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Equitable Life

It is a pleasure to welcome you to the Chair, Mr. Caton. I congratulate my hon. Friend the Member for Leeds, North-East (Mr. Hamilton) on securing this debate. It is a testament that the events surrounding Equitable Life continue to command a lot of attention from many hon. Members, as it should. Although this is the first time I have been called upon to appear in a ministerial capacity at a debate on Equitable Life, I have spent a considerable time getting up to speed and I am fully aware of the previous debates. Having looked through them, I think that it is fair to say that we are not covering much new ground today. Many of the arguments have been heard many times in this House. However, I thank all hon. Members, all of whom spoke eloquently on behalf of their constituents, for their contributions this afternoon. The Government always welcome healthy debate and continuing scrutiny, but I must be clear from the start: our position has not changed. We have made our response to the ombudsman's main report and we stand by it. We explained our reasons behind every rejection of her findings, and we believe that we had cogent reasons for doing so. Reflecting the limited extent of her jurisdiction, the parliamentary ombudsman's second investigation into the regulation of Equitable Life's with-profits fund under the Insurance Companies Act 1982 regime, which has now been superseded, looked exclusively at the role of the prudential regulator and the Government Actuary's Department. It was not permissible for her to consider the actions of Equitable Life or any other party within the private sector. The substantial report published by the ombudsman in July last year was the culmination of her four-year investigation. The factual and technical complexity of the issues that she investigated, which themselves contributed to the length of her investigation, are the reasons it has been necessary for the Government to take time to consider the report. Indeed, the Government would have been rightly criticised had they not considered the report carefully before giving their response. I repeat that the Government accept that maladministration occurred in some areas and that in some cases, but not all, that might have led to injustice for policyholders. The ombudsman welcomed the Government's acceptance of maladministration and of the fact that some policyholders will have been adversely affected by regulatory failures. We have apologised for that—and I do so again today—on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life between 1990 and 2001. We also accept that some policyholders might have suffered a disproportionate impact as a consequence of the maladministration and injustice accepted by the Government. We have looked in detail at the ombudsman's central recommendation for a compensation scheme. Several hon. Members suggested that the Government are at fault in not accepting the recommendation that we should establish and fund a compensation scheme with the aim of restoring those Equitable Life policyholders who suffered a loss as a result of the maladministration. However, such views fail to take account of the important principle, recognised by Parliament, that it is not generally appropriate for the taxpayer to pay compensation, even in the event of regulatory failure. The regulator is not the guarantor of the regulated and the taxpayer does not stand as the insurer of last resort. The responsibility to minimise risk and to prevent problems from occurring in a particular institution lies, first and foremost, with the people who own and run that institution, as was pointed out in Lord Penrose's report. Lord Penrose also found regulatory system failures—I do not disagree with him—but concluded that they were secondary. The ombudsman recognised in her report that the Government have to consider first the public interest and secondly their responsibility to taxpayers generally to balance competing demands on the public purse. The Public Administration Committee's report stated:""The decision to compensate must not be the equivalent of signing a blank cheque on taxpayers' behalf."" That is why we have set up a process that will establish the facts on relative losses experienced by different groups of policyholders and the factors affecting those losses.