On a point of order, Mr. Speaker.

The right hon. Member, who is an immensely experienced Member, knows that points of order come later. [Interruption.] Denis, I am wrong. [Interruption.] Order. I say to the House that I am wrong.

Even Homer can nod, Mr. Speaker. There are reports in the papers this week that an e-mail of this House was used to alter the Wikipedia entry of the leader of the British Conservatives in the European Parliament in order to remove references to his membership of what the chief rabbi of Poland called “a neo-Nazi party”. I would like you to ask whether it is possible for the House computer authorities to investigate this matter, and either make a statement or place a report in the Library, because no e-mail of this House should be used to whitewash away any massacre of Jews by anyone in support of neo-Nazi organisations in Europe.

May I say to the right hon. Gentleman that I was wrong, but I am afraid that he is wrong, too, which I say in all solemnity. I recognise that he feels extremely strongly about this matter and he has put his views on the record several times—doubtless he will do so again—but I am afraid that that is not a point of order, but a point of debate.

On a point of order, Mr. Speaker. Just before the recess, the Department for Children, Schools and Families and the Secretary of State in person announced an inquiry into Gloucestershire county council, and in particular its relationship with national challenge schools. On Monday of this week, one of my schools, the Vale of Berkeley college, was announced for closure. As yet, I have not seen the report from Mr. Badman. I have asked both the DCSF and the local authority for a copy of the full report. Given that you, Mr. Speaker, protect Back Benchers, will you as a matter of urgency look into why that report has yet to be made available?

I am afraid that that also is not a point of order, and I have a hunch that the hon. Member for Stroud (Mr. Drew), as an experienced and assiduous attender, is well aware of that fact. However, he has firmly registered his views on the matter, on the record, and I feel sure that those on the Treasury Bench will have heard what he has to say. If there are no further points of order, perhaps we can move on to the next business.

I beg to move,

That leave be given to bring in a Bill to require Primary Care Trusts to obtain prior approval for their spending plans; to require Primary Care Trusts to present an annual spending plan to certain local authorities for approval; to provide resolution arrangements in the event of Primary Care Trusts failing to secure the consent of the relevant local authority; and for connected purposes.

Judging by the Bill’s placing in the parliamentary timetable, I harbour few illusions about the odds on it making it to the statute book, unless fellow Members, or you, Mr. Speaker, are so impressed—clearly, you are not—by its obvious merit as to vary existing procedure. However, my Bill encapsulates a huge issue in this and the past few Parliaments: the democratic deficit in the NHS—the local NHS.

The local NHS is a huge taxpayer-funded service, affects everyone, is important to everyone, but is sadly totally remote from democratic decision making. Those who take the trouble to get elected to secure a mandate can make decisions about who goes to jail, who goes to war, who is taxed, who has power and who does not. We can make decisions about people’s daily behaviour: what they may say, whom they may marry, what they may buy and sell, where they may smoke and what, but not about what happens in the local NHS in their area. Those decisions are made by enlightened quangos or trusts, and they are usually a combination of medical experts and appointees who may or may not bring relevant expertise with them. They decide what drugs are available, which hospitals or hospital departments stay open, where services are, how GPs and dentists shape up, and what after-hours care exists. All those issues mean a lot to some people part of the time, and much to all people most of the time.

MPs can protest at the actions of such bodies, as I did when my town lost its children’s A and E service. We can plead for their intervention, as when we cajoled them into producing plans for a minor injuries unit. We can present petitions, and express concerns. But the thought of allowing anyone who has gone through the sordid process of getting elected anywhere near decision making has given successive Governments the vapours, and has been resisted hook, line and sinker, much to the satisfaction of hospital chief executives and health service managers.

Afraid to speak their minds, Ministers and mandarins have offered instead various sops. There were the community health councils—well-understood sounding boards, but bolshie enough to get abolished. There were PALS—patient advice and liaison service—the short-lived, worthy but ineffectual feedback collector. Now there are the mysteriously named and constructed LINks—local involvement networks. All were set up by successive pieces of legislation with the function of scrutinising, informing, listening, collating, airing and hearing, involving and consulting—anything, but never deciding.

All that is done on the mistaken assumption that the general public are too stupid to notice that they have absolutely no power over what happens in their local NHS. When an MP raises in this place decisions that their constituents oppose, and tasks a Minister about it, time and again the Minister, with almost comic sincerity, in Pontius Pilate fashion, says, “This is a matter for local decision making,” as though “local decision making” implied that local people—outside the quango circle—had any part in it.

That is a perversion of democracy, but it satisfies the professionals, who like the prescription and genuinely fear the alternative—democratic accountability. It would be refreshing if Ministers said what is on their, or the Department of Health’s, mind—what they really thought, but dare not say. What they think is that democratic decision making would lead to unworkable populism, that expert government is better than public governance, and possibly that the calibre of those elected is not up to the job—they may be too stupid or ill informed, even though many of the elected reappear on health quangos as appointees wearing different hats. They really think that this public service wants no genuine, local public voice—that that way madness lies. If a Minister actually said that, such a refreshing overt, clear declaration would flush out this argument for the fatuous nonsense that it is.

Democratically elected representatives can only espouse naked unthinking populism—which is what is feared—when they do not have to pick up the tab, run the budget or bear the consequences. Democratic bodies put up taxes, impose parking charges, change refuse arrangements, declare war, cut benefit and close facilities. I see no reason why they cannot make tough decisions, and no evidence to support that view. Democratic bodies also make a host of very technical decisions, competently, when aided by good professional advice.

For the reasons that I have given—solid and good reasons—the Liberal Democrats are very comfortable with the idea of elected health boards. We believe in removing appointees who have been whisked smugly, or in some cases humbly, into power because they have impressed some other appointee who has previously been whisked smugly or humbly into power, and replacing them with elected individuals who have had to impress the citizens served by the local trust, who gain community support and approval, and who, ultimately, justify their position to the people whom they serve.

My Bill is simply a bridge to that position. It involves even less change, and uses existing institutions. I propose that primary care trusts, as currently constituted, lay before the health scrutiny committees of existing councils, as currently constituted, their annual plans and their big decisions—not for scrutiny or consultation, but for approval, agreement and amendment. I propose a kind of democratic lock on the local NHS: a move beyond mere consultation. I propose a genuine redistribution of power from one existing institution to another existing, established institution. This is such a good idea that I believe that the model has already been embraced voluntarily in some areas.

There are likely to be disputes of substance between the PCTs and the health scrutiny committees. There are likely to be sharp differences on how to commit existing resources, given that resources are always limited. The PCT may suggest that maternity services be decommissioned, and the tribunes of the people—the council—may object. What one wants, the other may regard as plain unsafe. The Bill therefore contains a resolution procedure including, eventually, a reference upwards to the Secretary of State as a last resort.

I genuinely see no reason why this model cannot work—in fact, it does work— and produce not simply good decisions, but good decisions with a popular mandate. That would be nice. Our NHS could be reclaimed, without micro-management or meddling, and not with government by experts but with popular government, expertly informed.

Question put and agreed to.

Ordered,

That Dr. John Pugh, Andrew George, Annette Brooke, Paul Holmes, Andrew Stunell, Mark Hunter, Mr. Adrian Sanders and Mr. David Heath present the Bill

Dr. John Pugh accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 23 October and to be printed (Bill 152).

Before we move to the main business—the Opposition day motion in the name of the Liberal Democrats—I have a very brief and, I hope, pertinent statement to make.

I am grateful to the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg) for raising on a point of order on Monday the question of whether Members who have incurred losses with Equitable Life can vote on the first motion today.

As in previous debates on Equitable Life, any Members speaking in the debate should follow the advice of the Registrar of Members’ Financial Interests dating back to 2003 and declare their interests, whether or not they are formally registrable.

In relation to voting, I can only repeat the words of Mr. Speaker Weatherill in January 1986 in relation to members of Lloyd’s:

“In matters of public policy, it has been the long-standing practice of the House—originally formulated as far back as 1811 by Mr. Speaker Abbot—that there is no obligation on an hon. Member to refrain from voting on a matter of public policy.”—[Official Report, 14 January 1986; Vol. 89, c. 1013.]

I appreciate that that does not solve the right hon. and learned Gentleman’s problem—that, without speaking in the debate, he cannot put on the record his interest when voting—but he has himself done so by raising this as a point of order.

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.

rose—

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.

I shall answer the question directly, but I want to make one or two points first.

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.

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 shall come to that point directly, but I shall take another intervention first.

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.

rose—

rose—

I shall give way to my hon. Friend and then to the hon. Lady.

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?

rose—

I shall give way to the hon. Member for St. Albans (Anne Main) and then to my hon. Friend.

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.

Spring is my target date for providing the House with the design of the ex gratia scheme.

rose—

rose—

I shall give way to the hon. Member for Cheadle (Mark Hunter).

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?

rose—

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.

rose—