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Equitable Life

The willingness to look beyond the words of his report will depend, of course, on who is in government at the time and what their approach is; but whoever that is and whatever their approach, we want resolution of this process. It has been going for far too long, and the longer the disputes are about Sir John's report, the longer it will take for compensation to be paid to Equitable's policyholders. We need to bear that in mind. I now return to my speech, because I am conscious that many hon. Members want to take part in the debate. From the Penrose report onwards, it has been clear that one factor contributing to the problems of Equitable Life was the action of the regulator. In the concluding paragraph of his report, Lord Penrose said:""Principally the Society was the author of its own misfortunes."" Normally, Ministers stop their quotation at that point in his remarks, but Lord Penrose went on to say that""it may be appropriate to comment that the practices of the Society's management could not have been sustained over a material part of the 1990s had there been in place an appropriate regulatory structure"." From that point on, it was clear that the failures of the regulator over a decade played a key role in the crisis at Equitable Life. The Government could have responded to the Penrose report by accepting that there was regulatory failure and acting upon that failure then. If those findings had been accepted and acted upon, it could have led to justice being delivered to the policyholders many years ago. The crisis at Equitable Life could have been put to bed then. But the Government chose to ignore those findings, and then sought to block any further inquiry by the ombudsman into Equitable Life. The Government said that the ombudsman could not investigate the Government Actuary's Department—the Department that played the key role in the day-to-day regulation of Equitable Life—and therefore there could not be a second inquiry into the regulation of Equitable. The right hon. Member for Bolton, West (Ruth Kelly), the then Financial Secretary, stood firm on that until my hon. Friend the Member for Chichester (Mr. Tyrie) identified that the ombudsman's remit could include the Government Actuary, thus clearing the way for the ombudsman's second inquiry. That was a pivotal point in the process which led to the opportunity for the second inquiry into Equitable. With the start of the ombudsman's work, policyholders might have thought the end was in sight, but they did not take into account the ability of the Government to frustrate the ombudsman's work. Documents previously thought lost were suddenly found, further complicating the ombudsman's inquiry. But the new documents were not the only barrier that the Government put in the ombudsman's way. One might have thought that it was enough for the ombudsman to be bombarded with those documents, but then the Treasury decided to shower her with legal arguments on her findings. When the ombudsman's report was published, however, its conclusions were clear. There were 10 findings of maladministration in her report, and her recommendations were clear too: because the maladministration had caused injustice, there should be a scheme to make payments to the policyholders. That was where she added the two caveats that I mentioned in my answer to the hon. Member for Cannock Chase. The first was that the compensation paid to policyholders should be based on relative losses rather than the absolute loss. That means that market conditions at the time should be taken into account when calculating the losses suffered by the policyholders—an approach that Sir John Chadwick has adopted in his work. The second caveat was that the impact on the public purse needed to be considered when determining any compensation scheme. That is an important caveat, and it is accepted by all parties. The second recommendation called for the issue of an apology from the Government to policyholders. We accepted the recommendations immediately. It was the right thing to do. Indeed, we made a commitment to respect the ombudsman's findings during the cross-party campaign to force a second inquiry. But one voice was absent from the acceptance of the ombudsman's findings. One voice remained silent: that of the Government. One would have thought that the Treasury would have known exactly what the ombudsman's findings would be, given the arguments and debates between them. One would have thought that it would be prepared for her findings, prepared to give a response, but there was no immediate response—just silence.