I am grateful for the opportunity to debate Equitable Life. As a parliamentary candidate, along with many others from all parties, I signed a public pledge to support and vote for proper compensation for the victims of the Equitable Life scandal and the setting up of a swift, simple, transparent and fair payment scheme, independent of Government, as recommended by the parliamentary ombudsman. I am here today, along with many concerned colleagues, because, with the Chadwick report due imminently, I wanted to give the Minister an opportunity to hear the views of parliamentary colleagues and Members an opportunity to raise the concerns that have been brought to them since the election.
I must confess that I spent much of Sunday watching the Opposition day debate from 17 March on Parliament TV—although that may raise doubts about my sanity, it was very reassuring. The Minister showed a real understanding of the appalling injustice that has been suffered by Equitable members. According to the Equitable Members Action Group—EMAG—more than 1,000 policyholders and 2,000 group scheme members live in my constituency. He understood the anger felt at the previous Government’s delaying tactics. Most importantly, he was clear in committing a future Conservative Government to implementing an effective compensation scheme in a timely manner. I am pleased that that commitment has been restated in the coalition programme.
Nevertheless, concerns have been raised with me and my colleagues since the election. As many of us are new Members who did not have the chance to contribute to the most recent debate on the matter, I know that the Minister will appreciate the opportunity to hear their views as he considers the Treasury response to the Chadwick report and decides on future plans for a payment scheme.
I am not inclined to give a summary of the Labour Government’s attempts to avoid the findings of the Penrose inquiry and hobble the ombudsman in her first inquiry, only to refuse to accept her conclusions of maladministration and injustice in her second inquiry and the subsequent judicial review, which determined that much of their refusal failed the cogency test. I am sure that all Members present are familiar with that sorry saga; if they are not, there is an excellent Commons Library standard note on the matter, which they can peruse at their leisure. Suffice it to say that the Minister has been left with a scandalous legacy by his predecessor, and one that I would not wish on my worst enemy.
I will focus on some of the main barriers to progress that we face. The first barrier is that Equitable members have had all their faith in Government systematically destroyed by the transparent attempts by the previous Administration to delay and obfuscate—one of the few instances of transparency they can boast. The accusation that the Treasury made the cold-hearted calculation that the longer the process took, the less it would have to pay out, as Equitable members were dying off at such a rate, has never been verified. Nevertheless, the accusation sits uncomfortably in the middle of the negotiating room, making it difficult to build a constructive relationship when attempting to create a scheme that Equitable members can support.
Together we will have to find a way to build that relationship, however painful the process, and to start rebuilding trust, and I suspect that no amount of rhetoric will do the trick. The only way Equitable members will be able to move past the consistent abuse they suffered at the hands of the previous Government will be by seeing concrete action replace warm words. I urge the Minister to remember that history as he moves forward.
Many of us feel that, after our active championing of the cause of EMAG members when in opposition, they should feel that they can trust us. It is clear, however, that having suffered so much from Labour’s broken promises for so long, they now find it difficult to trust so easily. The only remedy for that distrust is to prove the doubter wrong by delivering in government what we promised in opposition. At the same time, Equitable members must meet us halfway by working in partnership with, rather than just in opposition to, the Government as we try to find a way to bring them justice.
Another point is that so many Equitable Life members are very hard up. I have received letters from many constituents, and one couple I heard from are now surviving on pension credits and rent rebates after a lifetime’s savings were decimated by the Equitable Life scandal.
That is the message I receive in my post box day after day, and I am sure that many colleagues have similar cases.
The second problem we face is uncertainty. For decades, Equitable members have been treated with the utmost contempt by the management of Equitable Life, the regulators and, latterly, the Labour Government, who refused to give them clear answers, denied their claims of injustice, even in the face of all the evidence and, even after accepting some measure of responsibility, have consistently refused to give the victims any indication of the timetable or costing.
Does my hon. Friend agree that, as we are determined to rebuild a savings culture, in addition to honouring our manifesto pledge, it is vital that people can invest in pensions with confidence, knowing that they will be compensated if those are mis-sold?
I agree entirely. A key concern during the general election campaign was the fear that the saving culture in this country, which for so long had been part of our economy, had been completely destroyed. We must do everything we can to avoid entrenching that destruction.
The hon. Lady, who is my fellow Oxford Member, makes her case passionately and effectively. Is not the crucial point that we get a commitment to transparency and fairness, which is what EMAG has been calling for, and that it would therefore be helpful to hear from the Minister on how the coalition Government intend to change and enhance the remit that was given to Sir John Chadwick?
Transparency must clearly be at the heart of any process we now embark upon. As I have said, with trust at an all-time low, the only way we can ensure a process in which all partners can take part is by showing that we are not in some way trying to brush under the carpet some of the problems that the previous Government did.
My hon. Friend is making a strong case. Like her, I wish to see justice for the victims of the problem. Does she agree with me that it would be helpful if in the meantime all the work proceeds on cleaning up the records and ensuring that the lists, and therefore the potential eligibility by category, are in the best possible order so that my hon. Friend the Minister can make a speedy disposition of funds once he has made a decision?
My right hon. Friend makes an excellent point. With all the delays we have seen, the last thing we want is to come to an agreement on the terms of a payments scheme, only to have to embark on a lengthy period of making the data ready for that. It would be excellent to hear the Minister’s comments on that point.
On timetabling, it does not take much imagination to see how such long-term uncertainty would eat away at an Equitable member, causing as much damage as a shrinking pension. The Minister was vocal in calling for a clear timetable in his statement on 17 March, so I am sure that he will be able to offer a timetable today, or very shortly in a statement to the House.
The final problem I will mention is the deep suspicion with which EMAG members view the Chadwick process. Indeed, the fact that they pulled out of that process less than 24 hours before the most recent debate on the matter was noted, as was the fact that as a result the final Chadwick report might be subject to serious dispute, if not to judicial review proceedings, which will also delay proceeding.
The concerns they have raised include concerns about the assumption of the third interim report, which asserted that regulators should be assessed on the basis of the lowest common denominator, despite the fact that the High Court judgment in EMAG v. Her Majesty’s Government found that it was reasonable to assess injustice on the basis of not only strict legal liability, but the policyholder’s reasonable expectation of a regulator. During those court proceedings, the ombudsman expressed concern that the Chadwick process broke the link between injustice arising from maladministration and the provision of any remedy by limiting future payments to those who had been disproportionately affected. Also, among current EMAG members is a sense that, in our straitened economic times, the Chadwick report will find a way to underestimate the losses.
Does my hon. Friend agree that addressing the loss, even in straitened times, is important? The Government ought to send out the signal that people who do the right thing should not be penalised, which is what has happened in the Equitable Life situation.
Yes, and that speaks to the earlier comments on the need to protect and enhance the saving culture and on sending the right message to people that they can put faith in how we regulate savings.
Could the Minister comment on two proposals that might address the concerns about the Chadwick process which EMAG has raised with all of us? First, the Chadwick report should not be the foundation of a payment scheme but, rather, one of the resources used in creating an independent payment scheme. Secondly, the final assessment of losses should accurately reflect the cost that Equitable Life members have borne.
We have all received lots of letters from EMAG, as candidates and as Members of Parliament, but two things have not been mentioned today—the dependants of policyholders who are now deceased because there has been such delay, and the issue of not means-testing such people. Does my hon. Friend agree?
The first of the two issues at stake is purely financial—the technical problems of designing a scheme that is fair, transparent, swift and simple. The second issue, which is almost more challenging, is ethical—the admission of responsibility by the Government for regulatory failures and the acknowledgement of what that failure has meant to Equitable Life members.
By failing to admit the full extent of the losses, we will fail on the latter issue, ethically, even if we succeed on the former, financially. I do not see any reason why we need to go down that route. All parties have consistently stated that final payments will have to be balanced against other calls on the public purse. The High Court stated that, as the Government were not required to create a compensation scheme, any legal objections to the nature of such a scheme were bound to fail, so there seems to be no legal barrier.
In my dealings with EMAG, representatives have clearly stated that they understand that full payment may well not be possible, but they want an acknowledgement, at least, from the Government of the full cost that they have shouldered.
Along with the rest of the country, Equitable Life members know that we have been left to clear up Labour’s financial mess. All sections of society will have to do their bit in getting our national finances back on track. If we ask EMAG members to trust us, as their Government, we should trust them to accept that we might be able to pay back only a percentage of their losses. If we attempted to pay out in full, according to calculations that do not have the confidence of the public, we would do significant damage to our credibility for the long term.
The Equitable Life case is a prism of the wider legacy of the Labour Government: public distrust in politicians and Governments is at an all-time low, as a result not just of media-induced cynicism but of Labour’s chronic inability to deliver on its promises or to take responsibility for its mistakes. The case is one of our key tests, a barometer of how straightforward we will be in the face of the tough choices that we have spoken about so often.
I have the greatest confidence that the Government will be honest and open about the extent of the damage inflicted on Equitable Life members and of the capacity of the Government to remedy it. According to the Minister’s own words, he has the compassion to lose no time in setting out a detailed programme for that remedy, putting to an end the decades of injustice and uncertainty endured by hundreds of thousands of Equitable Life members.
First, I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on securing the debate, the first in this Parliament on Equitable Life. I am certain it will not be the last such debate.
I want to respond to a couple of points made in interventions before returning to the main thrust of my remarks. My right hon. Friend the Member for Wokingham (Mr Redwood) asked about the quality and cleansing of the data. It is important to place on the record that there are 1.5 million policyholders holding 2 million policies, and that 30 million premium transactions have taken place over the period in question. The quality of data is a huge problem. I am grateful to EMAG for the offer of access to its database to help us cleanse the information. Equitable Life and others will be working with us to ensure the best-quality database. My right hon. Friend is absolutely right that such work needs to proceed in parallel with other work streams, so that we can make payments to policyholders as quickly as possible.
Reference was made to the importance of savings. The regulatory reforms that my right hon. Friend the Chancellor announced last month include the establishment of a consumer protection and markets agency, which will help to improve the regulation of our financial services, hopefully contributing along with other measures to rebuilding a savings culture in this country.
I did not need this afternoon’s debate to remind me of the importance of Equitable Life to so many of my colleagues, having received a number of letters, answered a number of written parliamentary questions and had a number of oral representations from colleagues about how important the matter is. I understand the strength of feeling, and I hope that, over the past four or five years in this role in opposition and now in government, I have come to be seen by policyholders as a strong advocate for ending the plight of those who have suffered as a consequence of Government maladministration. I want to see a swift response but, vitally, one that is transparent and fair to all policyholders and to the taxpayer.
Does my hon. Friend agree that the problem is that, because it has taken so long to get to the point we have reached today, we are in a worse position than if the situation had only recently occurred? Therefore, having promised to make good the damage left by Labour, we must put the matter to rest as quickly as possible—even quicker than in normal circumstances.
My hon. Friend makes an important point. The crisis has gone on for too long. Lord Penrose’s report was back in 2000, and the previous Government could have tackled the issue then. They blocked the ombudsman’s second inquiry into Equitable Life, and they took six months to respond to the ombudsman’s report. At every step in the process, the previous Government delayed. We want to make rapid progress, but fairly and transparently for policyholders and taxpayers.
In our coalition agreement we pledged to make fair and transparent payments, through an independently designed scheme, to policyholders for their relative loss as a consequence of regulatory failure. In the two months since we have been in office, we have made real progress and will continue to do so over the coming months. In May, in the Queen’s Speech, we announced an Equitable Life Bill, which will give the Treasury the statutory authority to incur expenditure in making payments to those who have suffered loss in connection with maladministration and the regulation of Equitable Life. The Bill will be introduced shortly and will be an important step towards resolving the issue.
Another important step will be the imminent publication of Sir John Chadwick’s final report on Equitable Life. It will give us a greater understanding of the losses that policyholders have suffered. Some have called for us to abandon the Chadwick process or to alter Sir John’s terms of reference. However, after careful consideration, I decided to allow Sir John to continue with his work under the current terms of reference. His work has been the culmination of almost 18 months of detailed analysis and evidence gathering. He and his actuaries have delved deeply into the issues, and their work has been informed by consultations with interested parties. For example, his flexible approach to establishing loss removes from policyholders the burden of proving what they would have done had they been aware of problems at Equitable Life. It is important to have his work available, as it will aid us in providing a swift response.
The Minister certainly has the reputation with EMAG members that he mentioned earlier, but an issue of concern is the Government’s attitude to Chadwick. The Minister said that their response would be published imminently. Is there likely to be a statement before the summer recess?
My views have not changed in that period. An option one gets as a Minister is to drive the process forward further and faster, and to change the approach. What hon. Members will have seen over the past eight weeks, which will become clearer when Sir John’s report is published, is that we have adopted a much more transparent and open approach to the resolution of the problem.
As part of that transparency, I will publish with Sir John’s report the advice provided by his actuaries as well as correspondence he has received on the matter. In the light of the sensitivity of the issue, we must know how he developed his methodology and what has informed his thinking. To restore trust in the process, I want to be as open and transparent as possible about our approach and the losses suffered by policyholders. I believe that that is the best way to tackle the distrust that my hon. Friend the Member for Oxford West and Abingdon referred to in her speech.
I am sure that people listening to this debate will be reassured by the approach that the coalition Government are taking, in contrast with that taken by the previous Government. Can the Minister confirm that, in taking into account what the Chadwick report says about the scale of the losses suffered by Equitable members, the coalition Government’s approach to how payments will be judged is new and not built on any of the previous Government’s work?
I will come on to the commission shortly, if Members will bear with me.
As I said, I want the process to be as open and transparent as possible. I have said to the House that when we publish Sir John’s report, I will provide a substantive update on the next steps in the process. We have already set out the important steps in how we will take the work forward, and some points about how the scheme will work.
My hon. Friend the Member for High Peak (Andrew Bingham) raised a couple of points in his intervention. I wish to make it clear that there should be no means-testing, and that the estates of deceased policyholders should be included in the scheme. We felt it important to clarify those two issues early on in order to settle some policyholders’ worries, and I am happy to reiterate those commitments today.
I will establish an independent commission that will advise on how best to allocate funds to policyholders and to help develop the scheme design. One of the key aspects of the ombudsman’s recommendations was that any scheme should be independent of Government, and I agree with the thinking behind that recommendation. The commission will be given a remit that will allow it truly to add value to the process.
The process will be time-consuming, and there is the potential that payments will be delayed if we ask the commission to start the process of determining relative loss from scratch. However, we want it to play a role in developing a fair outcome for all policyholders.
The Minister kindly mentioned how the funds will be paid out. In my constituency, a number of people are concerned that because it will take a long time to appoint the commission, which will then have to go through its own procedure, further delays could be added. Can he tell us how the commission will be put together and what his expectations are of the timing?
I am keen that the commission should work as quickly as possible. In many respects, the process would have been shorter without the commission, but it is an important guarantee of transparency and openness, and it is right that it be given a remit to do this work. Equally, I am mindful of the fact that we need to give it a tight timetable, so that it has time to think about the issues but is not seen as delaying the process of making payments to policyholders.
One of the concerns is that, sadly, many policyholders have died or are dying. Can the Minister give some comfort on the issue of giving interim payments once the decision has been taken, so that people can receive payments before the commission has completed its work?
I am conscious of the fact that many policyholders are elderly, but there is a challenge: we need to ensure that the scheme is designed transparently and fairly, and that there is fairness between groups of policyholders as well as between policyholders and taxpayers. The commission should look at where priority payments should be made, but I am wary of the question of how we can make interim payments to people on a sound basis that will not lead to further problems later. I take on board my hon. Friend’s point, but there are some challenges in taking the idea forward.
A key issue for many policyholders and Members of Parliament is how much the scheme will cost. As the ombudsman said, it is appropriate to think about that, and we will consider the potential impact on the public purse of any scheme, and what is affordable, before we decide how much we can allocate to the scheme. We will ensure that fairness is at the forefront of our thinking when making those difficult decisions.
I would like to take a moment to mention the excellent work of EMAG, which has campaigned for many years for a fair resolution to the matter. In opposition and now in government, I have met members of the EMAG board, who have relayed to me their concerns about the Chadwick process. I will say to hon. Members what I said to them: Sir John is only a building block in our approach, and I am willing to listen to EMAG and other interested parties who can give useful and productive insight into this complex issue.
I remind hon. Members that no final decisions have yet been made on many of the important issues associated with the scheme. I want the decisions to be in the best interests of policyholders and taxpayers, and I encourage EMAG and others to be involved so that we can move the process on and find a resolution, for which policyholders have waited for many years.
I will give more details on our approach and the next steps in the process when Sir John Chadwick’s final report is published, but I can confidently say that we are moving towards our objective of resolving the issue. We are now reaching a crucial stage in the story of the Equitable Life payment scheme. What happens in the coming months will be decisive in laying out how the scheme operates and the quantum of payments that will be made to policyholders. I encourage all MPs to engage in the debate. This is certainly an issue that we must get right.