Talks to avert Labour pensions rebellion fail

Whitehall talks aimed at averting a major backbench rebellion this month have collapsed.

Treasury officials are furious with Pensions Secretary Andrew Smith for raising expectations of a multi-million compensation deal for thousands of workers denied pensions when their companies collapsed.

The whips have warned that unless an agreement can be reached then the Government faces defeat when the Pensions Bill returns to the Commons for its report stage on 18 May.

They have told Tony Blair the revolt could be of a similar scale to those over top-up fees and foundation hospitals. Scores of Labour backbenchers are threatening to support an amendment tabled by former welfare reform minister Frank Field and Labour backbencher Derek Wyatt demanding compensation for the estimated 60,000 people who lost out.

The amendment has crossparty support.

Mr Blair raised hopes in the Commons two weeks ago that a "solution" could be found but Whitehall insiders say no deal has been agreed. Talks between Gordon Brown and Mr Smith aimed at averting the revolt broke down amid concerns that any financial package could leave the Treasury open to retrospective compensation claims.