I beg to move,
That this House welcomes the Government’s acceptance in full of the Parliamentary Ombudsman’s findings in relation to its maladministration with regard to Equitable Life; notes that the Parliamentary Ombudsman recommended that policy holders should be put back in the position they would have been in had maladministration not occurred; further notes that the overwhelming majority of victims have only received partial compensation compared to the confirmed losses directly attributed to regulatory failures; and calls on the Government to make a commitment to provide full compensation to victims of the scandal with the end of austerity now in sight.
I thank the Backbench Business Committee for allowing us to have this debate, and the Government for finally allowing us to have some time in the Chamber to debate the issues that the Backbench Business Committee wishes to put forward. I declare an interest as co-chairman of the all-party parliamentary group for justice for Equitable Life policyholders. I have held that office ever since I was elected to Parliament in May 2010. I will set out the history of the scandal, the Government’s position to date, the current position on compensation, and what we want on behalf of the victims of the scandal. It is worth recalling that this was a Ponzi scheme. Equitable Life encouraged people to move their life savings into unsustainable pension funds by promising bonuses that could not be delivered. It also paid commission to agents to encourage people to move their savings into these scandalous positions. Ponzi schemes are all very well when money is coming in, but eventually money must be paid out. If the amount of money coming in is unsustainable, the bonuses that are promised to savers cannot be paid.
After almost a decade of operating the scheme, Equitable Life started legal action in 1999 to try to reduce the bonuses; it was unsuccessful in that regard. It then tried to sue its auditors for failing to point out the errors in its scheme. It was unsuccessful in that enterprise, too, and had to pay out more than £30 million in court costs. All that money could have been used to compensate the victims of the scam.
Eventually, the parliamentary ombudsman intervened and took up the case. Her recommendations said that this was the most serious case of maladministration she had ever encountered, and that the people involved were the Government, the regulators and Equitable Life. That is what makes this case unique.
The hon. Gentleman is making a compelling speech. He is right that the situation has been ongoing for a very long time. The parliamentary ombudsman said—I have read some articles on this today—that people still have not yet been fully compensated, and some of them have actually died. We have raised this issue time and time again over the years. My hon. Friend the Member for Leeds North East (Fabian Hamilton), who will speak shortly, has done a hell of a lot of good work on this. I congratulate the hon. Member for Harrow East (Bob Blackman) on securing the debate.
I thank the hon. Gentleman for that intervention. I have no doubt that the co-chairman of the APPG, the hon. Member for Leeds North East (Fabian Hamilton), will make a substantial contribution to this debate. He has been involved in this for more years than he probably cares to remember.
The previous Government promised some degree of compensation to the victims of this horrible scandal. I was a candidate at the 2010 general election, and in the run-up to it, the only pledge that Conservative campaign headquarters asked me to sign was that we would give full compensation to the victims of the Equitable Life scandal. I regard that pledge, which I signed, as one to the electorate and it is something I will honour. I believe that the Conservative party should honour it in full, and I welcome anyone else who will join me.
I am grateful to my hon. Friend for all his hard work and persistence on the issue over many years. A number of my constituents, like his, have been affected by the scandal, but have received merely a fraction of what they are due and what the parliamentary ombudsman ruled they should receive. The Treasury’s reason for that was pressure on the public finances, but now that the public finances are in a better place, does my hon. Friend agree that it is now time to compensate the victims of this scandal properly?
I completely agree, and I will come on to our asks in a few minutes.
When we were elected in 2010 and the coalition Government came to the fore, that Government took action, as is acknowledged in the motion, and I was pleased that they did so. The piece of legislation to provide compensation was almost the first to be put through the House after the election.
I, too, congratulate my hon. Friend on securing this debate. The Government did take some action. My constituents Jean Cooper, Ron Moseley and Tom Graham—Equitable Life victims who have done a lot of work campaigning—have made lots of representations to me. Does my hon. Friend agree that, given the improving public finances, the Government should take on board the argument for full compensation, perhaps phased over time?
I thank my hon. Friend for that intervention. Conveniently, he leads me to my next point.
In the comprehensive spending review on 20 October 2010, the former Chancellor of the Exchequer, George Osborne—I do not always agree with him these days, but I certainly did at the time—remarked, in relation to Sir John Chadwick’s report:
“I accept the findings of the parliamentary ombudsman in full.”—[Official Report, 20 October 2010; Vol. 516, c. 960.]—
He did not say “partially”; it was not hedged in any way. He went on to talk about the relative losses and the amount of money, and said that the fair amount of funding at the time was £1.5 billion because of the state of the public finances.
In the financial statement on 20 March 2013, George Osborne went further and said that compensation should be provided to people who were not covered by the law—namely, the pre-’92 trapped annuitants. He said:
“We are not doing this because we are legally obliged to; we are doing it because, quite simply, it is the right thing to do.”—[Official Report, 20 March 2013; Vol. 500, c. 941.]
I agree completely.
In the financial statement on 8 July 2015, George Osborne stated:
“We are also going to use the remaining funds available in our Equitable Life payment scheme, as it closes, to double the support that we give to those policyholders on pension credit who need this extra help most.”—[Official Report, 8 July 2015; Vol. 598, c. 333.]
Does my hon. Friend agree that not only is it the right thing to do for these victims, but it is the right thing to do to show faith and confidence in the system and for all those who want to provide for themselves in old age? Over 2,000 of my constituents were affected by this.
Does my hon. Friend agree that if the Treasury was owed money by other people its attitude would be very different? It is amazing what the Government can find money for when it needs to. As my hon. Friend said, this is a pledge that this party has made over many years, and I support him in the campaign he has superbly led over many years. Does he agree that the Treasury should now do the right thing, as they promised to do all those years ago, as he has pointed out?
I thank my hon. Friend, particularly in helping all my constituents. Does he agree that the failure to pay these moneys out over the last couple of years, particularly at the time of the financial crash when the banks and building societies were bailed out, sends out the terrible message that we will look after corporations, but we do not look after our constituents?
That is a serious point. During the financial crash, the view was taken that we could not afford or allow a situation in which the banks and other institutions failed. Indeed, the position of the Government successively has been that Equitable Life was too big an organisation to allow to fail. Had it failed when it was basically trading insolvently, the Government would have needed to pick up the total cost for all those victims of the scandal.
I congratulate the hon. Gentleman and my hon. Friend the Member for Leeds North East (Fabian Hamilton) on the work that they do in the all-party parliamentary group, of which I am a member. Today provides a perfect example of how political will can transmit into effective action. We have read the stories about MPs being offered resources for their constituencies to support the withdrawal agreement; does that not show that when there is the political will, the money can be found?
Many of my constituents who have been affected by the Equitable Life issue regard the APPG as their only voice in not only this place, but the country. Does the hon. Gentleman agree that the failure to compensate the Equitable Life victims not only has a hugely detrimental effect on their lives, with their not be able to retire in the comfort that they deserve, as they thought they would, but also affects faith in this House and in the pensions system at a time when people are living longer and need to be doing more to prepare for retirement?
I join others in commending my hon. Friend on the extraordinary campaign that he has led. Does he agree that not only is this a debt of honour, but that the Treasury can take comfort from the unique circumstances of the case in terms of the fault that was found with the Government and other regulators to know that this would not open the floodgates? The matter stands on its own terms, and the Government can do the proper thing of compensating people without fearing that that will have some enormous knock-on effect.
We know that many of the victims were retired nurses, teachers and factory or shop workers, and therefore not people of huge means, but one particular group is affected: small business owners who had no choice but to set up a pension. Does my hon. Friend agree that we owe a particular debt of honour to these small business owners who had to set up a pension and thought Equitable Life was a perfectly proper company to do that with?
Many companies in this country encouraged their employees to invest with Equitable Life thinking that it was a safe haven. In fact I can speak from personal memory, in that I was an employee of BT at the time and we were encouraged to invest in Equitable Life. Thank goodness we had a choice—I made the right choice, but I could be in the position of the victims.
I congratulate the hon. Gentleman and his co-chair, my hon. Friend the Member for Leeds North East (Fabian Hamilton), on all the work they have done. I should declare an interest, in that I had an Equitable Life policy. I lost a very small amount of money, but over 2,000 of my constituents will have lost much more.
Does the hon. Gentleman agree that in addition to the financial benefits the Treasury would draw from money recirculating, doing such a thing would also mean that those former policyholders who are now having to look to other financial instruments to raise cash—such as equity release, which is equally inappropriate for them—would be protected from having to undertake other risky financial measures to sustain themselves in their old age?
One of the issues that has affected people in my constituency—they are really concerned—is the fact that they expected this to be dealt with. They trusted the Government to do so, and they are very suspicious and cynical about the delay. We need reassurances that the Government truly understand the impact that this is having on people’s lives.
I thank my hon. Friend; he has been exceedingly generous in giving way.
I can only echo the many points that Members on both sides of the House have made about this issue. Many of my constituents have written the most heart-breaking stories about how their lives were destroyed by this scandal. What is my hon. Friend’s view of the fact that no one has been prosecuted or sent to prison for this scandal?
That is clearly a matter for court action—for the Crown Prosecution Service and others—but it is a further scandal that no one has suffered anything other than the people who saved the money in the first place.
May I set out for the House’s benefit the categories of individuals who suffered the unfortunate loss? First, there are the pre-’92 trapped annuitants. Bizarrely—I have never understood this—the Government drew a line at 1 September 1992 for the people who would receive compensation. Those who invested before 1 September 1992 were excluded from the compensation scheme, yet they are the most elderly and often the most vulnerable individuals who are owed money. Someone who took out a pension policy on 31 August 1992 got not a penny, but those who took a policy out on 1 September 1992 could end up with full compensation. That seems completely arbitrary. Many of these people are particularly vulnerable. Some 9,200 of those individuals are still alive and it is clear that they should receive full compensation.
The cost of providing full compensation for those victims will be less than £100 million. The key point is that within the compensation scheme, there is a contingency, and that does not need to be used now because the forecasts are that the payment for those who were receiving 100% benefit will be 11% down, so the additional funds and the contingency are not required. The Government could therefore take the decision to pay in full those most elderly victims who need assistance.
Post-’92, there are of course two categories: those who received 100% compensation; and those who have received 22.4% compensation. Why 22.4%? That is an arbitrary figure. I believe that every victim of this scandal should receive the full amount of money.
In the various statements that were made to the different Select Committees and to this House, the Government accepted that the total bill would be £4.3 billion. That figure was later corrected to £4.1 billion. However, the Government have allocated only £1.5 billion. They clearly have a debt of honour, and I have three basic asks for them today. First, given the position of the pre-1992 trapped annuitants and the figures that I have set out, will the Government now take action to compensate fully those elderly individuals who are extremely frail? The money will almost certainly go straight back into the Treasury and the economy in a way that we would all welcome.
Secondly, will the Government face up to the fact that although the scheme is closed to new entrants, they are going to be paying out to the victims of the scandal for some considerable time? Will they therefore top up that money, possibly over a phased period, as has been suggested? Perhaps that period could be five years. Most of those victims will be coming up to retirement soon, and they need certainty that they are going to get some money. The key point here is that this would not immediately cost the Treasury the £2.6 billion that would be required, because this could be phased over a longer period to top up the pension schemes of those in operation.
My third ask, which is equally crucial, relates to the fact that the Government now know exactly who is involved, because the scheme is closed to new entrants. They know the names, the addresses, the national insurance numbers and the total amount that those people are owed, and that data needs to be retained. I ask the Minister to give a guarantee that data will be retained and not destroyed, so that when the Treasury eventually owns up to this and accepts that it has to pay full compensation, we do not have to go back to square one to get all the data back.
I am grateful to the hon. Gentleman for giving way. I think it is important to reinforce his three asks. I met an 87-year-old constituent on Friday afternoon who was distraught and in tears over how he had been left as a result of the Equitable Life scandal, but he was given hope when he got a note from the action group to say that today’s debate was happening. Given the hon. Gentleman’s three key asks, and given the political willingness right across the House and around the country to resolve this issue, does he agree that the Government must ensure that this will not be another false dawn for those who look to us most?
I thank the hon. Gentleman for his timely intervention.
I would like to sum up by thanking the Equitable Members Action Group and the policyholders who have suffered for so long. I also want to make it clear to the House that things have changed. When we were elected, it was basically only Conservative Members, and some colleagues from the opposite side, who were supporting justice for Equitable Life policyholders. The all-party parliamentary group now has more than 100 members, from the Labour side in particular, who now recognise that this is a debt of honour, so this is not just confined to these Benches. The reality is that if the Government fail to honour the debt, further action will clearly have to follow and we will force the Treasury to take action.
I start by paying tribute to my all-party parliamentary group co-chair, the hon. Member for Harrow East (Bob Blackman), who has given an excellent introduction and who has worked very hard indeed in the nine years that he has been in the House to try to bring about the justice that we all want for the victims of the Equitable Life scandal. I am sad that, after so many years of debating the issue, we are back here again today talking about the continuing losses suffered by hundreds of thousands of Equitable Life policyholders. They invested in the world’s oldest life assurance company in the belief that they would be able to live a comfortable old age, but instead, after a lifetime of saving, they find themselves sometimes destitute and often much poorer through no fault of their own.
How have we arrived here, nearly 20 years after Equitable Life closed its doors to new investors and nine years after the Government promised to ensure that the losses incurred by Equitable Life policyholders would be fully compensated? I hope that hon. Members will permit me briefly to go back over some of the history of this sorry tale in order to give the House and the public some answers to these questions. My first involvement in the Equitable Life saga was to speak in a Westminster Hall debate that I led on 24 June 2009. In that debate, I spoke about the serious issues facing so many of our constituents since the crash of Equitable Life following its inability to meet obligations and promises made to investors over decades.
In July 2008, the parliamentary ombudsman published her first report on Equitable Life, entitled “Equitable Life: a decade of regulatory failure”. On 11 December that year, the Public Administration Committee produced a report entitled “Justice delayed”, in which it stated:
“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced…Many are no longer alive, and will be unable to benefit personally from any compensation.”
I should like to thank my hon. Friend and neighbour for making the case for Equitable Life members. I should also like to pay tribute to my constituents, Ray and Marjorie Dunn, who have been brilliant campaigners for the Equitable Members Action Group. They have made these exact points: this has been going on for a very long time, and many pensioners are now well into their retirement and living in pensioner poverty because the Government have only partially compensated them. Is it not time for the Government to make up for their past mistakes?
Yes, indeed. I thank my hon. Friend and neighbour for making that point. I know Ray and Marjorie Dunn very well—they correspond with me regularly—and I know that my hon. Friend has been a champion of their case and of many other cases in his constituency. I will go on to say a bit more about how I think they should be compensated.
Would my hon. Friend accept that one of the biggest problems is that we have had so many investigations into Equitable Life, and that it was not helpful that the previous Government did not accept the case of the financial ombudsman, right at the beginning? There was a lot of, dare I say, confusion and deliberate misleading, but that report was very clear on where the blame should lie. This has not helped the case of the Equitable Life fundholders.
I thank my hon. Friend for making that point. The ombudsman’s report did indeed make it clear that this was a catastrophic failure of regulation, and that the Government bore considerable responsibility for compensating those who had lost out. I will go on to say more about that in a minute.
The Public Administration Committee also stated:
“We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”
That was more than 10 years ago. On 5 May 2009, Ann Abraham, the then parliamentary ombudsman, published a second report, “Injustice unremedied: the Government’s response on Equitable Life”, in which she stated:
“I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently on behalf of Parliament and after a detailed and exhaustive investigation.”
“In this case, I am satisfied that the injustice I found in my report to have resulted from maladministration on the part of the public bodies responsible for the prudential regulation of the Society has not so far been remedied.”
There was certainly no shortage of reports—just a shortage of justice for those who had, through no fault of their own, suffered huge losses in the life savings they had accrued over years of hard work.
I congratulate the hon. Gentleman and his co-chair on pursuing this issue so assiduously. As he says, the difficulty is that there have been so many reports. I have one constituent who is 84 and whose wife died three weeks ago. I have another who is 80 and who has just been diagnosed with dementia. Does the hon. Gentleman agree that those constituents need to know today that they will be compensated fully and soon, before they suffer further bereavement or illness?
I thank the hon. and learned Lady for that intervention. The story of her constituents is reflected up and down the country, in every constituency represented in this House, and I hope that we will get some answers from the Minister at the end of this debate.
Does the hon. Gentleman agree that the approach being taken seems inconsistent with the approaches taken in different contexts? For example, if someone is the victim of a crime, they can be compensated by the state for something that is not the state’s fault at all, and yet the state is more reluctant in circumstances where there was complicity, or certainly fault, from the state. Does he agree that is a troubling inconsistency?
Indeed, and if I am able to complete my contribution this afternoon, I will add to the hon. Gentleman’s point.
At the core of the problem is the fact that Equitable Life simply could not meet the obligations that it had made for itself, because it had made no provision for guarantees against low interest rates on policies issued before 1988. It declared bonuses out of all proportion to its profits and, indeed, its assets. Following the House of Lords ruling in July 2000, the society stopped taking new business in December that year, which effectively spelled the end for Equitable Life. More than 1 million policyholders then found that they faced cuts to their bonuses and annuities, which caused a huge loss of income on which many small investors had depended. After all, the average investment for the 500,000 individual policyholders was just £45,000 which, according to EMAG, even at its height would have yielded no more than £300 a month.
The then Labour Government unfortunately failed to introduce any ex gratia compensation scheme and refused to follow the recommendations of the parliamentary ombudsman. Reacting to the Government’s lack of response to the ombudsman’s report, the then Conservative Opposition stated their determination to introduce an Equitable Life (Payments) Bill early in the next Parliament should they form a Government after the forthcoming general election of 2010.
One of the coalition agreement’s plans for legislation did indeed include such a Bill, which became the Equitable Life (Payments) Act 2010. It was introduced early on in June 2010, shortly after the new Government took office. On 10 November, I tabled an amendment to the Bill in Committee that would have included the pre-1992 trapped with-profits annuitants—WPAs—who had been specifically excluded, as the hon. Member for Harrow East said earlier, from the proposed compensation scheme. The Bill offered 100% compensation to all with-profits annuitants who took out their annuities after 1 September 1992, and 22.4% to every other policyholder. Many right hon. and hon. Members on both sides of the House felt that that was inherently unfair, because the 1 September 1992 date was somewhat arbitrary. Many of the policyholders would unfortunately not even live to enjoy the compensation were it to be paid.
I tabled another amendment to that Bill, which read:
“Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out”.
The amendment took just over two hours to debate and the vote was lost by 76 to 301, but it strongly set out the case for including the pre-1992 with-profits annuitants. Although that amendment failed in 2010, I still believe that it is vital to give equality of treatment to those who took out with-profits annuitant contracts before 1992 and who are still alive. As we have heard, those people are the oldest and the most vulnerable victims, and the cost could be met from the £140 million underspent from the £1.5 billion originally allocated by Parliament.
Rectifying the injustice would cost in the region of around £100 million. The lifetime payments to the post-1992 WPAs are 11% less than forecast, and there is no reason to expect that the total amount of £620 million allocated for those payments will ever be needed, let alone exceeded. That means that the separate contingency fund should now be released and distributed to victims, rather than remain in Her Majesty’s Treasury’s back pocket. Will the Minister confirm this afternoon that every last penny of the £1.5 billion already allocated by Parliament will reach victims as intended?
The Bill received Royal Assent in 2010, and the compensation scheme was set in motion. It was slow at first, but it began to pick up over subsequent years. By 31 August 2016, when the scheme’s final figures were published, over £1.2 billion had been paid out to 932,805 policyholders, although more than 107,647 have still to be paid but cannot be traced. Tragically, 15,516 policyholders have died, and their estates did not claim the payments despite attempts by the scheme to contact them. In addition, 894,507 non-with-profits annuity investors have been issued with lump sum payments totalling £751 million.
To conclude, when we examine the compensation paid to investors following the collapse of the Icelandic banks in 2008, for which every investor received up to £50,000 of their losses in full and quickly, the Equitable Life scheme looks rather less generous. Given that the average policy involved a total sum invested of £45,000, it seems rather unfair to me and to Equitable Life policyholders that they did not receive more, which is why EMAG continues to campaign for full compensation for all policyholders and why so many Members on both sides of this House support that view. I urge all Members—this is the last bit, Mr Deputy Speaker—current and future to take up the cause of Equitable Life policyholders to try to restore their faith in the ability of this House, as the elected representatives of the people, properly to secure compensation for the victims of one of the greatest financial scandals of our age. We have a moral duty and should not be afraid to carry it out.
Order. I am not going to complain about the length of that speech, but if Members can try to speak for under 10 minutes, that would help the situation. All our constituents need the help and support of this House, and we need to hear these passionate speeches, but please try to help each other. The good news is that Sir Desmond Swayne has offered to undershoot in order to pull some time back.
It is a great privilege to follow my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton), to whom the House owes an enormous debt for the amount of time, effort and initiative that they have put into raising the profile of this important issue.
Ever since I have been in this House, I have experienced legislation after legislation and Government initiative after Government initiative to try to deal with the enormous implications of the problem we face as we spend an increasing amount of our lives in retirement. We cannot expect people to rely on the basic state pension. It was never designed to provide people with the level of comfort to which they had grown accustomed during their working lives. It was introduced to prevent people from falling into poverty, not to provide them with comfort. It was introduced to keep the wolf from the door. Notwithstanding the huge improvements that we have made, such as the legislative changes with respect to women’s entitlement and the operation of the triple lock, people imagine that they have paid for their state pension, but they have not. They have paid for those who are retired now, as they expect this inter- generational contract to proceed and that others will pay for them.
However, as the working population shrinks relative to the retired population, people must make savings for their retirement. We have this enormous task of public policy to get that message across to people and, hey, pensions are complicated and people have busy lives. They have children at school, mortgages to pay and job worries. Pensions are a low priority for them. I never cease to be amazed at the level of public ignorance and, indeed, indifference to knowledge about pensions—even in this House. Mr Deputy Speaker, you may be aware that the House authorities are providing seminars for Members who are approaching retirement, at which they suddenly discover the implications of the lifetime savings limit, something which you would have expected them to wrestle with since most of them will have voted for those changes in a Finance Bill in the last Parliament. Even Members are not immune from this.
We must deal with public indifference and ignorance, but we have added a further toxic element to that mix: hostility to pension savings. We have somehow let it get abroad that pensions are a mug’s game, that people who do the right thing and follow the exhortations to save actually end up, either through malice or through incompetence, having those savings stolen from them. Such is the case with Equitable Life.
These were overwhelmingly people of modest means. Many of them were employed in the public sector, where the scheme was widely advertised, so much so that they thought it was somehow publicly sanctioned. What happened, as has been described, was disgraceful. There was a measure of public culpability. The Treasury was aware of what was going on at Equitable Life, and therefore something must be done to compensate these people.
Ministers can be proud of the fact that, when they came to power in 2010 and sought to address this issue at a time when the public finances were under such pressure, they maintained it as a priority. Let us be honest that previously, when money was easy, nothing had been done. However, that was then and this is now, and it cannot go away—22.4% is not a settlement that can address the needs of those who are required to be compensated. We need to get the message out there that people will be protected if they do the right thing and save.
I have heard it said that Ministers sometimes ask whether, if they had a couple of billion to spend, this would be the way to spend it, given all the demands on the public purse. Yes, it would be. First, because of the public policy priority to which I have drawn attention and, secondly, because this is a matter of moral rectitude. If Ministers think it will go away and they can close the book, they should just look at the disproportionate number of the new 2017 intake who have joined this all-party group. It will not go away until there is justice.
It is an honour to follow the eloquent and succinct right hon. Member for New Forest West (Sir Desmond Swayne). I pay tribute to the hon. Member for Harrow East (Bob Blackman) and my hon. Friend the Member for Leeds North East (Fabian Hamilton) for their work as chair and co-chair of the all-party group in fighting for justice for Equitable Life policyholders.
I make no apology for repeating some of what has already been said, and I am sure others will do the same. It is a disgrace that there are over 1 million victims of this pensions scandal. It is even more disgraceful that it is 11 years since the ombudsman said that victims had lost their pensions because of a decade of serious serial regulatory maladministration, and it is a total disgrace that, despite the Treasury admitting it had blame for the scandal, these policyholders still have not been compensated in full.
The north-east regional branch of EMAG has advised me that there are over 2,000 victims of this scandal in North Tyneside. In recent years I have been contacted by several constituents who are rightly aggrieved because they have received only just over 22% of their pension pot. One constituent is in the group of around 8,500 people who are considered the oldest and most vulnerable— the pre-1992 policyholders—and who have been treated less favourably than those who bought their annuities later. I spoke to him yesterday, ahead of this debate, and he pointed out that, sadly, a number of these annuitants are no longer with us, as other colleagues have also mentioned. He is particularly concerned that the Government keep safe the data relating to Equitable Life annuitants until the money is available to recompense those who have lost out. I hope the Minister will reassure my constituent on that request today.
My constituent is, of course, correct in pointing out that some victims will never see justice done. No one is getting any younger, and it is heartbreaking that thousands upon thousands of Equitable Life victims, through no fault of their own, have been left without the security they thought they had wisely invested in for their old age.
I am one of the 2017 intake who have been contacted by constituents affected by this. Does my hon. Friend agree that, if we want people to save for their future through a pension, we have to put right the wrongs that have been done? Modest people who saved well for their pension have now lost out in their old age.
I thank my hon. Friend for that question, which I will be addressing later.
It is frustrating for us to know that justice has not been done, but how much worse must be the anger and frustration of those who feel cheated? Today’s motion specifically calls upon the Government to make a commitment to provide full compensation to victims of the scandal, with the end of austerity now in sight. EMAG’s demands have been put forward reasonably. As the Chancellor announced in the Budget that austerity is over, it seems that the statement by one of the Minister’s predecessors, following a meeting with an APPG delegation two years ago, that the demands—the payment scheme funding for the pre-1992 annuitants and the £2.6 billion funding to recompense fully the 895,000 victims—could not be met because of public purse constraints, even if they were spread over a period, and because it would run contrary to the Government’s efforts to restore sustainability to the public finances, is no longer applicable. That has been mentioned by previous speakers, and I think the Minister will hear it again.
Paying these victims what they are owed will not only be doing what is right but will send out the message that people can and should save for their retirement, in the knowledge that the Government will protect them if such a scandal, heaven forbid, were ever to happen again. I hope the Minister will be able to assure Members present that the Equitable Life victims we represent are no longer subject to the constraints of austerity. It is shameful that the years of austerity were ever used as an excuse for the Government to deny their responsibility for paying these pensioners and future pensioners their entitlement.
My message to the Minister and the whole Treasury is that, in these times of trouble and uncertainty, they should take the opportunity to restore some faith in the Government and our Parliament by, at last, paying the Equitable Life policyholders their rightful due.
I start by congratulating my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton). I hope they will take it in the right way when I say that their continued presence here after a decade gives me an overwhelming sense of déjà vu. Having spent a couple of years’ penance on the Front Bench, I come back to find that, despite their sterling efforts, the issue is still before us.
The Equitable Life scandal is one of the greatest failures, perhaps the greatest failure, of public oversight and regulation in modern times, so it was the right decision to act in 2010. But, sadly, to act only partially was a failure of moral leadership, as my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) intimated.
The ombudsman’s report in 2008 was unambiguous, as the hon. Member for Leeds North East said, in calling for all those affected by injustice and maladministration from 1990 onwards to receive full compensation. The chairman of Equitable Life himself said that the report was inarguable. The report made no distinction between post-1992 and pre-1992 investors, and nor did anyone else—not the victims, not Equitable Life, not the ombudsman and not the Public Administration Committee. The Government’s rationale was that people who invested before 1992 were not affected by the scandal. Well, I am afraid that I completely disagree. These were long-term investments that were affected by ongoing and long-running maladministration. They were affected by the continuing failings of both Equitable Life and the regulators. Moreover, as we have heard, nearly all the pre-1992 cases involved some of the oldest and most vulnerable victims—they were also probably the poorest—who have so far received only a paltry sum of money. If the state fails to regulate properly, it inevitably forces that cost on to the consumer, and it is incumbent on the Government to make that right—and make it right in full.
The ombudsman was clear that there were fundamental failings by the then Department of Trade and Industry, the Government Actuary’s Department and the Financial Services Authority. The truth is that they knew, for most of the time, that this was a fraudulent Ponzi scheme. My hon. Friend the Member for Harrow East has described it as such and we should understand that Ponzi schemes are frauds—it is straightforward and simple. The Government failed to ensure that accurate returns were in the public domain; they failed to take ample opportunities to step in; and they failed to use their full range of powers. So, frankly, it seems to me that the Treasury plucked a cut-off date from thin air—there is no other way of describing it.
The ombudsman called on the Government to compensate the victims fully: to put them in the position they would have been in if the scandal had not occurred. That is the test: where would they have been if this scandal had not occurred? Leaving aside the pre’92 victims, that is a far cry from the 22p in the pound that has, in effect, been paid to many of those whom we have chosen to compensate. As has been said, this ultimately comes down to an issue of public trust. These victims were not wealthy investors. Typically, in my constituency at least, they were retired factory workers, teachers, nurses and small businessmen, who believed they were setting themselves up for at least a tolerable and reasonable retirement—I was tempted to say a comfortable one. That is a perfectly honourable, reasonable and laudable ambition for all our citizens.
As my hon. Friend made clear, the Conservative party promised in our 2010 manifesto to compensate the victims—not partially compensate them or compensate some, but compensate them. Like him, I was a signatory to that—indeed, I was heavily involved in getting it to happen. So I feel personally committed to it, too. It was right there in black and white, and it is there with my signature on it, just like everybody else’s. A failure to right this wrong will only serve to further undermine the public’s trust in politics and financial institutions
The Government say, or said then, that this comes down to an issue of “affordability”, but affordability is always a decision of priority: what comes first? The Government did not say that they did not have any money—they said they did not have enough money. What is more important than this: keeping our word, supporting the poor, upholding an institution that is important to people in the future, as well as these victims? All those things make this issue incredibly important. So in my view the affordability argument was flawed in the first place, but that was the position. Now, even that falls down, because we are supposedly, as the Prime Minister tells us, at the end of the era of austerity—good. That should be good for every citizen, but it should be good first and foremost for those who have done the right thing, for those who have looked after themselves and for those who reasonably could have expected the Government to protect them.
I join in congratulating the hon. Member for Harrow East (Bob Blackman) and his co-chair, my hon. Friend the Member for Leeds North East (Fabian Hamilton), who spoke earlier, on bringing this debate to the House today. I commend them for their longevity in this process, because this has been the “Bleak House” of the bleak house of scandals. I cannot remember how many people from the beginning of Charles Dickens’s novel were still alive at the end, but this makes the point sharply.
I, too, think about all those people who have lost money in this process, with more than 2,000 of them in my constituency. My hon. Friend the Member for Stretford and Urmston (Kate Green) said that she had had a modest plan with Equitable Life, and so did I, probably along with lots of people in this House. But it is the people we have heard about this afternoon—those who thought this was a safety net, not a passport to riches or even comfortableness, in some cases—who have missed out and been let down. We have heard of the sorts of people that group included. I am not going to go through the whole list, but I do wish to pick up on the reference to small business owners and the self-employed, because this is a specific and important issue for my constituents.
In my constituency, we still have more than 400 guest- houses, bed and breakfasts, holiday flats, people in the visitor economy and hoteliers. We are talking about precisely the sort of people who would want to put money into a company like Equitable Life when times gave them a little extra money. Why shouldn’t they? After all, one could look at the nice little crest on the front and everything else. This was a company founded, I believe, in 1759. I am told by the briefing from EMAG—I did not know this before today—that even Coleridge and Wordsworth were early investors in it. For someone looking for something that might do what it said on the tin, this was the sort of company to go for, but, sadly, as we have heard, that was not the case, so many of these people have missed out—the people who did that sort of thing.
Over the years, I have had dozens of people come to my surgeries who wanted to retire from their hotel or small business background but simply did not have the money to do so. Inevitably, that was not to do with Equitable Life for all of them. One of these people has written to me saying:
“I came to Blackpool 17 years ago with my wife and granddaughter to open and run a new Care home for mental health rehabilitation…For health reasons (and I was well past retirement age) we had to close the business…I really would appreciate any input you could bring to the debate”
with my example.
“It would change our lives from having no spare money whatsoever every month. I suffered a seizure 7 weeks ago and am no longer allowed to drive. My wife is suffering from acute nerve pain…and is on morphine.”
Another constituent wrote to me saying:
“In my own case, my losses…were £28,942.
I received a payment of £6,483.
This means that the money I am still owed amounts to £22,459….The token 22.4% payment is a good start but does not solve the drastic depletion of my retirement funds....A debt is a debt and if the government sidesteps every obligation by claiming unaffordability there would never be any public expenditure. The government regularly chooses where and when to shake the magic money tree.”
I absolutely concur with my constituent’s indignation in that area.
I also want to pay tribute to the local co-ordinators, who have worked hard to identify those involved and keep their spirits up. The Blackpool South EMAG co-ordinator, Mr William Fray, has written to me to ask me to press these points today.
I fully concur with the points my hon. Friend and Conservative Members have made about the importance and dreadful nature of this scandal, and about the hard work that has been done by many local people. We have a group in my constituency, and its co-ordinator wrote me a moving and poignant letter about the problems that local people have has as a result of the Equitable Life scandal: some 2,000 people in my constituency have suffered. Once again, I concur with what he is saying and thank him for making this valuable point.
My hon. Friend makes a point of which everybody in the House will be cognisant. It is important to recognise the people who, totally off their own bat, giving their time and, in some cases, at their own expense, have taken this process forward.
I am not going to repeat the sorry history of the comings and goings and everything else. It is true that the coalition Government did accept the ombudsman’s report, but neither they, nor their successors, including the current Government, have complied properly or fully with the ombudsman’s judgment. I have been in this place for a long time, under Governments of all persuasions, and one develops a certain amount of cynicism as to when the shredder comes out. It is really important that the Minister guarantees today, in plain English, that the Government and their relevant agencies will retain the necessary data indefinitely. I would not like people to come back to the House in three or four years’ time only to be told, “I’m terribly sorry, we thought we had the data but somehow it got shredded.”
The Government have sold their interest in Lloyds and are reducing their stake in RBS, as we have heard. It would be fitting to use a small portion of the money recouped finally to settle the acknowledged debt to Equitable Life victims. From what we have heard today, it is absolutely clear to me that we need to deal with the people in an annuity situation. It is important that the Treasury does not leave money in its back pocket. It has great form in this area: I know from my Front-Bench role about the advanced learning loan money, only half of which has been spent by the Department for Education, with the other half now sitting in the Treasury’s back pocket, to use the expression we heard earlier. One wonders what “affordability” means, and whether it is simply a case of the Government waiting for many of the people affected to become too enfeebled or no longer able to press their views. This issue is not only terrible morally, but foolish practically, because of the negative vibes it sends out.
Let me give the House an anecdote from many years ago, when I worked as a public affairs consultant for a number of clients. As part of the process, we very often employed self-employed people—perhaps journalists doing a public awareness campaign—or small businesses. I was relatively young at the time, so it took quite a bit of pluck to go and talk to our director of finance, but I had a distinguished medical journalist who had not been paid for ages for doing these public things for my clients. I went along and explained the situation, and I was told, “Well, we pay large businesses within around 30 to 40 days, we pay smaller suppliers within 60 to 90 days, and we pay self-employed people when we feel like it.” I am not casting aspersions on any particular Minister, but for many of the people affected by this, it must feel like that is the case now.
I concur absolutely with the three demands made by the hon. Member for Harrow East at the beginning. Pensioner poverty is a key issue for so many of my constituents in Blackpool South, for a whole range of reasons, and for those in many other parts of the country, too. If we make progress in this area, those people will at least receive some of that safety net comfort that they should have had a long time ago.
It is a pleasure to follow the hon. Member for Blackpool South (Gordon Marsden). His description of the type of person affected by this scandal is very apt and applies throughout every constituency. I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing this important debate and thank him for all the hard work that he has put in over many years on behalf of the victims, and I thank every other member of the all-party group.
This debate gives me the opportunity to speak on behalf of the 1,400 Equitable Life policyholders and their dependants living in Erewash. There seem to be fewer than the number living in some other constituencies, but that number is still significant. The hon. Member for North Tyneside (Mary Glindon) said that she might repeat some of the things said by other Members; I will as well, and I will not apologise for it, because it is important that we are united on this issue, and if we repeat it enough times, hopefully those on the Treasury Bench will eventually listen.
Many of the victims of this national scandal come from a generation that was encouraged to plan for retirement, saving modestly for a rainy day. We need to continue to encourage all generations to plan for retirement, but scandals such as this one negatively impact on that ambition. My right hon. Friend the Member for New Forest West (Sir Desmond Swayne), who is unfortunately no longer in his place, so eloquently described that ambition, so I will not attempt to add anything further. He said everything that needed to be said about that.
As other Members have said, many Equitable Life victims are characterised as proud, hard-working people who previously worked in shops or factories, or who ran their own small business and invested their money in good faith, so as not to be a burden on the state or, indeed, their families in old age. Such are the conservative —with a small “c”—values that my party in particular has always championed, so it was only right that when we came into government in 2010, it was a Conservative Chancellor, the former Member for Tatton, who established a compensation scheme worth £1.5 billion to compensate policyholders who had been affected. But of course, as we all know, that was not enough.
Although the scheme initially only covered polices issued after 1 September 1992—an arbitrary date—it is important to recognise the steps that the Government have subsequently taken to compensate as many victims as possible, which mean that as it stands today, £5,000 is available to those who bought with-profits annuities from Equitable Life prior to September 1992, with a further £5,000 going to those on pension credit. Nevertheless, we need to do more. The stark reality is that, although the compensation is substantial, to date nearly a million savers have received less than a quarter of the losses they incurred when the Equitable Life scandal hit them.
With the compensation scheme now closed to new applicants, I make the case to my hon. Friend on the Treasury Bench that now is the time to unlock the remaining £140 million that is still in the scheme and use it to increase compensation before it is too late for victims to use in their retirement. Indeed, for many victims, the time for any other use of this contingency is running out. I wholeheartedly agree that a balance must be struck between compensating victims and protecting the interests of taxpayers. However, I would also argue that if we do not take action now, we could end up actually increasing the cost to the public purse as we see more victims forced in their old age to turn to the state for financial support through the benefits system. As my hon. Friend the Member for Harrow East argued, any moneys paid out now will work their way back to the Treasury over time.
Let me turn briefly to regulation and the findings of the parliamentary ombudsman, who found that the losses suffered could be directly attributed to decades of serious, serial regulatory maladministration. As the UK is a global financial hub, it is vital, especially in a post-Brexit world, that the Government learn the lessons of the past and ensure that we have in place a regulatory framework that not only attracts investment but can retain investor confidence in our financial institutions, regardless of the size of the investment.
The hon. Lady is making some good points, and I like the one about the dangers of undermining confidence in the financial sector. Does she agree that the financial sector is massively important not only to London but to Edinburgh, where my constituency is? Edinburgh has the second biggest financial sector in the UK. If we do not sort out the problem of regulation, confidence in the financial sector may be lost.
I completely agree with the hon. and learned Lady. Along with London and Edinburgh, Leeds is a great financial centre as well. It is important that we get this right to make sure we continue to have that confidence.
We are as united as ever not only on the Government Benches but, I believe, on the Opposition Benches too, in agreement that now is the time for victims of this preventable scandal to receive a final and fair package of compensation that they can use to fund their retirement. It is incumbent on the Government to learn the lessons identified in the parliamentary ombudsman’s report, and to review and, if necessary, reform the regulations, to ensure that a situation like this can never happen again.
I congratulate my hon. Friend the Member for Harrow East again on securing this debate which, as we can see, has a lot of support on what is a very cold and potentially snowy Thursday afternoon. I look forward to hearing the Minister’s response.
It is estimated that there are around 1,500 victims of the Equitable Life scandal in Lincoln, and I have been working closely with some of them. After years of campaigning, nearly 1 million people are still being told that their compensation is limited to less than a quarter of the loss that they have suffered, and many of those savers are nurses, teachers, civil servants and shop workers. They are not people with stocks of wealth to keep them in their old age. They have worked hard all their life and put money aside for a secure and peaceful retirement, just as the Government advised them to do. It is therefore completely unjust to expect them to accept only a fraction of the losses caused by administrative errors that were out of their control.
In 2010, the Government accepted in full the parliamentary ombudsman’s findings that the victims of the scandal should be promptly compensated for their losses, and that those losses were directly attributable to chronic failures by the Treasury and regulators. The former Chancellor, the previous Member for Tatton, stood up in this House in October 2010 and implied that, despite accepting the ombudsman’s findings in full, the Government could not afford to allocate more than £1.5 billion for victims due to his choice of embarking on a damaging and counterproductive austerity project. It is worth remembering that, although there is cross-party support for this cause, every Member here knows that it was ordinary people who suffered under austerity, at the same time as very wealthy people got tax cuts, and those tax cuts were clearly the Government’s priority at that point.
No, I will not. I want to make some progress.
The victims appear to have fallen between the cracks of the financial crisis, which saw our banking corporations bailed out while hard-working and responsible pensioners were left to suffer. This is not charity. This is repaying hard-earned and prudently saved money to its rightful owners, and that is surely something that we should be supporting. The Government’s refusal to repay in full has real-life consequences. Hundreds of thousands of people across the UK have been denied the secure retirement that they made sacrifices for throughout their career.
In Lincoln, one of my constituents, Jill, has been fighting on behalf of local victims of this scandal. She said:
“My husband and I worked hard throughout our careers. We were devastated to find that all but a small proportion of our pension pot, for which we had saved so hard, has been lost to us. All we ask is that we are paid the money that is owed to us, and that we saved so hard for. I really hope that the Government will do the right thing and ensure that the thousands of claimants in Lincoln and across the UK finally get the pension they are entitled to.”
If austerity really is over—I am holding my breath on that one—I sincerely hope that the Government will finally listen to Jill and the hundreds of thousands of others who have, through no fault of their own, been stripped of their hard-earned savings. It is time for the victims of this scandal to receive the justice that they deserve and the full pension repayment that they have been fighting for.
It is a pleasure to be called to speak in the debate, and also to have a chance to reflect on how some of my constituents have suffered as a result of what happened with Equitable Life. However, it is probably worth my saying briefly now that, over the past few years, the tax take from the wealthiest in society has gone up, not down.
Let me turn to the general focus of this debate. It is worth remembering that these investments would not have been seen as high risk. People would not have thought that their capital was linked to the performance of the stock market. They would not have thought that they would lose their money entirely. They saw these investments as something for their lifetime savings—they used to be referred to as “widows and orphans” investments—and they would not have expected to lose the whole lot of their money. This was not buying shares in equity or playing on foreign exchange markets, when a person has to accept that there is a chance that they will lose not just what they think they might have gained, but the actual capital they invested. It is therefore understandable that this case has had much more of an impact on those affected than would have been the case had they been investing in the types of products with such enhanced risks.
I pay tribute to Usha Waygood, the co-ordinator of Torbay EMAG, for the determination that she has shown over many years, as well as for the information that she sent me ahead of this debate. It is worth reflecting on the fact that this is a business that ceased trading in 2000—19 years ago. It is clear that a total failure of regulation in relation to the company led to its collapse. The parliamentary ombudsman’s report was compiled in 2008—long before many of us in the Chamber had even been elected as Members.
There was then—the hon. Member for Leeds North East (Fabian Hamilton) reflected on this in his interesting speech—a lack of response by the then Government, which was a huge concern. Thankfully, that situation was partially rectified in 2010, when we finally saw some action taken with the independent commission. It is worth saying people still saw only 22.4% of what they had lost paid to them.
To help me put that into perspective, I asked some of my constituents who had been affected to set out the cost to them. For example, Mr Brian Wills-Pope said:
“I have had 10% of the differences I should have got.”
Mr Gordon Cook said:
“It has cost me about £5,000 per annum in pension.”
Mr David Jones added that the loss was approximately £30,000. He was paid around £6,000 from the compensation fund in 2012. When Mr Robert Clee emailed me, he said that his pension had seriously depleted over the past 25 years, which coincided with his retirement, which he thought that he had provided for adequately. That is the issue: many of the investors were approaching retirement and therefore had little opportunity either to take on new work or to make alternative arrangements before they felt the full impact of the hit to their finances.
For me, this is about not just what happened—that has been well documented—but about what could happen next. I certainly join other Members in asking the Minister to look at retaining all the necessary data in perpetuity, given that there is an ongoing impact on those affected. That reassurance should certainly not be too difficult to give.
I am also interested in hearing a bit more about the point that has been made by some campaign groups in relation to the pre-1992 with-profits annuitants who could be given equality with later annuitants through the £140 million underspend from the £1.5 billion that has been cited. I am realistic—I accept that money does not grow on trees and cannot just be printed—but perhaps something could be done over the coming years. No one is saying that the money should be paid immediately. We accept that these are people who are looking for support over a period of time.
It is worth looking at some of the other impacts that resolving these issues would have. It is about a potential reliance not just on state—national—projects, but at a local government level, given the age of some of these people. Clearly they are starting to make social care payments, which would have been mitigated had they received the savings that they originally expected to have for their retirement.
It is vital that we reflect on how we ensure that people have confidence that this will not happen again—I am sure the Minister will consider that when he comes to respond to the debate.
I think that it is probably safe to say that there has been some action from this Government in responding to the recommendations of the parliamentary ombudsman, but this is about building faith and about people having confidence. Let me be blunt about this. There are those of us who have just turned 40. We want to make sure that those who are taking part in auto-enrolment and who are looking to retire in the future have the confidence to start putting money aside. Bluntly, I am putting money aside now for my pension. I will be 68 when I am entitled to take my state pension. I have to be confident that my money will still be there in 28 years’ time. I accept that, as Members of Parliament, we are in a unique situation, but people in the workforce want to have confidence that if they put away money that they do not plan to access for 30, 40 or even 50 years, it will still be there. It is so vital that that confidence is there. Ultimately, the pension system, like any other savings and investment scheme, operates on the basis of confidence. People need to be confident that if they put money away, it will still be there. They need to understand the risk that they are taking at the time. As we touched on, people viewed these schemes them as a pension investment—a secure pot—not as a high-risk investment through which, yes, the returns might be high, but there was a clear and present risk to their capital as well as to any future profits.
I am conscious that we need to move on because we have another debate to follow, so I will draw my remarks to a close. I hope that we will be able to make progress and that people in Torbay who have been waiting for so long, and who probably would not have expected their MP to still be talking about this issue 19 years after the company’s collapse, will have something to look forward to.
I thank the hon. Member for Harrow East (Bob Blackman) for setting the scene, and the hon. Member for Leeds North East (Fabian Hamilton), who is not in his place, for his help in bringing this matter to the House for consideration. It is always a pleasure to follow the hon. Member for Torbay (Kevin Foster). He usually sweeps up on the Government side of the Chamber and I often do the same on the Opposition side, but we often agree. And here we are again agreeing on an issue that he is interested in as the Member for Torbay, and that I am interested in as the Member for Strangford.
We all know the background to this story because we have spoken about it many times, but that does not take away one bit from the fact that, as the hon. Member for Harrow East said, it is as shocking today as it was back then. Like other hon. Members, I believe that we should honour the obligation and the pledge. The hon. Gentleman said that very clearly in his introduction. Well, I will tell the House something: I am also here to ask my Minister, of my Government, to honour that pledge. We look to the Minister for the satisfaction that our constituents need, and that is why each and every Member here is present today.
Let me gently break the issue down one more time, in the hope that the reality of the situation will provoke a greater scale of action some 20 years later. Let us remember that the Equitable Life victims are typically retired nurses, teachers, civil servants, factory workers, shop workers and small business owners who had no choice but to set up a personal pension. Before I was elected to this place in 2010, I was a Member of the Legislative Assembly in Northern Ireland, and one issue that came to my attention then was that of the Equitable Life policyholders, especially as there are dozens in my Strangford constituency. Unfortunately, some of them have passed on, so they never had the satisfaction of seeing this being addressed. I am here to uphold the policies of the people who are still living and to express some disquiet about those who have not had that satisfaction. With all our busyness as Assembly Members and MPs, I tried to address this matter along with many other Members, because this is not just Jim Shannon; this is everybody together—Members of all parties, on both sides of the Chamber—recognising that a wrong has to be righted.
There are people who have worked hard and worked away to secure their retirement, but to date almost 1 million pension savers have received less than a quarter—some 22%—of the losses they incurred when the Equitable Life Assurance Society nearly collapsed. Just before I was elected to this place in 2010, I was contacted by people in my constituency who had been stung by the Equitable Life scandal, and they all pointed to the fact that the parliamentary ombudsman clearly concluded in 2008 that the victims’ loss was directly attributable to a decade of serious, serial regulatory maladministration. In fact, just last year the Treasury admitted that it was culpable for the scandal. That is the story, so we look again to the Minister for his response.
In 2010, I can well remember the Government accepting that victims’ losses amounted to £4.3 billion, and I was disappointed at the allocation of £1.5 billion for compensation—a decision that was justified on the basis of the perilous state of the public finances, as other Members have mentioned. I was a member of the APPG that secured a small victory in 2010 with the passage of the Equitable Life (Payments) Act 2010 and the establishment of a scheme to pay limited compensation to qualifying Equitable Life members. But this payment was not enough, and the people who are missing out are the most vulnerable. The compensation amounted to only 22.4% of the relative losses of 895,000 traced pension savers. This was the sum left after compensating the people with annuities who had already retired. Ensuring that this large cohort of pension savers receive the unpaid balance of the full 100% of their relative losses would cost £2.6 billion. May I suggest that, when our finances are better, this small figure should be considered in order to bring the situation to a conclusion?
In the 2013 Budget, a cohort of 9,200 with-profits annuitants who took out contracts before 1992 received only £5,000 each, or £10,000 if they were eligible for pension credit. I stand today to support the call for these victims, who are the oldest and most vulnerable, to be afforded the same treatment as their younger counterparts, who bought their annuities later. We have a duty to deliver this. It would cost an estimated £100 million and could be funded today from the unspent £140 million in the Treasury’s coffers from the current scheme. If the money is there, let us do what is right. It seems like simple mathematics to me.
I am well known as someone who does not advocate borrowing like there is no tomorrow. I have a bit of Ulster Scots in me—every pound’s a prisoner. We are very careful in what we do, and that was instilled in me by my mum and dad.
Absolutely. Joking aside, the mathematics are plain. I understand that it is my children and grandchildren who will be paying off our debts for their whole lives, and I am supportive of efforts to reduce the deficit, although this cannot be done at the expense of those who are vulnerable and ill. More focus should be put on the higher rate tax bracket, but that is a debate for another day.
We have brought down the deficit and are no longer in a position of a financial crisis. I thank the Government for that because they worked hard to make it happen, and we support them—well done. Therefore, there could well be a time when we can do what is right by every person affected by the maladministration.
A briefing provided to me has outlined the fact that Equitable Life victims were pushed to one side as a direct consequence of the timing of the 2008 financial crisis, which saw the UK’s banking corporations bailed out while hard-working and responsible pension savers took the hit. Now that the Government have sold their interest in Lloyds and are reducing their stake in RBS, it would be fitting to use a small portion of the money recouped to finally settle the acknowledged debt to Equitable Life victims. There is a clear cross-party consensus, from right hon. and hon. Members on both sides of the Chamber who have a real heart for their constituents—for Equitable Life members who have policies that need to be delivered. It is so important that we honour that pledge, but to be able to do this we must be able to retain the necessary information.
Like other Members, I ask the City Minister to guarantee that Her Majesty’s Treasury and other relevant agencies will retain indefinitely the necessary data—addresses, policy numbers and amounts paid—to make the further future repayments that we are calling for. If he were to provide this assurance on the Floor of the House, it would provide a great deal of comfort to Equitable Life victims that there is hope for the future. I say very gently to everyone here that our duty is to deliver for our constituents. We are in this House because they voted for us, and we are here today to put forward their case. It is a collective decision of all Members present to request that these things happen.
Time has beaten me but I must stress one last time, on behalf of the Democratic Unionist party, that these people are victims. We have outlined wrongdoings and maladministration, and have paid out a small amount of money that is due. If we are in the position to do more, we must ensure that we do. But, more importantly, we must send the message that we are actually willing to do that; that it what it is really all about.
Today we have heard a powerful and consistent voice across this Chamber to end this scandal. I pay tribute to the hon. Member for Harrow East (Bob Blackman) for bringing this debate to the House. Like all former councillors, he cut straight to the heart of the matter and how it affects people’s daily lives, and he did so with eloquence and controlled anger. He is right to be angry on behalf of the people who have been affected by this scandal. He laid out the history and pointed out that it is a Ponzi scheme, and he is right that it has been a web of greed and exploitation leading people to this point. I add my voice to his clamour for the Government to honour, in full, the support needed by the victims, and I back his three asks in getting past this situation.
The hon. Member for Leeds North East (Fabian Hamilton), who is not in his place, talked about the life-changing negative effects of this issue, and has been a constant champion of the victims. [Interruption.] I am glad that he returned in time to hear me say that. He mentioned the report that described a decade of regulatory failure. It gave a well-informed exposition of the issue, and mentioned two shocking statistics—that 100,000 cannot be traced and over 15,000 people have died. What a disgrace.
The right hon. Member for New Forest West (Sir Desmond Swayne) and the hon. Member for Torbay (Kevin Foster) asked how people having to save for their retirement can have confidence in the system when this matter has been allowed to drag on in this way and left in this state of affairs. They also, quite rightly, pointed out that this is creating a framework for hostility towards pension saving. The hon. Member for North Tyneside (Mary Glindon) underlined those points. The right hon. Member for Haltemprice and Howden (Mr Davis), who is no longer in his place, said that it was a failure of Government to have dealt only partly with this. He should know. He is an expert in failures of Government, so we should listen to him.
The hon. Member for Blackpool South (Gordon Marsden) said that there was a “Bleak House”-type history to this, and, as many others did subsequently, talked about the opportunity to get some of the money back on the RBS shares as a way of settling this scandal for people. That should be taken on board. The hon. Member for Strangford (Jim Shannon) talked about the choices that Governments make. As a DUP MP, he knows about the choices that this Government make in terms of spending their money. There are lessons to be learned by Government Front Benchers on this. The hon. Member for Erewash (Maggie Throup) also underlined some of the things that need to be done by the Government, so I hope that the ministerial earplugs were left behind before the Minister came into the Chamber today.
Let us be clear: the only thing equitable in this whole saga is the name “Equitable”; everything else about it has been rotten. This scandal has simply been allowed to continue beyond any reasonable timeframe. So as Equitable Life is finally wound up, the UK must now, belatedly, ensure that justice is delivered for those affected by this scandal. That means dealing with the issue of compensation, and that can only be done when the loss is fully quantified by negotiating the correct sums involved. The EMAG website states that the £1.5 billion covers only 20% of the losses incurred and argues that there should be Government action to pay full compensation. At the moment, there is a huge gap between what is required and what the Government have set aside in their £500 million fund. I ask the Minister: when will the compensation be fully agreed?
In June 2018, it was announced that Equitable Life would finally be shutting down, with a surprise £6,900-a-head windfall for the last remaining policyholders, while about 261,000 people will have a share in a £1.8 billion pay-out following the transfer of its business, Reliance Life, through unlocked capital. That is good news, perhaps, for those who have hung around, but the 800,000 former policyholders—the vast majority—who were shifted to other providers or encouraged to cash in and cut their losses will get nothing from that. EMAG says that policyholders who left Equitable Life will still remain £2.5 billion out of pocket. As Paul Braithwaite of EMAG said:
“Equitable has crafted an elegant termination strategy for the small number of remaining members, but it will be no benefit to the vast majority of victims. If the remaining members vote in favour of this deal, they are likely to come out ahead. But for every one of them, there are five who left the society who are much worse off.”
That vote, as we know, will go ahead in the coming months.
The UK Government must now finally deal with the outstanding injustices felt by these aggrieved policyholders. Those people saved throughout their lives. They were encouraged—told—to do so by successive Governments in this place. They lost the savings they had entrusted to those whom the Government, in turn, had entrusted to look after them. The Government have not only failed them—they have failed to treat this with the due urgency it requires, or, indeed, the compassion it requires. They failed to compensate them, and that must be put right now. In doing so, the Government must consider the deep impact that scandals such as Equitable Life have on public confidence in pension schemes, and how they could end up actually deterring those who should be saving for their future needs. I therefore say to the Minister: “Let us make a commitment. Let us hear that from you to end the scandal, to belatedly make amends, to make it right, to make it fair, and, with no irony intended, to make it equitable for all those who have suffered.”
I thank the hon. Member for Harrow East (Bob Blackman) for securing this debate, which has been thoughtful and considered. Both he and my hon. Friend the Member for Leeds North East (Fabian Hamilton) have persisted to ensure that this important issue remains high on the political agenda over the years. They have worked tirelessly and they should be commended by this House.
The hon. Member for Harrow East set out the situation clearly, and it is a very unsettling picture. Hon. Members have spoken of the debt of honour and of the erosion of trust in this House that we face for failing to rectify this injustice. My hon. Friend the Member for Stretford and Urmston (Kate Green) said that she herself has been affected by the collapse of Equitable Life, highlighting the sheer scale of the impact this issue has had across the country. My hon. Friend the Member for Lincoln (Karen Lee) explained how it has affected people across a wide swathe of society—nurses, doctors, teachers and civil servants. Hon. Members have spoken of the despair and distress that this failure and collapse has caused to so many of our constituents. My hon. Friend the Member for Leeds North East described it as one of the greatest financial scandals of the modern age. I hope that the Minister has heard the clear and unambiguous views of many Members from across the Chamber.
As has been set out, this issue stretches all the way back to 2000, when Equitable Life Assurance Society closed to new business and was forced to acknowledge that it could not deliver for its policyholders, leaving up to 1 million people out of pocket through no fault of their own. Following the society’s collapse, the Government of the day set up the independent Penrose inquiry, which raised serious questions about the practices that had been happening at Equitable Life. This decade of mismanagement, combined with maladministration, was a major contributor to the society’s collapse. As we have heard, the Penrose inquiry was followed by an ombudsman report in 2008 that found that this mismanagement had corresponded with
“a decade of regulatory failure”.
This included an inadequate response to the chief executive’s appointment; inadequacy of advice by the Government Actuary’s Department; and poor transparency on the part of other Departments, including the Treasury.
In 2009, the Government apologised and appointed an independent adviser, Sir John Chadwick, to provide guidance on how to determine and resolve various technical issues. During this time, both the European Parliament and the Public Administration Committee had published sympathetic independent reports. It is worth noting that in 2010, the Conservative party manifesto, as many Members have mentioned, included a commitment to making
“fair and transparent payments to Equitable Life policy holders”.
All this culminated in a payment worth £1.5 billion in compensation to policyholders. As we have heard, the Equitable Members Action Group campaigners remain unsatisfied with this response, arguing that their losses amounted to more than £4 billion. This leaves a significant disparity in the losses faced and compensation awarded that so far has not been adequately explained or addressed by the Government. Instead, the Chadwick report of July 2010 concluded that relative loss should be defined as “those who have suffered financial loss”, but pointed out that the ombudsman recognised that losses in policy values were only partly due to maladministration, and that the backdrop to cuts in policy values was a sharp fall in world stock markets that all life insurance companies were forced to respond to. Similarly, the report argued that compensation should be assessed on the cost of maladministration as opposed to the size of investor losses.
However, we are politicians, and we can revisit decisions and choices. The Minister has been asked to consider carefully whether the Government should make different decisions or choices today, with the benefit of hindsight. After all, regardless of how fault is distributed among the institutions involved, these policyholders have found themselves significantly out of pocket, through no wrongdoing of their own.
Many Members from across the House, including colleagues from the shadow Front Bench, as well as the leader of the Labour party, have met the campaign to listen to its concerns and the full details of the case. I would therefore like to ask the Minister whether he has met the campaign, and whether he might consider doing so in the days following this debate, to hear its case directly.
Given that the Government have accepted that there were regulatory failures and offered some compensation already, they may be open to further discussions, to respond to the clear dissatisfaction that so many policyholders feel about how this matter was resolved. I hope the Minister will give a clearer sense of the Government’s willingness to look again at this matter.
My hon. Friend the Member for North Tyneside (Mary Glindon) raised the important matter of policyholders’ data. The campaign is anxious that the necessary data is retained, to ensure that policyholders can be identified were there to be a change in Government policy. The campaign has hoped for reassurance from the Minister, and perhaps we will have that today.
Lastly, while I have discussed the position of Equitable Life policyholders throughout my speech, there is also the question of the regulatory environment now. We have to ensure that lessons have been learned, so that such an awful case can never happen again. The regulatory frameworks that operate in this country must be continually stress-tested and reviewed. Regulatory organisations need the appropriate resources to ensure that proper regulation occurs. We have to consider that 100 or 150 people are looking at 200 insurance companies. What protections have the Government put in place to guarantee that similar regulatory failures cannot happen again? That seems an important consideration, not only to reflect on the past and seek justice for those affected, but to ensure that we do not repeat the same mistakes.
I hope the Minister will be able to offer a satisfactory answer to the questions I have raised. Clearly a serious injustice was faced by policyholders at Equitable Life, which has been the source of much discussion, inquiry and debate over many years, yet those affected do not feel that this has been resolved adequately. The Government have looked at this matter before, and I hope they will resolve to look at it again and begin a full and proper process of consultation with the campaign. Ultimately, people’s savings are in question, lost through no fault or wrongdoing of their own but a combination of factors outside their control. I look forward to the Minister’s response.
It is a privilege to respond to the debate. First, I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton) on their tireless work on this issue, which has helped the Government to achieve so much. I attended a meeting of the all-party parliamentary group for justice for Equitable Life policyholders last September, and the respect of colleagues on both sides of the House for those Members’ work was clear.
This well-documented topic has been explored once again in detail today, with 10 eloquent and measured speeches by Members on both sides of the House. I need to declare an interest. My father worked in a glasshouse nursery all his life and paid in modest sums each month to Equitable Life. He received the compensation of 22.4% to a bond that he was paying into. Sadly, he died of mesothelioma aged 69, just two years ago. I know that it was a matter of grave concern for him, and he took the money and invested it somewhere else. I am very familiar with the long history of this case.
I want to take this opportunity to remind Members that, on this issue, this Government have taken more action than any previous one. Using the ombudsman’s findings, we determined the reduced returns that policyholders received to be £4.1 billion. That is significantly more than the £340 million arrived at by the previous Labour Government in the Chadwick review, which was then dismissed. That increase is because we generously assumed that every new investor consulted the incorrect regulatory returns and, on the sole basis of those returns, made an investment.
In 2010, we announced that up to £1.5 billion would be made available for payments. Those payments were tax-free, which increased their value even more. Out of that £1.5 billion, following representations from groups such as the Equitable Members Action Group, we decided to pay the group of with-profits annuitants in full. The total cost of those annual payments was estimated to be around £625 million. As several Members have mentioned, there is an additional £100 million contingency fund in place to provide for annuitants should they live longer than their actuarial forecast, and we expect the contingency to be drawn on from the middle of the next decade. The remaining funding was distributed pro rata to remaining eligible policyholders. The scheme operated successfully for around five years, and in 2016 the operation was wound down.
There has, reasonably, been a degree of repetition in the asks made today, and three key points were raised. I have listened closely to those representations, and I would like to deal with some of them in turn. First, I have received suggestions that all policyholder records should be retained indefinitely, in case further payments are made. There has been correspondence between the Treasury and the APPG on that matter, and I can assure Members that relevant records are currently retained and will continue to be as long as it is legal. I can reassure the House that there are no plans to destroy any records.
Secondly, I am aware that some are dissatisfied with the £1.5 billion and suggest that it is incompatible with the ombudsman’s report. However, Members will be aware that the ombudsman wrote to the APPG on that issue and said that the Government’s decisions could not be said to be incompatible with her report. That spending decision was taken in the wider context of other spending priorities. I recognise that there is a whole range of opinions about spending priorities. That is what we do—we make relative decisions. This decision needed to be fair to the taxpayer, who funded these payments, and £1.5 billion was, on balance, judged to be the most appropriate figure.
I want to be clear: when this settlement was made, it was not subject to future review by the Government. I note the inference by the APPG and Members from the statement at the time, but no specific commitment was made to return to that calculation. No obligation linked it to the future state of public finances. There have been representations that this issue should be reopened and that a further £2.6 billion should be paid to policyholders. The Government’s position on this is clear, and I have set it out in my letters to the APPG and my meeting with it last year. Being in government is about making difficult decisions. Our decision was to spend £1.5 billion, reversing and multiplying by four the previous Government’s dismissal of a commitment to £340 million. These difficult decisions are about how to be fair to both hard-working taxpayers and those in receipt of public spending and services, and where the need to spend public money is greatest.
I acknowledge the point made by my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) concerning the imperative to provide for the next generation and, as several Members said, to restore trust in pensions and pension savings. There is cross-party consensus on that, and both parties have worked hard to achieve a lot in terms of auto-enrolment. There is more work to be done in that space. None the less, the House will recognise that the opportunity cost to the Exchequer of paying a further £2.6 billion is funding the salaries of 67,000 teachers, or 112,000 new nurses.
I am listening with some concern, as I am sure other Members are, to what appears to be an edging further and further away from the commitments that we have all asked for this afternoon. The Minister talks about priorities. We could spend three hours in this Chamber talking about the priorities that this Government have given to tax cuts and other things. He needs to choose his words carefully in responding to what has been said.
It is not about party politics; it is about saying that when we came into government, in the absence of a resolution to this matter, we increased the figure from £340 million, which the last Labour Government were proposing, to more than £1.5 billion. In the light of those facts, it is a bit unreasonable to criticise what I am saying. While I appreciate and empathise with the fact that some policyholders who have invested their funds have not received the funds that they hoped for, like my late father, and that this impacted on their plans and futures, we have taken the best action that we could have to resolve the Government’s part in these reduced returns. We have done more than any previous Government.
I draw colleagues’ attention to Equitable Life’s own research from 2011, which suggested that their policyholders wanted the Government compensation to draw a line under this issue. I agree with them. The Government’s view is that this issue is now closed, and as a Minister I have never been in the business of offering false hope.
With the leave of the House, I would like to thank the 10 right hon. and hon. Members who have spoken in the debate and the numerous other colleagues who made interventions. I regard the Minister as an honourable Friend, and I understand that he has to maintain a solid line from the Treasury and the Chancellor. That is clearly his job, but the 1 million people out there who are victims of this scandal will be disappointed with what my hon. Friend has had to say. The reality is that we have a debt of honour. I believe that we should repay that debt. It can be done over a period, not necessarily all at once, as we have said during the debate.
I am summing up, and I have to keep very tightly to time.
I am grateful for all the praise that has been heaped on me and the hon. Member for Leeds North East (Fabian Hamilton) for the campaign that we have continued to run. I would much rather that the Government honoured the commitment that we all made in 2010 to deliver full compensation for the victims of the scandal. During the debate, our membership of the all-party parliamentary group has increased yet again. We now have 238 members, and we have been joined by no less a figure than the right hon. Member for Doncaster North (Edward Miliband), the former leader of the Labour party.
If the Government do not wake up to the fact that, on a cross-Bench basis, we are determined to get justice for Equitable Life policyholders, they may find that if they do not do the right thing it will be forced upon them.
Question put and agreed to.
That this House welcomes the Government’s acceptance in full of the Parliamentary Ombudsman’s findings in relation to its maladministration with regard to Equitable Life; notes that the Parliamentary Ombudsman recommended that policy holders should be put back in the position they would have been in had maladministration not occurred; further notes that the overwhelming majority of victims have only received partial compensation compared to the confirmed losses directly attributed to regulatory failures; and calls on the Government to make a commitment to provide full compensation to victims of the scandal with the end of austerity now in sight.
On a point of order, Madam Deputy Speaker. During my brief intervention during the debate I was unable to mention that I have a close relative who was one of the policyholders and he has suffered as a result. I should like to add that for the benefit of the record.
I thank the hon. Member for his intervention and for giving me prior notice of it. I am sure that the House will appreciate it that as soon as possible he has been able to register the fact that he had a relative who was involved in the scheme.
On a point of order, Madam Deputy Speaker. I understand that at business questions today the Leader of the House was asked by the right hon. Member for West Dorset (Sir Oliver Letwin) what the timetable would be if, when she puts her withdrawal agreement or a deal to the House again it is voted down. He asked whether in those circumstances an amendable motion would be laid the following day. My understanding is that the Leader of the House did not give a positive reply to that and did not suggest that it would be tabled the following day, even though the Prime Minister said in her statement that in those circumstances if the deal was voted down again she would table an amendable motion for debate the next day.
There is real alarm about the discrepancy between what the Prime Minister said and what the Leader of the House said. Have you heard anything from the Government about whether they are trying to change the proposals that the Government put forward and, if they are not, why was the statement of the Leader of the House different?
I thank the right hon. Lady for her point of order. I am afraid that I was not here to hear what the Leader of the House said. It is not for the Chair to rule on possible discrepancies, if there are any, between statements from one Minister or another. However, she has put her concern on the record. The Treasury Bench will have heard her concerns. There is obviously the opportunity at business questions next week to raise this, but in the meantime if further clarification is required I am sure that the right hon. Lady will know that there are various ways in which she can raise that in the course of next week.
Further to that point of order, Madam Deputy Speaker. I was here for business questions and I had the opportunity to hear the response from the Leader of the House. Perhaps my hearing is not as good as everybody else’s, but I heard her say that it would take place the next day. That was the assurance, which was similar to what the Prime Minister said. Perhaps I heard her wrong, but I can say genuinely that I heard her confirm that, and I want to put that on the record.
The hon. Gentleman has put his finger on the different interpretations that have been made of what the Leader of the House said. However, as I say, those on the Treasury Bench will have heard that there is perhaps a little confusion about exactly the position, and that it might be wise to clarify that before too long.