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Equitable Life

There is a principle, long accepted and indeed long debated in the House, that there is not an automatic right or an entitlement to compensation for regulatory failure. That was a characteristic of the compensation scheme that was put in place for failures as far back as Barlow Clowes. None the less there is an ethical demand to have a compensation scheme set up. I have sought to deliver a payment scheme that meets the imperative to act, to deliver it swiftly and to ensure that the right people are included. I want now to say a word or two about the approach that the Government have pursued and the rationale for it. All hon. Members agree that we need to establish a fair payment scheme as quickly as possible. The ombudsman suggested a scheme that in her view could be up and running and complete its business within two and a half years, but her proposal relied on looking at regulatory returns. That has two consequences. First, it would entail a case-by-case review to understand who lost what and why. That would involve looking at 30 million investment decisions by 1.5 million people over 20 years. Secondly, and to my mind more problematically, individuals would have to prove that they relied on regulatory returns. As the ombudsman said:""I find that injustice was sustained by any policyholder who relied on information contained in the Society's returns for 1990 to 1996"." The Government simply did not think that such an approach would work. We therefore wanted Sir John Chadwick to look at a more expeditious and less risky way of setting up a payment scheme. Rather than a case-by-case analysis, Sir John has proposed that we look at different classes of policyholder—about 20 in total—and then, for each class, assess relative loss with a comparator on which he has gone out to consultation.