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Equitable Life (Payments) Bill

Let me add my congratulations to my neighbour in Cheshire and in London, my hon. Friend the Member for Congleton (Fiona Bruce), on her excellent maiden speech. Like everybody else, I support the Bill and I applaud our Front Benchers for moving so quickly to get this sorted out. I am disappointed, however, that we appear to be nailing our colours fairly firmly to the mast of Chadwick. The report is discredited, and in the course of my speech I shall try to explain why I see a difference between the £4.5 billion referred to by the ombudsman and the amount of about a tenth of that talked about by Chadwick, as well as why Chadwick is wrong. It is central to our understanding of this issue that we know why Chadwick was wrong and where the methodology was flawed. The sum of £4.5 billion is a lot of money. Roughly speaking, it is the cost of two aircraft carriers. Just because it is a lot of money, however, does not mean that we should not do the right thing in sorting out this matter. In particular, we should honour the commitments—both implied and explicit—that we made in the run-up to the election in respect of those people who have invested in Equitable Life. I want to make three points over and above my point about methodology and Chadwick. First, there is a group of people who have been particularly ill served by what has happened: the with-profit annuitants. I urge Ministers to consider making interim payments to them, because they have been severely hit. I do not accept the argument that doing so would affect the time scale of the rest of the payments. I do not think that that is true. Secondly, I urge Ministers to make the process simple when the payments are coming out. Let us not allow civil servants to convince us to build computer systems that would apply tens of thousands of transactions to tens of thousands of policies, ending up with the complexity that we saw in the Department for Environment, Food and Rural Affairs and the delay in farming payments. This can be simple, because we are making broad brush assumptions about the amount that we pay out in the first place. To go into spurious accuracy in how we allocate that among different fundholders is just wrong. Thirdly, we should honour the commitment by next summer. It is quite important in the context of the Bill that we know when payments will be finished and not just when they will start. Fourthly, we should look again at the adjustment that Chadwick has made. The reason that £4.5 billion became a tenth of that was that Chadwick said that in his view 80% of the policyholders who were informed—had regulation been done adequately—that this was a basket-case company would continue to invest in Equitable Life and that as a consequence, there was no regulatory failure in respect of those people. By applying that figure of 80%, £4.5 billion becomes pretty close to the sorts of amounts that we appear to be talking about. He said 80%; I say 50%. Somebody else says 30%. That figure is a question of judgment; there is no methodology. However, when we consider other financial crises, other runs on banks and other countries, the figure of 80% does not appear to stack up. I have had a go at applying a more reasonable number to the ombudsman's figure. It is reasonable that, having done all that, we should make an allowance for the spending position in which we find ourselves. I do not think that EMAG has a problem with that. However, when reasonable assumptions are applied to the ombudsman's starting point, it is very hard not to come up with a number that is a considerable multiple of the number that Chadwick talked about. I cannot get one that is much lower than about £2 billion, which, as those of us who are doing our arithmetic will know, still lets us have one aircraft carrier. May I make one final plea to those on the Front Bench? Can we stop benchmarking ourselves against the Opposition? That is a very low bar indeed. We must benchmark ourselves against what is right and against the expectations we raised when we were fighting the last election. It is not enough simply to do more than the Opposition.