[Relevant documents: The Second Report from the Public Administration Select Committee, Session 2008-09, on Justice Delayed: The Ombudsman’s report on Equitable Life, HC 41, and the Government response, HC 953, and the Sixth Report from the Public Administration Select Committee, Session 2008-09, 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 Ombudsman published her report on Equitable Life in July 2008, that the Government did not make its response until January 2009, and that its rejection of some of her findings was successfully challenged in the High Court; believes that the delays caused by the Government since the publication of the Ombudsman’s report have led to further and unnecessary hardship for Equitable Life’s policyholders and have done further damage to the UK’s savings culture; and calls on the Government to set a clear timetable for implementing the Ombudsman’s recommendations and remedying the injustice suffered by policyholders.
It is hard to believe that nine years after Equitable Life’s policyholders saw the value of their policies slashed, six years after Lord Penrose identified regulatory failures, 18 months after the ombudsman’s damning report on the regulation of Equitable Life and more than a year since the Government’s response, policyholders are still no nearer to knowing what the outcome of their fight for justice will be. They have been given no timetable for payments and no certainty as to how much they will receive. That is the tragedy of Equitable Life for its policyholders, many of whom will not live to see justice done.
The truth is that it did not need to be this way. The Government deliberately chose, at each turning point on the road to justice, to take the longer and more difficult route— there were no short cuts for the Government, because the delays suited them—and from the outset they sought to block the campaign. The pattern of the Government’s behaviour is clear. They wanted to block, frustrate and then delay the fight for justice. They could have chosen a better, quicker route to justice, but they dogmatically chose a different path: one that has delayed justice. Who has paid the price for that? The answer is Equitable’s policyholders, the people who have faced an uncertain future, the people who are struggling to make ends meet because their pension is not as much as they expected, not because of the market, but because of actions taken by the management of Equitable that were not picked up by regulators over the course of a decade. Every Member in this House will know from their postbag the personal cost of this to their constituents, but whatever the outcome for policyholders we know that more than 30,000 will not see justice. We also know that as every day goes by, more and more policyholders see the prospect of justice disappear.
May I cite the case of a constituent of mine, Mr. David McKeever, who has been particularly critical and believes that the Government are doing all they can to delay payment to the victims of the Equitable Life collapse? He told me that, since 2002, 10,000 of the 54,000 annuitants have died. Does my hon. Friend believe that the Government want to wait until all of these people die?
My hon. Friend makes an important point, because there have been huge delays during this process—I shall detail some of those that the Government have engineered—and, as a consequence, many of the policyholders have died and will not see justice delivered.
The fight for justice has united Members from all parts of the House, and I commend the creation of the all-party group on Equitable Life policy holders, which is chaired by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) and the hon. Member for Leeds, North-East (Mr. Hamilton), a Labour Back Bencher. I pay tribute to the work that they have done within this House to ensure that Equitable remains on its agenda. Tribute must also be paid to the Equitable Members Action Group—EMAG—which has galvanised policyholders into an effective campaigning body. EMAG’s members have not been slow in making their views known to Members of Parliament and their lobbying has been effective in maintaining the profile of this issue for many years.
I am following the hon. Gentleman’s remarks closely. Does he agree that as a gesture of compassion, given that 10,000 pensioners have already died unpaid and waiting, the Government should instruct Sir John Chadwick to make an interim tax-free payment—as advocated by EMAG—equivalent to two years on account to alleviate some of the hardship and stress that pensioners are facing now?
The hon. Lady raises the plight of a very important group of Equitable Life’s policyholders. It was noticeable that in the third interim report that Sir John published last week he highlighted that one group to have suffered a disproportionate impact from the failures at Equitable Life and from the failure of regulation was the so-called trapped annuitants. We are all mindful of the suffering that they face and of the fact that they have faced a loss of income. However, the challenge is this: if we make an interim payment now to the trapped annuitants, how much will that leave for the other policyholders? Surely the best thing to do is to move as quickly as possible to resolve the entire problem and then to consider how we prioritise payments, perhaps, once that settlement has been reached, so that the with-profits annuitants receive a fair deal then.
Stepping back from all this, does the hon. Gentleman agree that we all know what the common-sense answers are? The obfuscation does not disguise them at all and if we are to see justice, the Government need to prove that they are not trying to save money by waiting for more people to die. Instead, they need to accept the clear guidance that we have already seen, which the hon. Gentleman is outlining and with which those on the Liberal Democrat Benches and the majority of the Government’s Back Benchers agree—they should pay out, sort it out and put an end to this utter tragic travesty.
The problem is that this process has dragged on for far too long. All groups of policyholders have lost out as a consequence of the delays and we need to see a clear timetable setting out when payments will be made to them. It is very disappointing not just to Members of the House who have been part of this long fight for justice but to policyholders that the Government seem to be no closer to producing a clear timetable for payments to policyholders.
My hon. Friend spoke about the good work done by the action group. Many of its key executives live in my constituency and I have worked with them for nearly 10 years now. Is he aware of their frustration at the progress made by Sir John Chadwick, who they feel is doing nothing but repeating the Government line?
I understand the frustration that EMAG’s members feel about the process and the time that has been taken. The group announced earlier today or late last night that it had chosen to withdraw from further discussion of Sir John Chadwick’s work. I have some sympathy with its frustration about the process, but it is important that a strong voice on behalf of policyholders is party to the finalisation of Sir John’s report. Speed is of the essence because, as hon. Members have said in a number of interventions, the longer the process is strung out, the fewer the policyholders who will see justice.
The hon. Gentleman rightly makes the point that time is ticking on. Some 2,500 policyholders might die in the coming year and is that not the reason why my hon. Friend the Member for Solihull (Lorely Burt) is right that we need interim payments to be made, which would, after all, represent a small fraction of the overall compensation that we expect to be paid eventually and could be deducted from any final rewards? That would at least give people such as the Rev. and Mrs. Littlewood, in my constituency, some hope of seeing some money in the near future.
Of course, the truth is that we do not know how much compensation will be payable to policyholders. We will not know that until Sir John has completed his final report and his conclusions have been applied to the data supplied by Equitable Life. We need to bear it in mind that we do not yet know what the bill will be.
I am grateful to the hon. Gentleman, who is being very generous, for giving way. I wanted to clarify one point that comes from his answer to an earlier intervention. Is he proposing that the Government drop the John Chadwick process and revert to the process set out by the ombudsman?
I did not make that sort of comment at all. I am not quite sure what the right hon. Gentleman is referring to. I know that over the past few weeks he has adopted a habit of flip-flopping on a range of issues, but I am not going to flip-flop on this. We need to ensure that the process is completed as quickly as possible so that we get the right outcome for policyholders who have had to wait too long for justice. They have had to wait so long for justice because the Government have sought to block, frustrate and delay the progress on that report.
I agree with everything that my hon. Friend has said so far. Does he agree that this debate is rather like watching paint dry but without the paint? According to the action group’s spokesman today, more than 1 million people have lost £4 billion, but it is estimated that only several hundred million pounds, at most, will be recovered. In those circumstances, it is a question not only of those who have died, of those who will continue to live. Under present arrangements, they will not get anything realistic.
I thank my hon. Friend very much for giving way. Does he agree that the extent of the problem is even greater than the statistics show? The policyholders who have died and not benefited have left behind widows and dependants who will never benefit from the investments that their husbands and spouses made over many years.
I am very grateful to my hon. Friend for giving way, as he has been most generous. Following on from the previous point, is it not all the more important that the Minister give the House two assurances today? First, he must assure the House that the full detail of all the actuarial reports and background material that have been made available to Sir John Chadwick will be published. Secondly, he should rule out, clearly and unequivocally, that any compensation will be subject to means-testing. I hope that he is moving in that direction, and that he will make it clear today that there will be no means-testing. For people who have suffered a great deal of delay already, even the thought that compensation might be means-tested would really add insult to injury.
My hon. Friend makes an important point about the transparency of the process. We must make sure that Equitable Life’s policyholders have confidence in that transparency, and that requires a reasonable degree of disclosure about the basis for some of the judgments that have been made. That would help to reassure people that this is not a stitch-up but a proper and rigorous process.
I thank the hon. Gentleman for giving way. I am listening very closely to his explanation of the process and the history of this matter. Many hon. Members have made excellent interventions, but is not the real shame of this the fact that this House has been completely unable to support the independent ombudsman against the Executive and so ensure that the matter was dealt with several years ago, as it should have been?
The hon. Gentleman makes an important point. There is a quite a lot of frustration across the House about how the ombudsman has been treated. The hon. Member for Cannock Chase (Dr. Wright), the Chairman of the Public Administration Committee, has made comments along those lines—
Having read the motion, I am even less clear. When the ombudsman’s report came out, it was widely estimated that it would cost about £4 billion to implement. I have never been clear as to whether the Conservative party was saying that that was a bill that it was prepared to meet. If the hon. Gentleman is not saying that, there will be a suspicion that what we are hearing is some kind of electoral noise.
The hon. Gentleman refers to the bill for compensation, but no one knows how big it will be. That figure will be part of the outcome of the process that the Government launched back in January last year. He will know, from reading the ombudsman’s report, that her recommendations on compensation had two important caveats—that payments to policyholders should reflect relative loss but that the impact of any compensation bill on the public purse should also be borne in mind. That position was accepted by the hon. Member for Twickenham (Dr. Cable) in a debate last year, and I think that the Government also accept it, as do the Opposition.
What we need to do is find out what the compensation bill is. The sooner that that happens, the easier it will be to put a scheme together. However, people need a clear timetable for when they can expect to receive compensation payments for the losses that they suffered as a consequence of maladministration.
I really appreciate the hon. Gentleman giving way again, as he has done so a great many times already. Is he aware that Sir John Chadwick’s third interim report raises a number of real issues, such as the assumption that the regulator would always do the absolute minimum of minimums? That suggests that the report and the final decision will be very heavily disputed, and that that dispute could drag on for a long time. Under those circumstances, does he agree that interim payments become more important, and that there should be a willingness to look beyond the exact words of Sir John Chadwick’s report?
The willingness to look beyond the words of the report will depend, of course, on who is in government at the time and their approach; but whoever that is and whatever their approach, we want resolution of this process. It has been going on for far too long, and the longer the disputes are about Sir John’s report, the longer it will take for compensation to be paid to Equitable’s policyholders. We need to bear that in mind. I shall now return to my speech, because I am conscious that many hon. Members want to take part in the debate.
From the Penrose report onwards, it has been clear that one factor contributing to the problems of Equitable Life was the action of the regulator. In the concluding paragraph of his report, Lord Penrose said:
“Principally the Society was the author of its own misfortunes.”
Normally, Ministers stop their quotation at that point, but Lord Penrose went on to say that
“it may be appropriate to comment that the practices of the Society’s management could not have been sustained over a material part of the 1990s had there been in place an appropriate regulatory structure”.
From that point on, it was clear that the failures of the regulator over a decade played a key role in the crisis at Equitable Life.
The Government could have responded to the Penrose report by accepting that there was regulatory failure and acting upon that failure then. If those findings had been accepted and acted upon, it could have led to justice being delivered to the policyholders many years ago. The crisis at Equitable Life could have been put to bed then. But the Government chose to ignore those findings, and then sought to block any further inquiry by the ombudsman into Equitable Life.
The Government said that the ombudsman could not investigate the Government Actuary’s Department—the Department that played the key role in the day-to-day regulation of Equitable Life—and therefore there could not be a second inquiry into the regulation of Equitable. The right hon. Member for Bolton, West (Ruth Kelly), the then Financial Secretary, stood firm on that until my hon. Friend the Member for Chichester (Mr. Tyrie) identified that the ombudsman’s remit could include the Government Actuary, thus clearing the way for the ombudsman’s second inquiry. That was a pivotal point in the process which led to the opportunity for the second inquiry into Equitable.
With the start of the ombudsman’s work, policyholders might have thought the end was in sight, but they did not take into account the ability of the Government to frustrate the ombudsman’s work. Documents previously thought lost were suddenly found, further complicating the ombudsman’s inquiry. The new documents were not the only barrier that the Government put in the ombudsman’s way. One might have thought that it was enough for the ombudsman to be bombarded with those documents, but then the Treasury decided to shower her with legal arguments on her findings.
When the ombudsman’s report was published, however, its conclusions were clear. There were 10 findings of maladministration in her report, and her recommendations were clear too: because the maladministration had caused injustice, there should be a scheme to make payments to the policyholders. That was where she added the two caveats that I mentioned in my answer to the hon. Member for Cannock Chase. The first was that the compensation paid to policyholders should be based on relative losses rather than the absolute loss. That means that market conditions at the time should be taken into account when calculating the losses suffered by the policyholders—an approach that Sir John Chadwick has adopted in his work. The second caveat was that the impact on the public purse needed to be considered when determining any compensation scheme. That is an important caveat, and it is accepted by all parties. The second recommendation called for the issue of an apology from the Government to policyholders.
We accepted the recommendations immediately. It was the right thing to do. Indeed, we made a commitment to respect the ombudsman’s findings during the cross-party campaign to force a second inquiry. But one voice was absent from the acceptance of the ombudsman’s findings. One voice remained silent: that of the Government. One would have thought that the Treasury would have known exactly what the ombudsman’s findings would be, given the arguments and debates between them. One would have thought that it would be prepared for her findings, prepared to give a response, but there was no immediate response—just silence.
The hon. Gentleman just said that the Government—whichever Government—must take account of the impact on the public purse of compensating Equitable Life’s pensioners. Is that not a simple get-out for the Conservatives, and is there not very little difference between those on the Government Front Bench and the Conservative Front Bench on this? Is there not a moral obligation to pay the pensioners, whatever the cost to the public purse? It will not be in excess of the gross domestic product. But actually, if we collected a little more tax, we might be able to pay them quite easily.
As I said earlier, we need to see what the bill is. There is a big difference between the Conservatives and Labour on this. In the past few years, the Government have sought first to block the second inquiry, then to frustrate the work of the ombudsman and then to delay their response and the payment of compensation to policyholders. The Conservatives have been clear from the outset, when the ombudsman published her report, that we accepted her findings and wanted justice to be done. That is the difference between the Conservatives and Labour, and that is why Labour Back Benchers should be wary of the Government’s amendment to the motion.
When the Government did not give an immediate response to the ombudsman’s report, we saw the third stage of their strategy on Equitable Life—delay. Despite the commitment that the Prime Minister gave to my hon. Friend the Member for Shrewsbury and Atcham that there would be
“a statement before the House rises at Christmas”—[Official Report, 3 December 2008; Vol. 485, c. 38.]
nothing happened until the middle of 2009, nearly six months after the ombudsman’s report was published. That is when we finally got their response, and we must ask why they did not respond more quickly to the report.
There was a time when the Prime Minister would have been very quick to criticise delays in responding to reports. In 1989, he said:
“I must ask why we have had to rely on the ombudsman to confirm the mismanagement, maladministration and incompetence that was widely known about more than one year ago.”—[Official Report, 19 December 1989; Vol. 164, c. 204.]
When he was in opposition, the now Prime Minister made his name by championing the cause of Barlow Clowes’ shareholders and investors. He made that statement calling for action when the then Government had announced their compensation scheme, but here we are, 18 months after the ombudsman reported maladministration in the regulation of Equitable Life, still awaiting the details of a scheme as well as a timetable.
Let me just finish this point.
How times change for the Prime Minister: where he would once have urged quick action, he now seems happy to string things out for as long as possible. When he could have taken a decision, as Chancellor, to sort out Equitable Life, he chose to stand in the way of a solution. When, as Prime Minister, he could have put his foot on the accelerator to get a rapid solution, he found the brake instead. He has let the policyholders of Equitable Life down. I hope that the hon. Member for Coventry, South (Mr. Cunningham) can tell us why he decided to do that.
I am not going to answer that question, but I will say that we have attended a number of debates on Equitable Life, yet the whole thing does not seem to be going forward as I am sure the hon. Gentleman will agree. The important point to make is that many people are utterly frustrated with our rehearsing the arguments over and again but never taking matters forward. I have some sympathy with the comments of the Liberal Democrats that some form of payment should be made as a demonstration of good will.
I think that many people, including some of the hon. Gentleman’s Back-Bench colleagues, share his frustration that no real progress is being made despite policyholders having suffered a cut in their policy values in 2001 and despite Penrose having said in 2004 that regulation was a contributory factor to the problems at Equitable Life. We need to see some progress.
The reality is that the Government simply did not want to lift a finger to help those who had lost out because of the regulation of Equitable Life. They sought to block the second inquiry and they tried to deny that the ombudsman had the power to investigate the Government Actuary. When that tactic failed, they sought to frustrate the ombudsman with a barrage of documents and legal arguments, and when all that failed, there was delay. It is no wonder that we are not making the progress that the hon. Gentleman and many other hon. Members want.
Even when the Government published their response to the ombudsman’s report, their first act, after apologising for failing policyholders, was to reject a number of the ombudsman’s findings of maladministration. Perhaps, they had spent that six months of delay trying to wriggle out of their responsibilities to policyholders and finding loopholes to evade the course for justice. Of course, they were challenged by EMAG, and the High Court partially overturned the Government’s rejection of some of the ombudsman’s findings—another delaying tactic.
The Government’s response triggered a further delay, with the commissioning of Sir John Chadwick to advise on a number of areas such as calculating relative loss and establishing which groups of policyholders suffered disproportionate loss and what proportion of the losses could be apportioned to other bodies. Hon. Members will know that Sir John published his third interim report last week and that he expects to publish his final report in May. That is quite convenient is it not? There will be no formal response from the Government before the general election, no commitments and no guarantees.
Last month, at the meeting of the all-party group on Equitable Life policy holders, the Chief Secretary gave some hints of what he might do if the Government were re-elected, but there was no commitment to a clear timetable for making payments. There was no indication of when policyholders might see justice delivered or when they would know for certain just how much money, if any, they would receive from the Government. There were lots of hints but nothing specific—just like in their amendment today.
I will give way to the Chief Secretary in a moment. Labour Back Benchers, who have been seduced by the warm words of the Government amendment, might like to ask themselves a simple question. After years of standing by and letting policyholders suffer, can people trust the Government to do the right thing by policyholders once the election is over? Perhaps the Chief Secretary can answer that.
I will address that point in my own contribution, if that is okay with the hon. Gentleman. Before he concludes, what policyholders will want to hear from him is a clear statement about whether he supports the John Chadwick process or whether he wants it to be stopped, and the Government of the day to revert to the approach proposed by the ombudsman. It is a very simple question—it is imperative that policyholders know the Opposition’s position.
The risk of stopping the process undertaken by Sir John Chadwick is that we further delay the payment of compensation to policyholders. I think that Members in all parts of the House want justice to be delivered to policyholders as soon as possible. The problem over the past few years is that, every step of the way, the Government have sought to frustrate that process and delay it. People want justice to be seen to be done. It is important that we make sure that we do all that we can so that the process on which Sir John Chadwick has embarked enjoys the confidence of Members in all parts of the House and, in particular, has some support from the policyholders who are most directly affected.
It is no longer practicable to bring the Chadwick procedure to an end—a decision which is what the Government would like us to fall into—but that does not necessarily mean that it was a good idea to disrespect the ombudsman’s position.
We are, as is often said in politics, where we are. The process could have been handled far more efficiently by the Government, and we could be in a better place if the Government had not sought to delay their response to the ombudsman’s report. If they had not waited six months, we might know just how much policyholders could expect to receive and when. The delays are a significant let-down for policyholders. We need to make sure that we move ahead with all due speed, and make clear the timetable so that policyholders know when they are going to get justice.
The hon. Gentleman said that he would support the continuation of the Chadwick efforts. Would he add two further comments? Would he say whether he is committed to doing anything additional that might reflect the situation had the ombudsman’s report been able to continue. Would he also state his own timetable, to give policyholders a clear view of what a Conservative Administration would mean for them?
The hon. Gentleman makes an important point about the timetable. My right hon. Friend the Member for Witney (Mr. Cameron) said last month:
“If we win the election, we’re going to sort out Equitable Life very early on.”
That is a clear commitment to make rapid progress on this issue. The other aspect is that Sir John Chadwick is advising the Government, who are in a position to take on board the concerns that have been expressed about the way in which the Chadwick process will reach a final conclusion. It is important that the Government listen to those concerns.
There is a demand, which has been voiced very clearly in today’s debate, for a clear timetable from the Government. We have to ask ourselves what the Government did last year to establish a clear timetable for payments. Has any work been done by the Government on how they might make payments to policyholders, or to determine how long it might take to make such payments? If it has, the Treasury should be in a position to set out an indicative timetable. If the Chief Secretary tells us that no work has been done along those lines, policyholders will have to wait even longer for certainty as the Government work through the mechanics of compensation.
Such failure to be up front with policyholders about a timetable is a reminder that throughout this process the Government have sought to avoid responsibility and tried to delay resolving the problems for as long as possible. If the Government had responded to the ombudsman’s report more quickly, policyholders would have known by now what the outcome would be.
Our response has been clear. We accepted the ombudsman’s findings at the outset, and we said that if the Government did not put a scheme in place, we would do so. I reiterate the comment of my right hon. Friend the Member for Witney last month, when he said;
“If we win the election, we’re going to sort out Equitable Life very early on.”
That is the right approach. The Government’s actions have delayed justice for far too long. If we form the next Government, Equitable’s policyholders have the commitment that we will sort out the mess that the present Government have left behind.
We need to act quickly not only to help Equitable’s policyholders, but to restore confidence in savings. The long drawn-out process for dealing with Equitable Life has helped to erode such confidence. The message that people hear is that the regulator failed and the Government have sought to wriggle out of their responsibility to Equitable’s policyholders. It is no wonder that five times as many people prefer to save for the long term by putting their money into their house, rather than into investments. We are not going to rebuild the savings culture in the UK and put the economy back on the right track until people are confident that the regulators are doing their job and the safeguards that are in place to protect consumers work when they are needed. The Government’s failure to deal with the aftermath of Equitable Life has undermined confidence in savings.
Equitable Life has been a tragedy for many thousands of policyholders who have been condemned to hardship through a cut in policy values, let down by the regulators and failed by this Government. At every step of the way, rather than doing the right thing by policyholders, the Government and the Prime Minister have tried to evade responsibility. They have tried to deny policyholders the second ombudsman’s inquiry and tried to frustrate that inquiry. Now, 18 months after the ombudsman has reported, policyholders are no closer to knowing when they will receive compensation. A problem that could have been resolved after Lord Penrose had highlighted the regulatory failings in 2004 remains unresolved six years later because the Government failed to act.
The Government’s handling of Equitable Life has caused misery to hundreds of thousands of people, and financial hardship to people who should be enjoying their retirement. The Government should be ashamed of themselves. The Government amendment today is no damascene conversion. It is a cynical attempt to fool Equitable’s policyholders in the weeks running up to the election. They are treating policyholders like fools and it is our responsibility to stand up for them, clear up the mess that the Government will leave behind, and ensure that after their long fight, Equitable’s policyholders receive the justice that they have been denied for so long.
I beg to move an amendment, to leave out from “House” to the end of the question and add:
“recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; notes that the High Court ruled that the Government’s response to the Ombudsman’s recommendations on Equitable Life, its establishment of an ex gratia payment scheme, and the terms of reference given to Sir John Chadwick were a rational response to the Ombudsman’s report; notes that Sir John expects to produce his final advice in May; welcomes the Government’s commitment to respond with details of a payment scheme within two weeks of receiving this advice; welcomes the Government’s determination to establish a scheme administratively quicker and simpler to deliver than that envisaged by the Ombudsman; further notes that to abandon the Chadwick process so close to completion would add delay and hardship for policyholders; welcomes the Government’s view that, while it cannot prejudge Sir John’s final advice, there is a strong case for policyholders who have passed away to be included in the scheme and that it is neither desirable nor administratively feasible to means-test every individual policyholder; and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life.”
I, too, welcome the chance to debate Equitable Life today. I am grateful for some—not all—of the remarks that the hon. Member for Fareham (Mr. Hoban) made. In particular, I am grateful for his clarification that it is the position of the Opposition at this stage to support the Chadwick process. Perhaps later contributions will help me to reconcile that with the sentence in the motion that he moved, in which he seeks to set a clear timetable for implementing the ombudsman’s recommendations, rather than acknowledging support for the John Chadwick process. Perhaps we can return to the matter over the course of the afternoon.
I think I have an interest to declare as a former Equitable Life policyholder. How can the Chief Secretary promise to give a response to Chadwick in two weeks, when it took more than 10 times that long to give a response to the ombudsman? Is it because he has 10 times more confidence in the Government to be formed in May?
The ombudsman’s report is pretty substantial. It involved four years of work, and it was right that the Government considered it carefully. I wanted to give a commitment to respond to Sir John Chadwick’s final report within a couple of weeks because of the sentiment that has been expressed in the House, which I have witnessed at close quarters since I became Chief Secretary.
Since the debate last October, I have laid two written ministerial statements to keep hon. Members up to date with the progress of Sir John Chadwick’s work. Last month, Sir John Chadwick and I had the opportunity to discuss the issues, some of which I hope will be aired this afternoon, with the all-party group on Equitable Life Policy Holders. I should like to record my thanks to my hon. Friend the Member for Leeds, North-East (Mr. Hamilton) and the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) for organising such an excellent event.
This afternoon, I want to set out the Government’s approach and put on the record in Hansard my response to some of the questions that have already been flagged up by right hon. and hon. Members.
I thank the Minister for the letter that he sent to each member of the all-party group, which I found quite useful. In that response he states:
“I am currently of the view that it is neither desirable nor administratively feasible to means test every individual policyholder.”
Does that mean that the payment, whenever it comes, will directly relate to the pension that policyholders paid for and expected but did not get, or can we anticipate some other artificial reshuffle of the moneys paid?
I will come to that point directly slightly later in my remarks.
First, I want to repeat the apology to policyholders for the delay. This was an apology first made by my predecessor, now the Secretary of State for Work and Pensions. I would also like to repeat what I put on the record in our first debate in October, which was a word of thanks to the parliamentary ombudsman for her work. It is right and appropriate for the Government to record our gratitude for her work. Her report was substantial, careful and sympathetic, and it contained a weight of analysis that reflects the complexity and scale of the issue. It took the ombudsman four years to put together, but it demonstrated a commitment to get to the heart of a difficult issue.
It is also fair to say that we did not wholly agree with the ombudsman’s conclusions, although on many things we did agree. In nine out of 10 of her findings we agreed wholly or in part with the charge of maladministration, and in five areas we said that we believed that injustice followed. So it was not to provide a compensation for regulatory failure, but to answer an ethical demand for help that the Government proposed an ex gratia scheme be set up.
I am grateful to the Minister for reiterating his apology and it is accepted in the spirit that it is offered. He will know that sadly some policyholders will have passed away, so they will not hear that apology. Will their estates be in receipt of any compensation that is eventually given?
If the Government accept that there has been maladministration, surely the victims of that maladministration are entitled to compensation. Yet instead the Government have gone down the route of a simple ex gratia scheme, with no right to compensation for that maladministration.
There is a principle, long accepted and indeed long debated in the House, that there is not an automatic right or an entitlement to compensation for regulatory failure. That was a characteristic of the compensation scheme that was put in place for failures as far back as Barlow Clowes. None the less there is an ethical demand to have a compensation scheme set up. I have sought to deliver a payment scheme that meets the imperative to act, to deliver it swiftly and to ensure that the right people are included.
I want now to say a word or two about the approach that the Government have pursued and the rationale for it. All hon. Members agree that we need to establish a fair payment scheme as quickly as possible. The ombudsman suggested a scheme that in her view could be up and running and complete its business within two and a half years, but her proposal relied on looking at regulatory returns. That has two consequences. First, it would entail a case-by-case review to understand who lost what and why. That would involve looking at 30 million investment decisions by 1.5 million people over 20 years.
Secondly, and to my mind more problematically, individuals would have to prove that they relied on regulatory returns. As the ombudsman said:
“I find that injustice was sustained by any policyholder who relied on information contained in the Society’s returns for 1990 to 1996”.
The Government simply did not think that such an approach would work. We therefore wanted Sir John Chadwick to look at a more expeditious and less risky way of setting up a payment scheme. Rather than a case-by-case analysis, Sir John has proposed that we look at different classes of policyholder—about 20 in total—and then, for each class, assess relative loss with a comparator on which he has gone out to consultation.
The Government’s amendment states that
“Sir John expects to produce his final advice in May”.
When did the Government discuss with Sir John the likely return date of his report? Surely it would have been a better and more just result had his report been produced well in advance of May, so that the public could have studied it in the run-up to the election, rather than in the confusion after the election.
I am not sure that I accept that there is confusion after an election, but the hon. and learned Gentleman will accept that Sir John’s approach must be faster and simpler than looking at 30 million different investment decisions. In my conversations with Sir John Chadwick, when we discussed his timetable and, indeed, the resources that he needed, I wanted to ensure that he had the time and space to do a thorough job, so that once a scheme was set up it could be completed as rapidly as possible. I do not think that I met Sir John without asking him whether he had all the resources that he needed.
Some right hon. and hon. Members will be much more familiar than I am with compensation schemes that have been set up over the years, whether for Icelandic fishermen—a scheme that dates back two or three decades—or for injuries sustained in the coal mining industry. What characterises many of those schemes is that they take years and years—sometimes decades—to run all the way through to a conclusion, and that sometimes they cost billions of pounds to administer. I wanted to ensure that we had a payment scheme that was up and operating quickly, and got through its business as fast as possible.
I understand all that, but the Government stand charged with cynicism over the whole Equitable Life saga. Surely, however, they could have avoided that charge at least in relation to the date on which Sir John reports. It is no secret that there is likely to be an election in early May, and Sir John’s proposed report date is likely to be after the election. The Government are falling into their own trap: if it can be shown—and the suspicion must exist—that they have deliberately decided to push back Sir John’s report until after the election, they are going to land themselves with further accusations of cynicism.
I understand the hon. and learned Gentleman’s point. I have not approached the question with cynicism. I have approached the exercise, which has been one of the hardest I have had to confront since I have been at the Treasury, with only one concern: how we get a payment scheme up and running quickly, in a way that minimises risk and allows us to complete the exercise as rapidly as possible.
I had two policies with Equitable Life, and I am dismayed at the delay by the slothful ombudsman and the Government’s delay. In seeing the matter through, however, I am resigned to the Chadwick process and, as such, will vote with the Government tonight. I am pleased that the process is likely to include deceased policyholders, but will my right hon. Friend indicate by what date he expects the first payments to be made, and by what date he expects the scheme to have been concluded and all the payments to have been made?
I am grateful, because the right hon. Gentleman said that he had decided to adopt a different route from the method proposed by the ombudsman—that is to say, the route proposed by Sir John Chadwick. Given that, and if there is to be no suggestion of cynicism, is it not all the more important that the right hon. Gentleman takes on board the comment that several people made when he was present at the meeting of the all-party group on Equitable Life Policy Holders—namely, that there should be the maximum transparency in disclosing the report’s methodology and the other working documents that were made available to Sir John Chadwick? If there is to be less than full recompense, it is important that people know the basis on which the pay-out—whatever it is—is ultimately arrived at.
Of course. Along with his third interim report, Sir John has published some detailed actuarial studies. In some quarters—EMAG in particular—there is concern that that is not enough detail. If there is a demand among right hon. and hon. Members for more information, I will discuss with Sir John how we should make that available. Obviously, he and I will be legally obliged to protect personal information, but I am sure that there is a way to accommodate the hon. Gentleman’s point.
If we compare the two approaches that the ombudsman and Sir John Chadwick are taking, we understand why Sir John concluded that the approach suggested by the ombudsman was at best unsatisfactory and—more likely—impossible. On that basis, I am unable to agree with the ombudsman’s assessment that her scheme would take only two and a half years to deliver.
I think that Sir John’s approach will be better and faster, but his task is still difficult. He has to analyse about 2 million policies, to look at information dating back two decades on about 20 different types of policy and to review about 200 different financial products. None the less, his approach avoids some of the more difficult aspects of the ombudsman’s proposal and it will lead, I think, to a simpler and administratively quicker scheme.
Let me come directly to that point. I do not think that we can estimate when the first payments will begin to arrive, or when the process will be completed, until we have Sir John’s final report in May. I say that for a simple reason. Until we are able to estimate, and hear from Sir John about, the total bill and what the right kind of compensation looks like, it will be difficult for us to know or guess—and it would be wrong for us to attempt it—whether the right kind of compensation is cash or a different kind of financial services product. Equally, until we know who Sir John thinks it is appropriate to include in the final design of the scheme, we will not know whether the scheme that we are running will be paying out to hundreds of thousands of people or to millions.
The answers to these two questions have important consequences for how delivery arrangements should be set up. A smaller scheme could probably be delivered quite quickly—through the Department for Work and Pensions, for example. A more complicated scheme that involved, for example, distributing financial services products to Equitable Life policyholders, could require the Government to secure a delivery partner in another financial services company. That is why the answer to my hon. Friend’s question is difficult.
Is not the Minister himself making the argument for an interim scheme, at least as soon as Sir John Chadwick’s report is laid? When it is, at least some groups will be clearly identified as covered.
Surely the Minister also recognises that Sir John’s conclusions are likely to be challenged, as some are extremely contentious. I point again to the assumption that, having opened a can of worms, the regulator would have taken only the lightest-touch action, that the society would respond only in the lightest way and that most of the mess would have been left in place. Many of the assumptions are likely to be challenged through judicial review, but people’s essential payments, at least, should not be delayed for that process.
As I promised, I asked Sir John Chadwick’s advice on interim payments following our October debate. The difficulty is that when a scheme is produced there will be a cap on it—to cap liabilities to the public purse more generally. The difficulty with making interim payments is that it is impossible to estimate, until the final scheme is designed, whether the person has too much, too little or about the right amount. I would not want to embark on an exercise where people were being overpaid, because it would be impossible, and quite wrong, to ask them for money back; that would be seen as reprehensible by all Members of this House. Sir John Chadwick therefore examines in his report a proposal for potentially expediting payments to particular groups once the scheme design is finalised, and suggests two such groups, as the hon. Lady will have seen.
I was pleased that when the Minister came to see the all-party Equitable Life Policy Holders group, he said that the election date would not delay the proceedings that are going on in the background. However, the all-party group also heard from some of the victims, who asked why no work was being done in parallel to clean up the data, as that would speed up delivery once the decision was made on the criteria for who was going to be eligible. Could he give us a little more information about why that work is not being done? That work would ensure that, having stopped one set of proceedings, we do not then come up with another lengthy procedure that needs to be gone through before anyone gets a penny.
That is an excellent point, and I will try to ensure that we respond to it over the course of the debate. Some preparatory work is ongoing—for example, discussions with the DWP about possible delivery options. I have also asked the Treasury to ensure that any clearing of the ground that is required for a procurement process is undertaken.
Let me seek to provide an answer over the course of the debate.
I want to turn to two important points that hon. Members raised earlier. The first, which also came up in the all-party group, is whether payments should be made to the estates of policyholders who have passed away. As promised, we have reflected on this. Based on the evidence that I have seen to date, I feel strongly that they should be included in any scheme. I cannot see any rationale for treating their estates differently from those of any other policyholders. I think that is a view that the House will share. We cannot pronounce on this categorically until we see the final design of the scheme, but I thought it important for the House to know the direction of travel.
Secondly, several hon. Members have asked about means-testing. My assessment so far is that means-testing would be neither administratively feasible nor desirable. It would be an unwelcome complication that cannot, at this time, be seen in a positive light. Again, a final conclusion has to await Sir John’s final report, but I do not think that means-testing should be our direction of travel.
I am grateful to the Minister for having gone as far as he has. However, given that the Public Accounts Committee said that compensation was not a matter of charity but a matter of justice to rectify a wrong, would it not be right for him to rule out means-testing at this stage instead of giving qualifications about awaiting Sir John’s report?
I am being a realist about it. Having contemplated what kind of administrative procedure would have to be put in place to go through means-testing, I cannot see how in the world we would do it.
The third question, to return to the point raised by the hon. Member for Richmond Park (Susan Kramer), was about urgent payments. In the final scheme design, we should prioritise payments to those who have been particularly severely impacted by what has happened. In his latest report, Sir John Chadwick provisionally identified two groups: trapped annuitants and late joiners.
That is all that I wanted to say by way of response to the hon. Member for Fareham.
The Minister has nicely said, as far as I can tell, that he is not interested in means-testing. However, does he envisage a payment that is directly related to that which the policyholders anticipated but did not get, even if it is a proportion of the amount, or does he have some other artificial way of changing it?
The answer is yes—Sir John Chadwick has tried to compare the relative losses of different classes of policyholders.
Let me conclude by saying that all Members of this House will have constituents who have been affected by the injustice of Equitable Life, which now stretches back almost two decades. We are committed to acting urgently and fairly, even in the current fiscal climate. That approach is reflected in the Government’s proposed amendment to the motion.
As I said a moment ago, I cannot this afternoon set out when payments will start, or when they will finish, but I can commit to ensuring that the Government’s response to the John Chadwick report, which will be published within two weeks of the report being handed in, will include a delivery timetable, which will answer that question.
We have drafted the proposed amendment in a way that reflects the debt that we owe to the ombudsman and accepts the obligations of the Government, but that none the less reaffirms our commitment to an approach that we think will remedy this injustice as rapidly as possible.
Order. Before I call the hon. Member for Twickenham (Dr. Cable), I had better advise the House that the 15-minute limit on Back-Bench speeches is no longer appropriate in the light of the numbers of hon. Members seeking to catch my eye, so I give notice that it will be reduced to nine minutes.
I will try to make your task a little easier, Mr. Deputy Speaker. I had the privilege of introducing a debate on this subject on 21 October 2009, when I set out in considerable detail the Liberal Democrats’ views on how the problem should be dealt with, and I do not need to rehearse those arguments and the history again. There is a fair degree of consensus, which was summed up by early-day motion 1423 in the last Session. The motion was signed by 351 Members, from all parties, which I believe is the largest support for any such motion. On my quick arithmetic, that means that 70 per cent. of Members who are not on the Government payroll supported it. A considerable amount of work has been done since by the all-party group to reinforce that.
I shall first discuss the practical issues raised by the exchanges between the hon. Member for Fareham (Mr. Hoban) and the Chief Secretary. Since October, as the Chadwick process has ground on—we have now had the third interim report—and in the past few days, there has been a breakdown in the relationship with the policyholders group, which has consistently defended the interests of policyholders throughout the process. Initially, it worked in a constructive and positive way with Sir John Chadwick despite having reservations about how the process was being conducted, but that relationship has now broken down. I do not believe that the Minister addressed that problem.
I have two suggestions for the Minister. First, nobody is suggesting that we now go back and throw the work of the Chadwick commission into the waste-paper basket and start all over again. To be fair, as the hon. Member for Fareham said, we are where we are and we have to operate from the current position. The legitimate concern of policyholders is the lack of independence in the process and the role of the auditors, which I believe are appointed and paid for by the Treasury. If there were greater confidence that that process was genuinely independent, much of the lost confidence could be restored. Will the Minister consider how independent auditors who have the confidence of the policyholders can be introduced to the process, perhaps alongside those already designated by the Treasury, to bring the policyholders group back on board in the process?
We can argue whether it would have been better to have gone down the tribunal route than the ombudsman report route, but the policyholders group vehemently denies that matters are as complicated as the Minister made out. We can go over the history, but—given where we are—the key need is to establish the independence and integrity of the process. Confidence has broken down, and we need to find a simple way in which that can be remedied.
The other issue that has arisen—and it is an immediate and practical one—is that of interim payments. All three of my colleagues who have intervened—my hon. Friends the Members for Cheltenham (Martin Horwood), for Richmond Park (Susan Kramer) and for Solihull (Lorely Burt)—made that point, and I heard the Minister’s reply. I can understand the theoretical problem—that the interim payments might collectively be greater than a cap that might be imposed—but it is a rather academic objection. We are, after all, talking about a narrow category of people whom we all agree should be compensated—the trapped annuitants and the late entrants. Nobody is now disputing that. It also concerns a modest part of the compensation to which they will ultimately be entitled. So it is not clear why this relatively modest but rapid intervention of making interim payments should hit the financial ceiling, unless the Government envisage a ceiling that is ridiculously and unreasonably low. I hope that the Government will take a fresh look at the interim payment issue, because the objection advanced is not very credible.
If those two steps could be taken—a greater degree of independence in the auditing process, which is very complex and which no hon. Member is equipped to deal with technically, to restore the confidence of the policyholders, and the introduction of an interim payments scheme—much of the current suspicion about what is happening would be defused, and we would be back on track. That is the substantive point that I wish to make, but I shall briefly summarise the two overriding concerns that Members have expressed throughout the debate.
The first is the cumulative delay. We can argue about whether a particular step was reasonable or not, but it is the cumulative impact of a decade of delay that has caused so much anxiety and anger. The second is the integrity of the ombudsman process and our responsibility as a House for upholding the ombudsman’s authority.
On the first issue, it is worth—without going into the long and sordid history—recalling the milestones in this decade-long process. We had the four years to Penrose, who indeed criticised the delays in establishing his report. Then there were the three years to the ombudsman’s report and then the 18-month delay in the publication of the ombudsman’s report through the Maxwellisation stage, followed by the Government’s response, which was not satisfactory. Then came the ombudsman’s response to the Government, then the various challenges, including judicial review and the Public Administration Committee’s report. Then we had the six-month delay until the Chadwick process got under way, and the next series of steps that we are now encountering. Any one of those delays could be excused and explained, but the cumulative effect of the Treasury foot-dragging is great ill will and is the reason why Members on both sides of the House keep returning to this issue. It is also why the 1 million people affected by this issue are so frustrated.
The second overriding issue is the authority of the ombudsman. It is worth recalling that 351 of us said, when we signed the early-day motion, that this House
“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”.
We can argue about whether the ombudsman’s process was the best, but its principles were clear, and one of them was that compensation was right, and that it should take place according to the principle of remedies: we are not talking about arbitrary compensation with figures plucked from the sky, but about a carefully thought out procedure. The ombudsman also made the specific recommendation of an independent tribunal-like process. We know that the Government have rejected that, but the key point was independence, and that is what is lacking from the present proceedings. We then had talk about “rapid”, “transparent” and “simple” solutions to compensation, but again, we have not had “rapid”, we probably have not had “transparent”, and we certainly have not had “simple”. The question is: how do we get past that stage?
I will leave the Minister with the thought that introducing an independent element into the actuarial process at this stage may restore some of the confidence that has been lost. If the Government are now willing to look at interim payments through the Chadwick process, that would go some way—probably a limited way, but some way at least—to stemming the anger and frustration that a lot of policyholders feel.
We are here again to debate Equitable Life because we all have constituents who continue to suffer, as hon. Members have said throughout the debate. However, I am a little dismayed and disturbed that the issue is becoming a party political football, although I suppose that that is inevitable with a general election fast approaching. I remind all right hon. and hon. Members present for the debate—instigated, I accept, by the Opposition—that we are here today for one reason: to ensure that those who have suffered as a result of the Equitable Life scandal are properly compensated and that they stop suffering. For the 15 policyholders a day who are dying— 15 policyholders who will never see justice—we know that their estates are compensated, as I believe the Chief Secretary indicated, and as the Government amendment certainly indicates.
It is a real shame that the issue has become so partisan. I thank the hon. Member for Fareham (Mr. Hoban) very much for his kind remarks, but he said that the Government were trying to block, frustrate and delay the process. That might have been the case in the early days, and we all regret that. I certainly made it clear in my Adjournment debate last June that I regretted it, and my hon. Friend the Member for Cannock Chase (Dr. Wright), the Chairman of the Public Administration Committee, has done so too. However, we now have a process that perhaps many of us would not have wanted, but which is none the less approaching its conclusion. I am glad that the hon. Gentleman made it clear that the Opposition would see that process through, should they win the general election.
We had an Opposition day debate on 21 October last year, to which the hon. Member for Twickenham (Dr. Cable) referred. My debate, which was an hour and a half long in Westminster Hall, was held on 24 June last year. The all-party group on justice for Equitable Life policyholders held a meeting on 24 February —less than a month ago—which Sir John Chadwick was able to attend, thanks to a little pressure from me and the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), co-chairman with me of the all-party group. Chadwick answered some questions—some Members got some answers—but I share the view expressed by the hon. Member for Twickenham that the lack of independence of which EMAG has been so critical was quite evident in Sir John’s remarks on 24 February. It was a shame indeed—we have already made our view clear—that the room was so inconvenient that not all Members who wanted to ask questions were able to do so.
As hon. Members know, I have been very critical, but the aim of my criticism—I hope that this is the aim of everybody’s criticism of the Government—is to improve the chances that those who have had justice denied as a result of what happened at Equitable Life will get that justice. That is what we are here to do, and we must not forget that.
I am grateful to the hon. Gentleman for giving way, but after 10 years of obfuscation and delay, which have caused mass injustice to so many people, is it not right that, as we approach a general election, people should be able to look at Labour’s record on this issue and come to the same conclusion that we do, which is that if people want justice, they need to vote for a change? We have had 10 years of a failure of justice, and the hon. Gentleman has been honourable in pointing that out, but it is also worth pointing out that it is his party—the Government—who have carried out that injustice.
We now have a chance to put things right and do what we have not done so far. I think that that is finally happening on this side of the House, and that is why I want to see the Chadwick process completed. The question about timing that my hon. Friend the Member for Wolverhampton, South-West (Rob Marris)—who has now left the Chamber—put to the Chief Secretary is critical.
I thank the hon. Member for Fareham for his kind remarks about the work that the hon. Member for Shrewsbury and Atcham and I have been doing in the all-party group. I also commend the Chief Secretary on his openness. I think all Members will agree that he tried hard when he attended a meeting of the group. He listened to what we had to say, but it was clear that he was also attempting to make up for the years in which nothing had been done—although we should bear in mind that it took the ombudsman four years to complete her report.
I strongly support what the amendment says about compensation. It states that
“there is a strong case for policyholders who have passed away to be included in the scheme”.
That point also arose when the Chief Secretary addressed the all-party group. However, one word is missing from the amendment. It ends with the words
“and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life”.
The missing word is “policyholders”. We seem to be forgetting that individuals are involved, and we should not do so.
I thank EMAG because although—as the hon. Member for Twickenham reminded us—it has pulled away from the process following Sir John Chadwick’s third interim report, it has constantly reminded every single Member that this is an issue for his or her constituents and is crucial to many of them. As I said during my Adjournment debate, 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”.
That is why it is so important that EMAG continues to support, lobby, push and, ultimately, try to obtain justice.
The hon. Gentleman has praises EMAG. Does he share its concern about the way in which the Chadwick process is evolving? That is underlined by its submissive language, which refers to
“what factors the Government may wish to take into account when considering which policyholders have experienced disproportionate impact”.
That does not sound as directive as we would wish. We may end up with a process that will not lead to the quick resolution that we all seek.
I hope that the hon. Gentleman is wrong, and I hope that EMAG is wrong. I was about to say that I did not approve of EMAG’s recent action in pulling away from the Chadwick process. I think that many Members share my belief that, however much we regret the fact that the Treasury introduced the process, the fact is that we have the process now and we must see it through to its conclusion. I believe that that is the only way in which we can secure the compensation that policyholders need and deserve as quickly as is humanly possible from this moment onwards, whatever has happened in the past.
I asked the Chief Secretary why there was not a parallel process of cleaning up the data, but I did not receive an answer. The hon. Gentleman praises the Chief Secretary for trying to put things right. Cleaning up the data would be a simple way of trying to put things right. A Labour Member—the hon. Member for Northampton, North (Ms Keeble)—asked whether the Treasury was liaising with the Department for Work and Pensions, but again there was no answer. There are more things that could be done. Let us be critical about this, in a cross-party way.
I entirely agree. I am not suggesting for a moment that everything that the Chief Secretary has done is perfect. The cleaning up of data was raised at the all-party group meeting, but we have not received a definitive answer, and we need one. I hope that we will be given that answer in the winding-up speech, because it is important that the data is cleaned up so that the people who need and deserve compensation receive it when we finally have a scheme. The issue today, however, is what resolution we secure in the House, what debate we engage in and what decisions we make will best achieve our common aim, which is to ensure that compensation is paid as rapidly as is humanly possible from this day forward.
We have not yet had an answer on when the scheme will begin and end. The Chief Secretary made it clear that he could not answer that question until he had seen Sir John’s final report, which is a great shame.
The hon. Gentleman says that we do not know when the Chief Secretary will be able to give an answer, but the Government’s amendment contains a commitment that they will
“respond with details of a payment scheme within two weeks of receiving this advice”,
and we are due to receive that advice at the end of May, are we not, whatever the failings of the process?
I apologise if the hon. Gentleman has misunderstood the point I was trying to make. I am very pleased that the Government are committed to giving a response within two weeks, but my point is that we do not yet know when the payments will begin—indeed, we will not know that until they begin—or when they will be completed.
I recently met Chris Wiscarson, the new chief executive of Equitable Life, and I know that other Members have also met him. I thank him for his engagement with Parliament and hon. Members in order to ensure that, as leader of Equitable Life, he is focused on the policyholders and on trying to reduce his overheads and what he calls the bottom line—the expenses involved in running the organisation—to the absolute minimum, so that the maximum amount is available for policyholders. I commend him for that.
Turning to the Chadwick process, Sir John will give his final advice to the Government in May. He is looking into the details of 2 million policies, so he has to get this right. As we are dealing with about 2 million policies, the data must be clean. The Government said they will respond to Chadwick within two weeks of receiving his report, but a literal interpretation of the ombudsman’s findings would mean excluding at the very least trapped annuitants, which—
I shall endeavour not to use up my nine minutes, but let us see how we go.
First, may I declare an interest? I am a current Equitable Life policyholder, and also a former one, in that I held other policies that I managed to extract from that bottomless pit and move to other pension providers. Like so many other Members, I also represent a large number of constituents who have been grievously affected by this saga. Although I speak with a degree of disappointment on my own behalf, I speak with a great deal of anger on behalf of my constituents, many of whom have very little apart from their defunct Equitable Life pensions and other small pension entitlements from either the state or company pension schemes. They are on their uppers. They are really struggling to make ends meet, and they are having to do so at a time when interest rates are historically low and therefore such other savings that they have are producing a very low return. That is the backdrop against which my constituents are having to watch the Government continually delay this process.
This entire episode is not only bad in respect of the facts of what has happened, but it stands as a metaphor for the way in which this Government behave. We have a Government who appear not only to be prepared wholly to ignore or sideline the decisions of the ombudsman, an office set up by Parliament to protect the interests of the citizens of this country. They are also prepared to suggest in their amendment that the Government recognise—although they pretend that it is the House that recognises this—
“the vital role the Ombudsman plays in public life”
“the duty of Parliament to support the office of the Ombudsman”.
If that were actually true—if the Government actually believed what they had written in the motion—we would not be where we are now, as this matter would have been resolved, if not in exactly the same way that the ombudsman suggested, at least through something a little more similar to it and many years ago.
Not only are we left waiting for Sir John Chadwick’s final review to report—I appreciate that a number of interim reports have been published—but, as I said to the Chief Secretary to the Treasury, the Government have cynically adjusted the timetable so that the review will be published or will apparently at least come to be considered by the Government after the likely date of the general election. Nobody is in any doubt as to the likely date of the election, nor have they been for many months. I have no doubt that the Treasury, at both official and political level, has so adjusted Sir John’s timetable and so constrained his remit to enable the Government to shuffle off into opposition after 6 May with a view to washing their hands completely of this terrible saga.
Meanwhile, my constituents and those of many other hon. Members will have to deal with the human problem: the loss of their pension rights and their investments, which they so carefully placed into Equitable Life. These people are not spendthrifts; they have deliberately attempted to save for their old age. These are the people this Government have let down. One again places this issue in the context of the first decision made by the then Chancellor of the Exchequer when he arrived in No. 11 Downing street in 1997 to adjust—I put that neutrally—the whole matter of advance corporation tax. That, together with what has happened in this case, illustrates this Government’s view of the private pensions sector.
When one looks at our motion, which I wholly support, one sees a collection of facts, at the end of which one sees a conclusion based on those true facts. The conclusion is that an “injustice” has been done and it needs “remedying”. The Government seem to be reluctant to do anything practical about it. The anger, frustration and the slow process that the public suffer as a consequence of the Government’s cynical attempt to delay things until after the election is not just something that comes out as a rhetorical flourish during the debate—it is real. I suggest that those on the Treasury Bench should acquaint themselves with what the public actually feel. Given the all-party concern about this issue, I suspect that plenty of these poor Labour Members of Parliament who represent the governing party but who have the honour to represent people whose Equitable Life investments have been completely scythed are having to describe to their constituents what the Government are doing in words in which they have little faith.
The Chief Secretary, in his usual way, spoke quietly and with apparent understanding of the plight of policyholders, but if one analyses what he said during the 20 or 30 minutes of his speech, one finds that he said nothing. A proper deconstruction of his speech will lead one to the conclusion that he was almost playing a game with the public and policyholders; it was as if somebody was reaching for a prize only to see it pulled a little further away each time they got within six inches or so of it. Likewise, we see the outcome of the Chadwick review being pushed and pushed further away from not only resolution, but from this Government’s responsibility. I suggest to the House that the Government’s conduct is not just cynical, but irresponsible, and deliberately so.
There is no question but that much of what the Government say in their amendment is deeply questionable. I have already referred to the cynical way in which they have attempted to support the ombudsman, despite the fact that their actions demonstrate an entirely different motive. However, the amendment goes on to state that the House
“notes that Sir John expects to produce his final advice in May”
“welcomes the Government’s commitment to respond with details of a payment scheme within two weeks of receiving this advice”.
My suspicion—I have some knowledge of the workings of government—is that Sir John’s recommendations will be known to the Government in advance of the general election. They will be preparing their response—probably now, in advance of Sir John’s recommendations being produced—but they will stick it in a cupboard and wait to see what the result of the election will be. If they win, they will further delay the Government response and produce a timetable for implementation that will take us still further away from May. If they lose, they will be able to say, “Well, we are no longer the Government. It is up to the Conservative Government.” It will be up to my hon. Friend the Member for Tatton (Mr. Osborne) to sort this out, and the Government will swing quietly off into the distance. The Government kindly state that they note that
“to abandon the Chadwick process so close to completion would add delay and hardship for policyholders”.
We know that that is impractical. There is no way an incoming Conservative Government could in fairness or in practical terms do away with the Chadwick process.
This whole saga demonstrates to me a lack of good faith, a lack of planning and a lack of appreciation of the plight of innocent policyholders. It is utterly shaming.
This Government have done many, many things of which I am immensely proud. They have done nothing of which I am more ashamed than their handling of, and prevarication over, Equitable Life. The problem with Equitable Life was always to balance speed with fairness and to ensure that the scope of the compensation was correct. The hon. Member for Fareham (Mr. Hoban), who spoke for the Opposition, was correct to criticise the Government’s failure adequately to grasp the urgency with which the Government ought to have responded to the ombudsman’s report in July 2008.
The Government amendment states that the
“establishment of an ex gratia payment scheme, and the terms of reference given to Sir John Chadwick were a rational response to the Ombudsman’s report”.
How weak. They were a “rational” response. They were not appropriate, or sympathetic, or moral, but they were rational—if the end that one wished to achieve was to minimise the cost and delay the payments. Rationality is always important and necessary, but it is scarcely ever sufficient in matters of public policy.
In 2002, I believe, I spoke in the first debate on Equitable Life and urged swift action then. In 2008, when the ombudsman presented her report, the Government were wrong to consider that it was reasonable to delay a further six months before responding and then to challenge her findings in the court. The Government acted as though they believed that the clock started when the ombudsman produced her report in July 2008. In fact, for policyholders the clock had started in 2001. It has now been running for nine years and during that time many policyholders—some 40,000, according to Treasury advice—have now died. The Government have suggested in their amendment that
“there is a strong case for policyholders who have passed away to be included”.
It is of course right that the estates of the deceased should benefit, but that is of little comfort to those who each month draw closer to the end of their lives without the financial means for which they had prudently planned and saved.
The hon. Member for Fareham has indicated that he accepts that we are, in his words, “where we are”. He also made it clear that an incoming Conservative Government would accept and continue with the Sir John Chadwick process. Insofar as that is the case, I find the Opposition motion as it stands to be somewhat confused, because it refers to implementing “the Ombudsman’s recommendations”.
Earlier, I asked the hon. Member for Fareham to clarify the matter by saying whether his party intended to do anything in addition to Chadwick, perhaps by implementing elements of the ombudsman’s recommendations on top of Chadwick. I also asked what the timetable might be. The answer that I received was that it would be Chadwick, and that implementation would occur early in the life of the next Government. That strikes me as the common position of both the Government and the official Opposition. That being the case, I would simply press for additional steps to be taken, and in particular for interim payments to be made to surviving policyholders as soon as possible after we have all seen the Chadwick report.
Many of my constituents in Shrewsbury who are Equitable Life policyholders have come to see me in my surgery. Their sheer frustration and misery as a result of what has happened led me, together with the hon. Members for Leeds, North-East (Mr. Hamilton) and for Richmond Park (Susan Kramer), to set up the all-party group for justice for Equitable Life policyholders. I am very grateful that various people have referred to the work that we have tried to do on a cross-party basis to bring this issue to the forefront of parliamentary debate. I am particularly pleased that we are having this debate today, and that the Conservative party should have used one of its Opposition days to enable us to discuss these issues still further.
To begin with, I was extremely concerned that Sir John Chadwick would not come to see us and interact with us. I was appalled that a person in his position could disregard Parliament and parliamentarians and behave in such a way, but we finally managed to get him and the Chief Secretary to the Treasury to speak to the all-party group on 24 February.
I have never seen a room more crowded than on that day. It was standing room only. It was so encouraging to see how many Members of Parliament, from all political parties, tried to attend the meeting on behalf of their constituents. They wanted to put questions directly to the Minister and Sir John Chadwick, and I am very pleased that we have been able to distribute to every Member of Parliament copies of the questions posed and of the replies that we received from the Minister.
What concerned me profoundly is that, when the Minister left the meeting, we then interviewed the current chief executive of Equitable Life, Mr. Chris Wiscarson. He said, in front of all of us, that he had written repeatedly to the Minister asking to interact with him and his Department. He wanted various forms of communication to take place between Equitable Life and the Minister’s Department, but he told all of the MPs assembled that not only had he received no reply, he had received no acknowledgement whatsoever.
The Minister stood at that Dispatch Box this afternoon and said repeatedly how important the process is, and how passionately he believes in trying to resolve it in a speedy and timely manner. However, if those are his genuine views, he needs to sit down with Mr. Wiscarson very soon: he must afford the current chief executive of Equitable Life the opportunity of a meeting to put forward his concerns and suggestions.
Yes, absolutely. Far more transparency is needed throughout the process.
We saw what happened when the Government decided to bail out the individuals, councils and other institutions who had invested in an Icelandic bank—Icesave. Huge amounts of effort went into supporting those individuals and organisations. I simply do not understand why that level of urgency and commitment has not been forthcoming on this issue.
I pay tribute to Mr. Paul Braithwaite of EMAG. He is a gentleman with whom I have interacted repeatedly on this issue and I pay tribute to his hard work and dedication in pursuing this matter. He has sent me a few points which I should like to raise in the debate. EMAG issued a press release, explaining why
“we are walking away in disgust, after active engagement for months acting in good faith, from ‘The Chadwick process’.”
I would highlight the phrase,
“walking away in disgust”.
The word “disgust” is critical.
“Careful evaluation of his convoluted 109-page third interim report…demonstrates he’s not listening to any representations other than those of the Treasury—his paymasters—and he’s merely re-trying the case which was done independently and well by the parliamentary ombudsman. It’s as if the judicial review hadn’t happened.”
There Mr. Braithwaite makes a critical point. We have had the adjudication of the parliamentary ombudsman. As various hon. Members have stated, we have repeatedly rehearsed the arguments as to what should be done, and yet in my opinion the Chadwick process is a classic way of kicking things into the long grass.
Mr. Nick Bellord, an EMAG director, says:
“In summary, ‘The Chadwick Process’ has been a shameful charade to which EMAG is surprised that a retired Appeal Court Judge (albeit hand picked) has lent his name. The regulators allowed a Ponzi fraud to develop over nine years. The Treasury fathered and nursed a fraudulent reassurance treaty when the crisis arose in 1999 and ever since has not failed to stoop to every kind of cover-up, delay and low trick to escape the full truth being revealed—it is not just the failure to pay any compensation after a further decade—but the hiding of disgraceful behaviour by a major Office of State.”
Everyone who has spoken in this debate has spoken about the need to continue with the Chadwick process. The Minister challenged my hon. Friend the Member for Fareham (Mr. Hoban) as to what the Conservative party would do, should we enter office after the next election. Interestingly, it would appear that there is no alternative now, given where we are, but to continue with the Chadwick process. But so frustrated and demoralised are members of EMAG—the key words that I want to use are “frustrated” and “demoralised”—that Mr. Braithwaite says in his note to me:
“The right thing to do is to disregard the remit given to Sir John, although keeping the database developed by the Treasury’s actuaries, establish the independent tribunal as recommended by the parliamentary ombudsman and commit to the compensation process that the parliamentary ombudsman proposed. That’s an urgent priority for the next Parliament.”
So I am getting from Mr. Braithwaite a slightly different understanding of the situation, because I believe that he and other members of EMAG have lost so much confidence in the Chadwick process that even at this stage they may be prepared to throw it out and go back to the parliamentary ombudsman’s findings.
I am very heartened that my hon. Friend the Member for Fareham has stated that the Leader of the Opposition is determined to sort this matter out very quickly should we be elected to office. I suggest to my colleagues on the Front Bench that, should the Conservative party be elected to office in May, an urgent meeting be set up with EMAG at the earliest opportunity so that we can work with it constructively to sort the process out once and for all.
May I, too, declare a modest interest in Equitable Life, having made some additional voluntary contributions under the parliamentary scheme at the beginning of my time in the House? No doubt, I have made a small loss, but that is not why I am speaking today. I am speaking on behalf of the millions of people who have lost substantial sums and will be seriously affected. People in our position who have made small losses can bear them, but others cannot. We must all be aware that the difference between having a basic state pension and having a basic state pension plus £75 a week is equivalent to a real difference in living standards.
I am a member of the Select Committee on Public Administration, which is chaired so brilliantly by my hon. Friend the Member for Cannock Chase (Dr. Wright). We unanimously supported the ombudsman’s report and we wanted urgent action to be taken to respond to the needs of Equitable Life members who lost out. In retrospect, my reaction to these matters would have been to do the same as with Northern Rock. I would have taken Equitable Life into public ownership and underwritten all its pensions. That solution was not considered by either side of the House to be in the spirit of the times, but I am afraid that both sides have been wrong on this matter. We have subsequently reinvented the idea of public ownership in the financial sector. That is a good thing and I would like to see more of it in future.
There are wider lessons to be learned from this matter, particularly about regulation. The original apostles of deregulation were, of course, the Conservatives, but, regrettably, the Labour party followed in their footsteps. I disagreed with that approach from the beginning. Some of my left-leaning hon. Friends with more traditional socialist views were put on the Select Committee on Deregulation when they first came to the House and the first thing that they suggested was renaming it as the Select Committee on Re-regulation. I thought that a splendid idea, although it was said in jest.
The Equitable Life case concerns a failure of regulation. At first, it was regulated by the old Board of Trade and the Department of Trade and Industry, but its regulation was then passed to the Treasury and then to the Financial Services Authority. At each stage, the degree of regulation got weaker. I am amazed at the Treasury’s actions because it should have realised that if it did not regulate properly, it might, in time, have to pay the bill. That was one of the Treasury’s many failures of the past two or three decades of which I have been a severe critic. Those failures were passed on to the FSA, and who can blame it? It was told, “The mood and culture now is for light-touch regulation and deregulation,” so it did not push very hard. Of course, we have seen to our cost what has happened elsewhere in the financial sector. From the beginning, the bail-out costs might have totalled £5 billion. That does not seem like very much now, given what has happened with the banks, but at that time, £5 billion was, no doubt, a figure to make some Treasury officials and Ministers wrinkle their brows.
The root cause of the problem lay with regulation and the culture of deregulation. In some areas of regulation there is an inherent contradiction in that regulatory bodies have to regulate on one hand to make sure that lots of profits are made and on the other to make sure that they protect policyholders and consumers. The rail regulator has responsibility for making sure that the railways perform very well financially, but also for ensuring that they are safe. That presents a contradiction, and that is why I believe that certain areas of our economy ought to be in public ownership and accountable to this House, which can take all the factors into consideration and make sure that the public interest is properly represented. We would have to accept the cost to the public purse of doing that.
I am sad to say that, on this, there seems to be little difference between the Front Benchers on both sides of the House. I am sure that if the Conservatives had been in government at the relevant time, they would behaved very similarly to the Labour Government. Indeed, they might have delayed and prevaricated even more. The hon. Member for Fareham (Mr. Hoban) gave the game away when he said that we had to take account of the cost to the public purse. The Government’s failure to regulate led to the loss of billions of pounds of ordinary people’s money, and there was a moral obligation on the Government to put that right. It is interesting to note that the Public Accounts Committee said that it was not just about cost, but that a question of justice was involved. It was absolutely right about that.
The nonsense about market forces was another factor in the equation. The idea was that we were buying something from a market. If someone put all their money into an organisation that was meant to ensure that they could live a decent life in their old age, and the Government said that it was regulated, that person would expect the relevant moneys to be paid to them when they retired. If that money was lost, someone could not just say, “Well, I’ll change my provider and go to another organisation.” During the financial crisis a few years ago there was a surge of people trying to get their cash into national savings because they are underwritten by the Government. They wanted to get their money away from the private sector.
In future, we must look to ensuring greater public involvement in the financial sector in general terms, not just in respect of such savings policies. We must look towards having more certain public provision for pensions. I said in yesterday’s Work and Pensions questions that there will come a time when the Government will have to establish a compulsory SERPS—state earnings-related pension scheme—for all because occupational pension schemes are failing, declining and disappearing, and private savings companies are often of very poor value, with a third of the value of one’s savings going on administration, advertising and whatever.
Indeed. I thank my hon. Friend for his helpful intervention.
There is a lesson for us all to learn. In future, there will have to be much more state involvement in provision for old age and much more certainty about what we do with our money. A state scheme would not only provide more security for our savings but would be much more efficient, with guaranteed returns at the end of the day. It would not be stock market related, or dependent on stock markets or interest rates, but would offer defined benefits for all who saved with it, which would in time be the majority of the population.
As I have said many times in recent weeks and months, the way to solve the cost problems facing the Government not only in relation to Equitable Life but in general is to start collecting the vast amounts of tax that the Treasury fails to collect. The gap between what the Government could receive and what they actually receive in tax is said to be at least £100 billion a year—this week, I saw the figure of £175 billion—which is a staggering amount of money. If we collected just a quarter of that money, we would solve all our problems very quickly. Most of that money would be paid by wealthy companies and wealthy people, not by ordinary people, and it would be enormously beneficial to the economy and to Government resources. Now that I have made my point about regulation and have used up my time, I shall sit down, but I am pleased to have had this opportunity to speak.
I think that we should record the sadness of the occasion in debates such as this. This issue is sad and tragic for all the Equitable Life policyholders who did the right thing throughout their lives. They were prudent and they saved, and they are exactly the sort of people whom we should support. We should not lose sight of the fact that they are all individual victims of what has happened. There is, understandably, a danger that we will simply debate the process and what the ombudsman or Chadwick should do and how the matter should be handled. We all have a large number of constituents, many of whom we have got to know personally as a consequence of the long time that this has taken, who have suffered considerably, and continue to suffer.
We should never forget the damage done to confidence in savings and the pensions system as a whole. Ten years ago, Britain’s pension system was considered a model for others to follow. The low state pension was supplemented by good employer and personal pensions, and the majority of workers seemed to be heading for a reasonable retirement. Equity markets were booming, interest and annuity rates were high, and actuaries and investment advisers believed that good pensions were easily affordable. Over the past decade, however, our pension system has disintegrated, workers’ retirement plans have not turned out as expected, and many people face the prospect of an impoverished old age if they do not keep working. Private sector employers have abandoned final salary schemes, and confidence has generally been shattered.
These debates are sad, because in the past decade we have witnessed the meltdown of our once-thriving retirement savings culture. We need to get back to a culture of savings and thrift. Of course, people who invested in Equitable Life could in no way be accused of being anything other than prudent. After all, Equitable Life was the world’s oldest mutual, established way back in 1762. Many people who invested in it were lawyers and professionals who had every confidence in its being a reliable, redoubtable institution, so it has been a really sad day for them.
This debate may, in some ways, turn on narrow points. On the process, the Government have said that they will respond within two weeks of the final Chadwick report. Pretty well everyone in the House is cynical about the fact that the final report will not be published until May this year. The Government have signally failed to say—and I did not think that the Chief Secretary’s explanation was very convincing—when payments will commence, and when they will be completed. It is not difficult for them to give an indication of when they hope that payments will begin and over what period they hope they will be made. Thousands of policyholders have died, and given that the average age is 79, payments have to be made quickly to the rest of them. I would therefore wish to support those who argue for interim payments. After all, EMAG estimates that of 54,000 Equitable with-profits annuitants in 2002—the year in which pensions were cut—10,000 have died. The surviving 44,000 have an average age of 79, so it is not unreasonable to call for an interim payment equivalent to two years’ pension to be paid to all of them. The sum, which EMAG estimates to be £214 million, could be deducted from the final settlement, so all those annuitants would receive at least some money.
Delay has characterised this whole sorry saga. As my right hon. Friend the Leader of the Opposition has said, the Government have repeatedly put this off. In a sick way, I think that they are waiting for people to die. If that is the Government’s policy, it is unbelievably depressing. The whole history is one of delay. As long ago as July 2008, the parliamentary ombudsman published a report on Equitable Life, which recommended that payments should be made to policyholders to reflect the relative loss resulting from maladministration, subject to the state of the public finances. The Government promised to respond on several dates in 2008, but did not reply until January 2009. For example, on 3 December 2008, the Prime Minister told the House:
“There will be a statement before the House rises at Christmas.”—[Official Report, 3 December 2008; Vol. 485, c. 38.]
No statement was made.
It is now a year since the Government made a statement to the House on 15 January 2009 responding to the ombudsman’s report. The then Chief Secretary to the Treasury, the right hon. Member for Pontefract and Castleford (Yvette Cooper), said that compensation would be paid to policyholders who had suffered “disproportionately”, but she did not set out a timetable or define what that word meant. That was in January 2009, but Equitable Life policyholders are no further forward, although she said:
“We agree that there has been maladministration in particular areas, and…that Government action is merited…I wish to apologise to policyholders on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life between 1990 and 2001 for the maladministration we believe has taken place…we also want to focus on those who have been hardest hit.” —[Official Report, 15 January 2009; Vol. 486, c. 377-78.]
Those who have been hardest hit are still waiting for something to happen. They keep being told that a new form of process is going to take place. If I were an Equitable Life policyholder, I would be concerned if the Government were returned at the election, because, although they might respond within two weeks of receiving the Chadwick report, they would find yet further means to delay payment.
Let us not forget that the Public Administration Committee labelled the Government’s approach
“constitutionally dubious and procedurally improper”.
It said that it was “morally unacceptable” that the ombudsman had to take the highly unusual step of publishing a special report as a result of her disappointment with Government inaction. The ombudsman concluded in that report:
“The Government’s response to my report was deeply disappointing. It provided insufficient support for the rejection of my findings of maladministration and injustice.”
The High Court upheld the view that the Government unlawfully rejected the ombudsman’s finding of regulatory failure.
This has been a saga not just of delay by the Government, but of prevarication, incurring the criticism and wrath of every single regulatory body, from the ombudsman to the Public Administration Committee and the courts. Here we are, all this time later, and those who have suffered as a consequence of the collapse of Equitable Life are no closer to knowing when they are going to receive any money.
I shall conclude with two points. First, I hope that a commitment can be made to provide interim payments and, secondly, I hope that the contribution of my hon. Friend the Member for Fareham (Mr. Hoban) and, I am sure, that of my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands), who will conclude the debate on behalf of the Opposition, will reassure policyholders that an incoming Conservative Government will get to grips with this immediately and ensure that we make payments to those who have suffered as a result of the collapse of Equitable Life as speedily as possible. There is a Latin tag, sine mora, which means without delay, and I hope that, we can see, as soon as there is a Conservative Government—
I am waiting to hear the Latin tag, and I shall try to get hold of my hon. Friend the Member for Banbury (Tony Baldry) to find out exactly what it was.
The sorry tale of what happened in Equitable Life is well documented and, depressingly, was accurately catalogued by the hon. Member for Twickenham (Dr. Cable). It has also been picked over by the House on countless occasions, and I think that we all feel a sense of deep disappointment and frustration that we are gathered here yet again to press for the Government to honour their duties to Equitable Life policyholders.
It is with great sadness that in preparing this speech I realised that I first spoke in this place about the debacle in November 2002 after the publication of the Penrose report. I said:
“I fear that we shall need to debate the matter again in the months and years ahead”.—[Official Report, 27 November 2002; Vol. 395, c. 73WH.]
I did not anticipate that there would be an eight-year delay. The Government’s caution, delay and penny-pinching approach to doing the right thing by Equitable Life policyholders stands in stark contrast to the way in which they have showered taxpayers’ cash on other groups in the past decade. To be honest, I have a nasty feeling that they consider middle-class folk who have diligently saved to provide a comfortable retirement as “them”, not “us”. If the gross negligence that has been established at Equitable Life had taken place at the Easington colliery welfare fund, I cannot help but believe that something would already have been done by the Government.
As a result, it is with unfortunate cynicism that I greet the news that Sir John Chadwick is now committed to giving his final report on Equitable Life in May, with the Government offering to respond to him within two weeks of that. Given that we all know that that is likely to be after a general election, I fear that the Government are once again playing politics with the lives of many of my constituents by extending the hope of a resolution but ducking the responsibility of its enactment.
Policyholders may be forgiven for not having much faith in this latest round bearing fruit, either. After all, the ombudsman published her report on Equitable Life back in July 2008, but it was not until January the following year that the Government finally responded, after which their partial rejection of her findings was overturned by the High Court. Many now suspect that Sir John’s review is little more than a Treasury stitch-up that seeks to negate the four years of work by the ombudsman. Paul Braithwaite, the general secretary of EMAG, has been mentioned a number of times during the debate. As he says:
“The Treasury is attempting to retry the case, using actuarial sophistry to distort the figures. . . The logical conclusion of this sham process is that the Government will deny all obligation to compensate policyholders for the damage done by serial maladministration and only paltry discretionary payments will be made on the basis of charity, not justice”.
I know from the desperate letters that I get from constituents that policyholders would be grateful even for the smallest of concessions, such as a time scale for delivery following Sir John’s final report, even if that means that they would not receive compensation payments until, say, the end of 2011. Indeed, given the sad history of this shambles, my constituents and those across the nation who have been affected by Equitable Life’s downfall have learned to be realistic. People no longer have any expectation that they will get a share of the proposed £4 billion windfall, yet so long as indecision remains regarding the formula by which to calculate compensation payments, the Government have decided that the safest option is inaction. In the current state of limbo, people are worrying themselves sick.
Let us never forget that although pensions may be a highly technical matter—I accept that the report is very detailed and needs to be properly analysed—the problems surrounding Equitable Life and other pension schemes are human. As my hon. Friend the Member for Banbury (Tony Baldry) rightly pointed out, policyholders are dying as we wait for this sorry saga to be tied up. Surely it is not beyond the wit of man for us to be putting together an interim payment for those hapless folk.
I have spoken before in the House about some of the policyholders in my constituency who are affected by these terrible delays, but I believe it is worth touching on a few again, simply to reiterate to Ministers the suffering that the hesitation is causing. Mr. MacDermott of Motcomb street in Belgravia wrote to me before, saying:
“I cannot claim poverty but I can safely say that at 77, I might well have been happily retired rather than continuing working so as to provide for my wife and two university-aged children.”
He is now 80 and sees no sign of change or resolution of the issue.
Mrs. Valerie Walsh of Bedfordbury in Covent Garden said to me:
“If I had received my full pension pot I would not now be struggling just above the poverty line.”
Because she earns a relatively modest amount, it is impossible for her to claim any of the housing help and benefits that are available to many other pensioners in the district where she lives.
Most of the people who have lost out do not have the option of returning to the workplace to make their way in life. They are often in their 60s, 70s or even 80s and the Equitable Life money was the most important part of what should have been a relatively relaxed and quiet retirement. They have been denied that. They have been denied justice, and with ever more delays, many will be denied ever seeing any of the money.
Other Members have spoken about the wider issues, which I shall deal with in conclusion. We would be foolish to underestimate the ongoing damage to confidence in the pensions industry that is being caused by the failure to draw a line under the Equitable Life affair. The breaking down of conventional middle-class job security has made ever more important the concept of trust in personal and company pension schemes.
Until its collapse, Equitable Life was widely regarded as the jewel in the crown of the retirement providers, but the failure of the regulator to intervene in the affair showed that existing rules to protect the consumer from unreasonable risks were not enforced. We can go through the catalogue of events. The FSA should have taken its role more seriously when it was the regulator and engendered a culture of collective responsibility that would have ensured universal public confidence.
I am worried for the future. We all know that it will be the next generation of taxpayers who pay for the borrowing that is taking place now. We are spending £4 for every £3 that we raise in tax this year, purely for consumption. There is no investment involved in that. Future generations will have to pay the bill for our national profligacy. That makes it even more crucial that in the decades ahead the youngsters of today—the middle-aged folk of tomorrow, who will become pensioners themselves—have enough faith in the financial system to put their hard-earned cash into a savings pot for the future. Unfortunately, it is an indictment of the Government that those who had already taken responsibility for their own destinies by investing in Equitable Life have been treated with such contempt.
The Equitable Life debacle will go down as one of the great shames of this Parliament. It appears that we could not even support our own independent ombudsman against the Executive. My hackles were particularly raised by the Government amendment, which would make the resolution state that the House
“recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman”.
That is exactly what Parliament has not done in this case.
The Chief Secretary was all reasonableness today, but the Government had to be dragged through the courts kicking and screaming before there was any action to do justice to Equitable Life policyholders. No one could have been in any doubt after the ombudsman’s report that the Government had a case to answer regarding the actions or inaction of the regulators, leading to the downfall of the company. The matter has now dragged on for almost 10 years—longer than I have been a Member of the House.
I do not intend to rake over the coals of what went wrong. Many others have mentioned that. What is needed now is urgent action to right a wrong. Like all Members, I have among my constituents a significant number of Equitable Life policyholders, most now elderly, who have suffered significantly. Sadly, some have died waiting for justice.
The problem goes much deeper than that, and it is a problem for the whole House. It has not gone unnoticed outside this place how policyholders have been treated, compared with the speed of action on the banks. As others have said, that has undermined the case for savings and private pension provision, which are important for the future and which will come back to haunt successive Governments unless something is done quickly to deal with the situation. I suspect it is too late to bring back confidence.
When the Government said that they were going to apologise, there was real hope that action would finally be taken to end the saga. It was therefore a considerable let-down, to put it mildly, when all that was announced was yet another investigation under Sir John Chadwick into how a compensation scheme would work. I recall that, in January last year, in a Westminster hall debate following that statement, I said:
“The more cynical among us might consider that statement as putting a decision beyond the next general election.”—[Official Report, 27 January 2009; Vol. 487, c. 36WH.]
It turns out that I was not being cynical at all. That is exactly what will happen. The final Chadwick report will not be available until May and, according to the Minister, an announcement on a scheme will be made 14 days thereafter. I find it strange that, after all this time and all the reports, there is to be a sudden burst of action within 14 days to produce a fully formed scheme to deal with the problems.
Even now, pertinent questions remain that are not being answered. We need to know when payments are to be made. Will there be another period of inaction or will they be made quickly after the Government decide what they are doing? Will they be made by the end of May, by the end of June, or by some other date? Perhaps the Exchequer Secretary can clarify that when she sums up. It was interesting that the Chief Secretary was unwilling or unable to give any indication of the time scale of payment. That is what people want to know. They have waited years, and many of them are suffering badly. They want to know what they will get, and when, in order to draw a line under the whole sad saga. It is not at all clear, at least to me, who will receive compensation. It may be only those who have suffered disproportionately. I note that, in its briefing for this debate, EMAG says:
“Ex-gratia payments, it is proposed by the Treasury’s remit, will be further limited to only those who suffered ‘disproportionate impact’—now defined as With Profit Annuitants and those late-joiners who put in new money after 1998.”
Will the Exchequer Secretary please clarify exactly what is meant by “disproportionate”?
Means-testing has been mentioned several times during the debate, but again we still do not have a clear picture of what is proposed. Both Sir John and the Minister have said that it would not be possible to look at the individual means of every claimant, but a means test is not being specifically ruled out. We need some clarity about how that will be done. If the Minister is to respond within 14 days, the Government must have some idea what they are going to do, whether or not they have received the final report. Moreover, we are not sure which losses are directly due to maladministration, which seems to be another anchor on the scheme.
It will stick in the throat of many Equitable Life policyholders to see how the Government have reacted to that situation compared with their own.
The scheme that is being talked about could keep the lawyers in business for years if not decades, because so many parts of it are unclear. For all that the Minister said about the Chadwick process being quicker, it does not seem to have proved to be quicker than what the ombudsman proposed all those years ago. Had the Government accepted their responsibilities at that time, a scheme could have been up and running, policyholders could have been compensated and this injustice could have been righted long ago.
The endless arguments will continue. I appeal to the Minister, even at this late stage, to give justice to policyholders quickly and to produce a scheme that is even-handed and simple—one that ensures that my ageing constituents do not have an interminable wait to see whether they are to be compensated and that they get some compensation before it is far too late for them.
This may be the last opportunity that I have to speak in this Parliament and it is an honour to follow so many thoughtful contributions today. I particularly want to put on record that, soon after I became a Member of Parliament in May 2005, one of the first groups to make representations to me was those of my constituents who had already taken up this matter with my predecessor—I think particularly of Mr. Roy England, Professor Bonn and others. Five years on, I want to do what a Member of Parliament should do, which is make representations on their behalf in the House tonight.
The joint chairmen of the all-party group made thoughtful speeches. The hon. Member for Leeds, North-East (Mr. Hamilton), who is not in his place, was absolutely right that the main focus of this debate should be the plight of those who still require justice and compensation, but he was wrong so easily to dismiss the point made by my hon. Friend the Member for Fareham (Mr. Hoban) that, by their inaction, the Government have undermined confidence in the savings system, as my hon. Friend the Member for Cities of London and Westminster (Mr. Field) also said. Thirteen short years ago, we had a state pension system that was working, which could be topped up by occupational pensions, excellent personal pension schemes and a savings culture that had been encouraged by personal equity plans, and the majority had certainty about their retirement age. Equity markets were starting to boom and the economic recovery had been in place in for three years. People had some certainty and were able to plan. The environment now is very different. Retirement plans are not living up to optimistic forecasts. The public and private sectors have abandoned final salary schemes, and we are moving to defined-contribution schemes, the returns from which are infinitely less certain, with higher charges and increasingly expensive annuity propositions. As my hon. and learned Friend the Member for Harborough (Mr. Garnier) said, the Government’s initial actions to alter advance corporation tax and the dividend tax credit have also played their part.
The Government have failed on any number of occasions to take the opportunity to sort out this injustice and so have engendered a lack of confidence in the system. “By your actions shall you be known” is a well known phrase, and the Government will be known by their actions in this place, even their response to the Penrose inquiry. Penrose did say that the company is the author of its own misfortunes, but pointed out that there was a general failure of regulators and the Government Actuary’s Department. It was seriously disingenuous of the Government at that time to try to hide behind that first remark, yet not acknowledge the mistrust and opprobrium that Penrose attached to the Government actuaries and the regulatory process. It was also seriously disingenuous of the Government at that stage to say that Penrose had not recommended compensation, because that was specifically excluded from inquiry’s remit.
Understandably, therefore, one or two colleagues tonight have commented with some cynicism on the contribution of the Chief Secretary, who was unable to give any details of the payment scheme. Yet I note that the Government, in their amendment to the motion, appear to be moving slightly from their initial position that they would react within two weeks to the Chadwick report. Now they say that they will
“respond with details of a payment scheme within two weeks of receiving this advice”.
If they could respond within two weeks, surely they must already know some of the dates. They must know now when they would start paying out. Either this is a failure of the wording of the amendment, or the Government have changed their position; if so, the Chief Secretary should be able to give us that information now.
The comments made in the House last year by the then Chief Secretary were extraordinarily crushing. It is understandable that my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) should have made the point about the frustration felt when the Chief Secretary said that there has been maladministration in several areas. It had been pointed out by Penrose eight years before that there was a general failure of the regulatory system, and the ombudsman’s report made that point as well. My hon. Friend the Member for Banbury (Tony Baldry) referred to the hardest hit, but surely all the policyholders have been hard hit. There has been speculation that, in today’s money, the pension might be £75 a week, but there is an opportunity cost, because a number of people were locked into the scheme in 2000 when they were told that penalty fees would be charged for withdrawal. For the Chadwick process not to look at losses incurred after 2001, when it was already known that a penalty charge would be incurred if the money was withdrawn, seems disingenuous of the Government. A number of hon. Members question whether Chadwick is a transparent and independent process. To limit compensation on those grounds seems spurious. That the scheme was already falling apart had to be known. The whole issue of penalty payments has to be taken into account.
The Government conceded the case for compensation some time ago. They conceded that it was not an ex gratia payment, but a payment for wrongs done—a payment for justice. By continually putting off the payment and not being able to tell us any details in this House tonight, even though their amendment says that they will produce them within two weeks, the Government are, at the very best, being disingenuous, so it is no surprise that there is considerable cynicism about their good intent on this matter.
I hope that when the Exchequer Secretary responds she is able to restore our confidence in that good intent by giving us details of the payment scheme; telling us why the Prime Minister said in 2008 that there would be a statement before Christmas, when it came only in January 2009; and telling us in detail that the Chadwick process is independent and transparent. If she cannot do those things, there will be real concern not only from Members, but from the people whom we seek to represent tonight—the people who require that compensation for the injustice done to them—about whether this Government really do intend to publish those details.
I shall try to avoid the more party political comments made by some contributors to the debate, partly because the Equitable Life issue is one of simple justice, not of ideology or of party, and partly because many of the mistakes relating to Equitable Life and the regulatory regime that governed it predate this Government, which underlines the time that many policyholders have been waiting for a resolution to the issue. Many Members have referred to the 10 years since the Court of Appeal judgment and since Equitable closed its doors to new business, but six years before that Equitable Life started cutting the size of final bonuses, and by what should have been the turning point, the parliamentary ombudsman’s report in 2008, the crisis had been brewing for about 14 years. Policyholders have therefore had to wait an enormous length of time.
I appreciate that some matters have been in gestation for some time and, therefore, should not be subject to party politics, but does the hon. Gentleman not understand the concern, which many of us feel, including the hon. Member for Angus (Mr. Weir) who spoke for the Scottish nationalists, that the treatment of Equitable policyholders has been so very different from the treatment of shareholders in banks, bank account holders and a range of others? As I said in my contribution, a whole lot of cash has been showered on such individuals, in stark contrast to the treatment of Equitable Life policyholders.
The hon. Gentleman makes a fair point, and it is incumbent on whichever Government happen to be in office when such wrongs are exposed to respond fairly and reasonably, and that responsibility lies fairly and squarely with this Government.
The ombudsman’s report was absolutely damning. It said that the Government and regulators were guilty of regulatory failure and recommended that an independent tribunal quickly and simply calculate compensation. The Government slowly accepted, and apologised for, maladministration, but they initially rejected many of the ombudsman’s findings, failed to offer immediate compensation and failed to set up the fully independent process that the ombudsman had asked for. That refusal was not only an injustice to Equitable Life policyholders, but a potential threat to the whole credibility of the ombudsman system. On many aspects of casework, many hon. Members might share my frustration that the ombudsman’s reports are often not properly acted on, and I am afraid that the response of the Government at the time and, to be honest, since then has helped to undermine the credibility of the ombudsman system. That is potentially serious, particularly in respect of the Chadwick process, which we now have instead, because there is now a real question about whether it will resolve the issues at all.
I am disturbed by the wording in the press release from Sir John Chadwick’s office on 4 March. It accompanied his third and final interim report and noted his provisional views as to what factors the Government
“may wish to take into account when considering which policyholders have experienced disproportionate impact.”
In other words, the report will be only a polite suggestion to the Government about what they might do, and it will leave them scope for what might be regarded as a wider and remaining injustice, which those representing policyholders might easily reject. If we have only those tentative suggestions, we face the awful prospect, 16 or 17 years after the first warning signs, of still no resolution for about 40,000 Equitable Life pensioners, whose average age as the hon. Member for Banbury (Tony Baldry) said, is 79. Certainly, many of them are elderly and many have sadly died while waiting for compensation, and, as I said in an intervention, it is estimated that as many as 2,500 could die in the next 12 months without ever having received compensation.
Policyholders were told to expect a final report from Sir John Chadwick in spring 2010. Well, the daffodils are out and my personal benchmark of spring, the Cheltenham gold cup, is imminent—the Cheltenham festival has started—but there is still no report. The real shame, as many Members have pointed out, is that in the end it will be a post-election report, and that adds to fears that the report will be controversial; that it might, as my hon. Friend the Member for Richmond Park (Susan Kramer) pointed out, use over-pessimistic assumptions and that, in the end, it will be highly contentious.
Indeed, that is absolutely true, but let us hope that it is not true on this final—or what we hope will be this final—occasion.
The human impact of this fiasco has been absolutely terrible. Mr. and Mrs. Littlewood of my constituency wrote to me in 2008, describing that human impact. They said:
“Personally our pension payments have been sabotaged to the effect that we are now always, even more, conscious of the cost of daily expenses and costs… The annual payments we put into E. L. to achieve a modest pension out of our earnings have been ravaged.”
That is the effect. Like many others, their prospects of a happy and modestly prosperous retirement, reasonably free from financial worries, which is what most of would hope for at least, have been wrecked.
It is pretty difficult for many Equitable Life policyholders to bear that situation, for a number of reasons. First, as the hon. Member for Cities of London and Westminster (Mr. Field) pointed out, there have been bail-outs for those in cases such as Barlow Clowes, when the current Prime Minister championed the rights of investors. It therefore seems ironic that, on his watch, we have not been able to expedite similar compensation for Equitable Life policyholders. Secondly, in the Government’s view the bail-out culture apparently extends to wealthy bankers who have brought this country to the brink of economic collapse, but not to hard-working pensioners who have done nothing wrong. They simply and prudently tried to save for their retirement, but they have ended up in a much worse situation. Finally, because there is a clear risk that the Chadwick report may not lead to an agreed resolution, the prospect of an actual payment that helps people in their daily lives and with their current financial situation will recede still further into the middle distance.
I urge the Government to accept a couple of requests. First, they should urgently look at the prospect of an interim compensation scheme. Government Front Benchers gave a pretty feeble answer earlier, and the idea that the Government are not willing to consider such a scheme because there might be a small overpayment to some Equitable Life policyholders, many of whom have been waiting 10 years for any payment at all in compensation for their losses, will sound rather hollow to all policyholders, but that is a risk that the Government ought to be prepared to take. Indeed, there may not even be a real risk, because, as other Members have pointed out, EMAG’s estimate of the cost of that compensation scheme is £200 million—a fraction of the compensation that is likely to be paid in the final analysis.
Secondly, I urge the Government even at this late stage, to clarify urgently the remit given to Sir John Chadwick and express the hope that his recommendations will propose compensation in the spirit of the ombudsman’s report—in a way that rebuilds a level of confidence among policyholders and offers some prospect of justice at the end of this whole long-drawn-out and sorry business.
This has been a good debate, and I am delighted that we Conservatives tabled the motion for discussion today. It shows the importance that we attach to the issue of Equitable Life; after all, this is likely to be the last debate in Opposition time on Treasury matters before the election.
We could have called for a debate on the record-breaking deficit, on the longest recession of any G20 country, on the Government’s flip-flopping on ruling out rises in VAT or on the slide of the pound, but instead we chose to debate Equitable Life. The whole Equitable Life saga serves as an allegory for the Government Treasury team’s whole approach to the economy—saying that there are hard choices to make and then not making them. They are dithering rather than taking action; they promise that things will be sorted out, but put off paying the money until another day.
I should mention the many scores of my own constituents—51 in the past 18 months alone—who have written to me about their own difficulties as Equitable Life policyholders. I have read harrowing letters detailing lives blighted and retirement dreams dashed.
This is not the first time that we have debated Equitable Life in the House. I have gone through the various pledges made by the Government in the last debate on the issue, in October. To be fair, the Chief Secretary to the Treasury took a huge number of interventions during that debate, as he did this time. Frankly, however, he deserved his battering—so weak was his case and so unable or unwilling was he to answer any questions. I want to quote his response during the last debate to an intervention from my right hon. Friend the Member for Wokingham (Mr. Redwood), who asked whether the Government would go into this election
“having to say to Equitable Life policyholders, ‘We have not agreed any compensation for you’”.
He was told, weakly, by the Chief Secretary:
“I hope that we will not be in that position.”—[Official Report, 21 October 2009; Vol. 497, c. 934.]
But that is exactly his position as we go into this election.
I thank the Chief Secretary for the intervention, but that is just not good enough. I will outline the position, but I thought that he was intervening to tell us what he told us in October he would be able to do—go into the general election campaign with a clear pledge on amounts and a timetable. I am afraid that he has failed on both counts. I will answer his question when the time is right.
It is pretty clear that the Chief Secretary’s position is as I have described, and it is a terrible position for him to be in. I agree with my hon. and learned Friend the Member for Harborough (Mr. Garnier), who said that the Chief Secretary is playing a game with the public on this issue. He tried to set up an artificial dividing line between following the Chadwick process and fulfilling the ombudsman’s recommendations. That is a false choice. We very much hope—[Interruption.] The Chief Secretary should listen for a moment. We very much hope that the Chadwick recommendations will comply with the ombudsman’s recommendations. The Chadwick recommendations will, we hope, deliver the principal recommendations made by the ombudsman—that payments should be made to policyholders to reflect the losses arising from the failure to regulate Equitable Life properly.
The Chief Secretary also considered the two issues of deceased policyholders and means-testing; it was noticeable that he did not rule in payments to estates and that he did not rule out means-testing. I am afraid that very little comfort was given there. His speech contained nothing about amounts or timing, both of which are of the utmost importance and were promised by him back in October.
The hon. Member for Castle Point (Bob Spink) made a notable intervention on the Chief Secretary; it left me confused about the hon. Gentleman’s status. After the Conservative Whip was withdrawn from him, he sat as an independent, then as a member of the UK Independence party, then again as an independent. Then last week, he was part of the Canvey Island Independent party. Last Friday, his local papers reported that he had set up his own party, the Save our Green Belt party. The House of Commons Library has listed him as an independent, but he seems to be following the Labour Whip as he votes in the Division Lobby on crucial matters. I shall be interested to see under which party Hansard records his intervention.
The hon. Member for Twickenham (Dr. Cable) outlined the cumulative effect of foot-dragging and we wholeheartedly agree with him on that. The hon. Member for Leeds, North-East (Mr. Hamilton) talked about the danger of the Equitable Life issue becoming a party political football. I have to disagree; in fact, the last Opposition motion on the subject, tabled by the Liberal Democrats, had our full support, and I assume that the same will apply in reverse this evening. Unfortunately, the hon. Gentleman was not one of the Labour Members who voted in favour of that Opposition motion last October.
My hon. and learned Friend the Member for Harborough pointed out the cynicism of delaying any compensation until after the election. He also rightly pointed out, as did the hon. Member for Leeds, North-East, that the vast majority of policyholders were or are of very modest means. The hon. Member for Brent, North (Barry Gardiner) said that nothing that the Government had done had made him more ashamed than the saga of Equitable Life. Let us bear in mind that the hon. Gentleman resigned from the Government in protest against his own party leader. Strangely, however, he did not support the Opposition motion on Equitable Life last October, when the chips were down.
I should like to praise the work of my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) as co-chairman of the all-party group on Equitable Life Policy Holders. He and I were elected for the first time in 2005; clearly, the Equitable Life issue predates that time. My hon. Friend has shown courage and done a great service to many people by taking on the co-chairmanship. He called for a better working relationship between EMAG and the Government and we wholeheartedly endorse that.
The hon. Member for Luton, North (Kelvin Hopkins)—who, to be fair, did vote for the Opposition motion last October—showed us yet again that whatever the question, his answer is always more public ownership. He criticised us for our pledge to take into account the cost to the public purse of any compensation, but it is worth pointing out that that was a key recommendation of the ombudsman herself.
My hon. Friend the Member for Banbury (Tony Baldry) made a strong and attacking speech, reiterating the powerful points made by my hon. Friend the Member for Fareham (Mr. Hoban) about the damage done to our savings culture. He also called for speed in the compensation process, saying rightly that not much apparent progress had been made since July 2008.
My hon. Friend the Member for Cities of London and Westminster (Mr. Field) pointed out that he first spoke about Equitable Life seven and a half years ago. Again, that shows how long this sorry saga of Government mishandling has lasted. As my hon. Friend put it, the safest course of action for the Government appears to be inaction.
The hon. Member for Angus (Mr. Weir) reminded us of the importance of respecting the role of the ombudsman, while my hon. Friend the Member for Wimbledon (Stephen Hammond) told us in a strong speech how he was ending where he started this Parliament: speaking up for his constituents about Equitable Life. He talked wisely about the importance of enhancing our savings culture in this country. The hon. Member for Cheltenham (Martin Horwood) also made important points about the speed of compensation.
This all reminds me of the last time the issue was debated in the House. A sizeable number of Labour Back Benchers rebelled against the Government, voting for a motion from the Liberal Democrats and Conservatives. I ask those Labour Members to make their voices heard again, on behalf of Equitable Life policyholders, and to vote for the Opposition motion tonight.
By refusing to take responsibility for the appalling delay in giving compensation, the Government are behaving once again like a soldier deserting his post. Their approach to this problem, like their approach to the deficit, is one of hoping that the problem will simply go away.
I will not; my hon. Friend the Member for Fareham gave way 27 times, and I have only one and a half minutes left.
The Government have had the best part of a decade to get this matter right, and thousands have died with neither compensation nor justice. There may be only six weeks left in the lifetime of the Government, but it is still not too late for them to do the right thing. If they choose not to, we will make sure that justice is done.
The response from those on the Conservative Benches is absolutely clear: we accepted the ombudsman’s findings from the very beginning. My right hon. Friend the Member for Witney (Mr. Cameron) has stated clearly that if we win the election, we will sort out Equitable Life very early on. We make this pledge today: we will sort out the mess, and we will sort it out at some speed.
I thank all Members for their interesting and passionate contributions to this debate. I think that we are all agreed on one thing—the need to resolve this important issue quickly and fairly. I believe that we have been making good progress. Sir John’s recent interim report represents a significant step towards resolving the issue and, as the Chief Secretary said, he will submit his final report in May. As far as possible, the Government are progressing work on scheme design in parallel with Sir John’s work. We cannot prejudge Sir John’s final advice, and final decisions cannot be made until it has been received and considered. However, I want to reiterate what the Chief Secretary said in his opening speech: we recognise that there is a strong case for the estates of policyholders who have passed away to be included in the scheme; we recognise that it is neither desirable nor administratively feasible to means-test every individual policyholder; and we are able to commit to responding to Sir John Chadwick’s final advice within two weeks.
I shall now try to cover, as best I can in the time available, some of the points that hon. Members have raised. The hon. Members for Twickenham (Dr. Cable) and for Shrewsbury and Atcham (Daniel Kawczynski) referred to EMAG’s withdrawal from the Chadwick process. It is regrettable that EMAG has withdrawn from Sir John’s work. Sir John is a well-respected former Court of Appeal judge who carries out his work independent of Government, and I do not believe that his integrity is in question. Throughout the process, he has carefully considered representations from all interested parties, including EMAG, and has given equal time and weighting to the views of those parties. That is reflected in his latest interim report, which publishes all the representations that he has received. The independent panel appointed to peer review the work of Sir John’s actuaries comprises specialists in their field. They are all highly regarded and were selected on the basis of their professionalism and integrity.
Many hon. Members, including the hon. Member for Twickenham, my hon. Friend the Member for Leeds, North-East (Mr. Hamilton), and the hon. Members for Cities of London and Westminster (Mr. Field) and for Cheltenham (Martin Horwood), asked about interim payments. In order to make interim payments, we would be required to pre-empt Sir John’s advice, and we would have to make assumptions about a wide range of factors without having the full extent and analysis of the information required. I believe that it is important that all resources are directed towards ensuring that the final payment scheme is implemented as swiftly as possible, and at this point I do not want to divert resources that may, in turn, lead to delays in that implementation process. However, as the Chief Secretary said, we are investigating the possibility of prioritising payments within the scheme so that groups that have been the most disproportionately impacted would be paid first.
My hon. Friends the Members for Northampton, North (Ms Keeble) and for Leeds, North-East, and the hon. Member for St. Albans (Anne Main), who is not in her place, mentioned data cleansing. I would like to confirm that officials are in contact with Equitable Life on the issue of data, and the data cleansing process is part of the work that is being carried out in parallel with Sir John’s work. I am confident that data cleansing will not cause delay once Sir John reports.
Many Members, including the hon. Members for Angus (Mr. Weir) and for Wimbledon (Stephen Hammond), asked when payments will flow. At the moment, it is impossible to tell. At the very least, we will need to know who we are paying and how we are paying, and we will need to consider different delivery options. However, as I said, we are starting preparatory work so that we can move as rapidly as possible when Sir John reports. We have scheme design consultants on board who are developing options, and extensive work by officials has included discussions with Equitable Life and with stakeholder groups. This is potentially one of the largest schemes of its type and, as the Chief Secretary said, history tells us that extensive preparation is needed to get this right; its scale and complexity should not be underestimated.
In order for this process to be efficient and effective, I have absolutely no doubt—I am sure that the Minister will confirm this—that the Government will get sight of Sir John’s final recommendations well in advance of the published date noted in the amendment. Do the Government expect to get the report, either in draft or in its final form, before the end of April?
The hon. and learned Gentleman will be aware that we have received interim reports from Sir John during this process. [Interruption.] I believe that he just said that we have already seen the draft final report—I can assure him that that is absolutely not the case.
The hon. and learned Member for Harborough (Mr. Garnier) and the hon. Members for Shrewsbury and Atcham and for Banbury (Tony Baldry) expressed their cynicism about Sir John’s reporting in May. This is Sir John’s timetable. Sir John does not work to a parliamentary or a political timetable, and he is carrying out the work as quickly as he is able. Clearly, it would be irresponsible to rush to implement a scheme before the facts are established.
Many Members, including the hon. Member for Cheltenham, raised the question of Sir John’s independence. Sir John will come to his own views independently of Government. We have, of course, offered our own views and comments to the process, and they will be published along with all the responses, but they are representations, not directions. We have been very clear that we will take full account of Sir John’s advice.
Speaking of cynicism, does my hon. Friend share my view that the Conservatives are sitting on the fence? Their motion calls for the implementation of the ombudsman’s recommendations. Today, their spokesperson said that they hope that Chadwick will follow the ombudsman’s recommendations but did not say what would happen if the recommendations from Chadwick are different from those of the ombudsman: they are silent on that point.
Exactly. As my hon. Friend suggests, Sir John’s approach is already different from that of the ombudsman. Her approach was based on the scrutiny of individual cases, coupled with the requirement to prove that policyholders had relied on regulatory returns. Sir John has taken a flexible approach that already differs from that approach.
The hon. and learned Member for Harborough and the hon. Member for Angus said that we were wrong, as a matter of principle, to question the ombudsman’s findings. We do not accept this. To treat the ombudsman’s findings and recommendations as though they were binding would reflect neither the true nature and extent of her role, nor that of Government in their stewardship of public funds. Rightly, the Government cannot simply dismiss her findings and recommendations, and I assure hon. Members that they did not do so in this case, but they can depart from them in certain circumstances. To be clear, this was not indicative of any lack of respect for the office of the ombudsman; still less did it stem from any disregard for the plight of policyholders affected by the events at Equitable Life. It was simply grounded in the need to ensure that our response, and any actions that we might take, were based on a proper appreciation of the evidence.
The hon. Member for Angus asked what the disproportionate impact is. The concept of disproportionate impact is intended to help to ensure that payments made under the scheme are targeted at where they are needed most. Sir John will advise us on factors arising from his work. In his third interim report, he expressed his provisional view that holders of with-profits annuities and late joiners have been disproportionately impacted, in that the impact of maladministration was severe beyond the norm. However, the Government have not stated that only those two groups will receive payments. Final decisions on who will be paid will be made after Sir John submits his final report.
The hon. Member for Cheltenham asked about the comparator with the regulator in the 1990s and the possibility of that leading to delay. That was also raised in an intervention by the hon. Member for Richmond Park (Susan Kramer), who is not in her place. Sir John’s third interim report set out his provisional views on regulatory behaviour in the 1990s. He is considering various scenarios of regulation, whether stringent or loose, but he has not said which he prefers. He is open to all views on this—it is not fixed in stone—and input from everyone, now, will minimise dispute later. Sir John has not yet finalised the comparator.
The accusation levelled at the Government is that that we have consistently—some have even said wilfully—dragged our feet on this matter: even now, when Sir John is close to completing his work. That is simply wide of the mark and absolutely not the case.
In conclusion, we appreciate and share the genuine concerns that Members in all parts of the House continue to have on behalf of policyholders. We have before us a motion that exhorts us to set a clear timetable for implementing the ombudsman’s recommendations. However—
Question put forthwith (Standing Order No. 31(2), That the proposed words be there added.
Question agreed to.
The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).
That this House recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; notes that the High Court ruled that the Government’s response to the Ombudsman’s recommendations on Equitable Life, its establishment of an ex gratia payment scheme, and the terms of reference given to Sir John Chadwick were a rational response to the Ombudsman’s report; notes that Sir John expects to produce his final advice in May; welcomes the Government’s commitment to respond with details of a payment scheme within two weeks of receiving this advice; welcomes the Government’s determination to establish a scheme administratively quicker and simpler to deliver than that envisaged by the Ombudsman; further notes that to abandon the Chadwick process so close to completion would add delay and hardship for policyholders; welcomes the Government’s view that, while it cannot prejudge Sir John’s final advice, there is a strong case for policyholders who have passed away to be included in the scheme and that it is neither desirable nor administratively feasible to means-test every individual policyholder; and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life.