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Equitable Life

Thank you, Mr. Caton, for giving me the opportunity to contribute to this extremely important debate. I start as is customary but also appropriate by offering my congratulations and gratitude to the hon. Member for Leeds, North-East (Mr. Hamilton) on raising the topic. I welcome the Exchequer Secretary to her position. She is new to the Treasury. I hope that I do not sound churlish when I say that it would have been better had the Economic Secretary, who continues to serve in the Treasury, been present, because that would have offered greater continuity with the many previous debates in which he has given statements or replied on the Government's behalf. Nevertheless, we look forward to hearing the Exchequer Secretary's response. The background to this matter will be familiar to most if not all hon. Members present. The Government, through the then Department of Trade and Industry, the Financial Services Authority and the Government Actuary's Department, had responsibility for ensuring that the company Equitable Life acted properly and prudently. There have been no fewer than 13 reports on the failure of Equitable Life. The ones cited most often include those by Lord Penrose and by the FSA on its role from 1999 to 2000. Even the European Parliament issued a report on the subject. However, the report that everyone concentrates on and that has been mentioned repeatedly during this debate is by the parliamentary ombudsman. It cost, I am told, £3.5 million and took four years to bring to a conclusion. An extremely thorough report, it is entitled "Equitable Life: a decade of regulatory failure". The report does exactly what it says on the tin. We almost do not need to read the report; the title itself tells us the verdict that was arrived at. Nevertheless, it is worth pulling out a few quotes. The ombudsman said that the Government's restrictions on earlier inquiries were "iniquitous and unfair". The DTI's oversight of Equitable Life had been "passive, reactive and complacent". The FSA's regulatory efforts had been""largely ineffective and often inappropriate"." The policyholders had""a justifiable sense of outrage"." The language is stark. We are used to reading official reports in which some of the criticisms are couched in more guarded terms, but the ombudsman's conclusions could not be more explicit. I had the opportunity, from the exact position in which I stand now, to debate the situation, as it then existed, in this Chamber in November 2008, and many of the hon. Members present today were also present at that debate. We were assured by the Government and later by the Prime Minister himself that the Government would respond to the ombudsman's report by the end of 2008. I think that the Prime Minister said that it would be by Christmas 2008, rather than by the end of the year, but we would have been willing to grant him the extra week. In fact, the Government did not respond to the report within the timetable that they had promised, and when they did respond, the response was, by common consent, wholly inadequate. Since the debate in this Chamber in November 2008, there have been further contributions on the matter. The Public Administration Committee undertook an inquiry into the ombudsman's findings. Its report, entitled "Justice denied? The Government's response to the Ombudsman's report on Equitable Life", said that the Government's excuses were""shabby, constitutionally dubious and procedurally improper"" and that the ex gratia payment scheme looks "slow and onerous". It is a constant theme that the Government appear to be playing for time and dragging their feet. We heard earlier that that has consequences for all our constituents who are affected by this matter, who are dying on a daily basis without having the financial remedy that they rightly feel that they are owed. The ombudsman published a further report on 5 May 2009—very recently—entitled, "Injustice unremedied: the Government's response on Equitable Life". We have already discussed that to some extent. It made a number of points, all of which were critical of the Government—no, to be fair, many of them were critical of the Government. The overall tone was critical of the Government's approach. Even the Equitable Life chairman, Vanni Treves, asked in relation to the Government's response,""why haven't our policyholders been treated as well as Northern Rock and RBS depositors have? At any other time this would have been regarded as an absolute scandal."" The Government have put in place yet another review. There is a lot of frustration on behalf of Equitable Life policyholders. To use the familiar phrase, the matter continues to be kicked into the long grass. We have yet another review and more institutional delay. The review is under the auspices of Sir John Chadwick. By common consent, that review is inadequate. There is no definite timeline, unless the Minister can offer us one this afternoon. Very few resources are available to Sir John Chadwick to carry out the review in a way that many, including possibly him, would regard as desirable. The reporting process itself has been called into question. Ann Abraham, the ombudsman, said:""Whatever the outcome of the work that Sir John Chadwick will undertake, it is clear that the injustice I have found to have resulted from maladministration will not be remedied."" We could not have a more unequivocal response from the ombudsman than that. The question now is what can be done, given that track record of reports and the Government's lamentable record in responding to them. It is worth saying first that the Equitable Life fiasco was caused by systemic failures that go back a reasonable way. To pre-empt what the Exchequer Secretary might say, the seeds of the problem, according to both the Penrose report and the ombudsman's report, date back to a period before Labour was in government. I do not want the debate to be unduly party political; I want the Minister to respond on behalf of the Government of the day, rather than us having a debate along party lines. On that basis, let me concede that the Labour party could say with some justification that the problem did not start on 1 May 1997, when it came into government, although the problem has mainly been apparent and has grown since that date. It is imperative that the Government undertake a period of negotiation with policyholders. Why? We have just heard from my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith) that many people sought to behave responsibly and Equitable Life was seen as the gold-standard saving option. It was seen as beyond a normal commercial decision with the inherent risks that such investments inevitably involve. It was seen by our constituents as the cautious, safe, prudent way to save for retirement. The point was made earlier that we must incentivise people, as the population grows older, to save for their retirement, and it is precisely the people who are heeding that call and seeking to behave responsibly whom we should be seeking to assist, rather than deter from saving. More than anything else, we need to act with speed. The greatest frustration for most of the policyholders is the Government's inability to come to a speedy resolution. The money given to policyholders ought not to be means-tested, because that is not the nature of the arrangement. I say as a concluding note and in a conciliatory spirit—I hope that the Minister will engage on that basis—that no one or very few people are saying that they expect the compensation to be 100 per cent. There is recognition that improper or ill-advised judgments were made by those directly responsible within Equitable Life. There is also—this is a mature contribution to the debate—recognition that we are, as a nation, borrowing £480 million every single day and that that backdrop must be taken into account when considering whether the Government can be expected to commit to additional public spending. Nevertheless, even with those two important caveats, the Government have a responsibility, as the regulator, to compensate for regulatory failure. The Exchequer Secretary must bring this issue to a head now on behalf of the scores of constituents that I and all hon. Members have whose quality of life has been severely affected at the most vulnerable time of their life, because of the loss of savings due in large part to the regulatory failure over which the Government presided.