to live, would have random effects (see paragraph 30 above). Furthermore, as noted by the domestic courts, as non-residents the applicants do not contribute to the United Kingdom ’ s economy; in particular, they pay no United Kingdom tax to offset the cost of any increase in the pension (see, for example, paragraph 3 5 above). 87. Nor does the Court consider that the applicants are in a relevantly similar position to pensioners living in countries with which the United Kingdom has concluded a bilateral agreement providing for uprating. Those living in reciprocal agreement countries are treated differently from those living elsewhere because an agreement has been entered into; and an agreement has been entered into because the United Kingdom considered it to be in its interests. 88. States clearly have a right under international law to conclude bilateral social security treaties and indeed this is the preferred method used by the member States of the Council of Europe to secure reciprocity of welfare benefits (see paragraphs 50-51 above). Such treaties are entered into on the basis of judgments by both parties as to their respective interests and may depend on various factors, among them the numbers of people moving from one country to the other, the benefits available under the other country ’ s welfare scheme, how far reciprocity is possible and the extent to which the advantages to be gained by an agreement outweigh the additional expenditure likely to be incurred by each State in negotiating and implementing it (see paragraph 44 above). Where an agreement is in place, the flow of funds may differ depending on the level of each country ’ s benefits and the number of people going in each direction. It is the inevitable result of such a process that different conditions apply in each country depending on whether or not a treaty has been concluded and on what terms. 89. The Court agrees with Lord Hoffmann that it would be extraordinary if the fact of entering into bilateral arrangements in the social security sphere had the consequence of creating an obligation to confer the same advantages on all others living in all other countries. Such a conclusion would effectively undermine the right of States to enter into reciprocal agreements and their interest in so doing. 90. In summary, therefore, the Court does not consider that the applicants, who live outside the United Kingdom in countries which are not party to reciprocal social security agreements with the United Kingdom providing for pension uprating, are in a relevantly similar position to residents of the United Kingdom or of countries which are party to such agreements. It follows that there has been no discrimination and, therefore, no violation of Article 14 taken in conjunction with Article 1 of Protocol No. 1.
The Court held that there had been no violation of Article 14 (prohibition of discrimination) of the Convention in conjunction with Article 1 (protection of property) of Protocol No. 1 to the Convention. It found in particular that the applicants’ principal argument that, because they had worked in the United Kingdom and paid compulsory contributions to the National Insurance Fund, they were in a relevantly similar situation to pensioners who received uprating was misconceived. Moreover, as regards the comparison with pensioners living in the United Kingdom, it had to be remembered that the social-security system was essentially national in character with the aim being to ensure certain minimum standards of living for residents there. Nor did the Court lastly consider the applicants to be in a relevantly similar position to pensioners living in countries with which the United Kingdom had concluded a bilateral agreement providing for uprating.