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Equitable Life

Let me deal first with the central question about the difference between compensation schemes, as proposed by the ombudsman, and our conclusion that an ex gratia scheme would be more appropriate. The ombudsman made 10 findings and went on to say that a number of injustices resulted. When we looked through those findings, we came to the conclusion that in nine out of the 10 findings, we could accept wholly or in part her conclusion that there was maladministration. In four of those areas, which I think were significant, we accepted that injustice followed. Two consequences follow from that position. The first is that we departed from the ombudsman in her conclusion that a compensation scheme should be put in place, because we do not think the taxpayer should be the compensator of last resort. We think that would have perverse consequences, and it is a principle on which the House has voted in the past. Secondly, it would be irrational for the Government to propose a compensation scheme across the board for charges of maladministration or injustice that we did not accept. I know that when the ombudsman came before the Public Administration Committee on 21 January—my hon. Friends will correct me if I have the date slightly wrong—she said that she would almost rather the Government accepted her recommendations and then did nothing to provide compensation. I do not think that that is the right approach. There are findings that we have accepted. There are charges of maladministration that we have accepted. Further, there are charges of injustice that we have accepted. We also believe there will be people who have suffered and are suffering hardship—in some cases extreme hardship—as a result of that. That is why it is essential for us to set up an ex gratia payment scheme. The ombudsman did not have the chance to go into the vital question of who lost what. That is the first piece of work that we have asked Sir John to consider. I do not think it is possible to get an ex gratia scheme in place and operating justly until we have understood who has lost what. Obviously, there are hundreds of thousands of policyholders—