I beg to move, That the Bill be now read a Second time.
The Government want to see justice for Equitable Life's policyholders and that is clearly reflected in the actions that we have taken since coming to office. In our programme for government, we pledged to implement the Parliamentary and Health Service Ombudsman's recommendation to make fair and transparent payments to Equitable Life policyholders. As a constituency MP and as the Financial Secretary to the Treasury, I receive plenty of correspondence on this matter, I have answered a series of parliamentary questions about it and I have had a number of oral representations from colleagues on it, all of which have stressed the need for a fair resolution. I understand the strength of feeling and, given my role in the past five years in opposition and now in government, I hope that hon. Members will recognise my commitment to policyholders.
We need a swift resolution, but, vitally, one that is transparent and fair. I am pleased to report to the House that more progress has been made to address the plight of Equitable Life policyholders during the first few months of the coalition Government than was achieved over the past decade. We have published Sir John Chadwick's independent report setting out his approach to calculating payments. I commissioned the first bottom-up estimates of losses suffered by policyholders, calculated at each individual stage of Sir John's methodology, and published those estimates in July.
As one of the many people who signed the Equitable Life representatives' pledge before the election, I am very concerned that there should be a fair settlement. Will the Minister comment on the statement by the parliamentary ombudsman in her letter to all MPs of
"the Chadwick proposals seem to me to be an unsafe and unsound basis on which to proceed"?
My hon. Friend was one of a number of colleagues on both sides of the House, including me, who signed the pledge. I am determined to make sure that we honour the pledge and that justice is delivered to Equitable Life policyholders. I met the ombudsman yesterday to discuss her letter and her comments on Sir John's report. That is one of a number of representations that I have received about the report. I shall talk about the others in more detail later, but let me say that the starting point of Sir John's work is a basis for calculating external relative loss. That is the first such basis that has been proposed to us and we need to look at how it could work as a basis for calculating the losses. I am determined to make sure that in deciding the loss figure we should take into account all the representations that have been received, including those of the parliamentary ombudsman.
My hon. Friend is extremely generous in giving way a second time. Does he accept that whatever calculations are done, any outcome that results in only a small fraction of the relative loss being made good to the policyholders would be deemed unacceptable by the policyholders, and dishonourable behaviour by those of us who signed that pledge in good faith?
I draw my hon. Friend's attention to the ombudsman's report. She set out a process for assessing a relative loss, but she was very clear in her report that we need to take into account the impact on the public purse of any compensation scheme.
Before Opposition Members get to their feet, they should think about what happened over the past decade. The bill for the taxpayer would have been much less if rather than waiting till now the matter had been resolved under the last Government. They had 10 years to resolve it. Nothing happened until the present Government took power.
I welcome the swift move to put right the injustice about which the Opposition did nothing for more than a decade. To reassure colleagues, will my hon. Friend confirm that there will be a discussion between the Chief Secretary representing the taxpayers, and himself or some other Minister representing the Equitable Life policyholders? There needs to be a balance and we look forward to a sensible balance being struck.
My right hon. Friend makes an important point. There are two decisions to be taken. One is on the loss figure and the other is on the amount of compensation that the taxpayer can afford to pay. It is right that those decisions are made in the context of the spending review. That decision will be announced on
Is not the point made by his right hon. and hon. Friends this: when on the Government Benches we accepted the recommendations in principle- [Laughter.] Both the Liberals and the Tories in opposition gave policyholders the impression that they would be far more generous. Are they not now going back on their word which they gave before the general election?
I should not have given way to the hon. Gentleman. He has identified the problem. The previous Government could have dealt with the matter, but it is left to the present Government. We have to sort out not just this mess, but the mess that Labour left behind in the state of the public finances. That is the problem that we have to face in dealing with the Equitable Life issue.
Might the state of the public finances guide the Chancellor in his autumn statement on the public spending review to advance a compensation pot that would be in line with the rest of the Government's overview of public spending reductions, that being of the order of 25% for the majority of Departments, and nothing to do with the 90% reduction advanced by the Chadwick report?
My hon. Friend will recognise that the spending review is not simply a linear process. Some projects will be scrapped completely; some will suffer a small cut. We need to look at each case on its merits, rather than assume that an across-the-board measure will apply to all spending bids in the spending review.
Without speculating what proportion of the £5 billion estimated losses will be compensated, does the Minister agree that, whatever payment is announced today, the Government will recognise that it is merely a first down-payment on returning the losses to policyholders, with a view to further payments being made in future years?
A number of hon. Friends have made that point, and a number of representations made to me put an alternative point of view-that what policyholders would like is rapid resolution and a swift payment scheme to bring closure to the matter. The spending review is to cover the lifetime of this Parliament, and the figure that is settled upon should reflect the coalition's commitment to resolving the issue once and for all.
Nobody is keener than me for the Government to save money and get the finances back on track, and I am happy to meet my hon. Friend to give him some of my ideas about how we can do that. However, I hope that the Government, having made commitments to people while in opposition, will not use the argument that there is no money in order not to pay a fair settlement. After all, we all knew that there was no money when we were in opposition.
That is why, when the ombudsman published her report, we highlighted her recommendation that we need to consider the impact on the public purse of any compensation scheme. We made that point when she published her report, and it was in the Opposition day motions on which we voted prior to the election. It has been a consistent strand in our policy to recognise the impact on the public purse of this compensation pot.
I take the noise from Opposition Members with a great pinch of salt, given the way in which they behaved.
My hon. Friend rightly cited the ombudsman, and in the central recommendation of her report she set the following criterion:
"The aim of such a scheme should be to put those people who have suffered a relative loss back into the position that they would have been in had the maladministration not occurred."
Does my hon. Friend believe that he can get there-or close?
That is not a matter for me to decide; it is part of the spending review. However, I remind my right hon. Friend what the ombudsman also said. In paragraph 9.38 of her report's summary, she said:
"I am acutely conscious of the potential scale of what I have recommended and that acceptance of my central recommendation might entail opportunity costs elsewhere through the diversion of resources."
She recognised the potential impact on public spending of her recommendations, and that public interest is a relevant consideration, stating:
"it is appropriate to consider the potential impact on the public purse of any payment of compensation in this case."
I therefore point out to my right hon. and hon. Friends, who rightly put great store by the ombudsman's work, that her recommendations are strongly qualified by the question of affordability, and we need to bear that in mind. Of course, it would have been far easier if the matter had been resolved when she published her report in July 2008, rather than having to wait until now.
I thank the Minister for, at last, giving way. I have been a Member for some time and longer than he has, so I can tell him that this was an issue before 1997. The Conservatives, at that time in government, refused to pay any compensation to the Equitable Life pensioners. Under the terms that they now suggest, they will cut about £5 billion of the compensation that the ombudsman recommended for payment, but I heard the Minister in Westminster Hall say on many occasions that they, in government, would pay the pensioners in full. Why have they changed?
The hon. Gentleman should really direct his anger at his own Front Benchers, who for years blocked the investigation of Equitable Life by the ombudsman, who tried to delay her report and who took six months to respond to her findings. The real culprits are on the Opposition Front Bench, not on the Government Benches.
The Minister, in his opening remarks, spoke of justice. Where does justice lie-at 10% of losses, 100% of losses or some random figure in between?
As I have tried to make clear, the decision about how much the taxpayer can afford will be taken in the context of the spending review, when we look at this bid for spending alongside other bids.
My hon. Friend will know that the Public Administration Committee, which I now chair, issued in the previous Parliament two reports on the subject, and unless we make progress discussing the Bill itself, it seems that much of this debate will turn on what exactly the ombudsman meant in her report. May I advise my hon. Friend and, indeed, the House that my Committee intends to hold a further inquiry as soon as the House returns in October in order to elucidate the exact differences between the ombudsman's recommendations, Sir John Chadwick's report and what the Government's view may be at that time? We will issue a report on what we believe the ombudsman actually intended, and I hope that the Government will honour that interpretation.
I would be delighted to appear in front of the Committee to give the Government's view. It is important that there should be scrutiny through the Public Administration Committee. My hon. Friend was right to highlight the work done by the previous Committee; I particularly commend the former Chair, Dr Tony Wright, who did a great deal, with other Committee members, to keep the issue in the public debate. They published two reports very critical of the previous Government. I am happy to take part in that process.
The fact that this matter has not been resolved for so long is an absolute disgrace, and I congratulate the coalition on the fact that it will deal with it so swiftly. It is vital that the compensation given should be suitable and satisfactory to all the victims of Equitable Life. Going forward and looking at the bigger picture, we need to consider pensions as a whole. What does this issue say about how far the general public can have faith in any pension scheme?
Indeed; my hon. Friend makes an important point. I would like to say two things in response to her. First, any compensation has to be fair to both the policyholders and the taxpayers who will foot the bill. No one else will foot the bill-no one involved, such as the previous management of Equitable Life, will pick up the tab. The taxpayer will foot the bill. We need to make sure that compensation is fair for the taxpayer and policyholders.
Secondly, my hon. Friend is right to highlight the issue of how we ensure that there is confidence for investors and savers in insurance and long-term saving in the future. That is one of the reasons why my right hon. Friend the Chancellor announced in June that we are going to reform financial regulation and set up a new consumer protection markets authority. That will strengthen the regulatory regime in this country.
We also need to make sure that we help improve financial capability for savers, so that they can understand some of the issues around the products that they take out. That is why we have proposed an annual financial health check, which will help savers understand some of those issues.
As we have heard, many of us have signed the Equitable Members Action Group pledge. There is a wide gap between what Sir John Chadwick and the ombudsman are saying. Does the Minister agree that it is our duty to bridge that gap in a satisfactory way? Otherwise, all the good will that he has achieved in the past few weeks will be spent and the victims of Equitable Life will end up feeling hard done by.
I do not wish to repeat myself, but the important point is to honour the pledge that we all made and also to make sure that the settlement is fair to policyholders and taxpayers and consistent with all the recommendations that the ombudsman made.
I, too, congratulate the Government on getting to this issue so quickly, in line with the promise that we made before the general election. Will the Minister comment on the case of two of my constituents who between them had an annuity of about £11,000 a year? It is now worth roughly £4,000 a year and will continue to reduce; that is a loss of more than 55%. I should be grateful for the Minister's comments on what I am to say to them.
I am not familiar with the policies held by every single Equitable Life policyholder. There are 1 million policyholders with 1.5 million policies, and 30 million policy transactions went through during the period concerned. That is why it is important that Towers Watson, which has provided actuarial advice to the Treasury, should look at the calculation of losses.
I suspect that my hon. Friend's constituents may be part of one group for whom there is a great deal of sympathy. They are the so-called "trapped annuitants"-people who bought with-profits annuities policies. I have raised that topic with Towers Watson, to try to understand the losses that people in that category of policyholder have suffered, so we can understand the right approach in terms of compensation. Many people from that group believe that they have suffered quite significant losses, and we need to ensure that that is the case. At the moment, I am trying to do some more work to establish that.
The hon. Gentleman knows that I have spoken up for Equitable Life members represented on both sides of the Chamber. One of the issues that concerns everyone is speed-when people are going to get some money paid out. I do not expect him to give a specific day, week or month, but can he give some indication of when policyholders might expect to see payments beginning? I suggested in an intervention a few weeks ago that it might be well into 2011; what does he think would be a reasonable time scale?
The hon. Gentleman makes an important point. Speed is of the essence, and we want to make sure that payments start to be made as quickly as possible. There is quite a lot of work to be done before we get to that point; I will say a little bit about that work later on.
If I can answer one intervention before I take the next, it would be helpful to all hon. Members.
The hon. Gentleman may recall that when he made his statement to the House I asked him about an appeals procedure. Once a payment is recommended and the person does not agree with it, what kind of mechanism will be in place for appeals? Will it be independent? Will the Bill give a time scale indicating the length of time for the appeals procedure so that people can be clear about that?
The appeals mechanism is not the Bill. However, I took on board the point that hon. Gentleman made during the statement about the need for an appeals mechanism, and I have raised that with my officials. I agree, too, that it is important that any appeal is dealt with quickly, but of course that requires co-operation both on the part of the person making the appeal and the body adjudicating on the appeal. Part of the problem that we all face is that we are talking about premiums that have been paid back in the early '90s, so clearly for some of those making appeals there may be an issue about the availability of paperwork and documentation. I am very mindful of that point, and we will pursue it.
I would like to make a little more progress. I have been very generous in taking interventions from Members on both sides of the House, and I will take a few more in due course.
We will announce in next month's spending review how much we can afford to pay to policyholders. We have established an independent commission to assess how best to allocate compensation to policyholders, and we have announced our goal of making the first payments towards the middle of next year. Today's Bill is another step on the long road to a fair resolution of this situation.
The independent commission has already started its work, and the chairman, Brian Pomeroy, recently invited all interested parties to submit their views. That invitation extends to Members in all parts of the House; I know that many people have strong opinions on how compensation should be paid to policyholders once the final amount has been determined. I am keen that the commission should work as quickly as possible and that its establishment should not unduly delay payments beginning to be made to policyholders. However, the independence of the design of the payments scheme is a key matter of concern to policyholders, especially to the Equitable Members Action Group, so it is important to guarantee transparency and openness. It is therefore right to give the commission the remit to do this work.
I am also mindful of the fact that we need a tight timetable-one that gives enough time to consider all the issues properly but recognises that many policyholders are elderly and should not be required to wait a minute longer than is necessary for justice. Today, we have taken the opportunity to take another important step forwards to achieving resolution. The Bill authorises the Treasury to incur expenditure and make payments to those adversely affected by the then Government's maladministration of the regulation of the Equitable Life Assurance Society. This is why, regardless of how a future scheme will look, passing the Bill today is vital to enable payments to be made. I should make it clear that the Bill does not set the maximum amount that can be paid or dictate the design of the scheme, but simply gives the power to the Treasury to make those payments.
If I may continue a little more about the Bill, I will take more interventions shortly.
The Bill allows for payments made to policyholders to be disregarded for certain purposes, including making them tax-free in the hands of the recipients. The Government will also be able to consider what effect the payments might have on individuals' eligibility for certain types of means-tested state funding support, particularly tax credits, and how that might be mitigated. A final decision has yet to be made on whether those powers will be used, but it is sensible to include them in the Bill so that any arguments can be taken into consideration. It is essential that we take every action to avoid the scheme becoming unnecessarily complex.
I welcome the fact that the Bill places no restraint on the level of compensation. I wish to reinforce the point that, to restore confidence in the market, there has to be a fair resolution. Is the Financial Secretary still open to submissions on the level of compensation in the run-up to the comprehensive spending review, and is it still possible for people to make points that will influence that level?
Yes. Although we encouraged people to make representations by early September, I and my officials will still listen to any later representations. If anyone feels that they have not expressed their view, I will happily entertain their representations.
As the Financial Secretary has just said, and as the explanatory memorandum makes clear, under the Bill eligibility for some state-funded, means-tested support may be affected by compensation payments. Will he confirm whether any Equitable Life policyholder who receives a compensation payment and who is currently on housing benefit, disability living allowance or income support might be affected in that way?
The Bill provides for matters within the remit of the Treasury. My understanding is that the Department for Work and Pensions has the power to take into account the impact of compensation on other means-tested benefits, and we will discuss with it how the matter can best be dealt with.
I welcome the swift action that the Financial Secretary has taken, which puts the actions of the previous Government to shame. I particularly welcome the inclusion in the commission's terms of reference of the estates of deceased policyholders, as that goes some small way to making up for the suffering of the more than 30,000 Equitable victims who died waiting for a Government who will bring them justice. Will there be an opportunity to debate in the House the decision on quantum that he will reach in the CSR?
I will have discussions about parliamentary scrutiny with the Leader of the House. Indeed, the Deputy Leader of the House is in his place on the Treasury Bench and will have heard my hon. Friend. A range of decisions will be made as part of the CSR, and Equitable will need to be taken into account along other matters. The inquiry of the Public Administration Committee, chaired by my hon. Friend Mr Jenkin, will also provide an opportunity for parliamentary scrutiny.
I am grateful to the Financial Secretary for his generosity in giving way on this important topic. When it comes to identifying the affordability of any compensation scheme, does my hon. Friend agree that it is important to recognise the potential long-term cost to the taxpayer of a collapse in confidence in private pension provision and in people's ability to save for their future?
That is an important point, but we also need to consider other factors such as the general state of the public finances and the other demands on public money in the spending review. We must also recognise that the Government have decided to introduce radical reform of financial regulation and to improve the regulation of retail financial services through the establishment of the consumer protection and markets authority. We can take a range of measures to help restore long-term confidence in savings, and people will have confidence in saving for the future if they recognise that the economy is on a stable footing, that we have got public spending under control and that we are tackling the deficit and keeping interest rates reasonable for as long as possible.
I understand my hon. Friend's desire to get full and final closure, but the consensus at a packed public meeting of my constituents in Dover and Deal was that it would be better to have staged payments over a number of years if affordability was a problem right now. Will he consider that very seriously?
I discussed that idea, but I received a strong representation from Equitable Life advising against it, because of the complexity that might be attached to staged payments. Some have suggested that we make payments into people's pension funds, but some of the key criteria for judging the payments scheme will be simplicity, speed and transparency. People will be concerned that a series of small payments over a long period will not necessarily meet the simplicity, speed and transparency criteria against which a payments scheme ought to be judged.
Will the Minister acknowledge that the broad range of issues that he now says he will take into consideration were entirely absent from his discussions in the run-up to the election or in the coalition agreement, which states that the coalition Government will implement the Parliamentary and Health Service Ombudsman recommendation? People in the Equitable Members Action Group will be extremely disappointed with the Minister's tone when they compare it with the tone he took in the run-up to the election.
It is a bit rich for Labour Back Benchers to complain, when the Labour Government had a chance to resolve the matter but failed to do so. The hon. Gentleman should explain to Equitable Life policyholders in his constituency why his colleagues failed to take the action necessary to resolve the problem when they were in government.
We cannot object to anything in the Bill, but the detail on quantum is not in it. Does the Minister intend to provide details on the scheme to the House so that we can debate it before it is introduced?
I shall come to that in a minute, but the Bill simply gives the Treasury the powers to make the payments. It is right that the Treasury takes those powers, but it needs to do so now so that we can move on to the procurement process and identify who will make the payments.
I am sure that my hon. Friend is as shocked as I am that, in five months, this Government have achieved more than the previous one did in 10 years? I welcome the Treasury's swift action. The matter is extremely complex, as he said, not least because a number of financial regulators were involved during Equitable Life's problems and because of the problems associated with the life insurance industry in general. Will he assure the House that, unlike the previous Government, we will not hide behind that complexity in trying to bring justice to Equitable Life policyholders?
That is why we are keen to ensure that we have a scheme that is simple, swift and transparent. That is important and it is the basis of the pledge that we signed. I was unsurprised that the Government made so much progress in the first five months because I have been following this issue for some time. What surprised me was how little progress our predecessors made.
I want to make progress because I am conscious that there is an eight-minute limit on Back Benchers' speeches, and clearly many Members on both sides of the House are interested in the debate.
Once we receive the independent commission's report, I plan to publish a document, early next year, showing clearly how the scheme will function. The ombudsman envisaged that any system of payments would need to be independent, simple and transparent. I agree with that thinking and I have tried to ensure that our approach meets those criteria. On independence, the Government have established the Independent Commission on Equitable Life Payments to advise on the design of the scheme; to ensure simplicity, we will ensure that the future system of payments is as straightforward as possible to avoid any undue burdens being placed on policyholders; and, on transparency, we have published Sir John Chadwick's report, the actuarial advice from Towers Watson and representations made to Sir John. Interested parties therefore have access to information when making their representations.
In the spirit of transparency, I shall update the House on wider matters relating to Equitable Life and payments to its policyholders. It is worth reminding hon. Members that one outcome of Sir John's work is that it enabled us to produce the first bottom-up assessment of relative loss, which we did by comparing the performance of Equitable's policies against those of comparator companies. There are some reservations on the detail, but there appears to be some broad agreement on the general approach of comparing Equitable Life's performance with that of a basket of comparator companies. I recognise that a number of Sir John's recommendations were contentious, including his view that the majority of policyholders had to make the same investment decisions irrespective of maladministration, but I stress that Sir John's review is just one of the tools at our disposal in looking to fix an incredibly complex problem.
My hon. Friend mentioned the work of the actuary and the advice given to Sir John Chadwick to formulate his report, but, given the transparency that my hon. Friend is trying to bring to this matter, has he considered publishing the actuary's calculations?
My hon. Friend makes an important point about transparency. The actuarial advice gives a clear demonstration of the methodology used by the actuaries, but 30 million premium transactions had to be compared with a basket of comparable companies from 1992 to the end of 2009. The publication of the model at that level of detail would not aid transparency. It would be more likely to confuse, given the complexity of the calculations. However, we have ensured that EMAG and ELTA-Equitable Life Trapped Annuitants-have had an opportunity to meet Towers Watson, the actuaries, to go through the calculations. Towers Watson has provided examples of its calculations so that the mechanics can be understood.
The ombudsman states in her letter to every hon. Member that because the Government have fully accepted her recommendations Sir John Chadwick's approach is no longer relevant. Why does the Financial Secretary disagree with her on that point?
It goes back to what the previous Government were prepared to accept. Sir John's report is based on the terms of reference that the right hon. Gentleman's colleagues gave him, which dealt with the accepted findings. Of course, the previous Government did not accept all the ombudsman's findings, but that decision was overturned in the courts. It is important to recognise that the first stage-the calculation of external relative loss-is not dependent on the accepted findings because it covers the findings of Equitable Life as a whole across the period. The issue of the accepted findings becomes especially important when Sir John assesses what would have happened if Equitable Life had been regulated properly. The reconstruction of Equitable Life's financial accounts was based on the accepted findings of the previous Government. The problem is that as we get further and further away from the calculation of external relative loss, what the previous Government accepted and did not accept becomes much more relevant to the calculation of compensation. That is one of the factors that we need to take into account when we assess the final level of loss.
The Financial Secretary has just mentioned 1992, so it is clear that this issue goes back not just to the Labour Government but to the previous Tory Government. All Equitable pensioners want a resolution as quickly as possible and they will be disappointed by this slanging match. I have a simple question: what did the parliamentary ombudsman say to him yesterday when they met? Was she satisfied with his proposals, and what did he say to her?
The ombudsman's letter is clear. She said that she welcomed much of the Government's approach, including the appointment of an independent commission, the publication of a clear timetable for the beginning of payments to those affected and our commitment to consider representations on the best way forward. I do not feel that I can give the House the outcome of a private meeting, but the ombudsman reiterated her findings, which were set out in the report that she published in July 2008 and which the previous Government sat on for six months before responding. She will also have the opportunity to make her views known when the Public Administration Committee works on this. I just want to do all that I can to ensure that the recommendations published by the ombudsman in July 2008 are honoured, and that is the task that we have to achieve.
Does my hon. Friend accept that the six-month delay to which he alludes is just the tip of the iceberg? We faced years of delaying tactics, not least a calculated attempt to try to prevent the parliamentary ombudsman from even producing a report.
Indeed, and it was the work of my hon. Friend, who was characteristically modest in his intervention, that found a way in which the ombudsman could publish her second report into Equitable Life. Had he not found the way through, we would not be in this position today, so the House and policyholders owe him a debt of gratitude for getting us to this position.
My hon. Friend is absolutely right that the previous Government did everything they could to avoid a second ombudsman's inquiry into Equitable Life. The Penrose report, published in 2004, demonstrated that there had been regulatory failure at Equitable Life over a decade covering both Governments-I have no problem accepting that. However, the previous Government could have acted in 2004, but instead they dug their heels in-and here we are in 2010 with policyholders still waiting for justice.
My hon. Friend was talking about the delays in the response to the ombudsman's report in April 2008. Does he not also recognise, as we all do, I think, on the Government Benches, that the response of the then Chief Secretary to the Treasury was to start talking about those disproportionately affected by the saga but still without setting any time scale for compensation?
Indeed, and we have tried to bring to this matter a time scale and a sense of purpose and pace in resolving it. Of course, had it been resolved earlier, the compensation bill would have been cheaper and the pain suffered by Equitable Life policyholders far less. The previous Government dragged their feet, and we have to pay the price.
May I congratulate my hon. Friend on the progress he has made, given the complexities he alluded to of the time scale and the size of the calculations he has to make? He has already said that the commission will start work and first payments should be made to valid claimants next June. However, can he give any idea of the timetable by which all valid claimants, unless there is an appeal or other court procedure, might expect to receive a payment?
I cannot give that commitment yet, and we will not be able to do so until we see the scheme proposed by the independent commission. However, I am clear in my own mind that the time between the first and the last payments needs to be as short as possible, because these policyholders demand justice quickly-and that is what I am keen to deliver.
I want to press on.
On the progress that has been made, I should say that the letter produced by Towers Watson this July gave an estimate of losses, looking at comparable performance up until the end of 2007, and it has been working on a further detailed estimate over the summer to bring those numbers up to date-to the end of 2009-which should enable us to present a much more robust estimate of loss next year.
A number of hon. Members have mentioned the ombudsman. I have outlined the comments in her letter. We discussed with her yesterday her concerns about Sir John's advice, and I have noted those concerns, but I reiterate to Members on both sides of the House that the ombudsman's report set out some clear parameters for compensation. She talked about compensation and relative loss, but I reiterate that she was very mindful of the issue of affordability-and I refer to the paragraphs in her report that she highlighted. That has underpinned our response to this matter from the moment she published her report in July 2008.
In my statement on
As I said in opening, we have tried to be as open as possible in this process. We have sought to involve all interested parties to ensure that when a solution is reached it is fair to everyone, both policyholders and taxpayers. I personally want to see a swift end to this matter, so that policyholders who have waited in financial purgatory for so many years can receive the payments that are rightfully theirs. Although there is some way to go before we reach a final resolution, I believe that this Government have made more progress since May than our predecessors did from the time when the problems at Equitable Life first came to light over a decade ago.
The Bill before us today is a key milestone on the road to resolving those long-standing issues. It is a clear sign of the Government's commitment to those who have suffered losses owing to the maladministration of regulating Equitable Life. Policyholders have waited over a decade for justice. Passing this important Bill is essential to achieving justice for them, so I commend it to the House.
We very much welcome the fact that the Bill is before the House, and we shall not oppose it today. We will want to table amendments to the Bill in Committee, and this afternoon I will set out those that we have in mind. I hope that they will be widely welcomed across the House and that the Government will feel able to accept them.
However, let me first respond to the Minister's speech. I have not previously spoken in the House on the subject of Equitable Life, so I have been able to come at the issue fresh. Let me begin by acknowledging the extent of the hardship and anxiety that all too many people have endured as a result of the failure of Equitable Life and the long process since. I want also to associate myself with the expressions of apology already made by my right hon. Friends for the contributions to that failure of successive Governments. Unlike me, the Minister has made numerous speeches in the House and elsewhere on the subject-many of them made while in opposition-but he is now the Minister. He is now supposed to be making decisions. Today, as the Prime Minister likes to say, the rubber hits the road, but the Government seem more interested in the lay-by. They have not yet made those decisions. Four months after this Government were elected and almost two months after the publication of Sir John Chadwick's report, Equitable Life savers are still no nearer to knowing what payments they will receive.
Indeed, things are worse than that. It appears that the Minister, now safely elected, proposes to do precisely the opposite of what he said before the election that he would do. Not just he, but every Treasury Minister, signed the pledge drawn up by the Equitable Members Action Group, whose indefatigable campaigning he was right to draw attention to, and which will have won the respect of every Member. The Prime Minister, the Deputy Prime Minister and the Chancellor all signed the pledge, which committed each signatory to
"vote to set up a swift, simple, transparent and fair payment scheme-independent of government-as recommended by the Parliamentary Ombudsman."
The previous Government took the view, which I share, that there are practical problems with the ombudsman's recommendation. That is why we commissioned Sir John Chadwick to advise on a practical scheme. However, for EMAG, the position is clear: the ombudsman is right, the Chadwick recommendations are not. That is the issue that the Minister has failed to resolve.
My constituent Mr Peter Waller-not a Labour supporter-wrote to me following the statement made to the House previously to say:
"Already, the Coalition government...are...showing shameful disregard to us, after so many Conservative and Lib Dem members signed a pre-election statement that we would get fair justice."
Does that not sum up what this Government have done?
My hon. Friend is absolutely right. EMAG today is very angry indeed. When the Prime Minister, the Deputy Prime Minister, the Chancellor, every Treasury Minister, and the great majority of Government Members signed that pledge, EMAG thought that they meant it. Over the next couple of months, the Ministers and their hon. Friends behind them are going to find a lot of their constituents saying exactly what my hon. Friend's constituent said, and wanting to know why they have reneged on their pledge. They will have a great deal of explaining to do.
The previous Government made reparations for a number of historical injustices during their time in office, including compensation for the miners and for the fishermen involved in the cod war, and the financial assistance scheme. We hoped that all those processes would be simple and straightforward, but none turned out that way. Indeed, the Government had to revisit a couple of them on more than one occasion. Equitable Life is a far more complex case than any of them, however, and it was always going to be difficult, if not impossible, to come up with a scheme that was simple, transparent and fair. We hope that the Government will be able to do that, but it is going to be very difficult indeed.
My hon. Friend is right. This has been a difficult task, and that is why it has taken such a long time to get to this stage. We all hope that the matter will be quickly resolved, but it is now becoming clear that the coalition is not going to deliver. All those nods and smiles before the election, and all those pledges earnestly signed, are not worth the candle. The truth is that both the coalition parties led EMAG up the garden path. They will not deliver what they promised. It is flagrant: EMAG delivered votes at the election, but now that the election is safely over, it can be ditched.
I note that the shadow Minister opened his speech by saying that he had not spoken before on the subject of the anxiety of the victims and policyholders. Does he think that their anxiety was added to by the fact that, on
If I remember correctly, there was a statement in January 2009 in response to the ombudsman's report.
Precisely the people who promised the earth before the election have now decided to sell EMAG down the river. It is a breathtaking breach of trust.
Is this not a bit rich, coming from the right hon. Gentleman, for whom I have a great deal of respect? He had 13 years in which to sort this problem out. He obfuscated the ombudsman not once but twice, and then refused to implement the ombudsman's ruling. This whole issue could have been resolved by now. We need not have been debating it today if his Government had just got on and done it.
I think I am right in saying that the hon. Gentleman was one of those who signed the pledge. He will now need to work extremely hard to persuade his hon. Friends on the Front Bench to deliver what he and so many of his hon. Friends have signed up to.
Does the House share my sense of bewilderment that the right hon. Gentleman should be asking us to apologise for five months of action, when he has done nothing for 10 years? Can he give us a quantification of the cost to Equitable Life policyholders of the past five years of Labour's failed activity, given that a deal could have been done in 2004 but was not?
My advice to the hon. Gentleman and the great majority of his hon. Friends is turn his fire on those on his own Front Bench and ask them to deliver the pledge that so many of them signed up to. At the moment, we are heading towards the prospect of that not being delivered.
The Public Administration Committee will have to smooth these troubled waters, and I want to be clear about what the right hon. Gentleman is inviting the Government to do. Sir John Chadwick reported that
"the Terms of Reference require me to limit my considerations to those Findings that have been made by the Ombudsman and accepted by the Government", so what he could recommend was thereby limited. Is the right hon. Gentleman now inviting the Government to ditch the report that his Government commissioned?
No, the position we are in now is that there are two quite different ways forward. One was recommended by the ombudsman. The previous Government saw some serious difficulties in that approach, so called on Sir John Chadwick to give advice. The Government now need to choose which of those two options they intend to follow. Their difficulty is that every Treasury Minister-including all those I have mentioned-has pledged to adopt the ombudsman's approach. The Government are currently saying both that they accept the ombudsman's recommendation in full, and that Sir John Chadwick's report is a building block for what is going to happen. Nobody knows what that means, however, as it is trying to ride two horses, when what is required is a decision.
As a member of the Select Committee on Public Administration, I know that we will take evidence from the ombudsman in due course. Can the right hon. Gentleman help me and the House by explaining what in his mind's eye were the "serious difficulties" with the ombudsman's report that he mentioned?
I will come to that in a few moments. There are some serious problems with the complexity of the procedure recommended. That is why, I think, the Government have realised that what they said before the election will not be honoured.
Our policy is to proceed in the way we set out before the election-on the basis of what we promised our constituents on this matter-and to take forward what my right hon. Friend Mr Byrne committed to: that when Sir John Chadwick's report was submitted in May, within two weeks of publication he would publish the Government's proposed scheme, including a timetable. Where we are now, four months later, is that nobody knows what the scheme is. There is a fundamental inconsistency in what the Financial Secretary is telling the House. Is he with the ombudsman or Sir John Chadwick? Nobody has any idea.
I just want to make sure that Government Members heard the right hon. Gentleman correctly, as I think he is saying that he supports Sir John's work, and would pay out exactly what he proposes.
My right hon. Friend the Member for Birmingham, Hodge Hill set out before the election the process that we would adopt, which remains our view of the right way forward. What I have no idea about is what the right hon. Gentleman intends to do. We wait with great interest to find out.
Let me make a little progress and then I will gladly give way again.
I want to go back over the events of the period since 1990. The problems of Equitable Life occurred between 1990 and 2001. Lord Penrose concluded that it was principally the society's own actions that precipitated its downfall in the summer of 2000, but that regulatory system failures were secondary factors. The view of the previous Government, and my own, is that any scheme of payments needs to reflect that. Regulatory factors certainly did contribute: for example, a reinsurance treaty entered into by Equitable Life did not justify the credit that the company's regulatory returns took for it in 1998 to 2001, so the returns gave a misleading picture of the society's regulatory solvency position. Equitable Life's regulatory returns in 1990 to 1996 gave a misleading impression and should have been queried by the public bodies with regulatory responsibility at the time-but they were not.
I have referred to the clear apology to policyholders given by my right hon. Friend Yvette Cooper when she was Chief Secretary in January 2009 on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life for the maladministration that took place. My right hon. Friend the present shadow Chief Secretary did the same. I have yet to hear, however, any apology from Conservative Members for the shambolic system of financial services regulation that preceded the establishment of the Financial Services Authority. As many will remember, we had numerous little regulators of differing characters and sometimes overlapping powers. The deregulated financial markets of the early 1990s made a great deal of money for some, but, as we are reflecting on today, brought misery to many others. That was when, under the Tory watch, things started to go very badly wrong at Equitable Life.
May I remind the right hon. Gentleman what the former Chief Secretary said when she was in charge of this matter? She said that she would compensate only policyholders who had suffered disproportionately. There was no timetable for that compensation, and there was no explanation of what "disproportionately" meant. Is it still the view of the right hon. Gentleman's party that policyholders should be means-tested?
My right hon. Friend the Member for Birmingham, Hodge Hill made clear before the election that he thought that that was entirely inappropriate, so the answer to that question is no.
Parliament has recognised for many years that it is not generally appropriate for the taxpayer to pay compensation even when there is regulatory failure. The responsibility to minimise risks and prevent problems from occurring in a particular financial institution lies first and foremost with the people who own and run it. The Financial Services and Markets Act 2000 reaffirmed the long-standing exemption of financial regulators from liability for negligence in the courts. There would be serious repercussions for the taxpayer, and for the relationship between Government and financial markets, if the taxpayer were to provide a remedy for all losses every time the regulator failed to prevent a financial institution from getting into trouble.
Does the right hon. Gentleman feel that the emptiness of the Opposition Benches represents a lack of interest in trapped annuitants, or merely shame? I assure him that the fact that the Benches on this side of the House are so full represents a strength of opinion that we wish to express to our Minister on behalf of members of Equitable Life.
I wish the hon. Lady success. I believe that she is one of those who signed the pledge, and I am sure that she will be training her fire on Ministers. As I have said-and as EMAG has made crystal clear-we are currently heading for the breaking of that pledge.
I am not sure which investors the hon. Gentleman is thinking of, but I think it essential for us now to move quickly to a scheme. We need a timetable, and we need the details of a scheme, so that this long-standing matter can be resolved.
Many former Equitable Life policyholders who have spoken to me unquestionably felt that both previous Governments had been too slow to act. They will be very surprised by the extent to which Members who signed that pledge now apparently welcome proposals that are so far removed from what the Conservative and Liberal Democrat parties promised in the run-up to the election.
My hon. Friend is absolutely right. There is what I would describe as incandescence on the part of those who have been affected, because promises so clearly made to them before the election are not being fulfilled now.
I am going to make a little headway before I give way again.
I have spoken about the ombudsman's proposals. Sir John Chadwick was asked to advise on a simpler scheme design. Before the election, the present Minister said that he accepted the ombudsman's proposal. The present Prime Minister, Deputy Prime Minister and Chancellor all signed the EMAG pledge. However, in his report, published in July, Sir John referred to
"the obvious impracticability-if not impossibility-of determining these questions on an individual basis".
The previous Government favoured his approach as a practical solution, but now the Minister says that it is one of the building blocks of a solution.
I will make a little more progress, and then I will gladly give way again.
The ombudsman spotted a contradiction, and wrote to every member in July making that clear. She said:
"In the light of the new Government's commitment to implement that recommendation... the approach embodied in the Chadwick report has thus been overtaken by events and cannot provide a basis for the implementation of my recommendation."
The right hon. Gentleman has not yet mentioned the impact on the public purse. He does talk, however, about how incandescent former policyholders are. They are incandescent about the fact that compensation has been delayed for so long and that the last Government left the economy in such a mess, and as a result the ombudsman has had to say that compensation will have to be limited because of the effect on the public purse. How will Opposition Members explain that to policyholders?
If the hon. Lady had suggested that the words she has just uttered should have been inserted into the pledge before it was signed by so many Members on the Government Benches she would be on stronger ground, but she and many others gave the impression they were signing up to it in full. Indeed, they did sign the pledge as it stood, without those caveats, so it is no good their now coming back and saying, "We didn't quite mean what EMAG thought we meant when we signed that pledge." Therefore, this is the situation: the ombudsman says her proposal and Chadwick are irreconcilable, EMAG backs the ombudsman, and the Minister said before the election that is what he would deliver, but now he says the opposite.
I am listening with interest to the right hon. Gentleman's comments. As I understand it, the Labour party's position is that it still supports Sir John Chadwick's work. If that is the case, can the right hon. Gentleman confirm that Labour would support whatever compensation package Sir John comes up with, or would it follow the coalition and put an arbitrary cap on that?
Sir John has, in fact, reported. He did so in July. That was rather later than he was going to report; he would have reported in May, and my right hon. Friend Mr Byrne said that we would have produced a scheme within two weeks. As I have said, our view would have been that we should proceed as we had intended, and as we set out before the election, on the basis of the report that we commissioned.
The new Government delayed publication of the report until July, and we still do not know what the scheme will be. We know almost nothing about the timetable, but I am afraid it will not be what EMAG has been demanding, which it thought current Ministers were signing up to when they signed all those pledges. A great many people feel very let down indeed.
The ombudsman has found much to welcome in the Bill and this Government's proposals, such as the independent commission, the compensation scheme, the enabling mechanisms to be set up, the transparency and the progress made. She has welcomed that. Are not Opposition Members therefore getting ahead of themselves in writing off what the Government are proposing? It is one thing for long-suffering members of EMAG to be in that frame of mind because they have been let down so many times, but Opposition Members are getting ahead of themselves. The compensation pot has not yet been fixed, and we are all keen to see the maximum allowance made within the context of the state of the public finances. Opposition Members are being far too negative.
The ombudsman has said that the Chadwick approach is no longer relevant because the Government have fully accepted her recommendation, yet the Government are saying that they accept that recommendation but that Chadwick is the building block for the future scheme. There is a fundamental contradiction in the Government's policy.
If I were Brian Pomeroy or a member of the independent commission listening to today's debate I would be confused, especially by the Minister's contribution, because he is trying to support both the ombudsman's report in principle and major parts of Chadwick's report. What is absolutely clear from the debate so far is that the response from Front-Bench Members to all questions about what the compensation pot will be is that the needs of taxpayers must be taken into account. Does that not fundamentally contradict what they were saying before the election?
Yes, it does. Of course it is absolutely right that the needs of taxpayers must be considered, but Government Members signed the pledge that made no reference to that, which is why they have got themselves into such serious trouble.
That is precisely what happened.
I just wish to tell the House the main amendments that we will table in Committee. I hope that the first will meet no opposition, because it directly picks up on a point in the EMAG pledge. It will require that the payments scheme be independent of government. The Bill does not say that, but our view is that it should; indeed, the Minister has confirmed that he intends it to be independent.
The Minister made a slightly puzzling point in his statement to the House on
The ombudsman...concluded that the design of the scheme should be independent of the Government."-[ Hansard, 22 July 2010; Vol. 514, c. 577.]
That is of course true, but the ombudsman concluded that the scheme itself should be independent-that is the point that should be in the Bill, and it is crystal clear in the EMAG pledge. We will doubtless see lots of wriggling by those on the Benches opposite about exactly what was meant by the phrase "proper compensation" in the pledge once the figures are announced on
I am grateful that the right hon. Gentleman started his speech by saying that his party would not oppose the Bill this evening. Many victims of the scandal will wonder why his party did not propose a similar Bill when it had the opportunity to do so. My question is a specific one; I am asking him to make something clear for the benefit of everyone watching this debate tonight. His party commissioned the Chadwick report and set the terms of reference. Chadwick said that his final loss figure is £400 million to £500 million. Does the right hon. Gentleman's party accept that amount or not?
Our intention, as I have said on a number of occasions, would have been to proceed on the basis that my right hon. Friend the Member for Birmingham, Hodge Hill set out before the election. He did not set out an amount, but he did set out a process, and we would have published within two weeks of the submission of the Chadwick report the timetable for the payments and the scheme itself.
I am going to make a little more progress.
Secondly, as we heard in an intervention that I welcome, we need there to be a clear appeals mechanism that is also independent of government. I believe that the Minister indicated that he was reflecting on an amendment to that effect. The Bill as it stands does not establish such a mechanism, and one should be put in place, because it is certainly necessary. If the Government do not table an amendment to do that, we shall.
For the benefit of my constituents, I want to establish where the Opposition sit on this matter. I understand that one of their critiques of the Government is that they have not responded more quickly to the Chadwick report. Is it right to say that had the Opposition been in government they would, within two weeks, have accepted the Chadwick report and proceeded on the "unsafe and unsound basis" that the ombudsman criticises? Which side of the fence does the right hon. Gentleman think that policyholders would sit? Would they wish to proceed with the Opposition-within two weeks on the Chadwick proposal-or to take account, as the Government are doing, not simply of Chadwick but of wider views?
The hon. Gentleman's difficulty is that a very large number of EMAG members feel that, under the basis that is emerging compared with the one that they were concerned about in the past, they are going to end up in an extremely similar position; they do not see that any progress has been made. That is why they are so angry about having been sold down the river, after so many people signed their pledge.
I just want to run through the amendments that we want to table. Our third amendment will relate to the fact that the Bill does not say anything about the timing of the payments. As we have established in this debate, that is a crucial point. We will therefore table an amendment to require that either payments should start by a specified date or the Government should publish a report to explain why not. Our view is that that too should be in the Bill.
Our fourth amendment will pick up another important point in the EMAG pledge. Those who signed it committed themselves to vote for
"a swift, simple, transparent and fair payment scheme".
To enable the House to ensure that those criteria are met, we will table an amendment to include in the Bill a power to make regulations establishing the criteria for the scheme by the affirmative procedure. In that way, Members of the House and of the other place can consider the scheme before it takes effect and satisfy themselves that the criteria that Ministers signed up to in that pledge are delivered. We think it important that the House itself should have the opportunity to consider and debate the scheme. In that way, we can deliver that aspect of the pledge even though other aspects of it will not be delivered.
I have made it clear that we will support the Bill. We are still, I am afraid, a long way from having the scheme that Equitable Life members want. This has been a long-running and distressing saga and the Bill is a significant step, albeit one that still requires some improvement. On this side of the House, we look forward to arguing for those improvements so that those who have had to wait so long for help will at last receive it.
Order. I remind hon. Members that Mr Speaker has set a time limit of eight minutes for Back-Bench speakers. There are so many people who want to speak that I ask all hon. Members to help their colleagues wherever possible by speaking for less than eight minutes. We will have to consider progress in the debate later this evening, and whether everyone will get in. I also remind Members who feel that as they might not have a chance to speak they will therefore make an intervention, that the intervention should be brief, not a substitute for the speech that would otherwise have been made. I call Mr Bernard Jenkin.
I welcome the Bill because it gives the Treasury statutory authority to make payments to Equitable Life policyholders. Those policyholders have waited a very long time to receive compensation for the injustices of which they have been victims. It is now more than nine years since the value of their policies was drastically cut. Sadly, many have since died and more die every day. I therefore welcome the speed at which the new Government have moved, which contrasts sharply with the snail's pace at which the previous Government made progress.
It has been clear since Lord Penrose published his report in 2004 that there was regulatory failure. The regulatory regime was not properly resourced. Natural justice indicates that policyholders should be compensated for the losses they suffered as a result of that regulatory failure.
In the six years since Penrose, we have had two reports from the parliamentary ombudsman. Those reports were well named. The ombudsman's first report, which was published in July 2008, was entitled, "Equitable Life: a decade of regulatory failure". That was followed in May 2009 by another report entitled, "Injustice unremedied".
I want to draw the House's attention to the coalition agreement, which states:
"We will implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
The key phrases in that agreement are an "independent payment scheme" and "relative loss", and that as recommended by the ombudsman. I also draw the House's attention to paragraph 7 of the second report:
"Accordingly, I explained that the aim of such a compensation scheme should be to restore anyone who had suffered a greater loss, relative to that which they would have suffered had they invested in a comparable scheme with another company, to the position they would have been in had no maladministration occurred."
So the coalition agreement commits the Government to compensating for the "relative loss" suffered by the policyholders.
After years of delay, the previous Government commissioned the Chadwick report, but Sir John Chadwick's remit was flawed because he was allowed to consider only those parts of the ombudsman's findings that had been accepted by the previous Government. The ombudsman wrote to MPs on
"unsafe and unsound basis on which to proceed."
Bearing in mind the ombudsman's report and the coalition agreement, I urge the Government not to require the independent payment commission, through its terms of reference, to have regard to Chadwick's report because it has been so clearly discredited.
The Chadwick report uses a series of dubious calculations to cut the proposed compensation to about a tenth of the relative losses that were estimated by Towers Watson, which had been commissioned by the Treasury to calculate the losses suffered by policyholders. Chadwick makes many dubious claims, the most ridiculous of which is his estimate that even if the regulatory regime had done its job, about 75 to 80% of Equitable Life investors would still have ignored the regulator and put their savings into an obviously failing company. I find that assertion completely incredible. Sir John then used that figure to reduce the compensation payments by between 75 and 80%. I hope that the independent payments commission will conduct its own analysis, because I am sure that it will find that that figure is completely ridiculous. Because of the flawed Chadwick remit, the Government should delete all references to that report from the independent commission's terms of reference.
The ombudsman recommended that it was appropriate to consider the potential impact on the public purse of any compensation payment. That has always been a part of her reports, but I urge the Government, when they consider that recommendation, to bear in mind that Governments always want people to save and invest for their retirement. If people lose confidence in regulators, they simply will not save and invest for their retirement, and that will cost Governments more in the long run. People are not going to save or invest if they cannot be convinced that they will be compensated fairly if a future regulatory regime fails in the way that the past one did.
The Bill paves the way for a compensation scheme that policyholders have waited for nine years to see. The scheme can be made affordable by spreading payments over several years, as proposed by EMAG. The coalition agreement sets out the principles that should be followed: there should be an independent scheme and there should be fair and transparent payments for relative loss as a consequence of the regulatory failure. As long as those principles are followed, the surviving Equitable Life policyholders will at long last see justice done.
I support the Bill because it will enable Equitable Life policyholders to start getting paid. Those people put their savings into what was Britain's oldest and, as far as they were concerned, most reputable savings institution. They were not like the people who put their savings into outfits offering dubious and extraordinary returns, such as those who decided to chance their savings with the Icelandic banks. The Equitable policyholders are in their current position through absolutely no fault of their own.
So who was at fault? First, clearly, the people who were running Equitable Life were at fault. I do not think that anyone is going to dispute that. Secondly, the House of Lords was at fault in its judgment in the case of the guaranteed annuity rate beneficiaries. When it reached its decision, it knew what the consequences were likely to be for Equitable Life and other policyholders who would not benefit from that judgment. Rather ironically, the House of Lords showed no sense of what was equitable and not a grain of common sense. It decided that it would award justice to one small group of people, almost automatically resulting in injustice for a much larger group. In view of the dubiety of certain organisations with which people put their savings, we need to look at the law to see whether we can enable the courts to come to what might be described as an adjudication rather than a judgment, where a judgment in favour of one group of innocent people might be very damaging to another group of innocent people. The Treasury, the Financial Services Authority and others were clearly at fault. Nobody can deny that, but at the time that the first ombudsman's report came out, I believed she was wrong as well. In my judgment, her judgment did not give enough weight to the primary shortcomings and primary fault of Equitable Life, and attributed too much fault to the regulators.
Clearly, the Government were at fault in their response to that report. It was understandable that they did not fancy the establishment of the principle that people could seek compensation from a regulator. That is not an unsound concern on the part of a Government, who might not want to be subjected to all sorts of court actions-for example, when somebody decides that the police have failed to prevent burglaries in their area and seeks to bring a case against them. The financial services industry is keen always to blame regulators, as it has done in a big way.
Things changed at the time of the credit crunch. All questions about protecting the taxpayer fell away. All the old restraints fell away. The banking and savings industry, run by people of infinite greed and stupidity, was so hopeless that it was decided on both sides of the House that not only the people who had put their savings in them, but the institutions themselves, were entitled to be bailed out. From that moment on, I was convinced that had the Equitable Life issue arisen in 2007, 2008 or 2009, there would have been no doubt: we would all have agreed that the people who had lost their money should be properly compensated, and by the taxpayer. That is what we now have to do if we are to give people a sense of security in their pensions and savings.
No, I do not want to. We must get on.
As my right hon. Friend Stephen Timms said, the Conservatives and Liberal Democrats attacked the Labour Government-as far as I was concerned, quite rightly-and said in opposition that they strongly supported the ombudsman's recommendations. I do not recall my opponents at the last election getting up and saying, "Well, there were a few caveats in the ombudsman's report," and I doubt whether that crossed Tory or Lib Dem lips anywhere else in the country.
Before, during and after the general election, the two parties that now form the Government thrice promised that the ombudsman's report would be implemented, and they had better get on with it. However, their form of getting on with it is to establish yet another commission. That may work swiftly; I do not know. I have a question which I hope the Minister will answer. If the commission comes up with a scheme that EMAG does not like, will he send it back to the commission and insist that it comes up with a scheme acceptable to EMAG? I am happy to give way to him if he would like to contribute to the debate.
Once everyone has been paid, the situation is still not sorted out. We need to look closely at better regulation of those who are taking in people's savings. We need to look at the regulatory system to see whether that can be strengthened in various ways. Finally, as I suggested, we need to change the law so that in circumstances like those that originally arose in Equitable Life, the courts can adjudicate between two innocent parties, not help one lot and hammer the other.
It is an honour to make my maiden speech as Member of Parliament for Congleton. I recognise that I have much to learn as I succeed Ann Winterton who, over 27 years, conscientiously, consistently and courageously represented the interests and values of its people. I will endeavour to do the same, at least in my commitment to my constituents. My length of tenure I leave to them!
It is also a privilege to follow Ann in another respect. She served as chairman of the all-party parliamentary pro-life group. I am honoured to be its vice-chairman. I believe that no insignificant person has ever been born.
The market town of Congleton today has its origins as a northern mill town. I grew up largely in a terraced house in another northern mill town, Burnley, where my grandmother started weaving in the cotton mill as a girl, my father wore clogs at school and much of the life rawly depicted in William Woodruff's book, "The Road to Nab End", was for them a reality. But education, aspiration and determination, and the support of a loving family and strong local community, all of which I witnessed and benefited from as a child, and which inform my engagement in politics today, were key to my family's circumstances changing for the better. For all that, I am grateful.
My constituency comprises not just the town of Congleton, but Alsager, Middlewich and Sandbach, interspersed with lovely Cheshire countryside and close-knit villages like Holmes Chapel and Goostrey. Many features make it attractive for locals and tourists alike-indeed, I staycationed there this summer, enjoying the ancient town of Sandbach with Saxon crosses in its cobbled square; the lovingly maintained centuries-old black and white timbered National Trust property, Little Moreton Hall; the world-famous Jodrell Bank telescope; and the canals of the Cheshire ring, formerly industrial, conveying salt and pottery, now populated with prettily coloured narrowboats. I have enjoyed winter "Snowdrop Walks" through Rode Hall's woods, a brisk hike up the hill, The Cloud, to watch Easter day's sunrise, the Green Flag award-winning Brereton Heath country park, and a summer stroll beside the boats on Astbury Mere.
Do visit! But not just for the loveliness of the area. What makes Congleton for me the most wonderful constituency to serve is something else. It is its people-friendly, unaffected and unassuming. No one could have welcomed me more warmly as their new MP. I am most appreciative. The people of Congleton constituency have an outstanding commitment to community and family life. Voluntary organisations flourish. Support for the brave men of the Mercian Regiment is active and heartfelt.
Yet today these Cheshire towns face substantial challenges and change-a loss of traditional industries; farmers facing economic and bureaucratic challenges; insufficient jobs for youngsters meaning that they have to move away to work; challenges for the independent retailer on the high street; skills shortages in areas such as manufacturing and engineering; and a disproportionately higher than average older population to care for.
Yet are the good people of Congleton complaining or holding pity parties? No! Quite the opposite! They are pluckily rising to these challenges, actively looking at how, together, we can respond to them, and saying, "For such a time as this, we are not part of the problem. We are part of the solution."
Employers, such as Convert2Green, Ideal and Siemens are saying, "If we cannot find the skills, we will train them." East Cheshire chamber of commerce is organising advice on topics as diverse as export licences and shop doctors. Local traders' groups such as STAR-Sandbach Traders and Retailers-and Alsager chamber of trade are developing new ways to promote business and local produce, like farmers markets. The Congleton Partnership and Middlewich Vision are determinedly championing vibrant community life. Enthusiastic residents are giving time in Clean Teams, Milton Gardens, Rotary and Holmes Chapel Village Volunteers. Farmers like the Riddells are investing in technology while also diversifying into hospitality. Cheshire East council members and officers are open to talks with innovative community groups, such as Plus Dane and Crossroads Care, about how best to care for our elderly, whilst recognising that supporting families who care is, where possible, the best solution of all. We have town clerks-Jonathan Williams, Terry Fitton, Ann Banks and Brian Hogan-with real hearts for their towns and a pride in their heritage and excitement about their future; and we have inspirational head teachers for whom their community role is much more than a job. Several local newspapers flourish, defiant in the face of today's media challenges, promoting local life and values. They include the Sandbach and Middlewich edition of the Crewe Chronicle, the Middlewich Guardian, The Sentinel and T he Congleton Chronicle, in which the eagle-eyed Mr Grumpy ensures that we laugh at ourselves weekly. Hats off, too, to that paper's young reporter who, rightly affronted, took up with me the case of a young girl who, through the local job centre, was offered employment involving sex work. A few weeks later we saw this Government change the regulations, banning that practice nationwide.
Strong community leaders abound: Stephen Hodgkinson, helping the homeless, indebted and addicted-a hero in his home town; Matthew and Christine Wright, supporting the "Special Treasures" disabled children's group; Ian Bishop and Julia Brumby, initiating "Street Pastors" to get alongside youngsters on the street at night; and David Page, gently inspiring and encouraging people to rebuild together after their community hall burned down.
Individuals like those may never hold elected office, but they are motivated by nothing more-and nothing less-than the desire to make a positive difference, often while facing challenges themselves. They understand that creating a society worth living in, and of which we can all be proud, involves not so much what we can get, as what we can give.
Throughout the country today, people are asking, "What is the Big Society?" I say, "Come to Congleton! It is already here!"
I have highlighted, in this my maiden speech, the importance of personal responsibility, but I do not deny the need for a Government safety net to protect the most vulnerable or those suffering injustice. Equitable Life investors in my constituency took personal responsibility for their provision and were failed by the very Government regulator which should have protected them. They include people such as Stan Nin, a stoic Sandbach resident aged 80, who has lost the benefit of some £350,000 and cannot now even afford to run a car, let alone have a holiday. We cannot compound injustice on injustice; we must pay proper compensation, and do so soon as a priority to older trapped annuitants such as Mr Nin.
I am pleased to follow the maiden speech of Fiona Bruce. Ann Winterton will be a very difficult act to follow, but I am sure that the hon. Lady will be a fine representative of the people of Congleton in years to come.
On the Bill, the Scottish National party and Plaid Cymru have always supported the campaign to bring justice to the victims of Equitable Life. I am clearly pleased that we have before the House a Bill that will bring compensation a little closer, and we will support its Second Reading. The real problem, however, is that it simply sets up a mechanism for which a scheme can be introduced, presumably, through secondary legislation. I tackled the Minister on the question whether the scheme would be debated on the Floor of the House, but I received no answer. Given the significance of the matter, it is important that it comes to the Floor of the House so that we can have a good look at the proposal.
Given the further fact that the independent commission is not due to report until early next year, it appears that the victims of Equitable Life will have to wait another year or so before they know what, if anything, they will receive in compensation. That is also a problem, as members still do not know the specifics of the scheme. The huge concern of my affected constituents is that recent Government statements point to a watered-down scheme that is not that different from what the previous Labour Government proposed, except for the innovation of an overall cap on payments. That proposal will cause fear among many victims because if that cap is imposed, it will heap injustice upon the great injustices that those people have already suffered.
Does my hon. Friend agree that it is essential that the scheme rules out the Chadwick report's proposal of a payment cap for each policyholder, which would limit compensation to between only £400 million and £500 million?
The policyholders are entitled to due compensation, and I shall address that point in a moment.
I remind Government Members that the coalition agreement clearly states:
"We will implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
"I also explained to him the basis on which I had come to my conclusions and what my recommendation for compensation involved. I am very disappointed therefore to discover that Sir John has explicitly rejected those explanations and that assistance and has substituted his own interpretation of these matters without seeking my further comments."
That is a fairly damning indictment of what is now proposed. I stated in the previous debate on the matter that the failure to support our own ombudsman brought great shame on the previous Parliament, but, if we do not act now to re-establish trust in the system and listen to what our own independent ombudsman says, it will bring shame on this Parliament as well.
Prior to the election the Conservatives were clear in their view, and in March the motion before Members specifically stated that the House
"calls on the Government to set a clear timetable for implementing the Ombudsman's recommendations and remedying the injustice suffered by policyholders."
Regrettably, that does not seem to be what is now proposed; the new Government seem to have pretty much jettisoned the ombudsman's recommendations and adopted the process that the previous Labour Administration were putting in place-a system that the Conservatives roundly condemned prior to the election.
I do not quite share the indignation of Labour Members on this matter, because, if one reads carefully the speech given in the March debate from the now Minister, one discovers that the seeds of the current situation were already sown. He stated:
"The hon. Gentleman refers to the bill for compensation, but no one knows how big that will be. That figure will be part of the outcome of the process that the Government launched back in January last year. He will know, from reading the ombudsman's report, that her recommendations on compensation had two important caveats-that payments to policyholders should reflect relative loss but that the impact of any compensation bill on the public purse should be borne in mind."-[ Hansard, 16 March 2010; Vol. 507, c. 744.]
It seems to me, however, that only the second part of that statement is now the overriding consideration, and that the question of the amount of compensation has little to do with relative loss, being concerned purely with the perceived state of the public finances. We have moved on from means-testing the victims to means-testing the Government before deciding the level of compensation.
The problem with that approach is that it sets a very dangerous precedent. The Government, through the regulator, were responsible for what happened at Equitable Life, and the maladministration that occurred led directly to the losses suffered by the policyholders. However, the Government are effectively going to cap the amount of compensation at what they think that they can afford and, worse still, as part of a comprehensive spending review that is expected to impose swingeing cuts on all Departments.
I wonder how I would get on if I drove my car into a Porsche, causing many thousands of pounds worth of damage, and said "Sorry for your loss, but I can only afford to pay a small proportion of the damage." I suspect that any court in the land would give me very short shrift. It is a principle well established that those who have caused the damage are due to make recompense. That principle appears to have been watered down in the case of Equitable Life policyholders, and, as Frank Dobson said, that is not the case for other victims of financial circumstances.
In previous speeches, the Minister has praised the Equitable Members Action Group for its excellent work in keeping the matter in the public eye, and rightly so. Given that, we should take on board the very real concerns about what is now proposed. The group has made clear its concerns in three main areas, including the continued reliance on the Chadwick process, the remit of which was devised by the previous Government and clearly intended to minimise payouts. Indeed, the previous Administration did not accept many of the ombudsman's findings, coming up instead with a system of ex gratia payments to which many of us objected at the time. We in the SNP and Plaid Cymru supported Liberals and Tories in that objection. The important point is that the basis on which Sir John Chadwick was carrying out his work was that adopted by the previous Government. I remind Government Members that they supported the recommendations of the ombudsman in their manifestos and the coalition agreement.
The losses are to be calculated by the Treasury and not by the independent commission, and indeed the very basis on which that is to happen is moving from the relative loss identified by the ombudsman to an absolute loss method adopted by Chadwick. That reiterates the importance of debating the terms of the scheme on the Floor of the House. Furthermore, the commission is left with the unenviable task of distributing inadequate compensation, having had no say in calculating the true losses.
The policyholders of Equitable Life were treated shamefully by the previous Government. In opposition, the coalition parties promised to take action, but unless they tackle the concerns raised by policyholders and the ombudsman, this issue will continue to undermine the standing of this Parliament, faith in our ombudsman service and, as was pointed out, the continuing faith of all our constituents in saving for their futures; they might not be assured that their savings will be protected when investing with apparently reputable companies.
I urge Ministers, even at this late stage, to address these issues and come forward with a scheme that will bring this sad debacle to a just end. We should be given the opportunity to debate the scheme on the Floor of the House, so that we can be assured, and we can assure our constituents, that everything possible is being done for the unfortunate victims.
As requested, I shall keep my contribution short. First, I congratulate my hon. Friend Fiona Bruce on her excellent maiden speech, which was made during an extremely important debate for her and other Members' constituents.
I have listened to the debate with considerable interest and should say at the very outset that I congratulate the Minister, who has done more for Equitable Life victims in his first 10 weeks at the Treasury than the last Government did in 10 years. The Equitable Life saga is comparable to an epic Shakespearean tragedy; the only difference is that even in Shakespearean tragedies there is an element of comedy. There is nothing funny about the Equitable Life story-it is a sad, tragic and complex affair, littered with incompetence and failure, but most of all with personal loss and hardship.
My constituency is no different from any other represented in the House; many people there are affected by the society's failure. I am told that there were 470 Equitable Life policyholders in Chatham and Aylesford at the time of the collapse. That figure, however, accounts only for those constituents who held Equitable Life policies solely; it does not incorporate those who made additional voluntary contributions to their pensions. The revised figure, including those who made additional voluntary contributions, could be up to three times greater.
Unsurprisingly, I, like many Members here, have been contacted by policyholders, some of whom have lost tens of thousands of pounds and are now suffering financially as a consequence. The overwhelming feeling among policyholders in my constituency is one of injustice. They feel let down enormously by the last Government, who showed very little interest in trying to compensate their losses at a time when, to be frank, full compensation could have been afforded. Now, with the coffers bare, it is up to the coalition Government to try to provide fair and transparent payments.
Although I feel for the Minister, who is in charge of conjuring up money that does not exist, it is the victims in my constituency for whom I reserve my sympathy. They are the ones who have lost their savings.
If my hon. Friend does not mind, I shall press on, as time is short.
Those victims put their faith in a financial institution to look after their money and in a regulatory system to protect it, but both failed them and they now face a very different retirement from what they had planned. I have always felt that there was an assumption that every person who had invested in Equitable Life was wealthy and that therefore their loss did not matter so much. That is simply not true. I have had letters and e-mails from people who were never rich, but had just sensibly put money aside, as Governments want them to, on a guarantee that in the end turned out not to be worth the paper that it was written on.
Sadly, it is estimated that nationally 7% of Equitable Life policyholders have passed away since the collapse. Applied to my constituency, that statistic equates to 33 policyholders. Thirty-three does not sound like a large number, but it is important to remember that as a direct result of the previous Government's wilful inaction, 33 people have not lived to receive compensation for their loss. I welcome the Minister's previous comments on the provision of justice for the deceased and I urge him to ensure that it, too, is fair and transparent, for the sake of the surviving family members.
The Bill is, I appreciate, one that enables the technical provisions that, fundamentally, will provide compensation to those who lost money in the collapse of Equitable Life. It does not provide a figure for compensation. To be honest, I do not like that, although I understand it. However, I want to take this opportunity to urge the Minister to be as generous and creative as he can possibly be on this matter. The country might be bankrupt right now, and full compensation is impossible. But in the future, when the economy has returned to full health, further payouts could be authorised. I am not asking him to decide today on future payouts; I merely want him not to close the door on the suggestion.
I congratulate the Minister on his progress. I will be supporting the Bill in the House tonight. I simply ask him to remember the human cost of this tragedy and to do all he can to ensure that fair and transparent compensation is exactly that.
Before I start, I have an apology to make to the House. Owing to a prior, long-standing commitment, I shall not be present at the winding-up speeches and the conclusion of the debate.
Like so many Members on both sides of the House, I have tried over the past few years to champion the cause of my constituents who have suffered-through no fault of their own-because of a catastrophic failure of regulation by the Government of a previously sound and trusted financial institution. I do not want to rehearse yet again the history of how that failure, which has blighted so many lives, came to pass. I am pleased to see that this afternoon we are debating the Second Reading of a Bill that will pave the way for compensation, now long overdue, to be paid to long-suffering Equitable policyholders, especially the trapped annuitants.
Since my Adjournment debate on
I dare say that I have not made myself very popular with my Labour colleagues and friends who, until
Therefore the only people who are important in today's debate are those who have already waited more than nine years for recompense and are still waiting. I am thinking of constituents such as Mrs Ivy Robinson, who lives in Roundhay in my constituency of Leeds North East. She contributed all her working life to save for a personal pension, which promised to give her just over £400 a month, but she is now having to manage on less than £180 because of the failure of Equitable.
As we have heard time and again in debates in this House and elsewhere, the vast majority of Equitable policyholders are not rich people, but ordinary folk who simply tried to be careful with their hard-earned money in order to ensure a comfortable retirement. The average investment was only £45,000-enough to yield, according to EMAG's calculations, just £300 a month. They have been badly let down.
Ann Abraham, the parliamentary ombudsman, could not have been clearer in her recommendations and has spoken out on many occasions to tell the Government what was necessary to put right the wrongs caused by Equitable. The Government have largely ignored her sound advice. The former Chair of the Public Administration Committee, Tony Wright, already quoted this afternoon although no longer a Member of the House, was outspoken during the last Parliament in his support for Equitable Life policyholders. In part of the introduction to his Committee's report to the House in December 2008 he stated:
"Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long."
The then Conservative Opposition were vocal in their support for Equitable policyholders, as were many Labour and Liberal Democrat Members, and in October 2009 the Conservatives used an Opposition day debate to raise the issue once again in the House. They did so again in March this year, shortly before Dissolution. I spoke in both those debates and have been consistent in my support for the moral obligation that we owe those who have suffered and continue to suffer. In November 2009, EMAG organised a rally in Westminster Methodist central hall, which was very well attended and at which the Financial Secretary and I spoke, among many others.
"Sir John's terms of reference included the rejection or qualification by the previous Government of many of my findings of maladministration and injustice and the rejection of my recommendation. In the light of the new Government's commitment to implement that recommendation in full, the approach embodied in the Chadwick report has thus been overtaken by events and cannot provide a basis for the implementation of the recommendation."
So now we come to the Bill. It is of course fairly innocuous, as it tries to pave the way for a scheme of compensation as yet unpublished; that is why Labour Members are not opposing it today. I support my right hon. Friend's suggested amendments, which I believe will go much further towards the delivery of a compensation scheme for policyholders, especially trapped annuitants, who have waited for so long. Unlike him, however, I have never supported the Chadwick process, and I am in complete agreement with the parliamentary ombudsman, who says, again in her letter of
"the Chadwick proposals seem to me to be an unsafe and unsound basis on which to proceed."
While I have always been determined to try and ensure that this issue is lifted above crude party politics, I have to admit to being very uncomfortable at the EMAG rally last November when Mr Hoban, now the Minister, made a scathing attack on the then Labour Government. In the spirit of cross-party support for the victims of Equitable's failure, I have always refrained from attacking the Conservatives, so let me simply say that I am disappointed that the Chadwick process continued after pledges were made to abandon it, especially in the light of the ombudsman's criticisms. I am also upset that a ceiling of roughly 10% of estimated losses has been placed on any compensation scheme. This appears to go against the EMAG pledge that many right hon. and hon. Members-including, I believe, the entire Government Front-Bench team-signed before the election, and which committed each signatory to
"vote to set up a swift, simple, transparent and fair payment scheme-independent of Government-as recommended by the Parliamentary Ombudsman."
We are not there yet by any means. This Bill might be a building block, but it is only Lego-sized at the moment. I hope that the Government will think carefully and adopt the helpful Labour amendments very quickly in order to show our constituents that, at last, Parliament means to right this wrong.
I, too, congratulate Fiona Bruce on her maiden speech. In the spirit of fairness, I also pay tribute to Frank Dobson and Mr Hamilton. Much of their approach to this issue showed that there is an element of fairness among Labour Members, and I appreciate that.
We all know why we are here today, and we all know the financial constraints that we are facing. I should like to concentrate on three key proposals on how we can bring proper and fair closure to this whole lamentable episode. The first issue is regulation. Clearly, Members on both sides of the House recognise that regulation completely failed. To an extent, that gives us a very strong moral case. Irrespective of the financial challenges the country faces, the comprehensive failure of the regulators was so shocking that it should provide enough impetus for our coalition Government to go the extra mile to ensure that Equitable members receive the appropriate compensation.
I had a meeting with EMAG yesterday, and one of its representatives told me that-I cannot vouch for whether this is absolutely true-because the regulators apparently knew a good few years before the company hit the buffers that its financial model was in such a poor state, withdrew their pensions from the Equitable Life package. If that is true, it is absolutely disgraceful. It demonstrates what an atrocious job they did and emphasises that there is a very strong moral case for the payment of fair and appropriate compensation, irrespective of the financial challenges we face.
The second issue, which has been raised by several speakers-I concur, and I hope that my hon. Friend the Minister is taking this on board-is about staged payments. We all recognise the financial problems that the country faces-I will not bang on about Labour's responsibility for that-and EMAG does too. I implore my hon. Friend to look favourably on the staged payment process-first, so that payments can be made immediately for people in the most desperate need; we all agree that that is essential. Equally, the advantage of making staged payments over the next 10 years, as EMAG accepts, is that it will be much more cost-effective and should allow the Treasury to manage fairer payments without causing too much grief to the Exchequer.
Thirdly, I urge my hon. Friend Mr Tyrie, who is Chair of the Treasury Committee-he is no longer in the Chamber-and my hon. Friend Mr Jenkin, who is Chair of the Public Administration Committee, to invite the ombudsman to give evidence to their Committees, because her report, in its detail and expertise, completely blows the Chadwick report out of the water. That would, I hope, inform those Select Committees to the extent that they would be able to give a report to the Government that carried a considerable amount of weight.
In conclusion-I am determined to keep my contribution short because many of my colleagues want to speak; I hope that the Deputy Speaker will remember that when I next stand up to try to speak-we now have an opportunity to right a grave injustice. It is a grim situation. In Eastbourne, I have probably received more than 200 letters from people who have been affected. We are not talking about wealthy people; these are people who have scrimped and saved for most of their lives and through no fault of their own, and through the shocking irresponsibility of the regulator throughout the '90s, have ended up in a desperate state. There is a profound moral duty to resolve the situation as quickly as possible. I welcome the coalition Government's determination to honour their commitment. I am confident, because I am one of nature's optimists, that it will involve a higher sum than EMAG may fear; and if it is done over a staged process, it may even be a lot closer to what we all want and consider to be right.
I will also try to keep my remarks brief.
First, I associate myself fully with the remarks of my hon. Friend Mr Hamilton. I look forward to seeing the amendments proposed by my right hon. Friend Stephen Timms as the Bill moves into Committee. This is such an important issue to the people who have been affected by it, and we do need a solution, but I worry that the solution we will get from the Government will bear no likeness to what they promised or intimated when they were in opposition.
In terms of the number of representations from constituents, this is the biggest matter that I have dealt with since coming to this place. It is certainly the longest running issue for me, and many other Members will have had it on their plates for much longer than I have. However, we should think about those who lost their money. They have had worry and hardship from the start, and what is the solution? To my constituents who are affected, it is the implementation of the ombudsman's recommendations. Let us be honest: if we were personally affected, that is what we would want. It was what my constituents wanted from the last Government and what they expect from the current one.
The tone of the communications that I am receiving from my constituents is changing from blaming the Labour Government to blaming the Conservative party, the Liberal Democrats and the coalition Government. In reality, the blame game is not really productive, as the events of the past decade have shown. We all know that the problem and its causes have spanned different Governments, and that there have been failures by all parties. I worry that we are being set up for another failure, and I do not want that to happen to my constituents.
No, I will not.
Like other Members, I want the Government to have their moral hat on. Forgetting about the failings of the past, this is their opportunity to do right by those who have lost out, and their action should be moral, not party political. Ministers can stand up to Treasury officials and do what is right.
We have heard a lot today about the £5 billion price tag, but let us be clear that it is not £5 billion this year or next. As Members on both sides of the House have said, it could be spread over several years, or possibly decades. It does us as parliamentarians no good to throw telephone number-like figures around to frighten people into believing that we cannot do anything. We need to help the trapped annuitants who are locked into their losses.
I wish to address a point that Members from all parties have made. Many of the people affected are not rich. They span all walks of life, and they were doing the right thing by investing for their future. We need a commitment to help those people now, and we need costs to be allocated so that we understand the annual cost over, say, 10 years. However, we also need to be aware that about a third of the 1.5 million people affected had invested all their future in Equitable. Some of those people have lost their homes and cars, and with them their dignity, and we should take the opportunity to restore that dignity. As I have said, my constituents feel that despite their hopes, nothing has changed with the change in Government.
No, I will not.
The situation has been a shock to my constituents and a disappointment to hon. Members of all parties, as we have heard from them. I am concerned that the Treasury is going to impose a limit, in the hundreds of millions of pounds, that will not address the problem, fulfil our moral obligation or improve the hopes and ambitions of many of my constituents. Will the Government confirm whether reports that the Treasury has already set aside money are accurate? If so, how much money and why that amount? Will that be the lot, and who will it be for? We hear a lot about a fair solution, and that is what we need, not just a fair process.
Some will ask why people continued to invest in a failing company. The problem was that there was nothing to cause investors concern. Perhaps if they had known what regulators knew-or should have known-and what Equitable Life itself knew, the situation would have been different, but they did not. That is the crux of the need for fairness.
This is an enabling Bill, and as such I have no problem with it, but we do not know what it enables. The water is murky. What will happen to trapped annuitants, including those who are still in work and will retire in future? What happened to the belief that the Conservatives would sort out the problem, and what has happened to bring the coalition around to embracing Chadwick in some way? The Government do not necessarily accept Chadwick, but they are preparing their information based on Chadwick's £500 million figure. I ask the Financial Secretary to do all he can to make the Government's position clear, because it is not clear to me, and judging from my mailbag it is not clear to my constituents. When he was in opposition he implied that he would sort out the mess, but now he is creating his own mess.
Perhaps I can leave Ministers with a few questions to ponder. Do the Government still accept the parliamentary ombudsman's recommendation, and do they accept her belief that the Chadwick advice cannot mesh with her recommendations? How will she be consulted about the Government's proposals, and as others have asked, when will the House have the opportunity to debate the Government's approach to compensation? Finally, and most importantly, when will the Financial Secretary stand up to Treasury officials and do in government what he promised to do in opposition?
Order. Before I call the next speaker, may I say that a lot of Members wish to speak? If they try to take less time than they had envisaged, I will be able to get through as many of them as possible. I believe that is part of the reason why Members are not giving way.
Knowing that time is of the essence, I will apply the principle that brevity is a virtue and not a vice. Before I begin, I congratulate my hon. Friend Fiona Bruce on an absolutely super speech.
I very much welcome the Bill. Policyholders in my constituency were pushed from pillar to post by the Labour Government, and they had to get a judicial review. Even after that, the then Government would not accept responsibility. I welcome the current Government's intention to gain justice for policyholders and the fact that, within five months of their coming into government, there is a plan for redress for policyholders in my constituency and the country more widely.
I welcome the fact that the Bill does not predetermine the amount of compensation to be paid. I urge the independent commission to implement the parliamentary ombudsman's findings dated
"appropriate to consider the potential impact on the public purse of any payment of compensation".
I share the concern of the ombudsman and policyholders about the Chadwick report, because it does not enable fair and transparent compensation.
I welcome the Bill and the fact that the Government are setting up an independent commission to oversee the design and delivery of the compensation scheme. I also welcome the fact that policyholders will start to recover and receive compensation by the middle of next year or sooner. Finally, I congratulate the Financial Secretary and the Treasury on bringing forward the Bill so swiftly.
As you know, Mr Deputy Speaker, I represent in a constituency in Northern Ireland. Like other hon. Members, I have been written to by many constituents, particularly elderly ones, about the unresolved, inexplicable and inordinate delay in bringing forward payments in a fair and equitable manner for Equitable Life policyholders. They are very proud people, many of whom are entrepreneurs in industrious communities. Some are farmers or bin men, and they represent a wide cross-section of the local population. Many of them are still waiting for the matter to be resolved, having waited a considerable time already.
I wish to make it absolutely clear that, in the majority of cases, those who invested in Equitable Life were not in the high income brackets. I can certainly say that on behalf of my constituents who were affected. In the majority of cases, their investment in Equitable Life over many years was itself a struggle to meet, but their sense of responsibility drove them to make that commitment to their future. I fear that when we talk of investors, it is all too easy to think about those in receipt of large pensions. We are talking about people in the lower and middle income brackets. Many of our constituents who are affected are farmers, fishermen, small business men, dinner ladies and librarians-and the list goes on. During their working lives, those pensioners contributed much to society for the minimum return.
There is a clear need to resolve the issue. Much forensic work has been done, including the reports of the ombudsman and Sir John Chadwick. However, we thought we had a resolution. On
The previous Government's appointment of Sir John Chadwick was an attempt to devise a system of limited ex gratia payments, which would be made only to those who were disproportionately affected. The coalition Government appear to be continuing down that road, as we understand that the independent payments commission will abide by Chadwick's proposals. Victims will receive less than 10% of their losses, and the total sum that the commission is working to repay will be a meagre £400 million, in the face of estimates by the Treasury's own actuaries of much greater losses.
I caution the coalition Government against going down that route, not only on the grounds of the independent parliamentary ombudsman's recommendation and fairness for the many investors who have been left quite desperate, but on the grounds of what is right and proper at the heart of government. The handling of the Equitable Life issue by the previous Government and the coalition strikes at the heart of democracy and at the question of how the Government treat many people.
I certainly accept the hon. Lady's criticisms of the previous Administration, but does she accept that the coalition Government's prioritising the Bill early in this Parliament demonstrates some sort of commitment? However, I recognise the need for greater negotiation with EMAG to reach an appropriate settlement.
It would have been much better for the coalition Government to implement the ombudsman's recommendations. That would have been much more democratic and it would have reflected the needs of all our constituents.
Does the hon. Lady accept that although the coalition Government have been quick to introduce a Bill that enables payments to be made, the level of payment is equally important to our constituents, as is the commitment, which was made by both parties in the coalition before they entered government, to implement the ombudsman's report?
I could not agree more with the hon. Gentleman. That is exactly right, and it is the kernel of the letters that I have received from my constituents. They want this matter resolved by amendments to the Bill to reflect what was said in the original ombudsman's report.
The parliamentary ombudsman's report is independent and transparent, but it is being overruled by a Government-directed report that results in less favourable terms for investors. Such injustice at the heart of successive Governments is a great slight on our democracy. I urge the Government, at this late hour-perhaps it is not too late-to make amendments so that the Bill reflects clearly the ombudsman's report. Such amendments would show that we are truly earnest about helping some of the most beleaguered members of our society.
Right hon. and hon. Members have a big responsibility to deliver a fair resolution to policyholders who have been affected by this scandal of maladministration by the regulators. As we have heard, when in opposition, Conservatives and Liberal Democrats quite rightly pursued and scrutinised the previous Government, and sought to hold them to account for neglecting Equitable Life victims and for failing to establish a long-overdue compensation scheme. We rightly acted in victims' interests to support them as the previous Government dithered, delayed and dragged their heels. Disgracefully, as we have heard, they left many policyholders to pass away, unable to receive the justice that they deserved. That applies to a number of families in my constituency. By contrast, we are passionately committed to delivering a fair, transparent and independent payment scheme for the losses that people incurred because of that dreadful regulatory failure. Obviously, the Bill is a strong, positive measure and a step in the right direction.
It is important to remember that Equitable Life policyholders did exactly the right thing. They chose to save for their retirement so that they could have a decent quality of life in their later years. One of my constituents wrote to let me know of a loss of something like £130,000 as a result of being forced to buy an annuity. There are some maths involved, but the loss works out at around £80,000 per year, which is a substantial amount of money to anyone, but particularly to a pensioner trying to make ends meet in this day and age. He is more than frustrated; he is desperate beyond belief to find out the next steps and what, effectively, he will get. Another of my constituents has had to rethink their plans for retirement off the back of their losses, and I could reel off a list of more than 100 names of constituents who have contacted me on this matter.
I will not, if my hon. Friend does not mind.
The 1.5 million policyholders affected and their families desperately need certainty, finality and, frankly, closure on this lamentable situation. Although policyholders in my constituency broadly welcome the Government's decision and their commitment to begin making payments through the independent scheme next year, it is understandable that, owing to the actions of the previous Government, they remain sceptical. They have many probing questions for the Minister and the Government, as many colleagues in the House will recognise.
Transparency in the scheme is of course essential-the Minister referred to that-and although payments will begin next year, my constituents want to know when the process of making payments to all affected policyholders will be completed, as we have heard from other hon. Members. Let us be realistic. Processing payments is a challenging task made all the more arduous by the delays caused by the previous Government and the atrocious financial situation that we face, which we constantly hear about, but that is why it is important that all policyholders have their cases resolved promptly, in addition to receiving payments as soon as possible.
Where policyholders are not fully compensated for their losses, it is important that they are given clear reasons why not, and that they have an opportunity to restate their case when that is an option. I should welcome clarification from the Minister on any appeals process for policyholders who feel that an initial reward by the independent commission is unfair to them.
The scheme will also need to address the implications for tax, tax credits, other benefits and means-tested benefits. Frankly, in view of the bureaucracy associated with Her Majesty's Revenue and Customs and the current crisis of HMRC demanding money back from hard-pressed taxpayers and pensioners, policyholders in my constituency are genuinely concerned that although they might receive some compensation, they might also get a letter from HMRC demanding money back. After a decade-long struggle to receive justice and payment, the last thing that those policyholders need is a letter on the doorstep from a heavy-handed bureaucrat demanding money back.
Lives have been ruined and it is scandalous that, two and a half years after the ombudsman reported, six years after Penrose and almost a decade after the whole scandal came to light, justice has yet to be delivered. It is right that the Government should tackle the issue and the Bill is a great step forward. Fairly compensating those who have lost out has to be a priority for the Government. Having seen the shambles of the previous Government, I welcome this Government's commitment to policyholders. The Bill is an absolute must and is long overdue.
Before being elected to this House in May I met Equitable Life policyholders from my constituency. I am indebted to Richard Cox, the local EMAG regional co-ordinator, for bringing me up to speed on the issue and the background to the Bill. I did not immediately sign the pledge to support EMAG, because I wanted to ensure that if I signed I would be able to carry through my commitment. Having met those affected and read the numerous reports on the issue, I judged that there is an indisputable moral obligation to compensate the Equitable Life policyholders, so I signed the pledge in the knowledge that I would be judged later by my actions and follow-through.
In today's debate Members on both sides of the House have said that there are areas on which we can agree and build consensus. We all seem to agree that a compensation scheme is important and must happen. The differences between us appear to be the vehicle for compensation, the amount, the timetable for delivery and the payments. As I listened to the debate, I could not help wondering whether some of the exchanges would be seen as not especially helpful by those who want us to unite and find a way forward to help those who have been affected by this issue. Some of the to-ing and fro-ing across the Chamber may make for a bit of sport and entertainment, but it does not move the debate on. I hope that we will be able to make progress in further contributions.
I do not have any difficulty with the principle of the Bill in that it will enable a payment scheme to be put in place for policyholders, but I do have reservations about the nature of the Bill, as I always do with Bills that do not contain much detail. It is all very well to lay down the general direction, but the Bill fails to answer several key questions to which those affected have long sought answers. For example, the Bill does not set out who will be entitled to what under the compensation payments scheme, but that is the essence of the issue. Despite all the numerous reports, inquiries and legal actions, the Bill empowers the Treasury to make payments, but gives no details. I regret that that is a pattern in the Bills introduced by this Government. The lack of detail also puts some of us in a difficult position. We want the compensation scheme to be put in place as quickly as possible, but we are reluctant to support a Bill that does not actually outline the detail of that scheme.
It is worth quoting the coalition agreement on this issue:
"We will implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
There were no ifs and buts in that statement, but we now seem to hear some maybes about what might happen in the future. I urge the Minister to ensure that not only the design of the scheme but its operation is independent of Government, and that is why I welcome the amendment we propose to table.
In the end, not this House but those who voted for the coalition partners will judge whether they met their promises. Some of those who have brought their concerns to me would not naturally support my politics, but it has become increasingly apparent that while they may not have agreed with the previous Government's position, they at least knew what it was. Their problem now is that they feel let down, because they were given a clear commitment and now the Government are rolling back on that.
Will the hon. Lady explain the previous Government's position and whether she agreed with it? As far as I am concerned, the House will vote tonight for compensation for the victims of a scandal-the people who waited 10 years under her Government and never got a penny.
I would point out gently to the hon. Gentleman that that is exactly the kind of intervention that people in my constituency do not find helpful. What they do find helpful is that we now have a Bill-albeit with some flaws-and I hope that the hon. Gentleman will support our amendments to it. It is important that we take this issue forward and resolve the matter speedily-
It is no use the hon. Gentleman making interventions from a sedentary position when I am genuinely trying to point out areas where we can build consensus.
I hope that the Economic Secretary will address a couple of points. First, do the Government believe that it is their moral duty to compensate policyholders by choosing the issue of relative loss over absolute loss? Secondly, I hope that she will give consideration to the points made today about some compensation payments being made early. I heard what the Financial Secretary said about the need to put a scheme in place swiftly, but that is unlikely to produce any results until next year. Many of my constituents are anxious for some interim payment to be made by the end of this year and I hope that the Government will give some thought to that.
As other hon. Members have said, the Bill raises broader issues. It is clear that hard-working, decent and honest people who tried to do the right thing and provide for their families and their retirements have lost out. I hope that we will keep that in mind as we move forward with this Bill and in the debates to come.
I add my congratulations to my hon. Friend Fiona Bruce on her excellent maiden speech. In a spirit of fairness, I recognise that some Opposition Members have spoken passionately on this issue and gone against their Front Bench. It is unfortunate that Labour Front Benchers remain committed to the previous Government's position of not awarding adequate compensation to victims of this scandal.
I do not want to take too much of the House's valuable time as I am well aware of the many hon. Members who wish to add their views on this subject and raise the concerns of their constituents.
I wish to declare an interest, as set out in the Register of Members' Financial Interests, as I do some consultancy work with Finsbury Ltd, where I worked before my election to Parliament, which provides advice to the current management team at Equitable Life. But the interest for which I speak today is not corporate, but rather that of my constituents who were affected by this scandal and the basic concept of fairness, which is so key to this debate and this Government.
I do not intend to retell the stories of the countless constituents who have written to me, many of them those trapped annuitants worst hit by the scandal. They worked hard, did the right thing and put money away for the future. They were let down by poor management, dreadful regulation and a Government who did not care. I will not repeat the details of those cases as the House is already well aware of the need for justice. More than half of hon. Members signed the EMAG pledge during the general election and it is only appropriate that this subject should see such rapid progress early in the life of the new coalition Government.
Fairness was put at the heart of the coalition's programme for government and it is fairness that must remain at the heart of our approach to Equitable Life. I welcome, as the parliamentary ombudsman has welcomed, the clear focus, energy and rapid progress that the new Government have brought to this issue. I support the Bill entirely because it will enable compensation that is long overdue.
Alongside EMAG, I warmly welcome the appointment of an independent commission to allocate compensation, and the fact that within months we will know the extent of that compensation. It is tragic that so many Equitable Life members were allowed to die under the previous Government without compensation, and it will be a great achievement of the coalition that their heirs, as well as living members, will be compensated.
I cannot argue against any part of the Bill, but I want to take the opportunity to urge the Government to do even better than they have done already. Labour's shameful record extended not only to failures of regulation, to trying to avoid the issue for almost a decade, and to failing to act on the parliamentary ombudsman's report when they had it, but to second-guessing that report in a way that was ruled unlawful and to trying to wriggle out of paying fair compensation. The basis on which they did so must not become the basis of compensation today. In that context, I welcome the Minister's acceptance that elements of Chadwick are highly contentious, and I hope that he will act on that view.
The Government must ensure that, as the ombudsman recommended, people are fairly compensated for their relative losses. We are pledged to do so. Although I can understand why people who were let down for so long by the previous Government are wary of expecting fair treatment from any Government, I expect confidently that this one will show greater resolve for justice. I welcome the Minister's hard work on this subject, and I look forward with hope to hearing fair compensation being announced in next month's spending review.
It is a tragedy that Labour's failure to act sooner means that the debts they bequeathed us have to be taken into account. It is a tragedy, but one that the parliamentary ombudsman rightly acknowledged was always a possibility. The Equitable Life victims I speak to understand that, and they will also understand that, as the ombudsman recommended, the Government must take account of the impact on the public purse and their own fiscal situation in deciding the quantum of payment. In this unprecedented fiscal crisis, it would be wrong for the Government to put the compensation of one set of people, no matter how badly treated, before all else, because now, more than ever, we must adhere to the concept of fairness.
I urge the House to continue to progress this issue with all its might and with all speed possible, and to ensure that those constituents of mine affected by this tragedy can say that this Government, unlike their predecessor, were fair to them.
I thank you, Mr Deputy Speaker, for allowing me to say some words in favour of the Bill, and I congratulate Fiona Bruce on a very good maiden speech. The spirit of her predecessor certainly lives in her, and I wish her well in the Chamber.
A society is judged very much on how it treats its young and vulnerable, on how it looks after and cares for the elderly and on how the young are given opportunities. I hope, therefore, that no one is judging us in the Chamber by the standard we have set in the treatment of Equitable Life members, because if they are, they will be sorely disappointed. This debate has continued without redress, at least until now, and with no help from this place, at least until now, and EMAG estimates that about 32,000 policyholders have died since its campaign for compensation began-a stark figure already mentioned today-with members continuing to die at a rate of about 100 per week. Those are stark facts when we realise that these are people's lives we are talking about.
By the time this scheme starts paying out next year, 13,000 more members will have passed away, bringing to 43,000 the total number of people who have struggled more than is fair or judicious because no solution could be reached or help given by the Government when it was needed. I am glad, therefore, that today's legislative change is passing through the Chamber, and I look forward to further contributions when the programme goes forward.
I have some concerns, however, about the quantum. Everyone seems to be in favour of the process, but we have not been able to identify the percentage. I have been contacted by Equitable Life members, including a gentleman who is terminally ill-this sort of situation will be replicated across the whole of the United Kingdom-and is desperate to receive the money so that his wife will be able to live comfortably. Surely, this is the very thing that we should be trying to do; this is the whole purpose behind pension schemes and Governments encouraging people to invest in private pension schemes.
I stand here on behalf of that terminally ill gentleman and others like him. I could do nothing else, because my job as an MP is to fight on behalf of those who come to me. That is what we are here to do, and I urge that a reasonable solution be agreed today, so that people can receive their compensation in time for it to make a positive difference to their lives. I have constituents who were paid half of what they expected on the commencement of their pensions in 1992, when petrol was about 40p a litre. It is now three times that, and the pensions are worth half their value. That is an indication of where their pension schemes are and of how Equitable Life members are losing out.
Lives have been severely affected, and it is our duty in this place to redress the balance as much as we can.
Does my hon. Friend accept that it is the duty of the Government to take this matter forward, especially given that when in opposition and during the election the Conservative party pledged to implement the parliamentary ombudsman's report and recommendations, which for most people meant not a small fraction of their relative loss but substantial payments?
My hon. Friend must have read my mind. The parliamentary ombudsman's report describes the Equitable Life situation as a decade of regulatory failure, and her second recommendation is that the Government should set up and fund a compensation scheme with the aim of putting people who have suffered a relative loss back into the position they were in before maladministration occurred.
The issue facing us is the percentage of the value of the Equitable Life schemes. A report commissioned by the previous Government suggested that policyholders lost up to £4.8 billion in this debacle and proposed that they should receive a package of about £400 million. However, there is no guarantee of that figure, which has been bandied about by many. They are not new figures, and I am sure that some here could repeat them in their sleep, especially the Financial Secretary to the Treasury, who has been reminded of them several times in letters from constituents of mine, forwarded through my office, yet they bear repetition so that all here will be under no illusion about the situation.
I remind hon. Members that this is not merely a number-crunching game that we are playing; we are playing with the quality of people's lives, and it is essential that the Bill be subject to any decision reached. In July, the Financial Secretary said in the House:
"Consistent with the ombudsman's recommendation, Sir John has advised that relative loss for an individual policyholder should be capped at the absolute loss they suffered."-[ Hansard, 22 July 2010; Vol. 514, c. 577.]
Yet I remind the Financial Secretary that when he was a shadow Treasury Minister he wanted to ensure compensation for injustice. I ask that this be done and that we compensate for the injustice that all those people have suffered over years of unnecessary struggle.
I agree wholeheartedly with Chris Wiscarson, chief executive of Equitable Life, when he said:
"Let's not make Equitable policyholders victims three times over. First, at the hands of the regulators, as so clearly articulated by the parliamentary ombudsman"- as colleague have indicated-
"second, at the hands of the Labour government who failed to bring closure over a decade; and now third, compensation that will be decimated if Sir John Chadwick's advice, meant for the Labour government and slated by the ombudsman, is used."
I am aware of the financial position. We all know that we have to make hard decisions over the next few years about how the money will be spent. We are not running away from that. Indeed, I am fighting against reductions in grants that mean that Northern Ireland Housing Executive constituents are living with damp in their homes; that worthy disability living allowance recipients are being stripped of their support; and that roads are ruining cars because there is no money to fix them. I see all of that, and everybody else sees it, but I accept that we must take into account the fact that the money is unavailable. However, to compensate Equitable Life members with 10% of their investments is scandalous and can never be acceptable.
Today, it is my desire, and that of many in the House, that reasonableness be made the basis of any decision.
I wonder whether the hon. Gentleman is in the same position as I am. I have a family of constituents-two generations-affected by this problem, and the desperation of those who write to, email and meet me in my constituency is phenomenal. Has he found that in his constituency too?
Yes, it is replicated, right across the United Kingdom, for families, individuals and others. Indeed, there is sometimes a whole string of people affected, including people with different jobs. It does not matter what their jobs are: they can be fishermen owning their own boats or bin men collecting bins and getting rid of the rubbish. Those are the ups and downs-the highs to the lows, and everywhere in between-so the hon. Lady is absolutely right: everyone is affected.
What really worries me is that those who are affected have reached the golden age of retirement, when their mortgage has been paid off and when they know that they do not need to work any more or slog their guts out-if I can use that terminology in this House-but have time to enjoy the finer things, such as laughter and joy with their families. The terrible, horrendous situation in which they find themselves has stripped too many of our pensioners of their joy and placed on their shoulders both financial worry and a burden that should be long behind them. Today is the day for us to shoulder some of that load and burden, and to help them along life's road. That is our purpose as MPs in this House. Today is the day for us to step up to the mark and reset the balance for those who have waited for help for some 10 years. Today is the day for action. Let it be the right action.
I finish with a quotation from a letter from one of the many people who wrote to me: "I, like many others, in fairness expect and deserve compensation, as recommended by the Parliamentary Ombudsman and promised by the coalition Government, and not a figure based on the Chadwick advice, which the ombudsman himself described as an unsafe and unsound basis on which to proceed". With that in mind, I would urge hon. Members to support the legislative change and the amendments that will arise from it. In my book, Mr Deputy Speaker, that is worth fighting for.
I am conscious that many Equitable Life policyholders will be watching this debate this evening. Consequently, it is worth reiterating that the purpose of the Bill is to facilitate and enable the making of payments to those who have been affected. That is a fact of which we on the Government Benches can be proud. In just four months we have progressed more than the Labour party managed in 10 years. I am also pleased to hear that all parties will support the Bill this evening-although we should not be too self-congratulatory just yet.
Equitable Life members will be greatly heartened to learn that payments now seem to be imminent, but they are equally concerned about the likely level of those payments. I, along with many others, signed the EMAG pledge before the general election. Many Government Members are in the Chamber this evening because we signed that pledge, and because we are determined to prove our intention to try to honour it in the best way we can.
When we gave that pledge, we gave our word. It is difficult for all of us who signed the pledge not to give Equitable Life members-often people who will have put in their life's savings-fair, decent treatment and a proper compensation package. Does my hon. Friend agree with that?
I do agree with that; indeed, that is the point that I am making. We signed the pledge and we are here to try to deliver on it. However, as we try to deal with the economic carnage left to us by the Labour party, the fact that we always said-I think that this was the exact phrase-that whatever scheme was put in place would be subject to the impact on the public purse has become a more stringent condition and more restricting than we ever believed possible.
It is a crying shame that the Labour party did not deal with the issue earlier, before-to quote Mr Byrne-there was "no money left". Had the previous Government done so, it would have been easier to make a more generous and just settlement. The decent thing at the right time would have saved so much pain and heartache for so many of my constituents in the High Peak and so many constituents of fellow Members. We find ourselves in a position where we wish to honour our promise-our pledge-yet we are hampered in our efforts by the rashness of our predecessors.
I am conscious that many of my colleagues wish to speak in this debate. In accordance with your earlier wishes, Mr Deputy Speaker, I am determined to be extremely brief. However, I would ask the Minister to remember the pledge that we all signed. EMAG and the Equitable Life members are realists. They understand the difficulty that we face, given the economic carnage, as I have described it. They find it difficult to accept the recommendations of the Chadwick report. I would therefore ask that when the comprehensive spending review is complete, Equitable Life should be given a special place.
The Minister has my sympathy as he tries to perform this most difficult of balancing acts-but I have to tell him that most of the sympathy goes to my constituents in the High Peak, so let us not implement Chadwick without serious thought. I know that we want to expedite full and final payment swiftly. However, if a way could be found to increase payments, even if it meant spreading them across a longer period-albeit in a way that ensured that the administration costs did not eat up huge amounts of whatever funds are available-I feel that that could be made acceptable to Equitable Life people, who have waited too long for what I hope will not be too little.
Parliament has undergone a difficult year for its reputation. This Bill gives us a chance to start salvaging that reputation, but if we get it wrong, we will drive it further into the dust.
Mindful of what you said earlier, Mr Deputy Speaker, I will keep my speech short. I shall not go into the history of Equitable Life, because everyone in the Chamber is aware of the history, nor shall I go into the merits or demerits of Sir John Chadwick's report or the ombudsman's report. I want to talk about my constituent, Mr Barri Sharrat, who was made redundant by his company and whose pension was moved to an Equitable Life policy, which was to be his main source of income on retiring. Mr Sharrat put his trust and faith, along with years of savings, into the hands of Equitable Life to build a secure retirement. I want Mr Sharrat and millions like him to be compensated.
I agree with the ombudsman's view that people should be put in a position similar to that which they would have been in had Equitable Life not collapsed. I welcome the Bill and would urge the Government not to short-change the people on a promise that they made before the general election. However, I am afraid that the argument about money just does not carry any weight, because before the general election there were many debates about the country's finances. Therefore, the level of debt was well known to everyone. Knowing that information, Members who are now in government made a promise that they would honour the ombudsman's recommendation. I would ask them to continue to honour that promise, and then all those present who have taken a sanctimonious approach to the issue can be properly sanctimonious about it.
I urge the Government to make the Bill fair and effective. To make the legislation effective, they should put the independence of the compensation scheme on a statutory basis. There should be an independent appeal process, and a timetable-a short one-for making payments should be set out. The criteria by which compensation is to be paid should be made clear and simple. Again, I urge the Government to accept the ombudsman's recommendation that people should be put into the position that they would have been in had Equitable Life not gone bust.
The public finances may be taken into account, but it is my understanding that the Bill proposes to go along with Sir John Chadwick's proposal, which was not a very good one. As my hon. Friend Gordon Banks said, the compensation does not have paid in the next few months or even the next year; it can be spaced out over five years or perhaps even 10 years, so that people can be given the compensation that they deserve. As has been said, the ombudsman has made a recommendation, but it is for us here in Parliament to do right by our constituents, and that means going back and giving the appropriate level of compensation.
I, too, pay tribute to my hon. Friend Fiona Bruce for her maiden speech. I have heard many great maiden speeches since I arrived here, and I shall now be adding Congleton to my long list of places to visit in the UK.
My colleagues have made a great many points today, so I shall be extremely brief. I, too, signed the Equitable Life pledge before the election, because I believed that the Equitable Life policyholders needed to be compensated. I am therefore delighted to see that we are moving towards a swift resolution for them. They had to wait more than 10 years under the previous Administration, when there was money in the pot to pay them, although the will to do so was obviously not there.
Like other hon. Members, I have had many letters from my constituents on this matter, and as a result I had a meeting with them in Redditch on Friday night. Let me tell the House that there was standing room only. Emotions were running high and I have to say that it was a pretty uncomfortable hour. I listened to some heartbreaking stories, including that of a constituent who had put not only his and his wife's money into Equitable Life but that of his 15 employees too. I just cannot tell the House how bad he felt. I left that meeting feeling angry that my constituents have had to wait more than 10 years for justice, and I think that the previous Government should be ashamed of themselves for not dealing with this matter earlier.
But we are where we are. I want to say to the Minister that those people have suffered enough and, while I am grateful to him for settling the issue as soon as possible, I urge him, during his difficult negotiations in the Treasury regarding the spending review, to look closely at the compensation package that my constituents will receive. In these difficult times, I urge him to remember the pledge that most of us on this side of the House signed.
I will support the Bill tonight, but I hope that the Minister has listened carefully to what Members on both sides of the House have said about the fairness of the compensation scheme. Our constituents will await with interest the outcome of the spending review on
I am grateful for the opportunity to take part in the debate today, and I certainly want to support the Bill, because we do not want to do anything to delay the payments. The important thing now is to get those payments made as quickly as possible to the many ordinary hard-working people who made sacrifices in order to put money away in a scheme that they trusted to provide for them in later life. Those people were thinking ahead; they were the responsible citizens who had no intention of having to rely on the state. They continue to worry, however, and to suffer hardship, because they fear that there will be still more delays. They are also worried by the mention of a cap being placed on the funding of the payments. Most importantly, those people do not want smokescreens, spurious justifications or complicated explanations. They simply want the Government to take notice of the ombudsman's letter of
I am very concerned by the fact that the Minister spoke today of linking the amount to be paid out to Equitable Life victims with the comprehensive spending review. That would be totally unacceptable. We know that the issue of Equitable Life has gone on for some years now, and it should not be arbitrarily subject to a review that is to take place in a few weeks' time. Opposition Members are committed to seeing Equitable Life victims receive proper payments that reflect their losses. Anyone listening to what both the coalition parties said before the election would have thought that they too were committed to making proper payments. Indeed, they were vying with us to say that they would be more generous than we would. To state that the payments will now be subject to spending review cuts of perhaps 25% is absolutely disgraceful. What would have been a £100 payment could now be only £75. Frankly, that seems to me next to dishonest. Equitable Life victims were not responsible for the banking crisis, and they certainly do not deserve to be penalised by the slash and burn policies of the present Government, which respected economists are now suggesting might send us into a double-dip recession.
What is important now is to move on and get those payments made. The worry is that these smokescreens are putting people off, and the policyholders will not see any money at all. They want to see actual payments.
The policyholders are also worried about tax and benefit loss. I am pleased to see clause 1(3) in the Bill, but it is far too loosely worded. It gives the Treasury the power to disregard payments to Equitable Life victims when assessing their tax liability or their entitlement to means-tested benefits, but I would like to see a much more strongly worded provision, as well as a genuine awareness among Ministers that any payment will be disregarded.
I would like to continue for a moment, because I want to explain what I have understood from the speech made by the Financial Secretary to the Treasury today.
I was perturbed by what the Minister said. Far from giving any assurance that there would be a disregard for tax and benefit purposes, he said that the Department for Work and Pensions would sort these matters out in the usual way. That will set alarm bells ringing, as anyone who has lost benefit, pound for pound, as a result of receiving a payout will confirm. Equitable Life victims, having waited all these years, could end up receiving their payment only to lose the equivalent amount in benefits or additional tax. We need assurances from Treasury and DWP Ministers alike that insult will not be added to injury in that way.
It is incredibly interesting listening to the hon. Lady's speech, but surely she ought to hang her head in shame at the actions of the Labour Government, who continually betrayed Equitable Life policyholders. Will she apologise for the Labour Government's failure to act?
If the hon. Gentleman had been here under the previous Government, and been a regular attender at business questions, he would have known that the timetable for the Equitable Life programme was raised again and again. I can assure him that I made many representations to our Ministers to ask them to speed up the process. It was a complex process and there were enormous difficulties; there was also an enormous amount to read. That is why it took the ombudsman so long to produce the report in the first place. I can assure the hon. Gentleman that an enormous amount of good work was done, and that we would not be where we are now if we had not put in that work before the general election.
We need assurances from the Treasury and the DWP that people will not lose out as I have described. People are worried because the suggestion of a cap is being bandied about, and because the figures might be cut again in the comprehensive spending review. If they were then to lose money through a clawback of tax or benefits, it would be an absolute disgrace. It would also affect the most vulnerable people in particular.
Another worry about the Bill is that it contains no mention of a proper appeals mechanism. The Minister made a few encouraging remarks about appeals, but there are no details in the Bill. I call on him to consult policyholders about that mechanism, and to publish the relevant details as soon as possible. We want to see the settlements made as soon as possible, but we also want to see an appeals mechanism that can hear appeals quickly and fairly. The last thing we want is for Equitable Life victims, who have already waited far too long, to have to wait in a queue for their appeal to be heard.
Amendments have been proposed by those on our Front Bench, including my right hon. Friend Stephen Timms. One relates to timing, which is crucial. We must have a specific start date so that we know when the victims are going to get their proper payments. We also need a scheme that will be totally independent of the Government. There is also an amendment that provides for hon. Members to vote on the scheme, to ensure that it is swift, simple, transparent and fair. That is vital if we are to have the trust of the public that this is a genuinely fair scheme, not one that has been cooked up in a back room and that will be cut and cut again in order to meet some overriding demand from the Chancellor. I look forward to debating the Bill more thoroughly in Committee. I very much hope that we will have the opportunity to table our amendments, and that they will be well supported by hon. Members on both sides.
Thank you for giving me the chance to speak in this important debate, Mr Deputy Speaker. I, too, congratulate my hon. Friend and neighbour, Fiona Bruce, on her excellent maiden speech. I can assure the House that she has replaced Lady Ann Winterton-not Ann Widdecombe, as was asserted earlier-who is a real legend in this party. I would also like to join my hon. Friends in congratulating the Financial Secretary on the sheer speed and pace at which he is seeking to address the urgent matters before us. I have known him for many years before I came to the House and I would have expected nothing less than the positive approach that he is taking.
The story of Equitable Life policyholders is without doubt a tragic one. I believe it was my hon. Friend Tracey Crouch who suggested that it was like a Shakespearean tragedy. Well, I am half Danish and am more familiar with some of the Viking sagas. What the policyholders have been through would fit well into any epic tale. It is like the famous Njáls saga with its series of gruesome feuds. Similarly, today's story involves hardship and heroic campaigning-in this case by EMAG-but this tale is now in desperate need of a fitting conclusion.
I have not followed this case as long as other longer-serving Members, and I do not claim to have the same level of expertise on all the details that they possess. What is clear, however, is that maladministration has occurred, policyholders have suffered and compensation is due. It is absolutely right that this new coalition Government should respond, as they will. Sadly, the issue is yet another part of Labour's lamentable legacy-this time, not the cost of the record budget deficit, but the price of an unmet moral obligation that needed to be addressed.
I am sure that hon. Members will agree that policyholders have shown real courage and that EMAG has conducted a hard-fought and professional campaign. Like many other Members, I have met affected policyholders in my advice surgeries. I have heard about the hardships they had to endure. I have received well-argued letters and e-mails setting out their case both during the general election campaign and now as the Member for Macclesfield. It is the strength of their case and their campaign that has encouraged me to learn more about the situation, to sign the EMAG pledge, as many of us have, and actively to stand up for their cause. What I am even more proud of is the fact that the strength of their argument won the attention it deserved from the Conservative Front-Bench team and the Liberal Democrats' leadership before the general election. I am delighted that, working together, the new coalition Government have honoured their commitment and urgently brought this legislation before the House.
I welcome the Bill. It provides parliamentary authority for the payments schedule and scheme. It is a vital step, which I am sure will be widely welcomed on both sides of the House, as it has been welcomed today, but policyholders in Macclesfield and throughout the country want answers to important outstanding questions. How much will be paid? How should the scheme be designed, and how will it be administered? These questions now need to be fully addressed to ensure that policyholders get the best possible outcomes for their cases.
On the size of the payment, it is, sadly, a reality that in this challenging economic climate, the level of compensation will have to take into account the demands on the public purse. Like others who have said it repeatedly today, I urge the Financial Secretary to continue to consider the views of the parliamentary ombudsman in determining the final figure.
Does my hon. Friend agree that the majority of Members and the majority of the public out on the streets will not believe that a 10% payout even on a £5 billion liability is either a fair or equitable result for policyholders?
My hon. Friend makes an excellent point. It is vital for Ministers to take that into consideration and find the right level of payment in this difficult situation.
I also urge the Financial Secretary to continue to take a transparent approach in explaining the rationale used to calculate the final compensation figures. Such transparency is critical and I am sure that my hon. Friend will agree that it should not be allowed to get lost in the detail of the wider spending review as it gets reported.
I also congratulate my hon. Friend on creating an independent commission to advise on the allocation and the design of the payment scheme. It is another positive step forward and-like many others, I am sure-I am pleased to hear that the Select Committee on Public Administration will fully review the commission's conclusion when it reports in January. It is a vital step.
I am keen to seek further assurances from my hon. Friend that his officials will provide the necessary action for the administration of the scheme when payments are made in the middle of next year. Given the likelihood of a large number of appeals, this will not be a simple task. The scheme must be designed to accommodate the needs of these particular policyholders, whose average age is, I think, 78. It must be clearly communicated-not just on websites or via e-mails, but via well-written, high-standard communications and effective, well-manned telephone contact centres.
As I have discussed with the Financial Secretary, the administrator must learn from the launches of other Government schemes. Many will remember the agonies associated with the Rural Payments Agency and, more recently, HMRC's problems with new PAYE systems, which are fresh in our minds. We need to ensure that the Equitable Life scheme does not become another example of the administrative chaos that was the trademark of the previous Government.
Frankly, I am disappointed not to have heard an apology from Labour Members, but I am not surprised, as they have failed to apologise for the huge budget deficit and now it is the turn of Equitable Life policyholders. It is all part of a depressing pattern of denial.
I conclude by congratulating the Financial Secretary once again on the speed with which he has tackled this long-running saga. I hope that in addressing the concerns of the policyholders, he will help those in real need and-just as at the end of Njáls saga-bring about a meaningful reconciliation. It is what the policyholders deserve after the epic trials they have had to endure.
Thank you, Mr Deputy Speaker, for giving me the opportunity to speak in the debate. As a new Member, I have come to this issue afresh as a result of the contact I have had with the victims of this situation. I know that my predecessor also took up their cause. I have to say that, having read through as many of the reports as I could-they are certainly extremely lengthy and extremely difficult-I have come to the conclusion that the previous Government were wrong in their approach. I think they took the wrong road and I am not afraid to say so.
Clearly, the management of Equitable Life was also culpable, and it is highly regrettable that we are in a situation where that organisation is not in a position to compensate its customers who were so badly let down by its practices. It is equally clear, however, that there was maladministration and regulatory failure throughout the 1990s. Before we get into too much point scoring on the issue, that was obviously on the watch of Governments both Conservative and Labour.
What my constituents are now asking me-having read the Minister's statements in July, which concerned them greatly; I am sure they are no clearer today-is whether the Government are using the Chadwick calculations, which reduce compensation for loss by 90%, with a possible further reduction following the spending review. Is that what is being followed or not? I am no clearer about that today, so I cannot answer that question for them. If it is to be followed, that is not what EMAG has been fighting for or what EMAG understood to be the position promised by both constituent parts of this coalition Government.
It is highly convenient for the Minister to hide behind what has become this Government's theme tune-everything has to come second to deficit reduction, which is all the fault of the previous Government. It is too easy to sing that song continually, so I am going to take this opportunity-briefly, in view of what Mr Deputy Speaker has said-to say that we do not accept that statement of the situation. In our view, we are not deficit deniers. The last Government took steps to stimulate the economy and save our banks from collapse-something that at least one part of the coalition Government accepted at the time was the right thing to do, and several times said so. As a result, yes, when we left office, there was a deficit; equally, however, unemployment was considerably lower than had originally been predicted when the recession began. The deficit was actually reducing under the Labour Government.
We believe that the current Government's plans are wrong, that they place recovery at risk, and that it is not necessary to reduce the deficit at such breakneck speed. That may seem to constitute a diversion from the debate, but I think it important to restate it, because the Minister and many other speakers on the Government Benches have raised the subject of the financial position.
Did not the ombudsman recommend that the compensation scheme should take account of the state of the public finances? My constituents tell me that that they are happy to accept reductions that are in line with other reductions in public expenditure, but what are completely unacceptable are the reductions envisaged by Chadwick, which go far beyond that.
I agree. The people who have come to see me have said much the same. They have spoken of the possibility of staged payments and discussed how that arrangement could be affordable, but they have made clear that what they do not accept is Chadwick.
At least one intervention and, I think, some speeches from the Government Benches have suggested that the Government will go beyond Chadwick and take wider issues into account, which suggests more than the £500 million or thereabouts mentioned by Chadwick. If that is so, I am not sure why it is still necessary to talk constantly about the spending review. Does not discussing the review all the time, and hinting that the Chadwick recommendations will be followed, suggest that there will be less rather than more? We need to know the answer to that question.
During the election campaign, having considered the matter and read a number of documents-I have read many more since-I pledged support for EMAG. I would have held hard to that support had my party still been in power, and if it were in power I would be saying the same thing now. However, I have questions to ask. What compensation is being promised? Is it simply the £400 million to £500 million mentioned by Chadwick, and if it is not, will it be more or less? Blaming the last Government may make for good political knockabout, but it leaves those who have suffered loss little the wiser. We and they need some real answers, and we need to work together.
There is not a lot to be said that has not been said already, so I will keep it brief.
I support legislation that will give the Treasury the authority it needs to make the appropriate payments to policyholders, and I welcome the speed with which the Government have sought to right what I think we all now agree is a profound wrong. However, the Government will be judged on the basis of their final settlement. My plea is simply for that settlement to be set at a level that honours both the letter and the spirit of the commitment that the coalition has made to policyholders. I do not think anyone expects full compensation at this point, but whatever reductions are made should be broadly in line with those affecting other areas of spending. If the Chadwick proposals are followed, that will emphatically not be the case.
In the run-up to the general election, I was asked by hundreds of constituents for reassurance about the Conservative party's position. I was able to deliver that reassurance via a pledge which I know many of my colleagues have also signed. On the back of that pledge, a number of people-I do not know how many-voted Conservative for the very first time. So, as my hon. Friend the Minister considers the level of compensation, I simply ask him to remember the promises that we made before the election. I believe that that would not only restore people's faith in saving for their retirement, but restore their faith in political promises.
When it was said in the Bible that the stone that the builders rejected had become the cornerstone, that was intended to be a positive statement. In this instance, however, although parties and Members on both sides of the House agreed that Sir John Chadwick's proposals were wrong, flawed and grossly inadequate, those very proposals have become what the Government are telling us is a building block on the basis of which these matters can be resolved.
We should bear in mind that, according to what we have been told by the parliamentary ombudsman, that building block is unsafe and unsound. We as a House have a duty to have regard to the various pledges that we, as parties and as individuals, made in the course of the election, and also to what the parliamentary ombudsman has said-and we should bear in mind that this is a parliamentary ombudsman.
Not only have the Equitable Life policyholders been left suffocating with frustration, but their problem continues, and they are increasingly seething with cynicism. Rather than a Parliament that will clearly fix the problem, we still have parties that are simply in the business of fixing the blame, but people want to see a real resolution. I am pleased that we have a Bill before us, but it provides the bare chassis of the vehicle that will be needed to solve this problem. Other Members have said that they do not disagree with much of it, but that is because there is not much in it: it is basic enabling legislation.
If the Bill were on offer from a pension company or indeed from anyone else, we would be asking, "Where is the prospectus? Where are the key details? What have we to rely on? What does any of this signify, other than a vague, general promise in a very slim brochure?" That is all that we have here. I acknowledge that following the long indifference that we received from the Treasury Bench for so many years we at least have something-which is welcome-but the move from long indifference to inadequacy is not something for Equitable Life policyholders to celebrate when they are still languishing in injustice and uncertainty.
Let us, here in the House, have fewer party-political spats about what one Government did and what another Government are doing, and stop patting each other on the back. Let us remember that the collective political process is indicted by our failure to resolve this problem. The policyholders have seen one Parliament after another. Are we able to act on the basis of the clear recommendations and findings of a parliamentary ombudsman? The policyholders saw a Parliament and Government with the ability to bail out banks, call people in quickly, merge banks, find all sorts of taxpayers' money and go to the markets for money to solve the problem, because we did not want systemic failure in the financial system.
We need to ensure not just that there is confidence in the financial system, but that we underpin confidence in the future of the pensions system and regimes that will also have to be revised. Members on both sides of the House must make certain that we underpin that confidence by resolving the Equitable Life issue in the terms in which we all promised to resolve it, and to which the ombudsman has drawn attention. Yes, there will be issues about pressure on the public purse, which is why we must consider what the profile of the relief will be over time; but let us not pretend that offering a mere fraction or token of compensation accords in any way with fairness, transparency or justice.
Let us stop babbling about the reputation of this Government and that Government, and do something to restore the reputation of politics and the House by using the Bill to demand further commitments from the Government. Let us establish that they intend to follow it up with clear, detailed provisions that will be not just credible to us, but honest to victims of the ongoing crisis.
Order. Hon. Members really must exercise some brevity. I want to ensure that all Members have an opportunity to speak, because I know how important it is to their constituents that they make their mark. Please let us see what we can do.
I will do my very best to keep my speech brief, Mr Deputy Speaker.
It is an indication of the depth and strength of feeling that this scandal has created that so many Members wish to speak about it. There is no doubt that it is a scandal. Equitable Life behaved very badly. It hid its debts, it expanded too rapidly, and it had no visible means of support. Ultimately, those actions left my constituents and many other people throughout the country with reduced pensions, and with losses running into many thousands of pounds.
I think it fair to say that no one would have invested in Equitable Life had they known what was happening. The shame is that it has taken so long-nearly a decade-for us to reach a point at which we are actually going to do something about it. I welcome the Bill, I welcome the actions of the new coalition Government, I welcome the establishment of the independent commission that will report in January, and I welcome the stated aim to start making payments by the middle of next year. Those payments, however, must be fair as well as swift. I am glad that, after a decade of delay and prevarication, we are actually going to do something, and I think that all Members on both sides of the House agree that it is time to act.
Given that constituents have contacted me on this issue, I have obviously looked closely into it, and I must congratulate EMAG on all the work it has done in keeping the issue alive and at the forefront. I have spoken to its members and read its briefings, and I find myself in general agreement with its views. Like many other Members, I signed the EMAG pledge during the election, and I was happy to do so because I felt both that its members had a valid case for compensation and that that had been widely recognised. The real issue now boils down to money, therefore: how much compensation will be made available? Therein lies the problem, of course. We are doing the right thing here today, but we must continue to do the right thing.
I wish to make three points: first, we must be honest; secondly, we must be realistic; and thirdly, we must be compassionate. We must be honest about the level of losses Equitable Life members have suffered. We have had two reports, one from our own ombudsman-we have heard about the £4 billion or £5 billion identified in it-and one from Chadwick, estimating the sum owed at approximately one tenth of that amount. That is a 800 to 1,000% discrepancy. How is that possible? We heard from our own ombudsman earlier in the summer that she thought that was an unsafe and unsound basis on which to continue, and I agree.
In common with many Members, I campaigned during the election on a platform of honesty and realism. We must therefore be realistic and accept that we face extraordinary financial challenges, which were left to us by the previous Government, but we must not use that as an excuse not to do the right thing nor recognise what is the right thing to do. I agree with my hon. Friend the Minister that we must balance the needs of the policyholders with the needs of the taxpayer, but I think we should recognise the full losses that have been suffered before deciding what is affordable.
My hon. Friend is making a very powerful argument. One way in which we may be able to square this circle is by splitting up the Equitable victims between those who require swift payment as they are suffering real financial hardship now and other policyholders who have suffered losses but for whom an immediate payment is not necessary. I should declare an interest in that I am one such policyholder as, God willing, I have 30 years of working life ahead of me. We could consider the situation of policyholders such as me outwith the current spending review period.
I accept that point-indeed, funnily enough, I was just about to make it. One way we could make this situation more affordable is by splitting up the sums to be paid over the coming years. This Bill presents the opportunity to be a building block in the process of rebuilding trust in politics, because I think we can accept the losses and the ombudsman's recommendation, but we can also then work out how to stagger the funding of the compensation. There is a sense of realism about the fact that the compensation will have to be scaled back in line with what is affordable, but we should start from a point that reflects the true losses and perhaps then, as has been said, scale back in line with the cuts being experienced by other Departments across government.
Finally, we must be compassionate. I know that my right hon. and hon. Friends share my concern for all those who have been let down by the events at Equitable Life and by the actions-or, rather, inactions-of the previous Government, and I know that my Front-Bench colleagues will want to do all they can to support all of our constituents who have lost so much because of how Equitable Life conducted its business. I acknowledge that we as a nation face the most challenging financial situation since the war, but if we are to share the pain equally at this time of austerity, we must recognise that many who invested in Equitable Life have already been suffering that pain for many years and that they have pinned their hope for justice on this new progressive and equitable coalition.
As a matter of principle, we owe it to those people to do what is right. We said we would do it, so now we must. Obviously, I will support the Bill wholeheartedly, but on behalf of my constituents I ask the Treasury to play fair and find the necessary funds to make good what has become a decade-long travesty.
May I first offer my congratulations to my hon. Friend Fiona Bruce on her excellent speech in this important debate? I also want to congratulate the Minister on the progress he has made, and the speed with which he has been dealing with this issue; that is much appreciated. I also thank him for the time he has spent on discussion and correspondence with me and my constituents.
I want briefly to make four points. The first of them is about the independence of, and support for, the independent payments commission. There is much concern among EMAG members about the terms of reference for the panel and the inappropriate inclusion of Chadwick's work as the central building block. Can the Minister reassure the House that he has not accepted Chadwick and that the panel will have wide scope in its deliberations? Can he also confirm what resources will be available to the panel, what independent actuarial advice it will receive, and whether he expects its members to appear before a Select Committee of this House?
Secondly, will the Minister insist on an administrative cap? If so, what level of cap is he minded to call for, or will that be entirely for the panel to decide?
Thirdly, I turn to the issue of the pot of money, which will be announced later in the year. That goes to the heart of this matter. I deeply regret that that is being resolved now, rather than at a time when the country has deeper pockets, and I know that the Minister will want to do everything he can to put right this injustice. I press him to ensure that no stone is left unturned in that respect, and I also want to be reassured that he is considering where other funds may be found. For example, I have learned from a Library paper prepared for the 2007 Pensions Bill of Mr Field that there is still about £1 billion available in unclaimed insurance and pension accounts-so-called widows and orphans accounts-aside from that which has already been repatriated or given over to social enterprise funding. The public purse currently has no claim on those funds and there is no definition of what constitutes a dead account in respect of them, but that could be remedied. I know the Minister appreciates what we all want to see happen, and also that we all want it to happen quickly. We, in turn, appreciate the difficult circumstances in which this has to be done, so let us give ourselves every option and opportunity to do the right thing.
Finally, I want to pay tribute to a constituent of mine, Brian Aitchison, and EMAG for all their hard work. In my dealings with them they have been constructive, courteous and very pragmatic. They have a sophisticated view of this situation. They are very clear in what they are asking for; they are very clear about why they do not have it yet; they are very clear about why it will not be easy to deliver; and they are very clear about where the fault lies. The last Labour Government are responsible for these poor public finances and the delay in Equitable Life members getting justice. It is this coalition Government who must put both those things right.
Like many other Members who have spoken this evening, I welcome the Bill. It is timely-it has certainly not come before time-and I congratulate the Financial Secretary on introducing it so early in the life of this Government.
I too signed the EMAG pledge to stand up for fair and appropriate compensation, and like many other Members, I too have had many individuals in my constituency come to me in a terrible state because of what has happened to their pensions and their future as a consequence of maladministration and regulatory failure. For each one of those individuals that is a tragedy, but when we consider that 1 million policyholders and 1.5 million policies are involved, we see that it is not a tragedy; it is a national catastrophe, because it hits saving. We have now come out of one of the worst recessions in modern times-one of the worst since the second world war-and one of the things we must now do as a nation is get back into the habit of saving. Nothing in the previous Government's approach to the Equitable Life saga has done anything to encourage that habit.
I have sat through most of today's debate and I have been disappointed and slightly irritated by the synthetic anger from Labour Members-I felt that particularly at the beginning of the debate. They have suggested that in some way we have been responsible for the delays and for the fact that these payouts are not happening more quickly, but we know of the previous Government's attitude and approach to Penrose, of how they obfuscated on the second parliamentary ombudsman's report and of the, in my opinion, cynical way in which they set up Chadwick to report after the general election so that it would be us who would be standing in this Chamber addressing these issues as we are today.
I thank my hon. Friend for the powerful points that he is making. May I reinforce the fact that this is about the message we send to all those who are saving for their old age in order to give themselves a good quality of life? If we do not sort out the Equitable Life situation, it will send exactly the wrong message to hard-working people. I congratulate the coalition Government on having the political will to sort it out, given that the previous Labour Government had no such will. In fact, they used taxpayers' money to fight policyholders. I urge our Front-Bench team to get this sorted.
I thank my hon. Friend for making a very important point, with which I entirely agree. I welcome the coalition's commitments on several important matters, and they must not be overlooked in all the discussion about what the final payout is. The first is that there will be no means-testing. As we know, means-testing, when applied appropriately, can often provide resources to those who are most needy, but in this instance it will do nothing other than to punish those who have acted responsibly and have saved, putting something away for their future.
I too am very pleased that the Financial Secretary has stated that the estates of the 30,000 people who have died since this saga began will benefit through this scheme. I also welcome the transparency that has been proposed and the independent commission, which is so important in terms of designing and administering the scheme. I am happy that it will report so early in 2011, in time to make payments for the middle of next year. I am also particularly pleased that Brian Pomeroy has been appointed to that independent commission and that that was acceptable to EMAG.
I do not believe that interim payments should be made, because I accept what the Financial Secretary has said-I think he talked about this in his statement to this House on
Many hon. Members have also rightly recognised the complexity of the task facing the independent commission in deciding on the payments and administering them. We are talking about 30 million pension transactions over the period that we are considering. I urge the Financial Secretary to ensure that he does everything possible to ensure that no delay now occurs as a result of that task.
As we know, the Bill is enabling legislation-it is not designed to determine the final payout. That is part of the comprehensive spending review, and the report back to this House will be made on
We should not dismiss the Chadwick report's methodology and much of the hard work that was done, which took more than a year to put together in that report. However, I agree with this statement made by the Financial Secretary:
"I am aware that some of his findings will be contentious".-[ Hansard, 22 July 2010; Vol. 514, c. 577.]
Furthermore, I contend that they will be more than that if they result in 10% payouts; they will be wholly unacceptable.
I have been impressed by one aspect of today's debate, which is that members of EMAG have sat patiently watching our debate; I recognise one of the gentlemen in the Public Gallery at the moment. We owe it to them-we owe it to the individual policyholders-to do the right thing. We have a moral duty to them and we have a national imperative in terms of re-establishing the trust between government and people, which hangs on the decision that the Financial Secretary will take later this year.
I know that this issue is important to so many Members, so I shall to keep my comments as brief as possible. The one thing I have learned in my short time in Parliament is that those who speak for the longest time often do not have the most to say.
It is sign of this issue's importance that the Government Benches have been so full throughout this debate. I accept what Mark Durkan said about this being a human tragedy. It affects the many individuals who have been to see me in my constituency about this issue over the past few months, many of whom are now very elderly. I recall going to see an elderly couple in Thealby, which is one of the small villages in my constituency, who were desperate as a result of this situation, and that is when I took the decision to sign the pledge. In a few minutes' time, I shall say a little bit about what my understanding is of the pledge I signed.
This is not a political issue-or it should not be one-but I would like to respond to one or two things that have been said today because they deserve a response. I begin by welcoming the action that the coalition Government have taken, thus far, on the matter. Amazingly, we have heard criticism today from Labour Members about the speed of action on the part of the Government, despite the fact that we have been in government for only a few months and they had many more years to do something about this. What I could not quite understand was what exactly they have been arguing for today. They cannot have it both ways; they cannot dismiss the ombudsman's report and then berate Members on the Government Benches who signed the pledge for apparently now breaking it.
It takes some neck for the Labour Front Benchers to suggest that, and they had very little to say about what they propose as an alternative when they were directly questioned on what pot of money they think should be available for compensation. We heard no figure from them, just lots of words that were not a direct response to the question. That is why those on the Government Benches will take no lectures from the Labour party, which had the opportunity, when the public finances were in a much better state, to do something about this appalling tragedy; no lectures from the Opposition will carry any weight either here or outside with our constituents, who know that they were ignored for the past 13 years by a Government who did not seem to take a great deal of interest in this matter.
I fully support the Bill, as everybody does, simply as a mechanism for starting those compensation payments, but I wish to say something about my understanding of the pledge that I signed. It was not a pledge for 10% or, probably, for 20% compensation; it was a pledge for substantial compensation for those who have suffered this tragedy. I understood it to mean that there should be proper and full compensation, while taking into account, of course, the fact that there are great pressures on the public finances. Nobody denies that, but if there is to be any top-slicing or hair-splitting of the compensation-I say this in the strongest possible terms to the Minister-many on this side of the House will not accept a 90, 80 or 70% cut in it. That level is not what we told constituents about in the run-up to the election; people in my constituency were not left with that impression. Many in Brigg and Goole, and across east Yorkshire and north Lincolnshire, voted for me because of the pledge that my party went into the election on. I urge the Minister to consider some of the opportunities that have been proposed, including the possibility to defer or stage some of the compensation over a number of years. I am confident in the pledge that I signed, and I look forward to the Government coming up with a figure that I hope will compensate my constituents, and those of other hon. Members, properly and fairly.
I thank the hon. Member for taking much less time than he could have done. Everybody can see how many Members are standing and everybody can do the maths. We want to get as many contributions in as possible, so I ask hon. Members to show great discipline.
It is an understatement to say that this is a complex and difficult issue. I think that we all recognise the reasons for that complexity, not least the difficulties that Equitable Life had with its guaranteed annuity product and issues to do with regulation and jurisdiction, compensation, mismanagement and delay. I welcome the speeches of Members from all parties who have talked straightforwardly about those difficulties.
In many ways, this is a story of our times. It is a story of boom and bust-the very boom and bust that the former Prime Minister promised us he had abolished. It ill behoves some Opposition Members to have leapt on the moral high horse after not dealing with this matter for so long and leaving us with the crisis in public finances that makes it so difficult to deal with. In this issue, above all, we are all in this together.
I welcome the coalition's commitment to deal with this matter so quickly. I welcome the transparency of the process and I sincerely welcome the Minister's deep personal commitment to trying to resolve this issue as fairly as possible. I appreciate the complexity and the challenge of finding a fair settlement when we have inherited, in the words of the former Chief Secretary, no money.
As someone who signed the pledge in good faith, I urge the Minister, in considering the Government's proposal, to recognise that this is not just about money. It is about something much more important. It is about trust-trust in our savings industry and its regulation; trust in Government; trust in this coalition's commitment to financial responsibility and compassion; trust in the idea of the covenant between the generations, which sits at the heart of the big society; and trust in this Parliament and its commitment to do the right thing. I ask the Minister, as he considers the Government's response, to explore any method he can to soften the blow-in particular the solution proposed by EMAG of offering some choice to those victims who want to take short-term compensation and to those who prefer to wait. In due course, when the Government's finances return to rude health-as I have no doubt they will-some might choose to take a better return later.
The people have placed their trust in us; I am happy tonight to place my trust in the Minister and the Government and to support the Bill, in the expectation in good faith of a genuinely fair solution.
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.
Like most Members-I should probably say all Members-I have received many letters from constituents who have been let down by the regulatory system and who are worried that they will not receive fair compensation for the losses that they have incurred. Several of them are struggling to keep their heads above water.
I place a lot of weight on the ombudsman's recommendations and findings. In her letter to MPs of
I appreciate that today we are not deciding and voting on the level of compensation and that that will be determined at the comprehensive spending review in October. However, what is said today is a barometer of the mood of this House and must be taken into account when the level of compensation is decided. Let me refer back to the Minister's statement in July. For me, there is an inexplicable quantum leap from the relative loss of £4.8 billion to Sir John Chadwick's total payment of between £475 million and £600 million. Those latter figures are way too low. I must dispute Sir John's opinion that the majority of policyholders would have made the same investment decision irrespective of maladministration. That flies in the face of the evidence and of what my constituents are telling me.
On the way forward and complying with the ombudsman's recommendations I would make two suggestions. First, to achieve a fair settlement, the Government must review Sir John's suggested settlement figure and it must be crystal clear, simple and transparent how the eventual figure was reached. Yes, there is a need to consider the impact on the public purse, but any allowance must be fully explained and easily understood. Secondly, I request that the independent commission overseeing the design and delivery of the compensation scheme consider a framework that ensures prompt payment as soon as possible in the new year to the eldest policyholders and those in the most need. Thereafter, there should be further waves of payment depending on policyholders' proximity to retirement and relative exposure. EMAG has proposed how such a scheme could work and I am sure that Equitable Life would work with the commission to ensure that such a scheme would be fair to all and would recognise individual hardship.
My hon. Friend the Financial Secretary has made a lot of progress in the past four months. He has hit the ground running in his new role, but the Government need to go that extra mile to achieve the fair and just outcome that the ombudsman recommended and that so many of us-myself included-signed up to.
In common with other Members, I have a number of people in my constituency who have sent me letters and several hundred who have sent me e-mails about this matter. I want to make a few comments that might be helpful. The independent commission has a chair in Brian Pomeroy who is an EMAG nomination, and I am sure that EMAG will be happy about that. It is ludicrous to suggest-I refer to an earlier comment-that January is a long time to wait to have a report back from that group, because that is very speedy action in the relative scheme of things, and payment shortly thereafter would be welcomed by those members.
First, there is a slight omission on the website regarding what was said on
"implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments" but on the Treasury website that phrase is missing.
Secondly, the Treasury website refers to a large number of documents, including Ministers' oral statements, written statements, answers to questions and press notices, as well as the Bill, explanatory notes, an assessment, a memorandum, various letters, advice, the terms of reference and Sir John Chadwick's report. That report refers people on the Treasury website to Sir John Chadwick's website, and I wonder why the parliamentary ombudsman's report, which is entitled "Equitable Life" is not included among the documents of reference. It would be fair to people to include it on that website.
There is a case for having some categories of Equitable Life victims. There are people in emergency situations-those in most need and the families of those who have died who are in very dire straits-and there are people who need to be dealt with urgently, such as the elderly and those who have lost a lot in relative terms, whereas those who might have lost in part or who are still to retire in years to come can clearly be dealt with at a different time. I hope that, with the moves that are to be made on
Many victims are affronted and offended by the fact that the regulator seems to have removed most of its pension funds in June 2008. That adds to the question of public confidence in the regulator and affects those who wish to save for the future.
An Opposition Member said earlier that we should have no regard whatever to the comprehensive spending review as a background to payments made under the Equitable Life scheme, but that is a ludicrous suggestion. If we ignore the financial situation in which we find ourselves, we will be committing exactly the same crime as Equitable Life did originally, which got us to the current position. The parliamentary ombudsman's comments about the "potential scale" of her recommendations need to be set against that background, and what is done has to be affordable. It was suggested earlier that we could look at what the ombudsman said and apply a reduction of 25%-or possibly 40%, depending on what comes out on
It is absolutely right that we should try to be fair. The dictionary definition of "equitable" includes words such as fair, just, even-handed, unbiased, reasonable and impartial. We should deliver what Equitable Life and, most critically, the regulator did not deliver. I do not believe that Equitable Life victims are asking for anything unreasonable; they do not want an unreasonable advantage or to make a profit. They have been let down very significantly on two occasions-first by the company and secondly by the regulator-and I would hate to be part of a Government who let them down a third time.
Like other hon. Members present, I have been lobbied by a considerable number of constituents. Let me be clear: had Labour won the general election, we would by now be implementing the Chadwick recommendations and people would be receiving payments. What I find so irritating is the extraordinarily cynical, pre-election tactics that were adopted by the Conservative and Liberal Democrat parties in an attempt to garner additional support. It is no good Government Members referring to the country's financial situation and using the comprehensive spending review as cover for their inaction, because when they signed up to those pledges, they knew very well what the financial situation was. That simply will not wash.
The Opposition have been accused of showing "synthetic anger" and I have heard Government Members congratulate their Front Benchers, including the Minister. Members have said how they trust the Minister and their Front-Bench team. Before the election, one of the most vociferous cheerleaders of the pledge to pay a more generous settlement to the Equitable pension holders was the Minister himself, who regrettably is not in his seat.
I call on Members on the Government Benches to look at the Bill before us. It is extremely thin, and some Members' contributions seemed to recognise that fact. It is clear from the terms of the Bill that the Government are dragging their feet on the issue. There is no detail on the criteria for payments, there will be no independent appeal process, and there is no timetable for payments.
Only yesterday I received a letter from EMAG, which stated:
"EMAG welcomes legislation to enable payments to Equitable Life sufferers.
However, EMAG is alarmed about the following:
The continuing reliance by the Treasury on Sir John Chadwick's advice, despite the clear view of the Ombudsman that it is 'an unsafe and unsound basis on which to proceed'.
There is a mismatch between the formal acceptance of all the ombudsman's recommendations by the new government and the Treasury's dogged determination to ignore the PO and build upon Chadwick's advice, seemingly to provide a phony justification for derisory payments.
The lack of a proper comprehensive assessment of 'relative losses' based on all of the PO's findings.
The inappropriate inclusion of Chadwick's work as the central building block in the terms of reference for the independent payment commission."
There is not time to give way as I want other Members to have an opportunity to speak.
That is hardly a ringing endorsement of the Government's position, is it? A lot of crocodile tears are being shed this evening. We heard many exaggerated promises in opposition, but the Government are significantly under-delivering now that they are in power. Given the commitments that were made by the Minister and other Front Benchers, as well as virtually all the Back Benchers, they have a moral obligation to do more than they have done so far.
It is a poor show to have misled the political parties and misled people into thinking that they would receive more than they will. As I said, had Labour won the election, people would at least now be receiving some payments. We still do not know when people will receive any payment as a result of the Bill.
I think I speak for Members on the Government Benches in refuting a number of statements made by Chris Williamson. It is not entirely correct to say that we have been dragging our feet. Compared with what the Opposition did in government, we have made considerable progress, which has been well documented. As for the hon. Gentleman's contention about the state of the kitty, it is a wonderful idea to think that, when in opposition, we knew what was in the piggy bank. When we arrived and cracked open the piggy bank, it was very empty.
Equitable Life is a tragic episode and we in government have a huge responsibility to everybody in this country to get the outcome right. This is an issue not just of money, but of human tragedy. Like other Members, I pay tribute to EMAG. It has been phenomenal in persistently putting forward the cause of its members. I am pleased to say that it has helped a number of constituents in Newton Abbot make their case very powerfully.
Across the House, we all agree that compensation must and will be paid, but, as a number of Members have mentioned, there are two key issues. First, how are we to calculate the loss? Secondly, what framework can we put in place to ensure that when the loss has been calculated people are properly compensated? Tonight, many of the contributions have been about money, and fewer about the framework. I pay credit to the Financial Secretary for the thought that has been put into smoothing the way, once the figures have been sorted out, to ensure that that framework is in place.
The fact that we will be able to give tax exemptions is important. If people received payouts, only to be hit by a big bill from the tax man, that would be unacceptable. I am pleased that there is a provision to disregard from means-tested benefits the amounts that are ultimately paid out. That is to be commended.
On the loss, however, we must calculate two things, the first of which is the relative loss. Given that so many tortuous arguments have been put by so many people, it is important that we have time to get the calculation right. I should like the Financial Secretary to confirm that no fixed amount or limit will be set tonight, and that the money resolution will be left without any amount or limit.
On the calculation of that relative loss, I, like several colleagues, commend to the Government the ombudsman's recommendations, which are absolutely on point. I am sure that the independent commission will give them a favourable run, too, but I share the concerns of Government Members about Chadwick's proposals, which seem to have missed the point. If we calculate the ultimate payment on that basis, we will not do justice or live up to the pledges that we all made in good faith at the election.
I am grateful for the opportunity to follow on from that point. A constituent of mine has argued that the Equitable Life saga questions the credibility of both the legal and financial systems, and I tend to agree, but in the same way I do feel very strongly that if we base the compensation scheme on Chadwick's proposals, there will be a question mark over the credibility of many Members who made commitments during the general election campaign, including, dare I say it, many Government Members. Does my hon. Friend agree?
I thank my hon. Friend for that charming intervention and most certainly agree. He makes a very good point.
Having worked out the right figure to pay, we must consider the second issue with regard to loss: how much money is it right, fair and proper to deduct when we get to the spending review? We have an obligation not just to Equitable Life members, but to the taxpayers of this country. I wish we were not where we are, but the piggy bank was empty. Nevertheless, I absolutely agree with previous speakers, because, if Front Benchers come out with the figure of 10%, I for one will be horrified, as that is not adequate compensation. We must be very careful to look at those figures in great detail and at the concept of fairness: what is the fair and right thing to do?
Finally, I am delighted that we are moving ahead with the issue quickly, because one concern of mine is that some of my constituents are now in their late 70s, so we need to sort this out for them, their children and their grandchildren. I am therefore pleased that we shall do so quickly, at the front end of next year.
I wonder whether Chris Williamson has been listening to the same debate as I have. I hope that his constituents do not read his speech in isolation, because in the debate to which I have been listening Government Back Benchers have made it absolutely crystal clear that they will stand up for the members of Equitable Life.
I support this short, technical Bill, but I should like to make some wider points. I endorse many remarks that previous contributors have made, but I disagree on a couple of minor points. Those points are on the margins but, in the long term, absolutely vital, so I hope that Members will bear with me.
One key point is that the state manufactured the problem, or at least manufactured it to the extent that it is with us today: the state enabled Equitable Life to continue to attract new business when it should have folded. If I have understood correctly what I have been told, I should note that if Equitable Life had folded at the first opportunity, a smaller number of policyholders would have received 90% of their due, many years ago. Instead, state action means that very large numbers of people today are concerned about receiving much less, many years after the fact.
In government we have been handed a situation in which there is no doubt that the state must compensate Equitable Life policyholders, and it must do so honourably. That is what many of us signed up to in good faith, even though we knew that the cupboard was bare. The simple fact is that a fair sum must be found.
However, we should not pretend-as, I am afraid, Equitable Life's own briefing note does-that by paying a demonstrably fair level of compensation, the Government would, at a stroke, restore people's faith in saving for their retirement. This is a difficult point, but I should like to make it anyway. It is vital for the future that we reaffirm that the Government have nothing to give without first taking it. The state can only tax, borrow or debase the currency. It can only transfer wealth; it cannot create it. In the case of Equitable Life, the state has shown itself incompetent to supervise pension funds and incompetent to clean up the mess that it makes. It also turns out that the state is incompetent to run pension funds.
In my speech on
Having considered the assumptions about how that pension liability might be met, Mr Silver writes:
"Looked at this way, the UK is effectively an enormous unfunded and effectively bankrupt pension scheme, with a large speculative holding in some banks and a sideline in running a small island state off the northern coast of France."
Perhaps he exaggerates, but having read his paper I am afraid I must suggest that he does not. That is what we have been reduced to.
We must see the Equitable Life situation in context-and it works both ways. Government Members know that the billions add up, but I am afraid that we are getting to a point at which the trillions are adding up. In the short term, we must absolutely deal with this problem; we must maintain our honour and help the members of Equitable Life.
It turns out that the state is not competent to supervise pension funds or run them. Bearing in mind the events surrounding the banking system, other Members might agree that we can fairly say that the state is not competent to supervise financial services at all. I believe that we need sound financial law, not arbitrary intervention by regulators. I am happy to say that tomorrow my hon. Friend Mr Carswell and I will introduce a Bill that will begin to indicate the right direction of travel.
In this Parliament, we must deliver an honourable settlement for Equitable Life policyholders. There is absolutely no doubt that we are under an obligation to do so. But let us not pretend that wealth transfers can encourage saving or that the Government have an inexhaustible horn of plenty from which to insure everyone's risks at the expense of everyone else. If we are truly to honour our constituents, we must face the world as it is, and together construct a more hopeful future, in which the Government cease to trample the forces of social co-operation thereby manufacturing problems greater than those that they face.
In the meantime, it is clear from what we have heard today that if the Government give EMAG members a haircut of very much more than 30% to 40%, the Government will have a very rough ride.
First, I congratulate my hon. Friend Fiona Bruce on her maiden speech. As a Macclesfield man, I thought I knew everything there was to know about Congleton, but I certainly learned a thing or two from her thoughtful and informative contribution.
I start by declaring an interest. As a former policyholder in Equitable Life, I have held a keen and personal interest in the matter for a long time. I am pleased to have the opportunity to speak in this debate and would like to take the chance to talk about the human element to this saga. When immersing oneself in this subject, it is all too easy to get caught up in the highly technical details of legal complexity, maladministration and commercial misjudgment, but it is very important to remember that it involves real pain for real people. Since being elected, I do not think a single day has gone by without my receiving one letter or e-mail from constituents who have been affected by the failure of Equitable Life. I recently had one lady in my constituency surgery crying while telling me about the difficulties she had faced owing to this mess-crying out of worry, despair and sheer frustration at the length of this debacle, which felt like it was going to drag on for ever. I share her frustration. It has been nearly 10 years since Equitable Life policies were cut in value, leading to pension reductions of sometimes up to a third. For 10 years, 1.5 million people have been waiting for compensation. Some have even died waiting; as we heard earlier, approximately 30,000 have done so. Is it any wonder that faith in our politics has fallen to an all-time low over the past decade?
Who are the people who have been waiting? We are not talking about the über-wealthy, nor are we talking about the reckless investors. The 1.5 million victims of the failure of Equitable Life are ordinary people. They did the right thing, putting money aside and trying to save for their future. I am certain that all Members of this House can agree that we should be encouraging a return to a savings culture in this country. I would submit that the falling confidence in our pensions system and the endless delays in resolving the Equitable tragedy are not entirely unconnected. It is only right that policyholders are given justice, and as soon as possible. Failure to do so would only further undermine confidence in pensions saving. For that reason, I welcome this Bill and give it my full support.
The contrast between the actions of this Government and the previous one could not be sharper. While Labour did its best to drag its feet and dither, the new Government have worked swiftly and shown that they will honour the commitments made in opposition. This Bill does not mark the end of the Equitable Life story, but it is, at long last, putting that end in sight. I am very encouraged that Ministers are clear that there is much more to do and are committed to seeing a fair outcome for all. It is absolutely right that they have taken time to reflect on Sir John Chadwick's report and have sought the views of others.
For an issue as complicated as this, it is pleasing that the Bill is short and simple-for a simple man such as me-in giving the Treasury powers to make compensation payments to policyholders without pre-determining the level of compensation that should be paid. This should have been done years ago. If Labour had not spent its years in government endlessly delaying, it would have saved hundreds of thousands of people a great deal of anguish, and compensation could have been awarded in a less difficult economic period. Unfortunately, the previous Government used an absurd argument for not establishing a compensation scheme on the basis of their general responsibility to taxpayers. If one were to accept that argument, then surely compensation could never be paid in any circumstances when a public body was found to be responsible for financial loss and injustice-or perhaps compensation could be paid if the financial loss were relatively small and insignificant. Clearly, such arguments are ridiculous.
I am pleased that such arguments are over and that, even in a time of deeply constrained finances, the Government are working to bring justice for many of my constituents who are policyholders. The Bill is an essential measure in bringing about this justice, and I am delighted to support it.
I think that several things have struck us during the course of this debate. First, we have heard about the sheer volume of decent people who seem to have been affected by this crisis over time. Then there is the well-measured, sensible and proportionate campaign organised by EMAG, which perhaps sometimes stands apart from those conducted by other pressure groups.
We have all been struck by the political reaction. For the sake of the record, the Conservative party was clear about its intentions in its manifesto, the coalition was clear about its intentions in its agreement, and the Government have been swift in their action. Whatever we may say about that action, they have at least been swift in putting their commitment in place as soon as they possibly could. Needless to say, there is a "but", which is that the devil remains in the detail of the payments-and those are not under proper discussion tonight, for very good reasons.
Financial institutions, it seems, are no longer trusted. Young people do not know where to go and older people do not know who to trust, so it falls to all of us to ensure that confidence is restored. Resolving that problem was a moral dilemma, rather than a financial one, for the previous Government, and it is for the current Government too. EMAG has made a series of sensible proposals, rightly pointing out that a staggered system of repayments could work and that those in the greatest need should be considered separately from others. Even Equitable Life itself has made it quite clear what it expects a basic minimum to be.
The ombudsman has said that the level of compensation should reflect the state of the public finances. In this debate, a number of Members have raised one eyebrow, and some two, at that proposal, and I have a lot of sympathy with them. Equitable Life members across Britain all recognised that there was a risk attached to what they invested all those years ago. However, they will reasonably feel unfairly penalised if we use the public purse argument to bypass our moral obligations-especially, to be snide for a moment, when we are happily talking about spending a hundred million quid on a referendum on the alternative vote. Such things put us in a rather difficult situation when it comes to retaining the moral high ground. I agree entirely with my hon. Friend George Freeman-who, sadly, is no longer in his place-about the importance of the next stages of the process.
I understand the pressure of time, but I wish to come in on that point. All of us are here for the debate because we signed a pledge and stood up for a group of people in our constituencies who we felt had been let down and betrayed by the last Administration. I urge the ministerial team to think creatively at a time of great pressure on the public finances, and particularly to consider making payments free of tax, or paid out from a fund over a period of time. The recommendations as proposed, or at least as trailed, are simply insufficient. We know that some of the best minds in the country are working in the Treasury, so let us get them to work on this very problem.
That is a useful contribution. I was about to restate a point made by my hon. Friend the Member for Mid Norfolk, which reinforces the intervention by my hon. Friend Claire Perry. The next stages are important not just for those who have struggled over the past 10 years and for the families of those who have died while waiting for justice, but for restoring the confidence of the current and future investors whom we are trying to persuade to act responsibly in their fiscal affairs. Perhaps what has not come up so much in the debate is that they are important also for the credibility of Members and of this Parliament. That was perhaps where my hon. Friend's intervention was leading. We must not and cannot let people down now with a lame excuse about the state of the public finances today, because the problem goes far deeper than that.
A number of Members have quoted submissions from their constituents, and I should like to refer to an e-mail from Jerry Roberson of St Clears, in Carmarthen, a constituent of mine, who wrote:
"I'm afraid this business further undermines my confidence in politicians and if justice isn't done on this issue I don't see I will ever want to cast a vote in a General Election ever again."
That is an important message, and we need to take it in isolation from the technical aspects of the debate. The very credibility of Members of all parties, of the Government and of this building depends on how we deal with such issues.
The Financial Secretary has made significant progress, and I support the Bill. The matter has been dealt with as quickly as it possibly could have been, and the suggestions by Opposition Members that a delay has somehow been deliberately imposed seem an absurd rewriting of history. I cannot understand how, in all conscience, they can make such observations, given what several thousand people and their families have been through as a consequence of an inactive decade. The Financial Secretary has made progress, and we should support him. I naively and optimistically suggest that it is the moral obligation of all parties and all Members to put our party political interests aside just for one moment, to ensure that we can bring the problem to a fair and sensible conclusion. The Government do not pretend that the Bill is anything other than the first part of that process.
Like other hon. Members, I welcome the Government's recent announcement and their timetable. Second Reading of the Bill tonight would be a significant step forward. However, as others have acknowledged, this has been a long saga that has tested the patience of all concerned.
The reports and analyses of the past decade are voluminous, and the saga has come to resemble a Dickensian tale that would not be out of place in a novel like "Bleak House". I recognise that there are important questions-they have been debated in the House this evening-about the relative merits of the ombudsman versus Chadwick, and I, too, have reservations about key recommendations of the Chadwick report, but at the heart of the matter is morality. As the Public Administration Committee report of March 2009 said in response to the then Government's response to the ombudsman's reports, there is a clear moral dimension. The Committee said that it was morally indefensible for the Government to accept maladministration by public bodies without taking the necessary action to right those wrongs. We need to bear that message-that moral dimension-in mind as we debate this important Bill and this sorry saga, and we must not forget it.
Like other hon. Members, I have spoken to many of my constituents, and I know the human cost of this debacle. People who have worked hard and done the right thing have seen their dreams of retirement go down the drain. We cannot walk away from our moral duty to those people. That is why it is our duty to provide fair and appropriate compensation for them.
As other hon. Members have pointed out, there are wider policy implications. As my hon. Friend George Freeman remarked, we need to build trust in our pension system, which has been tarnished principally by the Equitable Life debacle. We need a successful resolution to the matter. That would help not only to compensate Equitable Life policyholders, but to restore trust in our financial services industry. I welcome the Bill and the Government's early decisions, but we cannot afford further delay. We need to do our duty to the people who have lost out in the Equitable Life debacle.
I shall try to be brief to assist my hon. Friends who wish to speak. I have received more constituency correspondence on Equitable Life than on any other issue, and there are well over 200 people in the local EMAG.
I congratulate my hon. Friend the Financial Secretary to the Treasury on achieving more progress in no more than a few weeks than the previous Government achieved in more than a decade. Had they dealt with the problem when the country was not mired in the debt that they left us with, the disaffected policyholders in my constituency would doubtless have received their compensation by now and would be far better off for it. We need to bear it in mind that the previous Government seemed to have an aversion to making decisions, including on Equitable Life, so I commend my hon. Friend for retrieving Equitable Life from the long grass into which it had been so uncaringly kicked.
I must take Chris Williamson to task for his comments. Perversely, he said that a Labour Government would have sorted the issue out by now and adopted the Chadwick report, and that Equitable Life members would have been very happy. He then turned that on its head, and said that the Chadwick report was flawed, and that EMAG did not like it. That shows the interest that Labour Members have in Equitable Life, and why Labour did not resolve the problem when it was in government.
The Bill is extremely important because it will allow the Treasury to make payments and deal with the tax treatment and consequences of those payments. I speak on behalf of my constituents in Nuneaton, who have become very disaffected as a result of this issue. The Bill does not do all that they seek tonight. It does not set the level of payments that will be made, which will be done in the comprehensive spending review next month. I will support the Bill tonight, but I wish to put over the concerns that I share with my constituents about this issue. They are still greatly sceptical and they suspect that the Government-like the previous Government-are not listening. We need to ensure that we are listening, because while we have the Chadwick report, we must also take into full account the ombudsman's comments and the concerns of EMAG, which has made an interesting, important and strong case for proper compensation.
It is important for the payment scheme to be independent, and I welcome that. The level of compensation is the most contentious issue and we should do what we can to listen to the suggestions being made about the taxation of the payments and the possibility of deferred payments. This is a bitter pill that my constituents and others have to swallow, and we should try to sweeten it as much as we can.
I implore the Financial Secretary and his colleagues to consider the wider implications of the compensation package. We have to recognise that confidence in savings and investments is at an historic low-not helped by the previous Government, who shot our private pension system to smithereens in their 13 years. We need to ensure that we protect people who work hard, save for their retirement and do not wish to rely on the state. As people in my constituency have pointed out, if we do not get this right now, we will show people that hard work and doing the right thing for themselves does not pay and that they will have only the same level of income in retirement as people who did not do the right thing. We have to show that we are the party which supports those hard-working people and, in the next few weeks, we should commit to ensuring that Equitable Life members get the compensation that they truly deserve. That would help to restore confidence in our pension system.
Several hon. Members have suggested today that the Equitable Life scandal-and a scandal it was-is complicated, but for me it is actually quite simple. It is about fairness to a group of people who were badly let down by the regulatory failures of their Government. I went into the recent general election supporting a Conservative manifesto that made a promise to Equitable Life policyholders in my constituency. It said:
"We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
I wish to take this opportunity to assure policyholders in my constituency that I for one do not intend to go back on that election pledge.
Most people accept that Equitable Life policyholders were the subject of Government maladministration, and that is certainly the view of the ombudsman, Ann Abraham. There is some dispute on all sides, however, about the level of compensation that should be paid to policyholders. Sir John Chadwick's report established that the relative loss suffered by Equitable Life amounted to between £4 billion and £4.8 billion, and the Financial Secretary, in his statement to the House this July, supported that figure. However, Sir John then used a series of convoluted calculations and speculative assumptions that allowed him to suggest a cap on the total amount of compensation that should be paid. He then went on to reduce that cap figure to just 10% of the relative loss figure that he himself originally calculated.
One of Sir John's most telling assumptions was that the majority of policyholders would have invested in Equitable Life irrespective of maladministration. That is a very big assumption that cannot be proved or disproved, but any rational person would consider such a lemming-like approach by investors as highly unlikely. I am simply not convinced by Sir John's arguments and I dismiss them out of hand, as do the Equitable Life policyholders in my constituency.
Like many Members, I have been in touch with many of those policyholders, and all they want is fairness, because they are fair-minded people. However, they are not stupid people, and they recognise that in these times of austerity even they must shoulder some of the burden needed to bring down the country's massive debt mountain. To ask them to accept a reduction of 90% in their compensation, however, is not only unfair but, as has been mentioned by other Members, immoral.
In the current economic climate, however, it would be right and proper to ask Equitable Life policyholders to accept a cut in compensation in line with those being proposed for Whitehall Departments. If departmental budgets are cut by 20 or 25%, as we are being led to believe, I am willing to support a similar reduction in the assumed total of Equitable Life's relative loss, which would mean a compensation package of between £3.6 billion and £3.8 billion. If anything other than a formula based on a figure in that region is proposed, I will be forced to vote against the Government when the figure for compensation is debated.