As I announced in Westminster Hall on 19 December, the Financial Services Authority is preparing a report on the events that led to Equitable Life's decision to close to new business. The report will cover both the FSA's role as prudential regulator and its exercise of its functions under the Financial Services Act 1986, including the Personal Investment Authority's responsibility for the conduct of business regulation of long-term, investment-linked life insurance. The report will be published.
Is it not clear that even if Equitable Life had won its court case in the Lords, there would almost certainly not have been enough to deliver its responsibilities to the guaranteed annuity policyholders without raiding the assets of the non-guaranteed policyholders? Has there not been a complete failure of regulatory supervision in this matter? Will the Chancellor publish not only the report of the investigation into the activities of the FSA and its predecessor SIB—the Securities and Investments Board—but the advice being given on the matter by the Treasury, which was also involved? Does the Minister agree that as the regulatory system, and especially the Treasury, have failed the public in this matter, the Government may well have a responsibility to compensate policyholders who have lost their money?
The Government recognise that policyholders will rightly be concerned at the news of Equitable Life's closure to new business. It is not for me or any Minister to give investment advice. As in all personal financial matters, independent financial advice is widely available from authorised firms or persons. The FSA is preparing a report on the events and it is not for me to speculate on the outcome of that report.
If my postbag is anything to go by—in the number of constituents who have written to me about the money they have lost as a result of investing in Equitable Life—a large number of people throughout the country have fallen foul of that company in these events. They ate extremely angry—through no fault of their own they invested their money in what they thought was a sound British financial institution. They are looking for a steer from the Government to ensure that the people who let those events happen are brought to account and that such events never occur again.
The Financial Services and Markets Act 2000 provides a model for the best standards of regulation in the world. As I am sure my hon. Friend is aware, one regulator will replace the current nine regulators. The Act gives the FSA clear statutory responsibilities, including objectives for market confidence, consumer awareness, the protection of consumers and the prevention of financial crime.
It is important that we recognise that the FSA's report will cover both the FSA's role as prudential regulator and the Personal Investment Authority's role. Its terms of reference include the background and events leading up to the FSA's assumption of responsibility for the prudential regulation of Equitable Life on 1 January 1999—[Interruption.] I am sure that on such an important matter, Opposition Members would like an accurate description of what is happening.
The report will describe the course of the supervisory work from then until the society's closure to new business on 8 December 2000, and it will indeed identify, as my hon. Friend the Member for Aberdeen, South (Miss Begg) has requested, any lessons to be learned.
Many millions of people are living in anxiety over this question. Will they not be shocked that the Chancellor of the Exchequer will not get up and take responsibility for his part in the matter? Will the right hon. Gentleman, through the Economic Secretary, take responsibility for the letter written by the Treasury in December 1998 which approved Equitable Life's decision to reduce the bonuses payable to those people who had guaranteed annuities?
Is it not the case that the fact that the Treasury ventured into an opinion on the law—an opinion that turned out to be wrong—was the reason why Equitable Life did not seek a sale of the company at that time? Therefore, are Ministers not responsible for the fact that the company is now unable to meet the expectations of millions of people? Will the Government take their responsibility seriously, and will the Chancellor of the Exchequer recognise that the fate of millions of people has been affected by what has been done in his name?
I am a little surprised at the right hon. Gentleman's approach. It is because we recognise that this is such an important matter that it is subject to an investigation and report by the FSA. It is not for any of us here to speculate on the outcome of the report. I trust that the right hon. Gentleman will wait for the investigations to be concluded and will look at the evidence that is presented.
Is it not a bit rich of the Conservative party, which was responsible for the mis-selling of hundreds of thousands of pensions, to try to make political capital out of the plight of Equitable Life policyholders? Should not the industry take responsibility for bailing out those policyholders who will be affected? Is it not about time that we reviewed and got rid of the requirement compulsorily to purchase annuities?
The whole country will hear what my hon. Friend has just said about the record of the previous Government in this regard. That stands on its own. As for the future of annuities, we have always said that we are open to ideas for alternatives to the rules for annuity purchase as long as they are fair and practicable and will provide an income to last the whole of retirement.