Skip to main content

Equitable Life

Volume 497: debated on Wednesday 21 October 2009

[Relevant Documents: The Second Report from the Public Administration Select Committee, on Justice Delayed: The Ombudsman’s report on Equitable Life, HC 41, and the Government response, HC 953; and the Sixth Report from the Committee, on Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life, HC 219, and the Government response, HC 569.]

I beg to move,

That this House notes that the Parliamentary Ombudsman has taken the unusual step of using powers under the 1967 Act to present Parliament with a further and final report on Equitable Life; also notes that the Public Administration Select Committee’s Sixth Report, Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life, concluded that the Government response to the Parliamentary Ombudsman’s report was inadequate as a remedy for injustice; recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; believes the Government should accept the recommendations of the Ombudsman on compensating policyholders who have suffered loss; notes the outcome of the Judicial Review announced on 15 October extending the period for compensation claims back to 1991; welcomes the formation of the All-Party Group on Justice for Equitable Life Policyholders; and notes with regret its necessary formation and the fact that over 30,000 people have already died waiting for a just resolution to this saga.

I have no interest to declare. Indeed, I am not only moving this motion for disinterested reasons, but moving it on behalf of more than my own party—although we feel strongly about it. Members in all parts of the House have taken up the cause of Equitable Life policyholders, and in fact the basis of this motion is early-day motion 1423, which has been signed by the remarkably large number of 337 Members, including 113 of the Government party. This motion should therefore have widespread all-party support, and the only amendment to it that has been tabled is a purely factual one; it notes that a judicial review has taken place, but makes no comment or judgment on the outcome.

There is a lot of detail—legal, actuarial and other kinds—in this argument and we shall be plunged into it before long, but I want to start by setting out the broad principles that underlie the motion. From our point of view, there are two essential concerns. One of them is a human concern—a concern for human welfare and the individuals who have lost from this disaster—and the other is a constitutional concern. The human concern derives from the fact that there are roughly 1 million Equitable Life policyholders. About 400,000 policies are still managed by Equitable Life, while the other 600,000 are managed by other insurance companies. Many of those people have suffered large losses—up to half of their pension. Of those 1 million, about 30,000 have died since the original collapse of the company. Since the ombudsman reported on the subject, about 6,000 have died, and every day that passes before justice is obtained another 15 die. That summarises, in rather graphic terms, the consequences of leaving injustice unremedied.

The constitutional issue is as follows. We have an ombudsman, and that office is not a Government quango. It is a parliamentary institution—it was set up by Parliament and it reports to Parliament on our behalf. The authority of the ombudsman is clearly at stake. Those of us who have tabled this motion have done so to ask the Government to implement the ombudsman’s recommendations; that is essentially the basis of it. The Government have so far declined to do so, either in spirit or in substance.

We need to remember just how important this issue of the authority of the ombudsman is. Many people do not attach great respect to this House—we can understand why that has been the case in recent months. The ombudsman is a parliamentary institution that is central to our constitution. It says, “Whatever you think about your MP or other MPs, there is a body you can go to that is independent of Government. If you have been wronged through maladministration in Government or a quango, this independent authority will investigate the matter without partiality and will help you to achieve justice through compensation, where necessary.” If the authority of the ombudsman is defied by the Government in this major case, we will lose the credibility of a major institution of the country. That is what is at stake.

I declare an indirect personal interest.

Does the hon. Gentleman agree that this goes beyond the argument he is making, in that there is literally no point in having an ombudsman unless Governments make it a principle that they will obey what the ombudsman recommends?

The right hon. Gentleman is right; as this is such an important case—it is the biggest that the ombudsman has taken on—if the ombudsman’s authority is simply flouted, that makes the ombudsman redundant. I might go further than him by asking the following: if the institutions of Parliament are flouted, what is the purpose of Parliament? That is a fundamental question.

Does my hon. Friend agree that the general public, including the 1,000 or so people in Montgomeryshire who lost money through Equitable Life, simply do not understand how this Government can resist what seems like an act of natural justice—following the guidance of the ombudsman? My constituents do not follow Parliament closely, but they feel that they are being treated unjustly on a matter that could be easily corrected in just the way that my hon. Friend has outlined.

Well, it can be and, indeed, it should be. Let me try to anticipate the Government’s concerns. In addition to the two broad principles that I have sketched out—the human concerns and the constitutional concerns—a third issue arises: money and finance. There is common ground on the fact that that must be relevant when we are talking about large amounts of compensation, but we have crossed a bridge in the sense that the ombudsman has accepted that the public purse is a factor that must be borne in mind in compensation awards and the Government have accepted, through their ex gratia payments proposal, that there has to be compensation. The principle that there is an issue to address has been accepted on both sides. We are now united on the broad principle that finance is a factor, but that the Government agree that there must be public expenditure. We are arguing about how that mechanism will be introduced.

Let us consider where the debate has reached in the past year. Our view, in moving this motion, is that the principles under which the ombudsman’s findings must be implemented must include, as she said, an “independent” process, which means a tribunal-like process independent of the Government and independent of the Treasury. The Government’s view is that compensation should be decided through a process led by, determined by and ultimately decided by the Government—the Treasury. That is now the fundamental distinction. In a way, that explains the heart of the constitutional problem: if the Government decide how we remedy a fault of theirs, wherein lies the independence of the ombudsman? That independence simply disappears.

Does not the fault with the Government’s position extend rather further than that? Not only have they ignored the findings of the ombudsman and refused to accept them, but they have engaged in an exercise of foot-dragging, procrastination and temporising. They have done everything possible to prevent this matter from being dealt with properly and to prevent these people from getting the justice that they deserve. Is that not the indictment against the Government in this case?

Indeed, and I now propose to take my hon. Friend through this nine-year journey, the end of which we hope we are finally approaching. Let me turn to one aspect of this tension between the two approaches to resolving the compensation—the Government-led versus the tribunal-led. I note that the Government amendment contains the remarkable phrase that their scheme

“is administratively quicker and simpler to deliver”.

The idea that after 10 years the Government are invoking speed as the basis for their case would have Sir Humphrey gasping with admiration at the Treasury’s abilities in this matter.

Just before my hon. Friend starts his nine-year journey, may I ask whether he also accepts that there is a second difference between our position and that of the Government? This is not simply about how much cash the Government are going to give as opposed to how much we think they should give, because the Government, by partially rejecting the ombudsman’s finding, have excluded some categories of loss and some categories of policyholder altogether. Therefore, even if they suddenly decided to become more generous in cash terms, they would already have excluded a set of people whom the ombudsman rightly thinks, as do we, have suffered injustice.

My colleague is right. Of course, following the judicial review, some of those categories are now included; I understood the statement that the Minister made yesterday to say that the Government have accepted that specific change. So, there is wider coverage than there was before, but we remain with the fundamental division.

My hon. Friend has discussed the cost of compensation, but does he agree that it is high time that the Government told this House and the taxpayer how much has been spent on evading justice over the past 10 years? It is time for the Minister to tell this House that figure today, which I suspect is very large.

I had not thought of that angle, but it is a good one. I am sure that if we were to add together the legal fees and the opportunity cost of Treasury officials’ time, we would be talking about many millions.

Does the hon. Gentleman accept the principle that justice can be means-tested? It seems that the tribunal will have to grapple with that. If that principle is accepted, what on earth will the Government say to those who do not make the cut?

Well, indeed; I believe that the hon. Gentleman is referring to the concept of disproportional effects, which the Government have introduced. None of us fully understands what it means. I do not think that the arbitrator whom the Government have appointed understands what it means either because, as far as we can tell, in his initial report he has not tried to engage with that extremely difficult issue, which many of us thought was introduced simply to evade the issue of compensation.

Does the hon. Gentleman agree with the many constituents of mine who are horrified that this Government have denied them justice by refusing to set a timetable for payment and, specifically, by not defining what “disproportionality of suffering” actually means? Does he further agree that the Minister should set people’s minds at rest on those two issues today? If he does not do so, would we be right to say that the Government are deliberately waiting for more of these people to die?

That is a very emotive way of putting it but, in essence, the hon. Gentleman is right. That is the fact of the matter because, as I said in my introduction, every day that passes another 15 of those people die; it is a sadness that many of them will never see justice.

I am sure that hon. Members are anxious to hear me get on with the history, but I shall take one further intervention now.

It is important that, at this stage, the hon. Gentleman makes it clear what he understands the compensation to refer to. I am one of the signatories of early-day motion 1423, which refers to the compensation recommended by the ombudsman. Does he agree that the ombudsman was talking about the relative loss arising from the acknowledged maladministration and not that element of loss arising from the vagaries of the market?

Yes, that is right; it has been clear from the beginning that we are talking about relative losses. It is clear that nobody—neither the action group nor anybody else—is suggesting that wider definition.

Let me return briefly to the beginning of these events. I do so not simply for the sake of it, but because a large number of hon. Members were not in this place when the original crisis broke. Having checked this, I believe that only one member of the Government Treasury team, the Financial Secretary, and one member of the Conservative Front-Bench team, the hon. Member for Runnymede and Weybridge (Mr. Hammond), were Members at that time. We have been around this for a long time and a lot of people have come into the story at different stages, so it is worth remembering where it started.

Equitable Life collapsed, in effect, in 2000. The first debate in this House, which was introduced by the hon. Member for Croydon, South (Richard Ottaway), was held at the end of that year. It is worth returning to that debate, because many of the arguments that we are rehearsing today were set out clearly and well on that occasion. In particular, the whole principle of compensation was discussed at that time, because it was clear to those of us who had been following events at Equitable Life that there was an issue of maladministration to address. The company had been declaring large bonuses far in excess of its profits or underlying resources for some years, such that the actuary responsible for it was subsequently fired by his professional body. The company had a guarantee of annuities that assumed a continuing high level of inflation, which was described at the time as mathematically brilliant but economically illiterate. The question was raised, even then, as to how it could possibly have been that the Government Actuary’s Department and the Department of Trade and Industry, which were overseeing the matter, did not spot the problem.

So, there was a prima facie case of maladministration. I recall asking the Minister at the time whether, if there had been maladministration, there would be compensation. I asked that question because the Prime Minister made his political reputation—a long time ago—as an Opposition spokesman arguing the case for the Barlow Clowes investors, who were compensated after maladministration. The answer I received from the Minister was that once the ombudsman had made a recommendation, we could proceed to compensation. We have been waiting ever since for that debate to be resolved.

Does my hon. Friend recall the Penrose report, which gave a clear indication of maladministration that, at the time, was entirely rejected by the Government?

Yes, and that was the second step in the process. We had several years before Penrose finally reported in 2004. Lord Penrose described the delays, even at that stage—remember, this was five years ago—as “iniquitous and unfair”. Indeed, he found a combination of failures of policy, which are not examples of maladministration, and of maladministration and recommended that the matter be passed to the ombudsman, which is what happened. The matter was referred to the ombudsman, and my hon. Friend the Member for North Norfolk (Norman Lamb) and I participated on behalf of our constituents. Let us remember that the reference to the ombudsman was made on our behalf as Members of Parliament—there were 898 separate complaints, submitted by large numbers of Members on their constituents’ behalf. That is why the ombudsman became involved. It was not an official process; it was a process that we initiated on behalf of our constituents.

The ombudsman pursued her inquiry and finished her work in February 2007. It was July 2008 before that work was formally presented to Parliament, as a result of innumerable questions posed by the Treasury under a process that is described as Maxwellisation. For those not familiar with the jargon, Maxwellisation refers, I think, to one of your predecessors, Mr. Speaker, as Member for Buckingham, although he is perhaps more famous—or infamous—for other things. That Maxwellisation cost a lot of time.

We received the ombudsman’s report in July 2008 and its key findings—it is worth summarising them briefly—contained 10 determinations of maladministration: one by the Department of Trade and Industry, four by the Government Actuary and five by the Financial Services Authority. The ombudsman recommended remedies—that is, compensation. It is worth remembering that, despite what has sometimes been implied by the Government, this was not a case of a difficult lady plucking some proposals for compensation out of the air. The recommendations rested on a solid body of reasoning that had been set out well in advance called “Principles for Remedy”, which explained exactly the conditions under which compensation should be awarded and the process that needs to be gone through.

The ombudsman was engaging in a meticulous process of reasoning that led to the conclusion that if there is injustice as well as hardship, a compensation process should be initiated. She described in some detail what should happen. At the risk of boring hon. Members, it is worth reading some of the key sections of her recommendations, because that is what the subsequent two years have been about. She stated:

“My second—and central—recommendation is that the Government should establish and fund a compensation scheme, with a view to assessing the individual cases of those who have been affected by the events covered in this report and providing appropriate compensation.”

She described how that should be done and her key recommendation was that the process

“should be independent and constituted along the lines of a tribunal or adjudication panel”.

Independence of Government was central to the recommended process.

We were then given the Government’s response. We had a response in the House from the then Chief Secretary, who is now Secretary of State for Work and Pensions, which people responded to very well because she made what seemed to be a full apology and suggested that the Government would put in process a compensation exercise. We were taken aback by the fact that the Government then issued a written response—as opposed to an oral response to the House—in the form of Command Paper 7538, which took us in a different direction. Several key elements have caused a great many problems to this day. The process was to be run by the Treasury, rather than independently, and payments were limited to post-1999 cases. That has now been remedied, but the limited degree of compensation excluded 90 per cent. of what the ombudsman had recommended. The document introduced the concept of disproportionate effects through means-testing, which we have already discussed, and sought to apportion blame between different actors, although of course the ombudsman was solely concerned with Government maladministration. Subsequently, the Government rejected the idea of interim payments, which might have speeded up payments to suffering individuals.

Over the past year—this brings us fairly close to where we are today—we have had a succession of responses to the Government’s response. One has come from the ombudsman, and we have had two reports from the Select Committee—I notice that the Chair is here and might well contribute to the discussion. We have also had the judicial review. It is worth reflecting a little on what the ombudsman had to say about how the Government responded to her report.

Will the hon. Gentleman refresh the House’s memory on the time scale the ombudsman had in mind and on how much of that time is gone? While I am intervening, may I put it on the record that although I am an Equitable policyholder I would give any compensation, were I to get any, to some good cause?

I cannot find the exact phrase in the few seconds that I have been given, but it was very clear that the process should be expeditious and humane. That is where we are in terms of the ombudsman’s approach. She also said:

“It is clear to me from the Government’s response to my report and from the further evidence given to the Select Committee on behalf of the Government…that, whatever the outcome of the work to be done by Sir John Chadwick, a full remedy will not be forthcoming for the injustice resulting from the maladministration I found had occurred in the prudential regulation of Equitable Life.”

In other words, she had already concluded that the Government mechanism did not allow justice to be delivered through compensation and that the process was fundamentally wrong.

It is interesting to note that the Government use the word “expeditiously” in their amendment. Perhaps timeliness is now very belatedly being addressed. Does my hon. Friend agree that Sir John Chadwick’s remit does not offer us the opportunity to be assured that there will be full transparency and fairness?

Indeed. Since the Government have declared themselves to be racing us in order to get there faster than the proponents of this motion, speed is no longer the issue. They have told us that they will speed up, at long last, but fairness will become the issue. The issue will be whether the Government accept Sir John Chadwick’s findings when they appear. We will come to that.

Let me finish my reference to the ombudsman’s response. Following the official response, the ombudsman has been involved in a very tart correspondence with the Chief Secretary. It is worth quoting one or two of the exchanges. The Chief Secretary spoke in this House on 21 July in reply to an urgent question. In response, the ombudsman wrote a letter that has subsequently been published. She stated:

“I noted what you said in the House on 21 July, and did not recognise it as a true representation of my position. That said, this is not the first time that the Government has misrepresented my position in order to defend its own and I suspect it will not be the last.”

We should be under no illusions about what the ombudsman thinks about the way in which the Government are handling the matter.

This is not just about the ombudsman. We have had two excellent reports from the Select Committee on Public Administration—“Justice delayed” and “Justice denied”—which are well summed up by the phrase that the Government’s position was

“shabby, constitutionally dubious and procedurally improper”.

We now come to the last stage of the process, the judicial review that concluded recently. The action group for the policyholders deserves an enormous amount of credit not just for briefing Members but for keeping alive an issue that could easily have died if it had not been driven so forcefully and with such conviction. The group took the judicial review option, at their own expense, to challenge the legality of the Government’s response to the ombudsman’s report.

The key point in this takes us back to the fundamentals of why we have an ombudsman. The purpose of the ombudsman was to remove the need for judicial reviews of Government decisions, or the need for people to spend large amounts of their own money challenging Government rulings in court. The review should never have been necessary, but it was sought by the action group, and it is worth reflecting on its key findings.

The judicial review concluded that the Government’s position “lacked cogency”, and that the Government unlawfully rejected the finding that maladministration caused injustice. It specifically instructed the Government to assess claims going back to 1990—quite a major advance in concrete terms. However, as the Chief Secretary pointed out in his statement yesterday, the review concluded that the matter had to go back to Parliament, so that the question of how the compensation process would work could be resolved.

It is therefore up to us, as Members of Parliament, to decide how the compensation process happens. Should it happen in the way that the Government have suggested, through Sir John Chadwick’s inquiry, or does it need an independent tribunal process? I am sure that the Government agree that, for practical reasons, there is no need to go back to square one. Sir John Chadwick has done a lot of work, so surely we do not want to put that in the bin and start doing something else.

Of course we do not want to do that. The practical position is that the very useful work done by Sir John Chadwick forms the platform on which we can build a resolution to the problem. That work need not be ditched, because it can now be taken over by an independent process. It can be continued with absolute confidence that the findings that are reached will be honoured, because those findings are impartial and independent.

In contrast, we have no confidence at all that the Government will not simply disregard a conclusion produced by Sir John Chadwick that is inconvenient to them. The evidence for that is the fact that, for the past nine years, the Government have continually dragged their feet on every action that would have brought justice for our constituents.

I must tell the House that I have selected the amendment in the name of the Prime Minister. I call the Chief Secretary to the Treasury to move it.

I beg to move an amendment, to leave out from “Life” to the end of the Question and add:

“also notes the Public Administration Select Committee’s Sixth Report Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life; recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; recognises the Government’s determination to introduce an ex gratia payment scheme that is administratively quicker and simpler to deliver than that envisaged by the Ombudsman; further welcomes the Government’s decision announced to the House on 20 October 2009 to widen the ex gratia payment scheme to include trapped annuitants who took out policies after mid-1991; urges Sir John Chadwick to report as quickly and expeditiously as possible; and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life.’.”

I start by genuinely welcoming the speech made by the hon. Member for Twickenham (Dr. Cable), and the fact that he has triggered this debate. This is a very proper subject for today’s Opposition day debate, and I want to set out a number of responses to some of the points that he made. First, however, I want to echo the apology on behalf of this and previous Governments made by my predecessor, my right hon. Friend the Member for Pontefract and Castleford (Yvette Cooper), who is now Secretary of State for Work and Pensions.

I have made two statements already since the House returned earlier this month, as I want to keep right hon. and hon. Members up to date with the Government’s work to clear up the problems of Equitable Life’s past. However, today is the first opportunity for a debate since the judgment in the judicial review brought by the Equitable Life members action group—EMAG—was handed down last week.

I promised the House last Monday that I would reflect on the court judgment as quickly as I could. I did that, and I updated the House on the matter yesterday. I should like to elaborate on that statement this afternoon, and try to address the three points that I think are now uppermost in the minds of both Equitable Life policyholders and hon. Members—the scope of the proposed ex gratia scheme, the speed with which we can act, and the fairness of the approach that we propose.

Before I go into that, perhaps I should first say a word about the role of the parliamentary ombudsman. In preparing for this debate, I looked back over the comments that I have made in the House on this subject. I think that I underplayed and under-celebrated the role of the ombudsman in public life. This afternoon, I want to put on record my gratitude to her for her work, and I have made sure that that is underlined in the Government amendment.

It was only right for the Government to make sure that our response to the ombudsman’s report on Equitable Life was based on a thorough examination of what she said. It is true that we did not wholly agree with her conclusions, but we did agree on many things. Indeed, in nine out of 10 of her findings we agreed wholly or in part with the charge of maladministration, and in five areas we believed that injustice followed.

I am grateful to the Chief Secretary for giving way at this early stage, but is it the Government’s view that they should decide whether they agree with a judgment handed down by a court? If the Government do not consider that appropriate, is that the right attitude to adopt when an ombudsman makes a decision or recommendation?

I think that the two things are quite different, and I shall explain why in a moment.

As I was saying, we agreed with the charge of maladministration in nine out of the 10 findings, and thought that injustice followed in five areas. To address that injustice, we proposed that an ex gratia payment scheme should be put in place.

How many people have received ex gratia payments? What is the difference between the Government’s position, as expressed in their amendment, and the Opposition’s, as expressed in their motion? A number of people in my constituency are extremely concerned about the delays in receiving compensation. I get regular letters and I have raised the matter myself, and I really want to know what the fundamental difference is, as there is a lot of hardship out there.

My hon. Friend is absolutely right, and I am grateful to him for that point. I shall say something in a moment about how many people I think are now within the scope of the ex gratia scheme, but I hope that he will allow me to take a short run-up to that.

The starting point for the debate about scope is the fact that the ombudsman acknowledged—I think in her evidence to the Public Administration Committee—that the Government could have chosen not to make any payments at all. She also recognised that the Government have a responsibility to balance competing demands on the public purse, a point that was underlined by the court last week.

That said, however, there is clearly a moral and ethical case for the Government to provide an ex gratia payment scheme from the public purse. The question then becomes, “What is the rational basis for the operation of that scheme?” Having considered that question carefully, we concluded that the right approach was to look at where we agreed with the ombudsman in thinking that injustice had arisen. We decided that that should be the foundation of the ex gratia scheme that we put in place.

We lacked the information about Equitable Life policyholders needed to understand exactly who would be embraced by such a scheme. That is why we asked Sir John Chadwick for his advice on the fastest and fairest way forward. That approach was then challenged in judicial review proceedings by the Equitable Life members action group. The hearing took place in July, and the judgment was handed down last week.

It is an important ruling. I think that it takes us one step closer to a swift resolution and the provision of support for those who are suffering. The court recognised that the Government’s basis for a payment scheme was lawful, and it accepted that the Government were entitled to seek Sir John Chadwick’s advice in establishing the scheme.

We very much welcome that confirmation of the legal basis of our approach, but the hon. Member for Twickenham was right to go on to say that the court also concluded that in two areas we focused too narrowly on the question of regulatory compliance. Having considered that judgment very carefully, and because I am ambitious for a speedy resolution to the matter, we took the view that the scope of the ex gratia scheme should be widened. Therefore, we have asked Sir John Chadwick to consider injustice arising in the period from mid-1991.

What will be of interest to many right hon. and hon. Members is that that decision ensures that a number of the policyholders who are often called “trapped annuitants” are now likely to fall within the scope of the ex gratia scheme. The fact that the scheme has been widened means that something like up to 1 million people could be covered.

Can the Chief Secretary clarify what he means by “speedily”? My constituents watching the debate on television will want clarification. We have had too many of those words. They are still waiting.

I shall deal with that question immediately. Speed, as the House has urged, is now of the essence. My goal, with the benefit of Sir John’s advice, is to deliver an ex gratia scheme that is administratively quicker and fairer than the approach proposed by the ombudsman, and in a way that puts less of a burden on policyholders.

I thank the right hon. Gentleman for giving way a second time. I would like a time scale. I would like a date—one month, two months, three months? “Speedily” is not good enough.

Can the Chief Secretary answer me on a matter of principle? The Government have gone for an ex gratia scheme, but I do not understand why, if other people have lost out owing to maladministration, they should be excluded from compensation. The Government have, in effect, entered into a means-testing arrangement for policyholders in Equitable Life.

That is an important point, which was acknowledged both in the Bradley judgment and again in the court last week. There is no legal obligation on Government to compensate people for a regulatory failure that, in large part, was caused by a failure of regulators in the early 1990s, extending up to 1998. Also, as Lord Penrose says, the company itself was the architect of the failure. Although there is no legal obligation on the Government to provide compensation for such regulatory failure, there clearly is an ethical and a moral demand for Government to provide some kind of ex gratia payment scheme. The question then becomes what is the rational basis for that scheme. The Government’s conclusion has been that the only rational basis for the scheme is where we agree that injustice was caused through maladministration.

On the question of speed—

Dates will come in a moment. When the ombudsman reported in July 2008, she suggested that a scheme could be established within six months and that, once established, such a scheme could conduct its work over the course of a further two years—in other words, taking us to December 2010. But we concluded that the approach that was recommended could be better. Indeed, when Sir John Chadwick, who is an independent judge of some repute, looked at the question, he described the ombudsman’s approach as

“at best unsatisfactory and more likely impossible”.

The reason for this is that the approach that was proposed by the ombudsman and that has been rehearsed again by the hon. Member for Twickenham and is recommended in his early-day motion entails a case-by-case review by a tribunal or another body of the evidence of loss from individual policyholders.

If we believe, as the hon. Gentleman says, that there are up to 1 million policyholders, and if we had to consider each of their investment decisions in the period that we are talking about, we would have to review something like 30 million different investment decisions. The approach proposed by the ombudsman puts the burden on the individual policyholder to show how regulatory failure created a loss. Then the policyholder would need to show what kind of relative loss they had suffered, which would require them to say something about a counterfactual.

What we have asked Sir John to do is to undertake a better way of securing ex gratia payments for policyholders. The approach that Sir John proposes is to look at different classes of policyholders and understand what the relative losses may be, in order to make sure that a much swifter and policy-based compensation payment can be made. That will be faster than a case-by-case review of 30 million investment decisions.

I understand what the Minister says about the amount of time and effort that needs to be put into the compensation scheme, but echoing the hon. Member for Guildford (Anne Milton), may I ask him to confirm that the compensation scheme will be in place in the lifetime of his Government—before the general election?

I think the Minister is going to receive another letter from the ombudsman for again misrepresenting what she said in her report about a process that she recommended could be completed within two years as a mechanism for compensation. Does the right hon. Gentleman accept that the term “disproportionate”, as he describes it, applies simply to the different impacts on different classes of policyholders if, for example, somebody had policy type A rather than policy type B? It is not a means-testing measure, and that point is crucial.

There are two points there, as the hon. Lady said. First, on the question of relative loss, it will be important to look at what policyholders would have made if they had put their investments into a different organisation, rather than a trade-off between different policies. All parties will have to come to a view about how what will ultimately be a fixed pot of money is shared between policyholders. That is one of the questions that Sir John has to consider, and it rightly should be a matter for further debate in the House.

I can see the strength of my right hon. Friend’s argument for a different mechanism from that proposed by the ombudsman, but a problem is that we are still a long way from getting that mechanism set up. The difficulty is that people are rightly asking why these leisurely discussions and reports are going on. Out there, people are dying. Out there, people are not getting any money. Why have not steps been taken already to set up the mechanism so that people can be paid out now? My right hon. Friend needs to give us definite indications of dates when payments can be made or when a mechanism can be set up if he is to persuade many of us to support him in the Lobby later today.

I am grateful to my hon. Friend for that point. It allows me to say that work is well in hand. Sir John has already set out his approach and he is already a long way through the work. It is worth the House reflecting on the scale of the task that Sir John is working through. He has to consider information on 2 million policies and information dating back to around 1990 on payments and investments for over 20 main types of policy. That demands a review of several hundred specific policy products. It requires that data be checked by both his actuaries and those of Equitable Life.

Sir John then has to give advice on how to assess the relative losses of the varied classes of policyholder. The only way to do this is to assess the performance of the rest of the industry at the time, a process that will demand some pretty difficult actuarial calculations and the testing of a number of assumptions, not least how to make payments most easily and what their tax treatment should be. We have asked Sir John to finalise the design of his scheme by spring 2010.

We all understand that the Minister has a perfectly legitimate role in protecting the Treasury, but his argument seems to be that the Government’s route is designed to protect the policyholders by getting them resolution more quickly than the ombudsman would. Why, then, does he think the policyholders have invested a substantial amount of money in order to pursue a legal action to follow the ombudsman route, rather than the one that he is recommending?

I cannot second-guess what was in the minds of EMAG, but I think there were two concerns in particular, both of which it was legitimate to test. The first was the legal basis for the Government’s approach, which the court was happy to confirm. The second, rightly, was for policyholders to test the scope of the ex gratia scheme.

The ombudsman used the expression “relative loss”, which has been used before in the debate. My right hon. Friend has also referred to that, but the Government’s favoured position is based not on relative loss, but on disproportionate loss. I have not seen a definition of that. Could he cast some light on the distinction between relative loss and disproportionate loss?

That is one of the questions on which we have asked Sir John Chadwick to advise. When the next stage of the report is finished, which I hope will be in the next week or two, that may be something that I could lay before the House so that we could test some of the conclusions in debate.

So that the House is not misled, may I put it to my right hon. Friend that the issue is not the technical efficiency of different schemes for delivering redress, but a fundamental difference in approach between the ombudsman, who says that redress should be as of right because of regulatory failure, and the Government, who say that they shall create an ex gratia remedy for those who have suffered disproportionate loss? That is a fundamentally different approach.

It is, and my hon. Friend might want to intervene again. However, the Bradley judgment and last week’s court judgment confirmed the legal basis of the Government’s ex gratia proposal, and that brings us to the point that there is no legal obligation on the Government to provide compensation for regulatory failure. The ombudsman appeared before my hon. Friend’s Committee, and it may have been him who asked her directly whether she would have been content for the Government to accept all the recommendations and then provide no compensation whatever. I think that it was question 29 of the relevant report, and her answer was yes: she would have been, perhaps not satisfied, but content that it would have been perfectly legitimate for the Government to provide no compensation whatever. However, even though there is no legal obligation to provide compensation, all parts of the House agree that there is a legal and moral demand for the provision of some compensation. The question then becomes, what is the rational basis on which to put in place that scheme?

The Chief Secretary is doing a wonderful job of dancing on the head of a pin. I met Equitable Life victims yesterday, and the reason they have gone down their particular route is that they do not trust the Government. If we do not sort out the matter now, we will live with that fundamental break in trust—in terms of being encouraged to invest—as a very poor legacy of this situation. Therefore, may I ask the Chief Secretary yet again to respond to my hon. Friend the Member for Guildford (Anne Milton) on the question of dates? Spring is not good enough.

Order. That was a notably lengthy intervention, but I feel that the reply from the Minister will be characteristically pithy.

I am grateful to the Minister for giving way; he has been generous in doing so. All who are concerned on behalf of their constituents about the issue will not be surprised at what I suspect will be the fury of the many thousands of people who will have looked in on this debate and, frankly, expected and hoped—despite all the odds—for a little better from the Government. Has the Minister calculated how many fewer people—because people with legitimate claims are dying—he will have to pay by his target date of spring next year?

Perhaps the hon. Gentleman will want to intervene again if I pose this question. How much faster does he think that compensation would flow to policyholders if an independent process were set up that then reviewed the investment decisions—all 30 million—of 2 million people? Will he intervene again and tell me how much faster he thinks that compensation scheme would be up and running?

I am happy to, because the point was made before: the question is not about having to review 30 million individual cases, but about reviewing policyholders’ different levels of policy. With respect, the Minister is making a fatuous claim.

I am glad that the hon. Gentleman says that a better approach is to review different classes of policyholder, because that is exactly the approach that Sir John Chadwick recommends. Perhaps the hon. Gentleman will answer the following question by intervening again. What is at stake is a test of approach, and the hon. Member for Twickenham prayed in aid the ombudsman’s report, citing paragraph 9.27, which says:

“My second—and central—recommendation is that the Government should establish and fund a compensation scheme with a view to assessing the individual cases of those who have been affected by the events covered in this report and providing appropriate compensation.”

Is the hon. Member for Cheadle prepared to intervene again and say that that is the wrong approach and that we should consider providing compensation for different classes of policyholder, which is of course Sir John Chadwick’s approach?

If my hon. Friend will allow me, I should say that the Minister has not answered the question from our hon. Friend the Member for Twickenham (Dr. Cable). The Minister offers what he calls a swifter and better way, but, if it is, why has he not convinced one single policyholder—they are not stupid—that that is the case?

All I can do is point to the ombudsman’s recommendation for, and assessment of, when her proposed compensation scheme would be up and running and have concluded its business. That best-case assumption was December 2010. When we and, indeed, Sir John Chadwick looked at what running that scheme would entail, we found that it was a pretty conservative estimate of how long it would take to get through the business. I think that Sir John’s approach is right and offers a swifter route to justice.

I shall give way to my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz).

I am grateful to my right hon. Friend for giving way again. I, unlike many colleagues, was convinced of the correctness of the Government’s ex gratia scheme approach, rather than of an approach that seemed to be a lengthy way of resolving the issue. However, I am concerned about the time scale—and even more now. We are told that the proposals for the scheme will be in place by 2010. Allowing for the natural delay to such schemes, anyway, we are probably talking about proposals coming forward next summer and there will be months of debate after that. By the time any money starts being paid out, we will probably be well into 2011, or beyond. That is unacceptable, so may I ask the Chief Secretary to—

As I say, my goal is to ensure that a scheme is up and running within a timetable that is administratively quicker than the ombudsman’s proposed approach, and I know that the House will hold me to account for delivering that proposal.

I do not share this love-in with the ombudsman, who took a slothful more than four years to produce her report. Nor do I share any love-in in terms of the time that the Government have taken. My right hon. Friend says today that a design for the scheme will be finalised by spring 2010, and that seems to be much better than the ombudsman’s proposal to review 30 million decisions. However, spring is an elastic date. By what dates does my right hon. Friend think that pay-outs will start?

That, I know, is the million dollar question, which I cannot answer this afternoon. [Interruption.] I know. Until Sir John has finished looking at the principles of how we calculate relative loss and assess disproportionate impact, both of which we will want to debate in the House, I cannot answer that question. I can commit to a date for the next stage—the scheme’s design.

The Chief Secretary is in danger of treating the House and our constituents like fools. He tried to dance around the issue of when payments will be made, and he said that Sir John Chadwick would design a scheme by spring 2010. Surely the Treasury has looked at how long it will take to implement a scheme. Treasury officials tell us that it has been working in parallel on those issues since Sir John’s appointment. When will payments be made to policyholders who have lost out? The Minister must have an indication of the timetable for delivery.

As I have said, the regulatory failures of the 1990s, which we are now attempting to clear up, unfortunately entail Sir John having to go back over 2 million policies and information going back to 1990, to review several hundred different products and to assess the relative losses that people may have suffered. That will entail, quite obviously, an assessment of the money that people could have made by putting their cash into alternative products. If a fair system is what we want, a fair system will require a thorough examination of the records. The hon. Gentleman will share my ambition and determination, given his party’s responsibility for and involvement in some of the regulatory failures of the past, to ensure that the ex gratia scheme is fair to policyholders. He will not want any short-circuiting during the review; he will want us to ensure that all the records are checked.

Can the Chief Secretary not assure the House and Equitable Life policyholders that, at the close of today’s debate, they will receive what they have not received to date—clarity and certainty about the dates when payments will be made?

The Chief Secretary has outlined the work that still has to be done, all of which I assume will be in the framework that he intends to have published by spring next year. What further steps must be taken after next spring that cause the uncertainty that he has expressed as to when payments will start?

My assessment is that payments can begin moving quite quickly once the final design of the scheme is understood and provision is made from the public purse.

Is not the bottom line, then, that whenever the next general election is held the Government will go into it having to say to Equitable Life policyholders, “We have not agreed any compensation for you”?

I want to record my interest as a former Equitable Life policyholder in relation to my pension as a special adviser.

The Chief Secretary is treating all the policyholders with the most enormous contempt if he says that he will not put the responsibility on to them to assess the compensation for claims that they may put in. To say that he is going to set up a system that will assess 2 million possible investment decisions in order to come forward with proposals puts the thing precisely the wrong way round. The one way to get policyholders in a position to make claims is to reverse the burden and put the burden on policyholders to come forward with their claims against a set of criteria that the Government and this House set.

I did not quite follow the hon. Gentleman’s argument. I said that requiring individual policyholders to come forward and provide an explanation to a tribunal about how they relied on regulatory decisions that turned out to be erroneous, and then show how losses were entailed, would place an undue burden on them. That is why the proposal from Sir John Chadwick is quite different—it is to look at different classes of policyholders to understand what their relative losses are and to propose an ex gratia payment scheme on that basis.

On 15 January, the Chief Secretary stated that policyholders would be paid. Why have not the Government done any contingency work at all on this matter? Why did they not start the process much earlier? Will he cut to the chase and tell us what disproportionality of suffering really means? People out there are bewildered and horrified by the Government’s approach.

In essence, relative loss is about losses that are suffered by policyholders once one has stripped out factors such as market movements, and disproportionate impact is about the effect of those losses on policyholders. As I said in an earlier answer, those are questions on which we have asked Sir John’s advice, and I will bring those conclusions back to the House at a later stage.

I appreciate the complexity of the situation, but could the Chief Secretary confirm that Sir John Chadwick has had the resources that he needs to deal with it properly? Given that we get the impression that this problem is yet again being kicked into the long grass, could it be dealt with more quickly with more resources? Is Sir John dealing with it full time or part time?

I asked Sir John before the summer whether he has sufficient resources to undertake the work that we have asked him to undertake, and he assured me that he had—but as I have explained, there is a considerable task for him to sieve through.

This has been a difficult legacy from the past that the Government have had to clear up. For me, the three principles are to deliver a payment scheme that meets the moral imperative to act; to deliver an ex gratia payment scheme in a way that is administratively simpler and faster than the way that the ombudsman suggested; and, perhaps most importantly of all, to ensure that the right people are included in the scheme. That is the approach reflected in the Government’s amendment, and I urge my colleagues to give it their support.

Conservative Members welcome this debate and will support the motion in the Division Lobby later this afternoon. The motion has cross-party support, and early-day motion 1423, which is at its core, has support from Members in all parts of the House.

The strength of cross-party support is a testament to the work of the Equitable members action group and to the number of constituents whose lives have been badly affected by the problems of Equitable Life. Each of us will have had letters and e-mails over the course of the past couple of days asking us to support the motion, but throughout this whole period policyholders have maintained pressure on MPs to ensure that justice is done. Many Members will have received harrowing letters from constituents whose lives have been blighted by the crisis at Equitable Life. It is easy to get lost in the detail of the ombudsman’s report, the Penrose report, the Baird report and the report produced by the European Parliament, but at the end of the day real lives have been affected by the problems at Equitable Life. The problems that arose back in the 1990s and at the turn of this decade continue to affect people’s lives today as they wait for justice.

In their response to the ombudsman’s report, the Government said, at paragraph 80:

“Regulation is never an easy job and mistakes, even serious ones, will occasionally be made, but the real test for government is how it then responds.”

So how have the Government responded? How have they passed the test? The reality, as policyholders see it, is that at each step of the way the Government frustrated the fight for justice for Equitable Life’s policyholders. We need only look at the fight that we had to allow the ombudsman a second investigation into Equitable Life. First, the Government claimed that it was outside her remit—an argument that was disproved by my hon. Friend the Member for Chichester (Mr. Tyrie); then the report was delayed because the Government suddenly found new documents; then the Government bombarded the ombudsman with further comments, through the Maxwellisation process, as she sought to finalise the report. Then, although the report was published in July last year, the Government gave its formal response only in January, rejecting some of her findings of maladministration and injustice, and thereby triggering the court case in which there was a judgment earlier this month. I am pleased to say that the Government have accepted the findings of that case, as many people were concerned that they would appeal and delay the process still further. It is particularly welcome that those judgments include bringing trapped annuitants into the scope of the scheme.

At every step of the way, we have seen delay. Each delay has put off the day when eventually policyholders would receive compensation for the failings of the regulator—failings that were evident from the Penrose report published five years ago. Each delay has meant that policyholders have had to get by on much reduced pensions; instead of enjoying their retirement they have struggled and had to fight for justice. Each delay has also meant that, sadly, some people will never see justice, as policyholders die. The Government should be ashamed of having tried to block attempts to give justice to people who have been so badly let down over a decade by regulatory failure.

Conservative Members have been clear throughout this process. We have said that if the ombudsman found that there was maladministration owing to regulatory failure and that compensation was required, we would accept those findings. That was our position while we campaigned for the ombudsman to be allowed a second investigation, that was our position when the ombudsman published her report last year, and that is our position today.

Does my hon. Friend agree that it was a signal moment when the Chief Secretary announced, on behalf of the Government, a constitutional doctrine whereby it was not necessary for the Government even to accept the findings of the ombudsman, leaving aside the question of compensation, and drew a distinction between that and a court judgment without ever explaining it?

My right hon. Friend echoes an important point that was touched on by the ombudsman and raised in the Public Administration Committee report. There is almost a sense that the Government are using the ombudsman’s status as an investigator rather than a judicial authority to wheedle their way out of taking responsibility for these things.

I want to return to a point that the Chief Secretary made on a couple of occasions when he said that there is a principle whereby the Government do not compensate for regulatory failure. If that were the case, the public bodies being investigated by the ombudsman would have been excluded by the Parliamentary Commissioner Act 1967, but they were not so excluded. That has led to the current position in which the ombudsman has the power to recommend that compensation should be given in cases of maladministration. Under the existing regulatory system, the Financial Services Authority is excluded from the ombudsman’s remit. However, the approach that the Government have developed to the ombudsman’s findings in this case was not raised in 2004, when the ombudsman sought a second investigation into Equitable Life, but emerged rather late in the day when the Government were trying to find a way to confound the ombudsman and confound policyholders’ fight for justice.

As the Minister who promptly paid compensation, with the permission of the House, after the regulatory failure in the Barlow Clowes case was found to be maladministration, may I ask my hon. Friend to confirm that a future Conservative Government would be prompt in making some compensation available to Equitable Life victims?

My right hon. Friend speaks from his experience of Barlow Clowes. The Prime Minister has tried to avoid paying compensation to people who suffered loss through the maladministration of Equitable Life. He is trying to block the process and has fought every step of the way to prevent that from happening. I am happy to say that we want to ensure that policyholders receive the justice that they deserve. The Chief Secretary was careful in his language and phraseology about quite what would happen in spring 2010, so it seems that whoever wins the next general election will have to deal with the problem, and clear up the mess that this Government have left, in order to provide justice for Equitable’s policyholders.

I suspect that my hon. Friend’s constituents, like mine, have been e-mailing him to say that they will be listening to the debate and watching how we vote. Tomorrow, as a result of what the Chief Secretary and others have said, I shall write to all the policyholders of whom I am aware. Does my hon. Friend have any advice or observations that I might put in those letters about how people who have suffered incredible financial loss might take their case forward from here?

I have some clear advice that my hon. Friend might wish to give her constituents. History has shown that this Government have consistently sought to block compensation for policyholders who have lost as a consequence of maladministration, whereas the Conservative party has argued in favour of compensation for policyholders when there has been evidence of maladministration. There is a clear distinction to be drawn—a clear choice to be made, to use the phraseology that the Prime Minister is keen on—between the approaches of this party and the Members on the Treasury Bench. I hope that my comments are sufficiently clear for my hon. Friend to include them in her letter to her constituents tomorrow.

Will the hon. Gentleman outline how he would approach the issue of compensation should there be a change of Administration following the next election? Would he be happy to go down the route recommended by the ombudsman, or would he be looking for a tailor-made scheme drawn up by his party?

We accept the ombudsman’s recommendation that payments should be made to policyholders who lost out. She was right to make her points about relative loss and the impact of compensation payments on the public purse, and I do not believe that anybody in the House disagrees about how that is to work. However, we need to consider the matter of the tribunal. Strong arguments have been made about how it should work and why there needs to be independent review, but I am conscious that policyholders have waited a long time for justice, because the Government have sought to frustrate and block the process. It is all very well for the Chief Secretary to be reasonable now, but some of his predecessors have been less than reasonable. I want to see justice given to policyholders speedily and fairly. They have waited long enough, and we should implement the scheme as quickly and fairly as possible.

We have been clear in our support for the ombudsman’s recommendations. That is our position today and would be our position if elected at the next general election. We have also accepted the ombudsman’s finding that there was a decade of regulatory failure. The Chief Secretary talked about cleaning up the mess that had been left, but he should acknowledge that some of the regulatory failures that the ombudsman identified happened on the current Government’s watch. If he has cleaned up anybody’s mess, it is the mess that has arisen as a consequence of the delays in dealing with the problem.

We agree with the ombudsman that policyholders should receive payments for relative loss and that the impact on public finances should be taken into account. We now need to understand how quickly the Government can move. Since January, when they accepted some of the ombudsman’s findings—they have now been forced by the courts to accept others—the Treasury has failed to set a timetable for the resolution of the problem. That failure, coupled with the Government’s tactics to date, create the strong impression that the Treasury wants to kick the matter into the long grass and put it off for another few months. That is not fair to policyholders, who want some certainty about when they might see a payment.

We have made some progress with the Government, and the Chief Secretary has announced that he expects Sir John to put forward a design for a payments scheme in spring 2010. What is less clear is when policyholders would receive their first payments under such a scheme. He said that the ombudsman’s proposals might not mean payment before December 2010, but do the Government believe that payments will be made before that point under their scheme? Policyholders need further clarity, and I am surprised that the Government have not produced an indicative timetable of what may happen once Sir John puts forward his scheme. Perhaps when the Exchequer Secretary winds up the debate, she will put some flesh on the bones of what the timetable beyond spring 2010 should be. The Public Administration Committee called for an indicative timetable in its report, and it is disappointing that the Government have failed to establish one.

Will my hon. Friend touch on the Chief Secretary’s words today that seemed yet again to indicate that means-testing is on the agenda, and on whether the Government are giving any steer on how the means-testing assessment will work? We have no idea what criteria the Government are thinking of using.

What the Government mean by “disproportionate” is one of the matters that they are yet to address. The Chief Secretary’s predecessor, the right hon. Member for Pontefract and Castleford (Yvette Cooper), was pressed on that when she made a statement in January. No further progress has been made on elaborating on what that means, which creates uncertainty in the minds of policyholders and a sense of doubt about the outcome. We need the Government to clarify their thinking about what “disproportionate” means in practice.

A lot of Equitable Life policyholders are in great financial difficulty and quite frail. Is there a possibility of interim payments to assist them, or are they going to have to wait until the very end, when everything is done and dusted with the compensation scheme?

My hon. Friend raises an important point. Some people affected are suffering real hardship, which has been prolonged by the delay in introducing the scheme. Once the Government have decided upon a scheme, having received Sir John Chadwick’s recommendations next spring, I hope they will consider that seriously. There is a real risk that the suffering and hardship will continue without any clear end in sight.

Does my hon. Friend agree that this is actually all very simple? A lot of hon. Members will make speeches today, but what my constituents want to know is what they are going to get, when, and what the calculation is based on.

My hon. Friend is absolutely right: that is what our constituents want to know, and it is the essence of this debate and of the letters that we receive. I understand that Sir John Chadwick needs to work through what the scheme might look like, but when policyholders will get money is a really important question to answer. I thought that the Chief Secretary was going to get there today: he had a little dance around it, and teased us with, “I will come to that directly.” I hoped that we might actually get a date, but all that we got was spring 2010.

We have had such statements before from the Government. We were promised a response to the ombudsman’s report before Christmas, but it did not appear until the start of this year. The whole process has been characterised by delay after delay by the Government, and some certainty is required for our constituents who have lost out.

The hon. Gentleman is rightly focusing on the time scale involved, and other hon. Members have probed a little on that. However, I want to be clear about what he is saying about his party’s position on this crucial issue. Has he decided that it is out of the question to go for what EMAG has been campaigning for, which is a completely independent tribunal? Is he setting aside any ambition for that and saying that any influence that his party might have in future will not be brought to bear on securing that?

All I will say to the hon. Gentleman is that we want to see policyholders compensated quickly and fairly. We all need to bear that in mind when thinking about how the process might develop. By next spring, so much work might have been done by Sir John Chadwick that setting up a tribunal could delay justice still longer. We need to be really careful and to think this through to ensure that we get the right outcome for policyholders, who are waiting anxiously for some resolution of the issue. Sadly, as every day goes by, more policyholders die. I wonder whether they would thank us for further delaying the process.

Let me raise a couple of broader issues that we need to address. As my right hon. Friend the Member for West Dorset (Mr. Letwin) said in an intervention, the whole episode has brought into question the way in which the Government approach the ombudsman’s work. At times, it has appeared that the ombudsman is an inconvenience and an irritant, whose work should be treated as a distraction. We must remember that the ombudsman is an Officer of the House, and the way in which the Government have dealt with her undermines an office of the House and is disrespectful to it. The fact that the ombudsman has had to issue a further report on Equitable Life is a sign of how frustrated she has been on the matter.

In evidence to the Public Administration Committee, the ombudsman said that

“the Government’s response was ‘strong on assertion, short on facts’, and that it ‘fails to address the basis on which [she] came to several of [her] findings’. As she put it…Perhaps another way of saying that is the response says that I said something different to what I actually said and then says it disagrees with something I did not say”.

I do not think that that is a very good position for an Officer of the House to find herself in. The Committee reported:

“The fact that the Ombudsman feels that she has been misunderstood and misrepresented is an indictment of the quality of the Government’s arguments as presented to the public.”

We should acknowledge that the Chief Secretary has sought to redress that by recognising that the ombudsman’s work has been undermined and that it should be celebrated more, but of course, what he needs to remember is that as MPs, we rely on the ombudsman to investigate claims of maladministration. To treat the ombudsman in such a way is to undermine the office and erode our constituents’ confidence in the mechanisms that Parliament has set up to protect and help them.

I mentioned regulation and compensation in an intervention. The handling of Equitable Life, from start to finish, has undermined people’s confidence in the regulatory system. The way in which the Government have sought to block the ombudsman’s investigation into Equitable Life undermines confidence in the regulatory system. People want to know that the mechanism that is in place to protect them works and is respected, but the fact that the Government have sought to frustrate the ombudsman’s inquiry undermines people’s confidence that that mechanism is working. Therefore, we need to think very carefully about the relationship between Parliament and the ombudsman and what lessons we should learn from the process.

Does my hon. Friend agree that one of the biggest challenges facing this country is persuading people to save for their future, particularly in the form of pensions? Half the population do not do so at the moment, so a saga such as this, in which people have no confidence in the pensions that they have bought, is an absolute policy disaster. The matter needed addressing a long time ago, and it is time the Government got on with it.

My hon. Friend is right: the episode has undermined people’s confidence. They need to have confidence in the pensions system if they are to save for their retirement, and also confidence in the regulation. People will not look beyond the headlines and will not be looking at the fine detail of the Parliamentary Commissioner Act 1967, which set up the office of ombudsman; they will just get the sense that the system that has been set up to protect them has not worked.

We need to ensure that our constituents understand that the actions that have been taken and the processes that have been put in place to protect them are now effective and working. Once we get people to trust those processes, perhaps we will see an increase in saving for retirement.

In conclusion, because I am conscious that other Members of the House want to take part in the debate—

No. I have been generous in taking interventions and have gone on for rather longer than I had hoped, and I am coming to the conclusion of my speech.

I ask those from across the House who signed early-day motion 1423 to vote in favour of the motion. That would be a clear sign to the policyholders that we are united in support of their campaign for justice, and a sign to the Treasury that the House wants speedy action to resolve the problem as soon as possible, and will not tolerate any more delays, obstruction or prevarication. It is not a partisan issue; it is about justice for policyholders, who put their faith in a regulatory system that has let them down. It is time for Members on both sides of the House to say to the Government that enough is enough, and that justice must be done.

Order. I remind all hon. Members that Mr. Speaker has imposed a 15-minute limit on contributions from Back Benchers.

I shall speak for much less than 15 minutes; indeed, I had not anticipated speaking at all, but I rise simply to say that I regard the matter—this will not go down well in the Whips’ quarters—as a House matter.

When our ombudsman—the parliamentary ombudsman—makes a report to the House and says that injustice resulting from maladministration has not been remedied, and when she is then moved to make a special report to the House, which has happened on only four previous occasions in the history of the office of ombudsman since 1967, she is entitled to ask the House to take a view. All she can do is report to the House and ask it to take a view on whether her reading of matters or the Government’s is to be preferred.

It is extremely unfortunate that we do not have a mechanism that gives the House collectively—I would hope on a free vote, because it is a House matter—the ability to determine the issue. We have not had a chance to do that. It is in some ways unfortunate, but perhaps necessary, that the only mechanism that has been found is an Opposition party motion on an Opposition day. From the point of view of the House and the ombudsman, it would be much better if there was a mechanism by which we could test the House’s opinion, in a genuinely independent way, on whether it wanted to accept what an ombudsman had said in such special circumstances.

In the conclusion of her latest and special report to the House, the ombudsman states:

“In this case, I am satisfied that the injustice I found in my report to have resulted from maladministration on the part of the public bodies responsible for the prudential regulation of the Society has not so far been remedied. I am also satisfied, for the reasons I have given above, that it will not be so remedied whatever the outcome of the work yet to be done by Sir John Chadwick…I consider that it is appropriate to draw this to Parliament’s attention, given the scale of the injustice I have found and the nature of the Government’s response—which means that this injustice will not appropriately be remedied.”

May I say how much I agree with the hon. Gentleman that there should be a procedure to bring an ombudsman’s recommendation in a special report before the House automatically? If he would like to refer the matter to the Procedure Committee, I would be happy to support him, and if he wants to table an early-day motion, I would be happy to put my name to it, because it is important that the ombudsman is respected, and there should be a proper procedure for the House to consider such a matter.

That is a very fine offer and I shall certainly take it up.

I am quite realistic about this. Such things test every Government. It is quite proper for a Government to say, “If we were to provide a remedy of the kind that the ombudsman suggests in this case, or indeed in any other case, there would be a cost.” In this case, the cost is substantial—there can be no equivocation about that. The figures look slightly less daunting than they did a couple of years ago; we now know how to use these big numbers.

It is in the public interest for the Government to point to the sizeable public expenditure implications of the recommendations, but there is a larger public interest in maintaining the integrity of the ombudsman system. If we start to chip away at that and say, “Oh well, we’ll accept some of her findings, but reject others,” we chip away at the ombudsman system. This House decided to set up a system of independent investigation of the actions of public bodies, including Departments, and having adopted such a system we cannot—except in the most exceptional circumstances—say, “Well, actually, we do not like the findings, leaving aside the question of any remedy.”

I agree with much of what my hon. Friend says, but if a parliamentary ombudsman finds an injustice and proposes a remedy that is, let us say for the sake of argument, wrong, and the Government propose a different remedy, that automatically breaks the link between the injustice identified and the remedy on offer. What is the right way to approach that question, when a legitimate debate may be had about the range of remedies that may address the injustice that the ombudsman has rightly identified? I am sure that my hon. Friend would agree that it would always be unsafe, in any area of public life, to receive arguments and proposals as if they were written on tablets of stone. No matter who produces those conclusions, there must always be a way of testing them in case the remedies proposed are incorrect.

We are getting into interesting territory, and I am not sure how much further the House wishes to go, even though it is important territory. When the ombudsman was established 42 years ago, it was not said in the legislation that the ombudsman’s findings would be binding. It was said that after recommendations were made, a response would be made. The assumption has always been that those recommendations would carry an authority with them and be routinely accepted. On the whole, that process has worked over the years.

We get into difficulties if Governments start saying that they want to depart from that convention, to pick and choose between findings and to vary the remedies recommended by the ombudsman.

The hon. Gentleman will know that for many weeks the shadow Leader of the House has asked for a debate on the special report from the ombudsman. That is the answer to the Minister’s question: if the Government want to do something that differs from the recommendations, they should table a motion to be debated and voted on by the House.

The hon. Gentleman is right. It is also right that we should have this discussion. Having made a decision, the Government should put their case in the best way that they can, and my right hon. Friend the Chief Secretary is doing that. He made some important points about the mechanics of delivering redress systems, but the fundamental points are still at issue. Only the House can come to a view on those.

The ombudsman has settled views on how redress should follow from findings of maladministration leading to injustice. Redress is part of the system. We are not compensating for the mismanagement of the Equitable Life company, or for what happened to the markets that made life more difficult than it would have been otherwise for policyholders, but we are compensating for that element of serial regulatory failure that contributed to what happened to those policyholders. It was only late in the day during the ombudsman’s inquiries that the Government suddenly announced the doctrine that they would not compensate for regulatory failure. The ombudsman rightly said to that, “Well, I wish that the Government had said that at the beginning of my inquiry.” When she was carrying out her inquiry, those bodies were not immune from ombudsman investigation or from paying compensation for regulatory failure.

The principle that the ombudsman advances is the same as the principle she advances in every other case that she investigates. When she finds maladministration by a public body, the people affected should be put back into the position that they would have been in had the maladministration not occurred. She has applied exactly the same principle in this case as in every other case that she investigates. The question for the House—I keep saying “for the House” because it is for the House to decide and not the Government—is whether it wants to adhere to that principle or not. If it does, it will have to go with the ombudsman’s principle of redress in this case, which would mean that all those who have suffered loss as a result of maladministration must have some remedy. When the Government say, on seeing the big numbers, “We will only, for the sake of charity, compensate those who have suffered disproportionately,” the ombudsman rightly says that that is not consistent with the principles of her office.

The fundamental point is that we have to decide, not as party people—that is how we do everything else in this place and it often demeans us—but as House people, whether we want to assert the integrity of the office of the parliamentary ombudsman, which this House established more than 40 years ago, or want to see it progressively undermined. That is the fundamental issue and that is why I shall support the motion, although as I said earlier, I wish that we were having a free vote on the ombudsman’s report itself.

I shall also try to be brief, because the hon. Member for Cannock Chase (Dr. Wright) said so much of what I wish to say, but said it a great deal better than I could ever have said it.

I first wish to congratulate EMAG. I am incredibly conscious of the many members of the action group and their appointed leadership who took the difficult decision to put themselves at risk and raise the resources to proceed with a judicial review. They have been utterly vindicated by the court, which accepted most of the principles that they brought before it, and changed the likely outcome for the many policyholders who lost money in Equitable Life because of regulatory maladministration. Those people deserve credit from this House.

I also join in the sentiment that the judicial review has been a marked success for Parliament and the parliamentary ombudsman. When the ombudsman produced her report, I was incredibly impressed, like many others, by the degree of detail, care and objectivity that were so evidently present in the analysis of the circumstances and the carefully drawn conclusions that she reached. I am shocked, therefore, by the Treasury response, which in many ways was arrogant, superficial and dismissive, and not the kind of response deserved by the work, thought and care that went into the ombudsman’s initial report. In a sense, the response was a comment on the Treasury’s view of the ombudsman system.

I cannot think of another instance in which we have seen the Government respond to an ombudsman’s report in a remotely similar way. It seems that this is unprecedented. Does the hon. Lady agree?

I very much agree with the hon. Lady’s comments. I also say to the Exchequer Secretary that we saw today a repeat of some of that attitude when the ombudsman’s timetable for delivering compensation to injured Equitable Life policyholders was questioned.

Does the hon. Lady agree that it would show greater respect to policyholders were the Labour or the Conservative party—whichever wins the general election next year—to undertake to make interim payments or payments in full to policyholders before the end of next year? That is a substantive issue.

I can only agree with the hon. Gentleman. On the ombudsman’s timetable, the Government’s response to the ombudsman’s recommendations, published in January 2009, states:

“The Ombudsman has said that the scheme”—

the compensation scheme—

“should be established within six months of any decision being taken to set it up”—

the ombudsman would have assumed that that meant summer 2008—

“and that its work should be completed”—

completed means all payments made—

“within two years of its being established.”

We would have been almost through the entire process had the ombudsman’s ideas and structure, which came out of the detail of four years’ work—they were not off the cuff or the back of an envelope—been accepted. Today, once again, the Government and Treasury have suggested something very different from the ombudsman’s position.

I totally agree with what my hon. Friend says about the detailed work done by the ombudsman. We have an ombudsman to consider such cases and recommend justice. Does she agree, however, that the Government’s response undermines the whole office of the ombudsman? Treating this report in such a way could create a precedent for future ombudsman reports being ignored and recommendations being cherry-picked.

I could not agree more with my hon. Friend. Everything that we do has the potential to create a precedent. I and, I suspect, many other hon. Members would like the ombudsman’s role to be accepted and strengthened, rather than weakened dramatically.

I want quickly to raise a second issue. What, for most of my constituents, goes to the heart of the matter is the issue of “disproportionate impact”, which is to be the principle for compensation payments. In June 2009, Sir John Chadwick, who was asked to consult on this matter, used the following phrase:

“I am satisfied that the Terms of Reference”—

his terms of reference—

“do not require me to engage in any form of means-testing in relation to individual policyholders.”

What we have heard from Treasury Ministers today seems to conflict with that statement. Therefore, I hope finally to hear in the winding-up speech a definition of “disproportionate impact”. I certainly do not want to argue against a principle if the Government have already abandoned it, but it did not sound to me, from the Chief Secretary’s opening speech, as if they have.

Like many of us, the hon. Lady has received many representations from constituents and others. Has she received any representation from any policyholder who feels that they suffered, or whom she believes suffered, merely a proportionate impact?

The hon. Gentleman speaks with great common sense and reflects the voices in the letters and representations that I have received.

I am sorry to interrupt my hon. Friend when she is in such fine form, but does she not also agree that the fact that the judicial review struck down the Government’s alternative plans shows very clearly that the Government have been on the wrong foot right the way through in their response to the ombudsman?

I am glad that the judicial review has been raised, and I agree with my hon. Friend. I do not want to repeat the comments about the judicial review made by my distinguished neighbour, my hon. Friend the Member for Twickenham (Dr. Cable), in his opening speech, because he summed up most of the situation extremely effectively. However, I want to point to one issue raised on the Floor: the presumption that somehow there is some resistance to the principle of compensating for regulatory maladministration. Comments were made by the judges on precisely that issue. We should pay attention to such comments when they come from such a distinguished source. They said that they

“found no evidentiary support, at least in the material before us, for the claim…that Parliament ‘has accepted’ that compensation for regulatory failure is ‘not generally appropriate’”.

These are judges. They understand how to read legislation and Hansard, and they did not think that this House had set up a barrier, or raised some principle, against compensating for regulatory maladministration. I understand the judges’ words to mean that we might strongly presume that the House expects regulatory maladministration—as others have said, we are not talking about market or management failure at Equitable Life—by the regulator to lead to some form of compensation, or the expectation of it.

I do not want to take up the time of the House by talking about my many individual cases, but it is important to make it clear again on the Floor of the House—this has come up in previous debates—that people impacted by maladministration do not form a select group of highly paid, wealthy professionals who happened to take out exotic life policies. Those who have been impacted in my community range across the social scale. Some are on very low and meagre incomes; others are on decent incomes. However, the notion that this is a case of the rich coming to us with a cry from the heart is completely false, yet often that belief seems to underpin much of the thinking of those on the Treasury Bench.

I want to make a plea that I have made before on the Floor of the House: we should be able to hold such a debate in Government time. We have heard that from others, but we all ought to make it clear that this is our expectation. Many people will resist supporting a motion tabled by an Opposition party, particularly on one of its Opposition days, merely on the principle that that is what is done. That is unfortunate, because an issue like this, given the suffering that has been caused, overrides any such facile view of how Parliament should function. The Government keep challenging us, over and over again, on our position on this issue, but surely this is exactly the kind of instance in which the Government should be introducing the debate, presenting it to the House and allowing the House the final word. We live in a parliamentary democracy, and surely we must fight for that principle, as well as the principle of justice—real justice—for our constituents.

I want to make one last remark on Sir John Chadwick. I have great respect for him, but he has been very resistant to meeting the all-party group on Equitable Life policyholders, of which I happen to be the secretary. I find that unfortunate and I take it to mean that the debate that he is conducting is far less well informed than it should be. I ask the House to call again on Sir John Chadwick to rethink his interest in excluding Members of Parliament from considering these issues.

I start by thanking the Chief Secretary for reiterating the apology given by his predecessor, my right hon. Friend the Member for Pontefract and Castleford (Yvette Cooper), which was certainly a good start.

Earlier, the hon. Member for Reigate (Mr. Blunt), who is no longer present in the Chamber, said in an intervention that policyholders should be able to come forward and apply for compensation against criteria and for a sum of money determined by this House. That was reiterated, in a way, by my hon. Friend the Member for Cannock Chase (Dr. Wright), who said—many of us agree with him—that we are talking about a matter for the whole House. It is a matter that should be discussed without partisan interest, but in the interests of our constituents only, as the hon. Member for Richmond Park (Susan Kramer) has said.

I was interested in the contribution made by the shadow Chief Secretary, the hon. Member for Fareham (Mr. Hoban). He said in his conclusion that the subject of this debate is not a partisan issue. I agree with that: it is not a partisan issue, and I hope that the parties here will not make it a party political issue for their own gain. It is something that the public look to this House as a whole, and that our constituents look to us as individuals, to put right.

On 24 June, I had an Adjournment debate in Westminster Hall. I was subsequently asked to stand as the joint chairman of the all-party group on justice for Equitable Life policyholders, which I agreed to do. There are many officers here today, from all parts of the House, who support that group and its principle of justice for those policyholders. I do not want to repeat the remarks that I made on 24 June, but I want to draw out some important points from that speech, to remind hon. Members and those on the Government Front Bench exactly why we are holding this debate. I am sorry that this debate is being held in Opposition time, as many hon. Members have said, because that has certain implications for the way in which Members vote.

I said on 24 June that I did not want simply to repeat the words that had been said in previous debates. I wanted to try to bring to the House some of the experiences of my constituents to remind us why we are debating the issue yet again, and to try to persuade the Government to agree to the recommendations contained in the parliamentary ombudsman’s original report, “Equitable Life: a decade of regulatory failure”, which was published in July 2008.

As we know, after the publication of Ann Abraham’s report, the Public Administration Committee produced a report entitled “Justice delayed”, on 11 December 2008. On 5 May this year, the parliamentary ombudsman published a further report, “Injustice unremedied”, which has been referred to on a number of occasions. There is no shortage of reports, just a shortage of justice for those who through no fault of their own have suffered huge losses in their life savings, accrued over years of hard work. That surely cannot be right.

Like many other hon. Members who until recently knew little about how all that had come about, I was not very sympathetic at first. However, as the hon. Member for Richmond Park has said, as much as the world’s oldest mutual insurance company had overstretched itself and as much as the real issue was poor regulation, I became more and more concerned about what my constituents were telling me. I suspect that that experience has been echoed throughout the House, and that there is not one Member who has not received correspondence from constituents about Equitable Life.

The Public Administration Committee said in the introduction to its December 2008 report:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive,”

as has been said,

“and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

The parliamentary ombudsman’s second report, “Injustice unremedied: the Government’s response on Equitable Life”, is scathing about the inaction on her initial recommendations from July 2008. Indeed, she said in that report:

“I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently,”

as my hon. Friend the Member for Cannock Chase pointed out,

“on behalf of Parliament and after a detailed and exhaustive investigation.”

I said that I would take a little of the House’s time in highlighting some of the cases that have been brought to my attention by constituents. I want to concentrate on one case only, which I am sure will ring a bell with many Members. This particular lady, Mrs. H of north Leeds, told me that her modest income of £200 a month was reduced overnight to less than £100, although she now receives about £120. She is 83 years old. She was dependent on that £200 each month, so when it was initially reduced by more than half, she found it hard to cope financially. It was only the help from her ex-husband that kept her going. However, she still struggles every month, owing to the continued shortfall in income.

Why, then, is the regulator to blame? We have heard a number of views on that this afternoon. Surely investors must have understood that their investments could decrease as well as increase. How could Equitable Life maintain a rate of return and a guaranteed annuity rate beyond those of any competitor in the market? Those are the questions that Ann Abraham addressed in her initial report of July 2008, which took four years to complete. Her answers are at the heart of the anger expressed by investors through the Equitable members action group. At the core of the problem is the fact that Equitable simply could not meet its obligations—obligations that it had made for itself, because it had made no provision for guarantees against low interest rates on policies issued before 1988.

We know also that, following the House of Lords ruling in July 2000, the society stopped taking new business in December of that year, which effectively spelled the end for Equitable. More than 1 million policyholders found that they faced cuts in their bonuses and annuities, which caused a huge loss of income—income on which many of those small investors depended. After all, the average investment for the 500,000 individual policyholders was just £45,000, which even at its height yielded no more than £300 a month, according to EMAG.

As has been pointed out, we in this country, along with many countries in the western world, have a growing problem: the problem of an ageing population that needs to be encouraged to make greater provision for its retirement and old age, as the state will simply not have sufficient resources to provide enough money in statutory pension payments. That is a controversial issue and a source of great debate. The problem will only become worse as the years pass and the proportion of younger people in work declines in relation to those in retirement.

It is already clear that my generation—those in their mid-50s—will have to work longer before retirement, whichever party wins the next general election. However, unless we can save more and see our savings grow securely, there will be little confidence that there is any point in saving at all. I believe—many other Members have also expressed this view—that the Equitable Life scandal has severely reduced the confidence that the people of this country have in the principle of saving for retirement.

Does the hon. Gentleman agree that there are two emotions? The first is the anger of the policyholders, who are angry that they have been let down by a system that they believed in, and the second is the one that he is talking about, involving trust. There has been a huge loss of trust, not only in the Government, but in the ability of those in this House to bring such matters forward, as the hon. Member for Cannock Chase (Dr. Wright) pointed out earlier.

I agree; indeed, the situation is much more serious. People always lose confidence in the Government of the day, because they blame them for everything. However, people have enormous trust in this House. They may not like MPs or Parliament generally, but they like their constituency MP. They look to us to come here and use this House to redress injustice. It is the loss of trust in this House that worries me far more than the loss of trust in the Government—a Government whom I, of course, wholeheartedly support.

I follow the hon. Gentleman’s interest in such matters. Following that point, does he agree that the loss of trust is compounded in this instance? Not only is there an appearance of failing to take on board the recommendations of independent adjudicators, but people still have some trust in the courts system, and the condemnation in Lord Justice Carnwath’s judgment of the stance taken is comprehensive. If the House ignores the judgment of distinguished lords justices sitting in the divisional court, it will make people’s lack of faith and trust in the House even worse, and compound this very real problem. As the hon. Gentleman says, it will create real difficulty for people on limited incomes.

That is why I agree with many right hon. and hon. Members—especially my hon. Friend the Member for Cannock Chase—that the decision on how we should respond must be a matter for this House. The hon. Member for Reigate also made that point. I fully accept that there are huge implications for the Treasury and for taxpayers’ money, but we have seen far greater sums of money being used in the past 12 months to rescue our banking system—rightly, in my opinion. Surely, Equitable Life investors who have lost out as a result of regulatory failure deserve the justice not only that the courts have said they should receive but that the ultimate court in the land, this House, thinks they should have. I urge the Government to allow sufficient Government time for a full, proper debate on this matter, with a free vote, so that we can make our views as Members known to our constituents and give our constituents the justice that they deserve.

If investing a large proportion of earnings results in that money either disappearing or being greatly reduced in value, the resulting lack of trust in the system will lead to increased poverty in old age. It will also remove any incentive to make personal provision from a lifetime’s earnings. In the end, the state will have to foot the bill, thus increasing the cost to us all through taxation.

It has been said that this is a scandal that affected only the well-off, and that ordinary people with relatively small savings were not involved. Let me remind hon. Members and the Government that EMAG told the Public Administration Committee that

“the majority of Equitable Life’s policyholders had modest sized pensions and were not ‘fat cats’ who ‘risked their money to get above average returns’. In particular, the average investment of the half million individual policyholders amounted to £45,000 each, which in today’s money would buy a pension paying around £75 per week”.

I am grateful to my fellow co-chair of the all-party parliamentary group on Equitable Life for allowing me to intervene. His comments about Members of Parliament scrutinising this issue resonate with me. Does he agree that it is important for outside bodies—and for Sir John Chadwick in particular—to come before the House and to be held to account? Does he share my concern that Sir John Chadwick has refused to come to Parliament to interact with members of the all-party group?

My honourable co-chair makes a good point. It has already been pointed out that, since Sir John Chadwick was appointed, he has refused to come to the House or to deal with individual Members. It is time that members of the all-party group, on behalf of all Members, were able to meet him and question him on the way in which he is setting about the business of remedying this injustice. I urge him from these Benches—I hope on behalf of all hon. Members—to talk to Members of Parliament as soon as he possibly can. It is important that he should be accountable to us, and that our constituents should be able to see that he is not refusing to talk to us.

I conclude by once again asking the Exchequer Secretary to the Treasury to answer the four questions that I put at the end of my Adjournment debate on 24 June. I hope that the House will forgive me for reiterating these points. Sadly, she ignored them completely at the end of that debate, and I hope that she will be able to respond to some or all of them today.

First, will she amend Sir John Chadwick’s terms of reference to include all the recommendations of the parliamentary ombudsman’s report, “Equitable Life: a decade of regulatory failure”? Secondly, will she agree to implement EMAG’s proposal that Parliament set a total amount of compensation for individual policyholders affected by the collapse of Equitable Life, then allow the proposed tribunal to get on with the job of distributing that money quickly and fairly? Thirdly, will she accept that the delay caused so far has meant that many policyholders who suffered through no fault of their own have either endured financial hardship or died in the meantime? My understanding is that 15 such policyholders die each day. Fourthly, does she accept that, for many, the phrase “injustice unremedied” has real meaning, and that it is about time that the hundreds of thousands of investors received real justice?

If the Minister can answer these questions positively, this injustice could be brought to an end rapidly and the Government would receive the credit for its resolution. If not, I fear that the resentment and bitterness will continue, with huge cost to the individuals who have suffered and to the country as a whole. I remind the House that justice delayed is justice denied.

I shall not take the full allocation of my time in the debate, to ensure that all my colleagues who wish to speak can also get in. I should like to thank my hon. Friend the Member for Twickenham (Dr. Cable) for his opening speech, and I shall try not to repeat the points that he made. I advise anyone reading this in Hansard that his speech is worth reading from start to finish.

I am delighted to have been called to speak today. I remind the House of a previous Liberal Democrat Opposition day motion on an issue of fairness and justice. At that time, many MPs from all parties got together and did the right thing. That day, it was for the Gurkhas, and common sense and decency prevailed. Equitable Life policyholders, who I am sure will be following today’s debate, will be hoping for more of the same from the House today. Parliament was in the news last week for all the wrong reasons, and today’s debate gives us a chance to show this place at its best.

It is a scandal that we even need to have this debate. Quite apart from the number of times we have spoken about this issue in this place and in Westminster Hall over the years, we have also had an ombudsman’s report, a damning Public Administration Committee report, an almost unprecedented special report from the ombudsman and now a High Court ruling, all of which concluded that there is an injustice that needs to be remedied quickly. It seems that it is only the Government who do not get the message.

Today’s debate takes place in the context of last week’s court ruling. Treasury officials tried their best to spin the outcome, but it was clear to everyone, including the judge, that the policyholders were the principal victors. I was glad to hear yesterday that the Government will not be seeking to take the decision to appeal. Of course, we should remember that, were it not for the tenacity of EMAG in bringing the case to court, it is likely that the Government would have got away with their inadequate response to Ann Abraham’s initial report. That raises this question: what use is an ombudsman, if they are simply ignored by Ministers and the Government? The fact that the ombudsman felt that she had to issue a special report to highlight the Government’s inaction is a disgrace. This is only the fifth time in 42 years that the ombudsman has felt moved to use the so-called nuclear option, and it shows how serious the Government’s negligence has been.

The hon. Gentleman paid tribute to EMAG, and I echo that sentiment. Will he join me in particularly congratulating Mr. Paul Braithwaite, who has spearheaded this campaign? He has been to the House of Commons on many occasions to interact with the all-party group on Equitable Life, and he has really driven the campaign forward.

I am happy to concur with that.

A lobby of Parliament by Equitable Life policyholders is scheduled to take place next month. I have read that the lobbyists will be drawing our attention to the fact that 15 policyholders die each day waiting for justice while the Government drag their heels. It is a great testament to the policyholders that they are prepared to keep fighting for the cause not only for themselves, but for those who are no longer with us. Let us be very clear, however: they should not still have to be fighting.

Like all hon. Members, I have a great many constituents who been affected by the collapse of Equitable Life. They include Ian Fairweather, John Stepney, James Michael Morton, Hana Hornung and John Smith, among many others. Those people did the right thing and made provision for their retirement. The proposed payout scheme looks as though it will leave 90 per cent. of policyholders with little or no help at all. That is simply not good enough. In fact, it makes me think of my constituent, Joe Shepherd, who has been fighting for justice in pensions—not against Equitable Life—for 19 years. He has gone through three MPs and when I stand down at the next election, he will be into his fourth. He is now in his 80s and he is the last pensioner from the relevant company left, yet he has still not had justice. I dread to think how many Equitable Life people will be in the same position.

If Equitable Life policyholders are left with nothing, what message does that send out to the next generation, who are already reluctant to save towards their pensions? My constituents who have lost significant sums of money are justified in asking why Equitable Life is treated so differently from a failed bank. I have no good answer for them. At today’s Prime Minister’s Question Time, the Prime Minister responded to one of the later questions by saying that not one saver had lost money in a British bank. We in this place have to ask why the Government are not giving the same pledge to Equitable Life savers.

My hon. Friend the Member for Twickenham mentioned earlier that some Members were not elected to this place when the whole saga started. Many Members, for the same reason as me or for other reasons, will not be in this place when—hopefully—the payments start to go through. In my own city of Edinburgh, which has seen many Equitable Life members badly hit, I believe that a number of MPs, including a number of Labour MPs, will lose their seats at the next election. I think that they will have let down Equitable Life policyholders.

The treatment of Equitable Life policyholders is one of the great injustices of this Parliament. It is a mess of this Parliament’s making and we need to sort it out and to do it quickly. The Government have just over two weeks to give their response to the High Court ruling. The great tragedy is that for too many policyholders, time has already run out.

I start by congratulating my hon. Friend the Member for Twickenham (Dr. Cable) on introducing the debate and making use of this Opposition day to outline, as other hon. Members have said, what could have been done differently by the Government. It is very important to have this debate, carrying on from our previous debate in Westminster Hall. I thus congratulate my hon. Friend on his use of Opposition day time and, of course, on his excellent introduction and the way in which he framed this afternoon’s debate.

I also pay tribute, as have others, to the Equitable members action group, to the all-party group and the Select Committee, which has examined the issue in detail. I also mention the work of the ombudsman: although at least one other hon. Member has commented on how long that took, it is nevertheless part of the process of getting us to where we are today.

Hon. Members of all parties have been assiduous in pursuing this issue on behalf of individual constituents, but also because most of us are motivated, I hope, by a sense of justice in all we do. I sometimes think that there is little more than a great injustice—whether it be to an individual or to a whole group of people—that can motivate MPs in taking hold of particular issues and not letting them go. This situation falls into the category of a whole group, as many people across the country are affected by the issue and they will continue to be affected by it until they have some form of resolution.

I am pleased that so many Members have had the courage of their convictions and signed early-day motion 1423, which I hope is a statement of intent for later today. What we are debating today is essentially the same principles as are in the motion. Although I understand that Labour Members find themselves in some difficulty in thinking about how to vote on an Opposition day motion, I hope that they can set it aside, because, as has been said, today provides our only opportunity. While many hon. Members have expressed a hope that the Government will bring something forward to return to the issue later on, I have to say that the evidence thus far does not lead me to the conclusion that that will happen. This may well be the only opportunity that the House has in the near future to get something on the record and have a vote on this crucial issue. I urge Labour Members—I understand their difficulty—to carry through what they have already done in signing the early-day motion.

In 2000, what happened through Equitable Life’s default was hugely painful for all those who had invested, but those involved in the mismanagement of the funds are not solely to blame. The Government as a regulator and the agencies that the Government established to regulate financial matters have been shown, sadly, to have failed time and again in recent years. We must be absolutely clear that those failures were under the watch of this Government and their predecessor, as they looked into what was going on in Equitable Life. The people who invested in good faith expected the regulatory mechanisms to guarantee their interests, so they feel very let down. They have, of course, been let down particularly badly.

What action, then, can we take finally to offer some justice? The Government say that ex gratia payments are an adequate mechanism for providing that, but I am not convinced that they are. Members of the action group, who have acted very effectively on behalf of all the Equitable members, certainly do not feel that that is the case. Of course, whatever happens will cost money, but as other hon. Members have said, the Government have found the money in other circumstances—to bail out the banks, for example. My hon. Friend the Member for Twickenham made the point that investors in banks found their interests protected and he asked why Equitable members should not also find their interests protected in the same way.

Money has also been squandered in other recent Government pet projects—on big IT projects and certain foreign adventures that have been launched against the demonstrated will of the people living out there in the relevant countries. Money has been found for those things, but not, it seems, in this case. It may well be painful to find the resources to provide this measure of justice, as we are being invited to do, but however difficult it is, the central issue is natural justice and it must be met.

At every turn, the Government have dragged their heels. Many Members have sought to focus on the imperative to get this issue dealt with as soon as possible because some of the people involved are, sadly, no longer with us—and there are others who, sadly, will not live to see the benefit of any compensation scheme. We must not allow any imperative to act against the issues of fairness that EMAG has raised all along.

In other fields, I know that the Government have sought to speed the processes up. Sometimes, in my view, they have done so against the interest of securing the right resolution. In a planning Bill of a couple of years ago, for example, there was an absolute dedication to getting all major infrastructure planning issues sorted out in six months; what is important to me, however, is reaching the right decisions in these circumstances. Yes, time is important, but it is not the only thing that we have to consider.

I have been in regular correspondence with a number of my constituents affected by Equitable Life. There are about 50 or so of them, but I well know that there are many more in my constituency who have not contacted me about it. They have contacted EMAG and may be cynical about whether they will ever get the resolution they want and deserve. In every one of our constituencies, there are so many people affected, and they are watching what we are discussing here this afternoon.

I spoke to a couple of constituents this morning. What touched me is that they both prefaced their remarks by saying, “Others are far worse off than I am. Others are going to be affected worse. My retirement plans have been affected, as has my ability to do things like replace my car, which is currently on its last legs, but I have lost only £9,000”—and in the other case, it was between £13,000 and £14,000. Those are significant sums for those people, but I thought it revealing that they adopted the approach of talking about others who were even worse off than themselves.

We clearly need a scheme that is reasonable and takes account of the constraints on resourcing, but it must also compensate properly and it must not be a token effort. In order to be reassured that that is the case, it needs to be overseen, as my hon. Friend the Member for Twickenham said earlier, by an independent tribunal. He set out how that could happen without setting aside the work put in up to now.

I very much agree with the hon. Gentleman, whose experience in his constituency is similar to mine. Is not the conclusion he advances reinforced by the findings of the Public Administration Select Committee, which rightly made it clear that compensation was

“not a matter of charity, but a requirement of justice to redress a wrong”?

Should that not be the principle that underlies any decision taken on this matter?

As ever, the hon. Gentleman speaks with great authority, and I agree with his comments. As many hon. Members have said, we must consider an approach that is based not on issues of hardship and on means-testing, but on justice. The Government’s written responses have not contained a good enough apology for the failings that occurred, and it would reassure people to see that in writing. We need a fuller apology, something that provides hope for those Equitable members who are affected, and genuine measures that offer them justice.

Earlier, I probed those on the Conservative Front Bench on their proposals, and I completely understand their desire to push forward and criticise the Government for the speed of their response. However, bearing in mind that they have added their signatures to the motion tabled by my right hon. and hon. Friends, which is welcome, I am disappointed that they are stepping back a little from an independent tribunal, which is crucial to reassuring Equitable members that their interests are being looked after.

The hon. Gentleman makes his case calmly and fairly, and it will have an echo in my constituency. It is good that he is putting ideas in front of us. Obviously, in the Division, which will be on party political lines, we will vote as we will. May I say that I hope the Government take on board some of the ideas put forward, because an injustice was done and needs to be put right? I congratulate him on his thoughtful and measured case.

I am grateful to the right hon. Gentleman for his kind remarks, although I am perhaps slightly disappointed by the signal he has sent as to which Lobby he might find himself in later. I hope that he will take the chance to reconsider that on the basis of further contributions.

Many hon. Members have served in local government, where, when difficult decisions are faced, administrations often talk about being above, and not wanting to get into, party politics. However, when the boot is on the other foot, they are quite happy. When the courts have handed such an issue back to the House, for it to respond to the ombudsman, hon. Members must take a view based on the interests of Equitable members in their constituencies, irrespective of which party has put forward the proposals. I hope that they will do that later, and as has rightly been pointed out, many Members signed the early-day motion and put their comments on the record. Therefore, if they decide to vote with us, it should be easier for them to justify that decision to their Whips.

My hon. Friend the Member for Edinburgh, West (John Barrett) also drew a strong parallel with an earlier Liberal Democrat Opposition day vote on the Gurkhas. I had the honour of being a Teller on that occasion, and in what I hope is a sign of things to come, I delivered the verdict to the House. Tonight, I hope that hon. Members across the House will unite to send a strong signal to Equitable members and the Government that the Government’s proposals are inadequate, that we need to focus on what the ombudsman, EMAG and people across the country have said would be the right, meaningful compensation, and that we need to do that quickly.

Other right hon. and hon. Members have rightly raised the issue of the proper standing and treatment of the parliamentary ombudsman by the House and by Government. At a time when the House’s reputation has taken all sorts of damage over expenses, we need to remind ourselves that people have a more fundamental question about not the expense but the worth of the House. When Equitable Life policyholders see the clear findings of the ombudsman evaded and dismissed, and the work and worth of the ombudsman’s report denigrated by Government, that raises questions about the credibility of the parliamentary apparatus.

Given the number of Members who have signed early-day motions and written replies to Equitable Life policyholders, those policyholders know that a clear majority in the House wish to see proper remedy for their injustice. But when we allow ourselves to be frustrated by procedural chicanery, they question the worth, relevance and responsiveness of the House. If even a Select Committee being clear in its findings and conclusions on the issues can count for little, we should join the public in being worried about the role and relevance of the House.

It has taken a court case to bring acknowledgement of the kind that we have seen from the Government this week, in accepting findings of the ombudsman that they had previously resisted and rejected. I say to hon. Friends who approve of the terms of the Government’s amendment that we should remind ourselves that those terms would probably be different had last week’s court case not taken place, and the Government not moved to accept the findings in the way that they did.

I am also a little perturbed that the Government have sought to downplay the scale and nature of some of those findings, and to minimise the court’s findings and the fact that it came down heavily against the position taken persistently by the Treasury. For the Government to say, “It was only on this thing that the court came down against us, and they were for us on something else,” is like trying to pretend that a tyre is only flat at the bottom. It is simply not a credible position. Thankfully, the House has the benefit of that important judgment, and the Government are now showing the wisdom and responsiveness at least to accept key aspects of the judgment, which I welcome.

However, we know from the written ministerial statement and some of what was said today that serious questions still arise. I listened to the Chief Secretary tell us that the Government’s ex gratia payment scheme, based on Sir John Chadwick’s proposals, will be up and running by spring. Therefore, we must ask ourselves: what exactly does “up and running” mean? Does it mean that the scheme is coming soon, or will be open for business soon? I hope the Exchequer Secretary will tell us later.

I hope the Exchequer Secretary will clarify that point, because my understanding was that the scheme would be available by the spring, not that money would be going out by then.

I thank my hon. Friend for amplifying my question. We all want to know what “up and running” means. We also heard the Chief Secretary, in reply to a question, say that he had spoken to Sir John Chadwick, either before the summer or in early summer. Another hon. Member asked whether Sir John Chadwick had adequate resources or needed more. Since the judgment, however, the scope of Sir John Chadwick’s work has expanded. Instead of going back to July 1995, it must go back to July 1991. I wonder whether the Chief Secretary should be talking to Sir John Chadwick again to see whether, in the light of the judgment, he has sufficient resources. If, as the statement admits, his work has additional scope, does he not need additional resources? As other hon. Members have raised the failure of Sir John Chadwick directly and sensibly to engage with the all-party group or any other Member, such engagement might be usefully explored, so that we fully understand the implications of the court case for his continuing work.

The hon. Gentleman will know from my previous interventions on the subject that many of my constituents, including members of my own family, have been affected. Does he agree, however, that it is strange that the Government should still hang on to some vestige of a means test for people who have suffered so badly? During the banking crisis, they did not means-test those who might have lost their money in a bank; they paid up. Why should this be different?

The hon. Gentleman has made his point very eloquently. Many of us have questioned the Government’s announcement that ex gratia payments will be made to people who have suffered “disproportionate impact”. I understand why the Chief Secretary or other Ministers may be unwilling to give a single example of disproportionate impact, and probably cannot provide a comprehensive definition of everyone who has suffered one, but could we at least be given a definition of a proportionate impact? That would enable us to identify those who might be counted out, although I have certainly not heard from anyone who feels that he or she has suffered proportionate impact.

The hon. Gentleman mentioned the resources that Sir John Chadwick had at his disposal, and that is critical to the speed with which the issue will be resolved. However, EMAG has expressed the fear that some of the resources may be inappropriate, because one of Sir John’s most important advisers has been seconded by No. 10 Downing street. EMAG feels that that constitutes a conflict of interests.

Obviously there are various arguments to be made about foxes and chickens, but, given that the Government have accepted the court judgment, I think we should be asking how we get to where we need to be from here, rather than necessarily testing any of the personnel who have been involved so far.

This situation, which long predates my time in the House, has continued for far too long and affected far too many people. Those people were bemused by jargon; then, just when the way seemed clear, there was obfuscation and evasion. It has been like one of those Homer Simpson nightmares. Every time people think that the nightmare is reaching a conclusion, there is some new twist, and off it goes in another awful direction. They are left bewildered, and with a further sense of loss, suffering and frustration to add to their ongoing loss. We need to bring this scandal to an end by providing a remedy for the clear injustice that has been identified.

As the hon. Member for Edinburgh, West (John Barrett) pointed out, people are particularly at a loss to understand why their situation has dragged on for so long, and why the Government have been so intensely resistant when it is possible to apply so many measures to underwrite the losses—or potential losses—faced by others such as Icelandic banks. People will inevitably and sensibly draw those comparisons. It is not a matter of their being jealous or unduly concerned about themselves. Those are natural questions asked by policyholders, and asked by us, as public representatives, in the House.

If it is right to underwrite others in the context of the banks because we want to underpin the stability of the finance system, surely it is right to provide a proper remedy for these policyholders so that we can underpin confidence in the pension system in the future. If we want to encourage people to save for their pensions, and if we want to encourage them to become involved in schemes such as this—as we are doing increasingly; indeed, we are imposing on them a requirement to become involved—we must at least give them some basis for confidence. That is why we need to move further and faster.

We know that EMAG has said that, for the purpose of an overall outcome, it wishes the House to identify a sum that would be available to remedy its members’ plight. In the context of either an outright compensation scheme or the ex gratia payment scheme to which the Government have referred, I hope that the Exchequer Secretary will tell us whether, if the scheme is to be up and running by next spring, the Government will announce a clear quantum sum that will be available. Will we hear from them by the time of the pre-Budget report, for instance? If in telling us that the scheme will be up and running by the spring of next year, the Government want us to believe that money will be paid out during the next financial year, when will we hear what quantum will be available? If the Government continue not to give any indication of the amount that they intend to make available, we shall inevitably have doubts about their real intent.

I know that the issue of the money will be difficult, but in a sense it brings us to the real issue of what is or is not considered by the Treasury to be disproportionate. When a Treasury statement talks of policyholders suffering a disproportionate impact, we know that the Treasury’s real motivating concern is fear of the disproportionate impact of a compensation scheme on the public purse. If that is the real fear, let the debate be clear about that, let the Government be clear about it, and let the Government be clear about what they think would be a proportionate sum of money to offer. The rest of us, having considered the issue properly in today’s debate, can then decide whether that amount is adequate, realistic or meaningful.

As a number of Members have observed, this matter has been dragging on for many years. After all the years that I have spent dealing with it, I have a file full of letters and reports that would choke an elephant. Like other Members, I have many elderly constituents who are affected by the collapse of Equitable Life, and, sadly, some have died waiting for justice. Other Members have also made a point with which I strongly agree: that the Equitable Life crisis is part of a much more general crisis of confidence in savings and pensions. If we do not get this right—if we do not demonstrate that people can expect justice when things go wrong through regulatory fault—we shall have a serious problem with persuading people to save for pensions and their own future.

Many of my constituents, like those of other Members, have approached me and asked, “If the Government can bail out the banks, why will they not do anything about my problem with Equitable Life?” We can argue about the macro-economics, the economy and the need to bail out the banks, but it is a reasonable question. However, there is a better analogy to be made, although I appreciate that it is not exact. The Government instituted the Pension Protection Fund. They rightly took action to help people who found themselves in danger of losing out when company pension funds were becoming insolvent—ensuring that they received a large proportion of the available funds so that they would not face poverty in retirement—and to shore up the sector.

It seems to me that the same principle should apply in the case of Equitable Life. Equitable Life was effectively a pension scheme for, in particular, many self-employed small business people. Those people invested in Equitable Life policies because Equitable Life was seen as a large and very sound company. Many financial advisers pushed those policies over many years, especially—as was pointed out by the hon. Member for Richmond Park (Susan Kramer)—to small business men. Now those people find that their pension pot has effectively disappeared, or at least been severely reduced. What is the difference between them and those whose company pension funds become insolvent, other than the fact that they are losing out partly because of a failure of regulation? Indeed, in many ways they are in a stronger position than others to demand compensation. That is particularly true in view of the fact that, at least for part of the time involved, the regulator of Equitable Life was the Treasury.

I was deeply troubled by what the Minister said in his opening speech. He said that there was no obligation for compensation to be provided. I cannot believe that that is the case, given that the Government were effectively the regulator for at least part of the time. I understand to some extent the Minister’s concern about the impact on public funds of compensating all Equitable Life policy-holders who have lost out as a result of the failure of regulation, but I feel that to impose the scheme that the Government are proposing goes against natural justice. If a loss has been suffered through maladministration, surely the victim of that maladministration is entitled to compensation regardless of his or her personal circumstances.

There is a question that still hovers over this issue. It is to do with the possible means-testing of the victims of the Equitable Life collapse. The Minister has been asked on many occasions in the debate to define disproportionate loss. It is not at all clear what that means—how it will be determined and what it means for people. Given the Minister’s comments, it seems to me that in the circumstances under discussion, the concept of disproportionate loss clearly amounts to a means test applied to the person who has suffered a loss from the failure of Equitable Life. Even if that is the case, it is still not clear how the concept is to be determined, so we need clarity. Is the Minister talking about a disproportionate loss on a particular class of investment or is this about the personal circumstances of an individual? We need to know.

The Minister said that the Government’s position was an attempt to speed up the system, and after 10 years it could certainly do with some speeding up. He attacked the alternative system involving a tribunal by saying there would have to be a case-by-case investigation—but if the Government are determined to impose a concept of disproportionate loss and that is to be conducted through a means test on the individual, how will that be done unless each case is gone through separately, looking at the loss suffered and the personal circumstances of the individual? It therefore does not seem to me that imposing this strange concept, which is nowhere explained, will speed up the system at all. I fear the system will grind even closer to a halt.

Equitable Life policyholders have waited 10 years for some justice. We have inched forward slowly. In January, I spoke in a debate on this issue and I described the Government’s position as being like that of an old lag appearing in a criminal court who starts with an outright denial, but as the evidence accumulates reluctantly accepts he will have to plead, and then makes a half-hearted plea and tries to wriggle out of the consequences of his actions later. That is exactly the position the Government are in. Even after the judicial review, they tried to spin things to suggest that they had in some way won it. It was very clear that they had not. The judge ordered that this matter be re-examined. The Government must throw up their hands and admit that there is a responsibility here, and introduce a system that is clear and fair, and will quickly deliver for Equitable Life policyholders.

I was disappointed in the comments of the hon. Member for Fareham (Mr. Hoban), who opened for the Conservatives, because their policy on this is unclear. From the comments made, it seemed to me that if by any chance they were to form the next Administration nothing much would change, because the hon. Gentleman was unwilling to answer straight questions about how they would deal with the situation. It seemed to me that if the Government manage to get a system up and running by the time of the next election, the Conservatives would just continue it. I ask the hon. Gentleman to make it clear what the Conservatives’ position will be. If a system is up and running by that time, will they reopen it and look at the tribunal system, and give real justice to Equitable Life policyholders?

I shall be very brief, as I know that other Members wish to speak.

I fervently hope that we are now reaching the end of this decade-long saga, in which 30,000 people have died waiting for justice. One million investors have lost up to half their pensions, amounting to an estimated £5 billion, and they were people who did the right thing: they saved for their retirement, but they have been let down by a series of regulatory failures by this Government.

What does this mean in human terms, however? I shall explain by recounting just two stories that west midlands Equitable Life investors have told me. It means a couple having to sell their lovely retirement bungalow and move into a caravan. It means that instead of going to the shops with enough money to be able to enjoy the experience of shopping and buying what was described to me as “nice things”, they have to scratch around for the cheapest reduced items just to make ends meet. It may not mean destitution in many cases, but for most of such people it means the destruction of a quality of life that they saved for, made sacrifices for and deserved.

My hon. Friend the Member for Twickenham (Dr. Cable) has outlined the history of this sorry episode and I will not repeat it now. I do not want to dwell on the shameful history of how this Government have prevaricated ever since the publication of ombudsman Ann Abraham’s report in July 2008, so aptly subtitled “A decade of regulatory failure”, although I entirely share her frustration at the prevarication of the Government in their response, which prompted her to take the unprecedented step of issuing a second report this May, called “Injustice unremedied”. I am not going to dwell on the Government’s response, which was to attempt to exclude up to 90 per cent. of pensioners from any compensation at all, but I do wonder how a Government who purport to be a compassionate Government could allow so many people to suffer for so long, ignoring the ombudsman’s findings and trying to evade paying compensation.

I welcome the decision of Lord Justice Carnwath and Mr. Justice Gross backing the decision of the ombudsman that compensation should be paid back to 1991, not 1995 as the Government wanted, and I implore Sir John Chadwick to come up with a compensation scheme with the utmost urgency so that as few more pensioners as possible have to die without ever seeing justice in their lifetime.

I ask the Minister to say what will happen in respect of pensioners who have died. My understanding is that their money will be forfeited altogether, so that neither they nor their surviving relatives will ever benefit. If this is the case, is there any provision for making some compensation available to their estate even when, because of the great length of time this has taken, it is not only they but their families who would otherwise lose out?

Finally, as a final act of compassion, I ask the Government to ensure that a compensation scheme will be in place and payments will already be being made by the time they leave office and we have a general election next year.

I apologise for not being present at the start of the debate; I had to attend a pressing constituency meeting.

I set up the all-party group on justice for Equitable Life policyholders primarily because of my belief in the parliamentary ombudsman system. We must protect the ombudsman’s findings, and she has stated unequivocally that there has been regulatory failure. We as parliamentarians have to do everything possible to ensure that her findings and her position are respected in this House.

As a constituency MP, I rely on ombudsmen on many occasions to assist me with difficulties that constituents are facing. The ombudsmen work so hard and do such sterling work that I wish to pay tribute to all of them. If their views are ignored, that simply chips away at their position and undermines them.

The all-party group has become very large, as many Members of Parliament have joined it. I wish to pay tribute to the hon. Member for Leeds, North-East (Mr. Hamilton), who is my co-chairman, to the hon. Member for Richmond Park (Susan Kramer), who plays an active part in the group, and to my right hon. Friend the Member for Haltemprice and Howden (David Davis), who takes a great interest in it and comes to our meetings. Some 42 Labour Members of Parliament have joined the group, some of whom represent key marginal seats. I will be watching closely how they vote this evening, because they have joined an all-party group that seeks justice for Equitable Life policyholders and I do not see how someone who is a member of such a group can vote against this Liberal Democrat motion. As has been stated on many occasions, Equitable Life policyholders have suffered terrible financial problems and are very frustrated by the lack of action. As we have also heard today, every day 15 of those policyholders die.

My other main gripe is with Sir John Chadwick. I do not mind telling you, Madam Deputy Speaker—although I will probably get into terrible trouble for saying this—that I have called for his resignation, such is my frustration with him and with his refusal to interact with the all-party group. I get very concerned when people who have been appointed by the Government, and who have such extraordinarily important roles to play and who are working on issues that affect so many of our constituents simply refuse to come to the House of Commons to interact with parliamentarians. We are trying to represent our constituents by trying to lobby Sir John. He has stated that we can write to him like anybody else—but that is simply not enough. As a democratically elected parliamentarian who represents 74,000 constituents, I demand to have the opportunity to call him before us and to engage with him. His approach shows great arrogance on his part, and I very much regret that.

The other thing that I wish briefly to say is how disappointed I am with the right hon. Member for Rotherham (Mr. MacShane), who is no longer in his place. He intervened on the hon. Member for North Cornwall (Dan Rogerson) to say that tonight’s vote would, of course, be on party lines. What a disappointment that is. The right hon. Gentleman must have Equitable Life policyholders in his constituency who have been affected by these events, and one would think that Labour MPs would, as happened in the Gurkha debate, show conviction by voting against the Labour party. I have voted against the Conservative party on one occasion—over the privatisation of Royal Mail—although it is difficult to vote against one’s own party and it takes a great deal of courage. I might write about it in my memoirs—

Order. Perhaps the hon. Gentleman could face the Chair; it assists not just the occupant of the Chair, but the Hansard writers.

Forgive me, Madam Deputy Speaker. I was just saying that it is very important, on occasion, to vote against one’s party and to rebel.

I shall end my contribution by saying that I received a letter from the Equitable members action group containing the response from one Labour MP. That MP, who is a member of the all-party group, had said, “No way am I voting on this Lib Dem motion. This is just party politics by the Liberal Democrats and I am not prepared to support them.” I disagree with that Labour Member. Although I am not a great fan of the Liberal Democrats, I believe that on this occasion they are raising something on one of their Opposition days that is of vital importance to our constituents. It is not politics on the part of the Liberal Democrats, because I feel just as passionately as they do about seeking justice for Equitable Life policyholders. I urge Labour Members to think about the ramifications here. If they are members of the all-party group, they should show respect to their decision to join the group and to their constituents, and they should remember that at the next general election, a lot of the policyholders will be voting on the basis of how their Member of Parliament votes tonight.

I am thankful for the opportunity to speak briefly in this debate. First, I pay tribute to the Cardiff and south Wales committee of EMAG. Many of my constituents in north Cardiff and the surrounding area are affected by the issues we have debated today. I have had meetings in the constituency with EMAG and have met many individual constituents on the issue, too. I am also a signatory to early-day motion 1423. Let me repeat that I know that we are not talking about wealthy, rich people. The people whom I have met are suffering because of what has happened to Equitable Life.

My concerns relate partly to the position of the parliamentary ombudsman. I am a member of the Public Administration Committee, so I have been part of the process and a contributor to the reports that the Committee has produced. I support the comments ably made by the Chairman of that Committee, my hon. Friend the Member for Cannock Chase (Dr. Wright). I believe that it is very important to preserve and support the position of the ombudsman. My hon. Friend said that he considered this matter to be House business, although he did not think that the Whips would approve of that. I am thinking about it in the same sort of way. It is very important that we should support the ombudsman in her findings.

I am also concerned about the decision as to who will be disproportionately affected—an issue that other hon. Members have mentioned—and the means test. I am very concerned about the situation. If someone has lost money through accepted maladministration, after we have removed the effects of the market and mismanagement by Equitable Life, should a means test apply in deciding what compensation should be paid to those members? I am concerned about what “disproportionate effect” means.

I welcome the Government’s decision to accept the court’s ruling and extend the number of people who could be eligible for payment. However, I am also concerned that that might mean smaller payments. Could the disproportionate impact consideration be applied more stringently? I welcome the decision, but I am concerned about those implications, too.

As a member of the Public Administration Committee and as someone who has signed the early-day motion and wants to support members of the scheme strongly in my constituency, I feel that I will be unable to support the Government this evening. I understand the dilemma for the Government about having to pay out large sums of money, but I have a duty to my constituents, as well as to the role that I have played on the Public Administration Committee, to follow that course of action.

This has been a high-quality and important debate and I congratulate my hon. Friend the Member for Twickenham (Dr. Cable) on kicking it off and setting exactly the right tone for the subsequent deliberations. All hon. Members who had the opportunity to participate—my hon. Friends the Members for Solihull (Lorely Burt) and for North Cornwall (Dan Rogerson) among them—spoke movingly about how these issues affect real people. It is easy to get wrapped up in the process and in which Committee said what about which report, but we should always remember that hundreds of people in each of our constituencies have had their quality of life materially affected by the matter that we are deliberating this afternoon. Others touched on the role of the ombudsman and the importance that we should all attach to upholding the integrity of that position. That point was made by the hon. Member for Cardiff, North (Julie Morgan), but it was also made by the Chairman of the Committee on which she serves, the hon. Member for Cannock Chase (Dr. Wright).

Several hon. Members talked about the incentive to save and how important that is, particularly as over the years ahead we will move to having a higher proportion of people beyond retirement age in relation to those who are of working age, and how we as a country must ensure that people are given the greatest possible incentive to save and how that incentive is undermined if people do not feel that they have confidence in the mechanisms that enable them to save. That point was made by the hon. Member for Leeds, North-East (Mr. Hamilton), who plays a prominent role in the all-party group, and by others. Some, like my hon. Friend the Member for Edinburgh, West (John Barrett), talked about the wider economic context, including incentives to save. Finally, the hon. Member for Angus (Mr. Weir) spoke—accurately, in my view—about how many savers saw Equitable Life as a gold standard institution. These were not people who put their savings in a place where they expected to take a high risk to achieve a high return; they were seeking to be responsible in quite a cautious way, so it is particularly unfortunate that they should find themselves in these circumstances.

However, the one thing that I would say, respectfully, to the hon. Member for Angus is that I am not at all sure, were we to have independence in Scotland, that his constituents would be compensated any more speedily, if at all.

Does the hon. Gentleman agree that many of those who took out Equitable Life policies did so in order that they would not be a burden on their families or the state in old age? That has been frustrated.

I strongly agree, and that is why it is especially important that we consider seriously all the contributions made during the debate.

In summary, I want to speak about three matters—the motion before us, the Government’s pattern of behaviour over recent months and years, and how we might go forward. First, hon. Members who have not had the opportunity to study the motion in detail will see that it is almost word for word the same as early-day motion 1423. It has been updated to reflect developments with the addition of a small clause that does not materially affect the direction of the motion or, I hope, anybody’s willingness to support it.

Early-day motion 1423 was signed by 336 Members of this House. Given that Ministers on the whole do not sign such motions, that shows that a very high proportion of hon. Members felt able to sign this one. In addition, the total of signatories includes 113 Labour Members, many of whom have taken part in the debate. Therefore, I do not take the view expressed by some Labour MPs that this is a partisan, party political topic. The debate is about the integrity of the ombudsman and the material well-being of many hundreds of our constituents. I see it as an opportunity for MPs of all parties to follow through their convictions and vote for the motion.

The costs are very important, as is the time scale involved. How much does the hon. Gentleman expect the proposal to cost, and according to what time scale does he see the money being spent?

Those questions have been deliberated at length over the past three and a half hours, and I shall come to them in the third part of my speech, but I am currently dealing with the motion. My point is that it is a straightforward motion, tabled by the Liberal Democrats on one of our Supply days. I am delighted that every Conservative Treasury spokesman, and the party’s Chief Whip, have put their names to it, but it is not a party-political motion. I see no reason why Labour MPs who are members of the cross-party committee, or who have signed the early-day motion, should have any difficulty in supporting it.

My second point has to do with the conduct of the Government. For many of us, and for many of the people watching our proceedings either in person or on television, the way in which the Government have chosen to conduct themselves will have been a source of deep frustration.

We were asked a moment ago what the cost of the proposal would be, but does the hon. Gentleman agree that the cost to the country is the loss of dignity in old age for policyholders, and increased contempt for this place because of how the Government have behaved?

The hon. Gentleman is right that there is a cost beyond the financial cost, but in his opening remarks the Chief Secretary to the Treasury—

I do not think that the hon. Lady was present to hear the Chief Secretary’s opening remarks. She may have been, but she certainly missed large portions of the debate. He coined an unintentionally laughable word that reminded me slightly of when Hillary Clinton said that she “misspoke” when she was caught out saying something fundamentally untrue, or of when Janet Jackson suffered a “wardrobe malfunction”. It was an expression of that type. He said that he had under-celebrated the role of the ombudsman. That is one way of putting it.

Let me tell the House what the ombudsman said about the Chief Secretary. She stated on 20 August, only two months ago, in a letter to the Chief Secretary:

“I noted what you said in the House on 21 July and did not recognise it as a true representation of my position. That said this is not the first time that the Government has misrepresented my position in order to defend its own and I suspect it will not be the last.”

I can see why the Chief Secretary is likely to under-celebrate her role, but it is part of a wider pattern.

In her initial report, the ombudsman said that the Department of Trade and Industry oversight had been

“passive, reactive and complacent”,

and that Financial Services Authority regulation had been

“largely ineffective and often inappropriate”.

The Select Committee on Public Administration, which has been referred to on a number of occasions, described the Government’s excuses as

“shabby, constitutionally dubious and procedurally improper”.

There has been a track record going back months—indeed, years—of the Government dragging their feet and behaving dishonourably.

Even last year the Prime Minister promised that the next stage of the process would be completed by the end of 2008. That is the report to which we keep referring, which came in the middle of January 2009. One should be extremely cautious about accepting the timetables put forward by Ministers. The fact that the Chief Secretary stood before the House today and implied that policyholders should express gratitude for the swiftness of the Government’s response compared with the other potential solutions on offer stretches credibility to the very limit.

I have signed the hon. Gentleman’s early-day motion and I shall support his motion. My constituents are grateful for the chance to get that on the record. Will the hon. Gentleman say something in his closing remarks about the role of Sir John Chadwick? I am afraid I disagreed with the comments of my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski). I think Sir John is a fantastic gentleman with a first-class mind.

I would love to be able to comment on Sir John Chadwick in greater detail, but I have not had the opportunity to meet him. I suppose that was the point being made by the hon. Member for Shrewsbury and Atcham (Daniel Kawezynski). Sir John should meet Members of Parliament. We were elected to represent our constituents and that would aid the process. I have no reason to doubt that he is an honourable person.

In the last few minutes available to me, let me deal with the way forward. The Minister said that we should be looking at a timetable based on spring 2010. Some people will be worried that that is an elastic date. He was notably evasive when it came to offering a specific date when people could expect to see some payments made, not just further progress made. Even if that were spring 2010, hon. Members should remember that at current rates another 3,000 or so Equitable Life policyholders will have died between now and then.

A policy process that does not recognise the acute needs of the individuals concerned will cause a huge amount of distress. There was no talk about interim payments. There was considerable concern about the expression “disproportionate loss” used by the Government. We need to make it clear that this is not some form of means-tested benefit, but recognition of the actual losses experienced by real policyholders.

Everybody accepts that there was fault on the part of the people who ran Equitable Life. Of course market forces have an impact on the value of policies, but the ombudsman’s report was concerned with the regulatory failure. The Government need to accept the ombudsman’s report, give a straight response about a reasonable outcome and, most of all, reassure people across the country that speed is of the essence, that the Government understand their immediate human concerns, and that they will respond to those as a priority.

I thank all hon. Members for their comments during this informative debate. The continuing scrutiny of our position is an important part of our parliamentary process, and I welcome it. This has also been the first occasion for a debate since the judgment in the judicial review that was brought about by the Equitable members action group.

First, I refer to a point that I think the hon. Member for North Cornwall (Dan Rogerson) made about the Government’s failure to apologise. I do not know whether he noticed, but one of the first things that the Chief Secretary to the Treasury did was to reiterate the Government’s apology. Certainly, when I took part in the Westminster Hall debate on 24 June, it was the first thing that I did. I am more than happy to reiterate, once again, on behalf of public bodies and successive Governments who were responsible for the regulation of Equitable Life between 1990 and 2001, the apology for the maladministration that they accept took place. That will be on the record once again.

Does the Exchequer Secretary not feel that we are in danger of rehearsing the Gurkha escapade, whereby the Government give a little bit more, then a little bit more? Why can we not be up front and say, “We are going to pay those people who have missed out on the Equitable Life situation and the compensation scheme at the earliest point possible”? Then we can all be happy.

I do not know whether my hon. Friend has been listening to the debate, but one point on which the whole House agrees is that it is very important that we obtain a speedy resolution. We all have constituents who are affected, and I reiterate that we remain committed to achieving a speedy resolution.

In the time available to me, I hope to cover as many as I can of the points raised by the hon. Member for Fareham (Mr. Hoban), who spoke for the Opposition; my hon. Friend the Member for Cannock Chase (Dr. Wright); the hon. Member for Richmond Park (Susan Kramer); my hon. Friend the Member for Leeds, North-East (Mr. Hamilton); the hon. Members for Edinburgh, West (John Barrett) and for North Cornwall; my hon. Friend the Member for Foyle (Mark Durkan); the hon. Members for Angus (Mr. Weir), for Solihull (Lorely Burt) and for Shrewsbury and Atcham (Daniel Kawczynski); my hon. Friend the Member for Cardiff, North (Julie Morgan); and the hon. Member for Taunton (Mr. Browne).

I had better clarify matters up front, because there were some misconceptions about the scheme being up and running by spring 2010. The Chief Secretary said that there would be a scheme design by spring 2010, and we will move with all speed to set it up thereafter.

On our relationship with the ombudsman, I reiterate that we still rebut any suggestion that there was anything improper, dubious or shabby about the manner of our engagement with the ombudsman. The Government have a great deal of respect for the ombudsman, but we also have a duty to consider the wider interests of the taxpayer.

It is important that the Minister takes note of the ombudsman. However, it is equally important that we introduce a scheme as quickly as possible to help as many people as possible. No one has mentioned the financial cost, but that must be a consideration.

The ombudsman herself acknowledged that it was legitimate for us to take up the wider interests of the taxpayer and the issue of the public purse.

Constitutional matters were raised. The constitutional balance that the legislation reached, on the one hand, permits the parliamentary ombudsman wide jurisdiction and powers of determination, as well as the ability to make far-reaching recommendations, but, on the other, permits a Government to reject findings and recommendations in certain circumstances. We did not depart lightly from the ombudsman’s findings. After careful consideration of her report, we accepted some, but, where we believed that we had cogent reasons, we departed from others.

The recent High Court ruling upheld a number of those departures, and others have gone unchallenged. The Court found that the Government did not have cogent reasons for some departures, and we have accepted those findings and amended Sir John Chadwick’s terms of reference to include them. Sir John is confident that that additional scope will not impact on the time scale for resolving his work.

At no time have we sought to delay matters. The ombudsman’s report was the product of four years’ work, and it raised a number of complex and difficult issues. None of the Government’s actions has been motivated by anything other than the desire to achieve a fair resolution for policyholders and taxpayers alike. We continue to believe that this was, and is, the right approach.

Some Members, including the hon. Member for Bromley and Chislehurst (Robert Neill), suggested that the Court struck down our ex gratia scheme. That is not the case. It endorsed the Government’s right to depart from the ombudsman’s finding 3 and strongly rejected the challenge to the Government’s decision to depart from her recommendation. That is not indicative of any lack of respect for the office of ombudsman or any disregard for the plight of policyholders affected by the events at Equitable Life.

May I assure my hon. Friend that many of us are desperate to vote for the Government’s amendment and would happily do so if she could give us one piece of information: when will the payments be made?

The design of the scheme will be available by spring 2010, and we will move with all speed to get the payments made. The motion proposes the implementation of the ombudsman’s recommendation for a scheme setting up a tribunal, which would mean that individual assessments took longer, and it would therefore take longer for the money to get through.

I cannot give way; I have only four minutes left.

I want to correct another assertion. The hon. Members for Solihull and for Edinburgh, West said that our original proposed payment scheme left 90 per cent. of policyholders without help. I do not recognise that figure, and I have seen no data to back it up. We have not analysed the policyholder data so we do not know exactly how many people are included. However, following our decision to include the findings previously not accepted by the Government, the period of injustice accepted goes back to the period covered by the ombudsman’s report. Having considered the judgment of the Court, we think it right to accept its decision in relation to those findings. The key impact is that the terms of injustice accepted by the Government now extend from mid-1991 rather than mid-1995. One effect of that is that a large proportion of trapped annuitants now fall within the scope of the period of injustice accepted; many hon. Members have voiced concerns about that group. About half those people fell within the scope of the injustice findings originally accepted by the Government, and the Court has now determined that the Government’s interpretation of injustice was unduly narrow with respect to certain findings. We have accepted the decision, with the effect that most trapped annuitants now fall within that scope. Sir John Chadwick commented that that would not have happened even if all the ombudsman’s injustice findings had been accepted.

Members heard my right hon. Friend the Chief Secretary explain the Government’s approach to resolving the Equitable Life issue, focusing on the scope of our ex gratia payment scheme, the speed with which we can act and the fairness of our approach. We are clear that speed is of the essence in bringing this matter to a close.

Two points were raised on interim payments. We have asked Sir John to consider interim payments as part of the scheme. On payments to estates, that issue will be taken into account when deciding on the final terms of the payment scheme.

Sir John Chadwick is making good progress, and it is clear that the continuing priority is for Sir John and the Government to get on with the work required to deliver this ex gratia payment scheme. He has already published a further interim report on his progress and has invited representations on it by 27 October. He has also committed to providing a further update before the end of the year. I note that members of the all-party group on Equitable Life policyholders are concerned that he has not yet managed to find time in his schedule to visit them. I think that his priority at the moment is to get on with designing the scheme. However, I will pass on the comments made by the hon. Member for Shrewsbury and Atcham, who will know that I visited the all-party group and spoke to its members. Not many were there, but what they lacked in quantity they made up for with the quality of their questioning.

As my right hon. Friend the Chief Secretary said, Sir John faces a complicated task. We expect him to finalise the design of the scheme by the spring, and we will move quickly to consider his advice and announce a payments scheme that is practical to deliver and fair to policyholders and to the taxpayer. That is what we all want. I have said before that I cannot see how it would bring anything but further delay to accept the ombudsman’s recommendations for a tribunal and a case-by-case individual examination. The amendment in the name of the Prime Minister urges an ex gratia scheme that is administratively quicker and simpler to deliver than that envisaged by the ombudsman, and that must be in the interests of policyholders. I therefore urge the House to reject the motion and support the amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.

Question agreed to.

Main Question, as amended, put and agreed to.


That this House notes that the Parliamentary Ombudsman has taken the unusual step of using powers under the 1967 Act to present Parliament with a further and final report on Equitable Life; also notes the Public Administration Select Committee’s Sixth Report Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life; recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; recognises the Government’s determination to introduce an ex gratia payment scheme that is administratively quicker and simpler to deliver than that envisaged by the Ombudsman; further welcomes the Government’s decision announced to the House on 20 October 2009 to widen the ex gratia payment scheme to include trapped annuitants who took out policies after mid-1991; urges Sir John Chadwick to report as quickly and expeditiously as possible; and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life.