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Equitable Life (West Chelmsford)

Volume 502: debated on Monday 14 December 2009

The Petition of residents of the constituency of West Chelmsford, Essex,

Declares that the petitioners either are or they represent or support members, former members or personal representatives of deceased members of the Equitable Life Assurance Society who have suffered maladministration leading to injustice, as found by the Parliamentary Ombudsman in her report upon Equitable Life, ordered by the House of Commons to be printed on 16 July 2008 and bearing reference number HC 815; and further declares that the petitioners or those whom they represent or support have suffered regulatory failure on the part of the public bodies responsible from the year 1992 onwards, but have not received compensation for the resulting losses and outrage.

The Petitioners therefore request that the House of Commons urges the Government to uphold the constitutional standing of the Parliamentary Ombudsman by complying in full with the findings and recommendations of her Report upon Equitable Life.

And the Petitioners remain, etc.—[Presented by Mr. Simon Burns, Official Report, 11 November 2009; Vol. 499, c. 321 .]

[P000413]

Observations from the Chancellor of the Exchequer:

The Government responded to the Parliamentary Ombudsman’s report into the prudential regulation of Equitable Life on 15 January 2009. The Government have the greatest respect for the Office of the Ombudsman. The Ombudsman’s important role in the maintenance of standards of public service is unquestioned.

The Government are permitted, in certain circumstances, to reject the Ombudsman’s findings and/or her recommendations for remedy. In this instance, where the Government departed from findings in her report, and her compensation recommendation, it did so only after very careful consideration.

The recent judgment in the judicial review of our response confirmed the legality of the Government’s decision to reject the Ombudsman’s compensation recommendation. With regard to her findings, the Court found in three instances that the Government had focused too narrowly on the issue of regulatory compliance, and we have accepted those findings.

The Government must act in a way that balances the legitimate interests of the taxpayer with those of policyholders affected by events at Equitable Life. The Ombudsman herself recognised in her report that the public interest is a relevant consideration. What this means is that it is appropriate to consider the impact on the general taxpayer of any payments.

A further issue is that the Ombudsman was only able within her remit to consider the role of the regulator and not the role and responsibility of Equitable Life and other parties. The Government do not believe that the taxpayer should fund payments for any losses attributable to other factors, such as market conditions or the actions of Equitable Life itself.

The Government also explained in their response that they do not believe that it is generally appropriate to pay compensation where there is regulatory failure. The responsibility to minimise risks and to prevent problems occurring in a particular financial institution lies, first and foremost, with the people who own and run that institution.

Nevertheless, the Government recognise that some policyholders have been disproportionately affected by the events at Equitable Life. There are strong reasons to act quickly to help those hardest hit. We remain firmly committed to introducing a fair ex gratia payment scheme as soon as possible. The ex gratia payment scheme will be developed based upon consideration of Sir John Chadwick’s advice and to take into account other relevant considerations such as the position of the public finances. Our goal is to introduce a scheme that is administratively quicker and simpler to deliver than that envisaged by the Ombudsman.

The Government expect Sir John to submit his final report in spring 2010. Once the Government have had an opportunity to consider Sir John’s advice, details of the payment scheme that is fair to both taxpayers and policyholders will be announced.