Equitable Life

– in Westminster Hall at 10:59 am on 27th January 2009.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 10:59 am, 27th January 2009

I quote:

"I attended many of the public meetings convened by Equitable Life and found them truly depressing. I could see the fear and despair in elderly members' faces though they invariably tried to put on a brave face. I particularly remember a frail couple in their seventies. They were only 30 feet from me and I could see that as the man spoke his wife was squeezing his hand in silent support. It is not easy to speak in front of hundreds of people. He explained that until the collapse they had been advised that their pension would be around £75 a week. They now had to take their pension and (six months later) it was to be £35 per week. Could anything be done? Charles Thompson solemnly explained that not only could nothing be done but the £35 may actually decrease in future years. The man thanked him and sat down. The expression on the couple's face is seared in my memory. Both trying to be brave for each other. Both terrified."

I wanted to start in that way because there is a human face to the Equitable fiasco. In the course of this debate, we will discuss parliamentary process, ombudsmen, Select Committees and all the rest of it, but we risk losing sight of up to 1 million people who trusted the Government and a financial institution, and have been profoundly let down. I contend—as, I suspect, do other hon. Members, of whom there is a good turnout today—that they will still feel let down, not just by Equitable Life and the regulators, but by the Government's response to what the ombudsman said.

On 17 July, the ombudsman published her second report on Equitable Life. Almost six months later, on 15 January, the Chief Secretary to the Treasury gave a statement to the House setting out her response. I wonder whether, like me, other hon. Members did not follow it very closely. I just got a vague sense that the Government had said sorry, admitted a bit of maladministration and set up a compensation scheme. I thought, "Well, maybe that's the end of it," but my instinct was that it was not, and that that was not what had in fact happened. I believe that I am right in saying that none of the hon. Members who heard the Chief Secretary's statement that day had yet had the opportunity to read what was behind it: Cm 7538, which gave the details.

The statement sounded reasonable. We heard an apology and the Chief Secretary sounded understanding. She thanked the ombudsman and the Public Administration Committee, and she even asked a retired senior judge to come up with a fair payment scheme. What could be better than that? However, the reality of the situation is very different.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Does the hon. Gentleman accept that it was obvious even then that there would be a further several years' delay before anyone received compensation? The Chief Secretary said at the time that it would probably take two and a half years but might take longer.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman is absolutely right. The phrase "justice delayed is justice denied" applies in this case. It was apparent even in the statement that although the ombudsman wanted action to start within six months and to be completed two years later, what would actually happen was delay piled on delay. Many of the people affected have already died, and there are questions about whether estates and widows will benefit. Many families have had to live with such unanswered questions for a decade.

Photo of Annette Brooke Annette Brooke Shadow Spokesperson (Children, Schools and Families), Shadow Minister (Education)

Does my hon. Friend agree that the proposals could not be further from what the Public Administration Committee recommended, which was an independent, transparent and simple compensation scheme to provide swift redress to those who had lost out?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

My hon. Friend is absolutely right. As I hope to explain, there are many facets of the Government's response that do not meet what either the ombudsman or the Public Administration Committee said.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The hon. Gentleman mentioned the judge appointed to oversee the matter. Does he agree that that judge's remit has been deliberately restricted by the Government to ensure that compensation is limited and takes considerable time to be delivered?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

There is a good deal of prescience in Members' interventions. The hon. Gentleman is absolutely right. The process is fundamentally flawed in many respects, one of which is that the judge can answer only the question that he is asked, and that question is being circumscribed overwhelmingly and unfairly.

Photo of Alan Duncan Alan Duncan Shadow Leader of the House of Commons

I congratulate the hon. Gentleman on raising this important topic, and I note that Opposition Members outnumber Government Members by about five to one. Does he agree that the simple message that we need to send from this Chamber is that many people feel that the Government are quite simply hoping that people will die off before they have to meet their obligations? The Government have a pressing moral obligation to do something immediately to compensate some of the most cautious and responsible investors in the country.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I certainly agree with the hon. Gentleman about the need for speed. I have received a copy of a letter that one of his hon. Friends sent to a constituent, and I am a little worried about what that Member wrote. They said that the Government had announced that they would establish a payment scheme and that they had made an apology, adding:

"I hope that these developments will lead to a resolution of the outstanding issues."

One of my worries, not only about the hon. Gentleman's colleagues, but about the whole House, is that we have been had. We heard a statement that sounded mellifluous and gave reassurances about feeling people's pain, but I hope that every hon. Member present will leave this debate more worried than when they arrived, and more determined to do something about what the Government propose.

Photo of Gisela Stuart Gisela Stuart Labour, Birmingham, Edgbaston

May I put it on record that the Government side is represented and that there are Labour Back Benchers in the Chamber? One thing that has troubled me—I have asked everyone who has written to me about Equitable Life to come and see me—is the difficulty of teasing out which losses were incurred as a result of maladministration and which as a result of market failure. Does the hon. Gentleman accept that rather than squabbling with each other and scoring party political points, we could try to find a way of taking the matter forward positively?

B

The lady may be right that the place may have been packed to the rafters with Labour MPs but note how many spoke in the debate !!!.
Thats right less than half a dozen and most of those were spoiler comments. Just like Gisela's.
The answer to this was perfect.

Submitted by Bob Danson

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I agree that no one is suggesting that people should have a free ride, or that they should not be subject to the same stock market variability as everyone else. The analogy that has been drawn to my attention is the comparison with investment in "Elsewhere Life": what people might reasonably have expected had their money been with a similar company of similar status, but elsewhere, and how what they actually got differed, particularly because of regulatory failure. We need to focus on those issues.

Several hon. Members:

rose—

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

Let me make a little progress and then I shall give way again.

Everyone present knows that there has been a series of reports. The ombudsman's second report involved four years' work, at the end of which she made 10 findings of maladministration and five findings of injustice. The Government's response—this was published repeatedly—said either that there was no maladministration, or, if there was, that no injustice had arisen from it. It is worth considering the list of findings. On finding one, about the dual role of the chief executive and the actuary, the Government's response said:

"finding of maladministration not accepted".

On finding two, the Government's responses were:

"Valuation interest rates...finding of injustice not accepted" and

"Affordability and sustainability of bonus declarations...finding of injustice not accepted".

Neither have they accepted finding three of injustice, or finding four of injustice about valuation rates. One would never know any of that from listening to the Chief Secretary's statement.

Photo of Mark Simmonds Mark Simmonds Shadow Minister (Health)

The hon. Gentleman makes a powerful case and is being generous by giving way yet again. Is he aware that because of the reasons that he has just articulated, it is estimated that perhaps more than 90 per cent. of those who have lost out through the Equitable Life scandal will not be compensated at all? Will he join me in expressing concern for the people of Lincolnshire and those where his constituency is? This issue is causing people major concern that needs to be rectified as swiftly as possible.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

It is all right; no one knows where Northavon is. The hon. Gentleman makes a serious point: the process has curtailed massively the people who might be even potentially eligible. It is interesting that the ombudsman says in her report:

"My second—and central—recommendation is that the Government should establish and fund a compensation scheme".

However, I have read the Chief Secretary's statement word for word, and I cannot find the word "compensation" anywhere in it. What we are discussing is a hardship fund that will work on a charitable basis and probably be means-tested, and that is the fundamental problem.

Photo of Mark Hunter Mark Hunter Shadow Transport Minister; Parliamentary Private Secretary to the Leader, Shadow Minister (Transport)

Is my hon. Friend as struck as I am by the contrast between the Government's approach on this issue and the swiftness of their decision to bail out the bankers in their hour of need? They acted with great urgency to assist the banking industry, while many hundreds of hard-working families who have investments in, or are policy holders with, Equitable Life feel that they are being asked to wait an extraordinary length of time for what is simply natural justice.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

My hon. Friend is absolutely right. Other bail-outs have been provided—one thinks of the situation involving Icelandic banks—but this case is dragging on and on with no obvious end in sight. As we have heard, the worry is that people are dying as it goes on. Even if that is not the case, the situation is causing constant anxiety. I appreciate that there is a range of circumstances, but some policyholders are scrabbling to get by and are seeing their real-terms income declining year on year. I had not appreciated that until I talked to the Equitable Members Action Group, to which I pay tribute for its tireless campaigning. One of my constituents says:

"My Equitable Life pension has fallen from £7306.79 per annum, when I took it out, to £5525.76 now, despite being transferred to the Prudential...To add insult to injury, I understand that it will continue to fall year on year until it dwindles to nothing, if I don't die first."

The situation is not even static—it is getting worse.

Photo of Bob Spink Bob Spink Independent, Castle Point

The hon. Gentleman will be aware that the Government are relying on the earlier Penrose report, which stated that Equitable was the author of its own misfortune. However, even Penrose pointed to serious shortcomings regarding the regulators, which failed policyholders. The Government's policy, with its reliance on Penrose, is flawed. Even if we go back to the first report, we find that the Government should be giving compensation. Some 30,000 affected pensioners have already died.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

They have indeed. The Chief Secretary has quoted selectively from Penrose. Penrose goes on to say that

"it may be appropriate to comment that the practices of the Society's management could not have been sustained over a material part of the 1990s had there been in place an appropriate regulatory structure".

It is a both/and situation: clearly the society's management and operation were at fault, but the regulatory regime should have picked that up and did not.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

Does the hon. Gentleman agree that one necessary task for the Prime Minister is to explain why the Chief Secretary did not give the House the information in the report or the Government's publication that followed shortly afterwards? Does he also agree that it would be suitable for the Liaison Committee to concentrate on that the next time the Prime Minister comes before it, in order to show that Parliament will not be treated in that way, especially when there is an issue of injustice?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

If members of the Liaison Committee raised the point with the Prime Minister, I would welcome that. I am sure that we would get an answer.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The sorry saga of Equitable Life has rumbled on for eight years. The Chief Secretary to the Treasury said that when blame rests with the owners of a financial institution,

"it is not generally appropriate for the taxpayer to pay compensation".—[Hansard, 15 January 2009; Vol. 486, c. 378.]

However, the ombudsman made it clear that the Government should pay up. Those Equitable Life policyholders who are left cannot afford to wait another few years while the Government procrastinate.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman is quite right. The waiting has gone on long enough; it is time for justice.

This is the fundamental problem. We have a process involving a parliamentary ombudsman who is independent and to whom our constituents, through us, can go for redress where maladministration has occurred. For many decades, what the ombudsman said went, and that was an entirely good thing. Sometimes when I have complained to the ombudsman, she has not found in the way that I wanted, and sometimes she has. The point is that we accept the outcome in either case. I am worried that the Government are essentially being defendant, judge and jury simultaneously. They do not like the verdict, so they are simply saying, "We'll have this bit of it, but not that bit." What is the point of an ombudsman process if the Government behave in that way?

Let us consider what Sir John Chadwick has been asked to do. I do not know a great deal about him, but I understand that he is a retired senior judge and I am sure that he is an expert. However, I feel instinctively uneasy that the whole process has been handed over to a good chap. We are asking a good chap to go away and think deep thoughts; to set up, presumably from scratch, an office and a structure to gather data; and to report not to Parliament, but to the Treasury. As far as one can see, he will report privately and in secret. I do not imagine that the Minister will say much that is helpful this morning, but if she can at least say that we will have access to what Sir John says to the Treasury and that we will see his findings and recommendations as we go along, that will offer a little transparency to the process that might otherwise be totally lacking.

Photo of Susan Kramer Susan Kramer Liberal Democrat, Richmond Park

Does my hon. Friend agree that nothing in Sir John's remit addresses the issue of justice? Justice lies at the foundation of the claims of Equitable Life policyholders. If regulators cannot be held to the standard of justice, we can have no confidence in our financial system generally.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

My hon. Friend raises an important point about confidence in the financial system. One of my constituents wrote to me:

"My own children, seeing what has happened to me, have decided not to bother saving for pensions."

The Government's response is so worrying because there is a presumption among the public that when they invest in the private sector, there is a regulatory framework to protect them. It may not protect them from all risk—nor should it—but at least it should ensure that companies are properly run. However, it did not do so in this case. If the Government walk away from their responsibilities, why should anyone else trust those institutions, especially given that Equitable was a gold-plated mutual with a nice crest on the letterhead, and all of that? If people cannot trust Equitable Life and the Government do not help, why would they ever invest?

Photo of Brian H Donohoe Brian H Donohoe Labour, Central Ayrshire

I congratulate the hon. Gentleman on securing the debate. I have had the opportunity in the past to partake in such debates.

The hon. Gentleman has just mentioned the Government's not giving a commitment to Sir John. However, I understood that they had given such a commitment. Indeed, Equitable Life states just that, noting,

"the commitment by the Chief Secretary to the Treasury to relay this information back to Parliament at regular intervals."

B

My my this gentleman must have been placed as a spoiler to deflect the debate. I cannot believe a labour MP would do that and affect working mens rights and an ombudsmans ruling.

Submitted by Bob Danson

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

There is a difference between what Sir John says privately to the Treasury, which is then filtered and relayed to us, and direct access to what he is saying—in other words, the incoming material not filtered through the Treasury. That is my point. If what Sir John says to the Treasury is placed in the public domain, I shall be delighted, and if the Minister can confirm that, I am happy with that. We need to hear what is said at the time, rather than what is filtered some time later.

Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

What angers my constituents in particular is that the payment of compensation, as was made clear by the Committee, is not a matter of charity but a requirement of justice to redress a wrong, yet the Government have concluded that compensation will be paid on a means-tested basis. That is their whole remit. Can the hon. Gentleman think of any other case where justice has been dispensed on a means-tested basis?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The two concepts certainly do not sit well together. Clearly, if someone has suffered an injustice, the matter of whether they have other means or are still of working age and can earn money from somewhere else does not seem material in remedying that injustice.

Many Members want to contribute to the debate, so I shall just run through the fundamental flaws of the Government's approach to Sir John Chadwick's work. First, to assess people who have suffered disproportionately —although I do not think that is the right question to ask—an assessment of their circumstances and those of other household members, along with their other incomes, would be needed. A complicated household means test of some sort would be needed, which would be bureaucratic and time-consuming, and money that should be spent compensating people would be spent on bureaucracy. I do not recall the ombudsman saying that the compensation scheme should just be for those disproportionately affected and I am concerned that that element has been allowed to creep in. As the hon. Gentleman says, if the scheme is about justice, I cannot see why there should be a test for disproportionate effects.

Secondly, Sir John will be asked to apportion blame between the management of Equitable Life and the regulators, but I do not see how he can do that. If the company messes up and the regulators fail to stop it and alert policyholders, whose fault is that? It is both their faults. However, the Government are responsible for the regulatory regime. Why should the policyholder receive less compensation for the injustice that they have suffered from the failure of regulation just because somebody else was the ultimate cause? I do not follow the logic of that. How can Sir John put a number on it? I assume that he will have to do that and then say, "It was half the regulator's fault and half the company's fault, so we will pay half compensation." It does not make sense.

Thirdly, we have talked about speed, which is so much of the essence. I understand that the average age of annuitants is 80, so the consequences are obvious. There are already plenty of Equitable widows—and widowers, for that matter—who simply need to know where they stand. I hope that the Minister will reassure us today that the estates, and thus widows and survivors, will benefit. It is not their fault that their loved one—the policyholder—died. Why should they suffer again because of delay in the process?

Photo of Jo Swinson Jo Swinson Shadow Minister (Foreign and Commonwealth Affairs), Liberal Democrat Spokesperson (Foreign Affairs)

I congratulate my hon. Friend on securing this important debate.

On the issue of speed, eight years have passed already, and even the ombudsman has suggested another two years, which would take the period to more than 10 years. However, the Government, dragging their feet, suggest that it will be even longer. Can my hon. Friend think of any other case in which justice has been so long delayed? Let us compare Equitable Life with the Icelandic banks situation, where the Government acted quick as a flash. Why does the Equitable case not require urgency from the Government?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I congratulate my hon. Friend on the leadership that she has shown on this matter and on the debate she introduced in this Chamber some months ago. Sadly, there are other examples in which justice has been similarly delayed, but of course that does not justify the situation that faces us today. That is the key point.

A further point about Sir John's study is how independent it will be. Crucially, the ombudsman wanted an independent tribunal, but Sir John has been appointed by, and is answerable to, the Treasury so how can he be fully independent? Let us bear in mind that he will be advised, presumably by the Treasury, which is ever so slightly implicated in this whole thing, and by the Government Actuary's Department, which also has ink on its hands—I suppose that is the phrase. Surely, if such a structure is to be used, at the very least we need involvement from a policyholder representative. Just asking one decent chap to do the decent thing and give some advice does not seem up to the scale or urgency of the problem. Surely the Government should have acted on what the ombudsman said, not invented yet another structure and delay.

Photo of Anne Main Anne Main Conservative, St Albans

I congratulate the hon. Gentleman on securing this important debate. Will he expand on the point he was making? The lack of transparency in the original process led to what my constituents have called a cruel deception—when Equitable Life was technically insolvent, but they were still encouraged to invest. Without the involvement in the process of such good men as the hon. Gentleman described, people will have no faith either in the Government or the transparency of the process that they are trying to put in place.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

There has been a series of regulatory failures under consecutive Governments, the answer to which has always been transparency. Had we known what was happening inside Equitable Life, many of those things would not have happened, but now we need to get inside Sir John's mind. The whole business seems extremely strange to me. The structure that the Government have adopted is a new creation and another way of kicking the matter into the long grass. We need an open process to respond positively to what the ombudsman said.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

Every Member in the Chamber today is here because they have constituents who have suffered as a result of the situation being discussed. They will be looking for something a little more concrete. I have not yet heard the hon. Gentleman say how much he thinks it will cost to put right this wrong. Without quantifying the amount that hon. Members think the Government should invest in a compensation scheme, all we are hearing today are warm words.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I have to disagree with the hon. Lady; she is starting in the wrong place. She asks how much we can afford and says that afterwards we should tweak the scheme to meet the bill. We are talking about an injustice that needs to be righted. She knows that figures of up to £4 billion have been talked about. That is one estimate. However, we do not have access to data on scheme members—how much they have lost and the different categories—so it is difficult to know how much the bill would be. The starting point must be to remedy the injustice. Of course, we will have to put a figure on that, but to start by asking what we can afford is not the way to remedy the injustice.

My final concern about the John Chadwick process is the following fundamental issue: is it about hardship, charity and discretion, or about righting injustice? Surely it must be the latter, which is why the ombudsman process was involved. Was there maladministration leading to injustice? The ombudsman said yes. The Government said, "Well, probably not." However, they excluded most of the ombudsman's expensive findings. The Government say that they agree with five in 10 of the findings, but those are the cheap five. The position is so constrained that it is not acceptable.

Photo of Tim Farron Tim Farron Shadow Secretary of State (Environment)

One of the Government's objectives must be to draw a line under the whole case. If Sir John draws further conclusions with which hon. Members and, more important, policyholders, are not satisfied, it will leave the matter up in the air and it will return to the Government's desk time and time again. Justice must be achieved quickly and with an end.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

My hon. Friend is right. I suspect that the parliamentary process will not produce justice, so again the courts will probably have to do it. The winners will be the lawyers, and the losers—we hope—the Government. Sadly, the taxpayer will have to pay more money so that the case can be fought in the courts. I hope that Equitable policyholders get justice, but I have a nasty feeling that it might be in the courtroom rather than through Parliament. That is depressing for all of us who have gathered here today.

I shall end with a quote from a constituent:

"My husband is 80 in May and is suffering from dementia and Parkinsonism and is unable to cope any longer... his pension diminished by a quarter to a third several years ago when all the problems became apparent. Although the monthly amount we received is extremely small that little extra that was deducted makes a difference."

We are not talking about fat cats or people on the take; we are talking about ordinary, decent people who saved and trusted. They deserve justice.

Photo of Derek Wyatt Derek Wyatt Labour, Sittingbourne and Sheppey 11:25 am, 27th January 2009

I add my congratulations to those given to Steve Webb on securing a debate on the inequitable life fiasco. Two things come out of the issue. First, I hope that at some stage we will enshrine the role of the ombudsman in law, and, secondly, despite not just this case, but the occupational pensions case and all the banking issues that have arisen over the past six months, hardly anyone has said anything about the auditors. Those who audit these things write them off, put their reputation on the line, and get off scot-free. We must examine the law on auditing and auditors, but that is for another time.

I completely associate myself with the remarks made by the hon. Gentleman, and I will not repeat them because I know many hon. Members want to speak. In terms of compensation, there are some extraordinary parallels with the occupational pension scheme debate that I started in the House back in July 2002. We met the Secretary of State for more than a year and there were lots of warm words. If we had had 50 per cent. of the occupational pension scheme that we wanted, we would have signed. Those concerned were happy to go for 50 per cent.—they would have gone for anything because they had nothing. Instead, however, they sensibly dug in. Amazingly, they also had an ombudsman report, which found in favour of my and other constituents. There were only 126,000 people involved—not 1 million—but all were individuals with a case to be answered.

What did the Government do? They started by saying, "Let's hang something out. Let's have £400 million. That seems a good figure. Let's go to £1.2 billion. No, that's not enough." Gradually, as the campaign developed, they said, "Let's go to £3 billion." Eventually, we got our justice, which was £8 billion.

It seems that exactly the same parallels exist in relation to Equitable Life and I simply do not agree that it is right for the Government to concentrate only on those who are needy. Let me give an example from just one constituency case out of 500. Lorraine and Richard Baker state:

"We find it unacceptable that the Government Minister is prepared to discriminate against some of those affected by the Regulators failure whilst others will receive compensation. Whether we have yet experienced hardship as a result of this fiasco is not entirely the point. If we are not compensated for the losses we have so far incurred we will of course experience hardship in the future."

That just does not come under any jurisdiction that we have so far heard about from the Chief Secretary in the House.

My sense is—the point has been made previously—that the Government actively want a legal challenge in the court. In relation to a legal challenge, I will give 100 per cent. support to the Equitable members who are here listening to this debate and to those in my constituency. I do not know whether it should be a judicial review or whether it should take place in the High Court as I am not a lawyer, but it is imperative that we support them as a House. It is critical that we go with the people concerned and support them—whether in the High Court or as part of a judicial review.

Photo of Susan Kramer Susan Kramer Liberal Democrat, Richmond Park

Does the hon. Gentleman not think it is a disgrace that a strategy of dividing people seems to underlie the Government's position? That means that those who face extreme hardship are so desperate that they will accept any mechanism that might get them something, instead of banding together to fight for full justice. Considering the people concerned are so elderly, such an attempt to break, divide and conquer is even more despicable.

Photo of Derek Wyatt Derek Wyatt Labour, Sittingbourne and Sheppey

I agree. I am reminded—this was mentioned previously—that we had miners' compensation and compensation for dock workers who had cancer of the throat. There were loads of incidents in relation to which the Conservative party did not pay compensation for 18 years. It seems that this is in exactly the same territory—we are going to push and push, but, at this rate, there will not be a single cheque paid until 2012. That is just not acceptable. I agree entirely with what the hon. Lady says.

The issue is moral, which is exactly what the occupational pensions people said in 2002 and 2003. Ultimately, that is what Ministers came round to agreeing with and the money was paid. The Government must reconsider their response, and I hope that the presence of so many Members here today will make the Minister take back to the Treasury the fact that the initial response was inadequate and, to be frank, showed that nothing had been learned from the occupational pensions campaign. I believe that, in the end, Equitable Life members will win, however painful and slow the process may be.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester 11:30 am, 27th January 2009

The Government appear to accept that there has been regulatory failure, that the failure amounts to maladministration and that a resolution should come sooner rather than later, but they have also, almost immediately, gone in for a series of blocking and delaying tactics in response to the ombudsman's report, and that is wholly indefensible. I accept that the Government have apologised, but what exactly did they apologise for? It seems that they apologised for some vague 20 years of regulatory failure, but we need an apology for the decade of delay while the issue was on the Government's books waiting to be dealt with—while it was on their watch.

I congratulate Steve Webb on his remarks, and I shall sum up his key points, to which he has already alluded. There are two unacceptable factors: first, the arrangements for compensation and, secondly, the effect of the decisions on the time it will take before compensation comes through.

On the compensation arrangements, we have had the transmogrification of what should have been a compensation scheme into a hardship fund, and that is wholly unacceptable. The Government have rejected the parliamentary ombudsman's recommendations for arranging compensation, and they have introduced means- testing, which the ombudsman said would be a novel and worrying development. The approach has been rejected in other cases and, explicitly, by the Public Administration Committee. Somebody has already quoted point 84 from its second report on the issue.

Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

I made exactly that point earlier. My hon. Friend is very knowledgeable about these matters, so can he think of a similar case in recent history, whereby a matter of injustice or maladministration was resolved by a means test rather than in relation to the scale of the losses of those with a grievance?

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

My hon. Friend has already made that point eloquently, and I certainly cannot think of a case. If there had been one, I am quite sure that we would have heard about it already from the Government.

In discussion with the Chief Secretary to the Treasury immediately after her statement, I sought from her in the corridor an explanation for the decision to create a hardship fund rather than a compensation scheme. She gave me a number of explanations that I did not understand, and I asked whether I could write to her and receive her explanations in writing so that they could be put in the public domain. I wrote that letter immediately—within 24 hours—but have not yet had a reply. I hope that the Exchequer Secretary is today furnished with something to enable us to take the explanation for, and justification of, the hardship scheme a little further.

Photo of Maria Miller Maria Miller Shadow Minister (Children, Young People and Families)

Does my hon. Friend share my concern about the message that the Government are sending to my constituents and to those of everybody in the Chamber about the importance of saving and providing for the future, and about how the message is being taken by people making such provision, when the Government statement clearly shows that it is not only in this process that they will discriminate against such people? That is what the ombudsman has done throughout the process.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I completely agree. Some big issues are involved. One is the damage that has been done to the savings culture in Britain. Large sections of the community were looking after themselves and did not want to allow themselves to become a burden by requiring some kind of benefit from the state. Many of them will now be thrown back, or have already been thrown back, on exactly that support.

I find some of the wider questions perplexing. I still cannot work out whether the Government want people to start saving or to abandon saving altogether and spend even more. The Government have so many contradictory policies on the conduct of economic policy that it beggars belief. However, that is a subject for another day.

I turn to the second of the unacceptable aspects of the statement, which to some degree has already been discussed—the question of delay. As I said a moment ago, the Chief Secretary sought in her statement to shift blame by talking of decades of regulatory failure, going back well into the 1980s. As I pointed out, the Government have had the opportunity to do something about that for well over a decade, but they have done virtually nothing.

The delays built into the compensation scheme are unfair and will be seen to be unfair by the hundreds of thousands of policyholders who might be affected. Further delay will be seen as the Government kicking everything into yet more long grass. Policyholders now realise that the Government are not endorsing the recommendations of the parliamentary ombudsman; they are not even attempting to do so, but are doing the opposite and setting them aside. The Chief Secretary said in her report that any compensation scheme should be "independent, transparent and speedy". No one could use any of those words to describe the Government's response to that report.

In all the time that I have been campaigning for the policyholders of Equitable Life, I have tried very hard to avoid party politics. It would be difficult to find statements of mine that are party-political. Early on, when I was on the Front Bench and responsible for such issues, I had discussions with Dr. Cable. We decided to work together in a wholly non-partisan way. However, the statement, with its attempt to shuffle blame on to an Administration of 20 years ago and the calculated introduction of further obstacles to speedy compensation, has drawn me to conclude that the quickest route to a measure of compensation—Derek Wyatt in effect confessed this—will probably be the election of another Government.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs) 11:38 am, 27th January 2009

I congratulate Steve Webb on securing this debate. The subject affects constituents of all of us. As a former court lawyer, it occurs to me that the Government's actions in relation to Equitable Life are similar to those of an old lag up before the sheriff. He starts with an outright denial, but as the evidence accumulates he reluctantly accepts that he will have to plead; he makes a half-hearted plea and then tries to minimise it and wriggle out of the consequence of his actions.

No one could have been in any doubt from the ombudsman's report that the Government had a case to answer on the inaction of the regulator that led to the downfall of Equitable Life. I do not intend to cover the cause; what is required is urgent action to put right a wrong. Frankly, the actions announced by the Treasury are far too little, far too late. Like all hon. Members, I have a significant number of Equitable Life policyholders as constituents, most of them now elderly, who have suffered significantly. Sadly, some died while waiting for justice.

When the Government said that they would apologise, there was real hope that action would finally be taken to end the saga. It was therefore a considerable let-down—to put it mildly—when all that was announced was yet another investigation, under Sir John Chadwick, on how a compensation scheme, if it was even that, would work. Worse still, it was abundantly clear that the Government expected that it would be some years before compensation was paid to anyone. In her statement, the Chief Secretary said:

"The ombudsman recommended that a payments scheme should be completed two and a half years after the decision to pay out. The Select Committee said that it could not assess whether that was viable, and our initial assessment of the ombudsman's approach is that it might take significantly longer than that to implement fully." —[Hansard, 15 January 2009; Vol. 486, c. 379-80.]

The more cynical among us might consider that statement as putting a decision beyond the next general election. However, it raises some pertinent questions. What is the date of the decision to pay out? Is it the date of the Chief Secretary's statement to the Commons, the date on which Sir John Chadwick reports with specific recommendations or some other day? We do not know whether the two and a half year period has even started. It could be some time before it does. There is absolutely no time scale for telling anyone if and when they will get any payment. In responding to the debate, will the Minister clarify that point? How long do the Government think it will be before payments are made?

It seems that even after nearly 10 years of waiting, policyholders will still have to wait several more years before compensation is available, but of perhaps even greater concern is the Government's stance on who will receive compensation. It seems abundantly clear that they do not intend to compensate everyone who has lost out but only those who have suffered disproportionately. What that means is unclear to me and, I think, to many others, but it seems clear that some sort of means test is envisaged, and the hon. Gentleman gave a clear exposition of what that could mean. Will the Minister clarify how the disproportionate effect will be calculated? How will it be determined which losses are directly due to maladministration? Both concepts could keep the lawyers in business for years, if not decades.

The worst thing about the scheme is that it will inevitably lead to endless arguments about definitions, calculations and who is more worthy of compensation than others. It is a mean-minded scheme that will set policyholders against each other. I appeal to the Minister, even at this late stage, to give justice to that group and come up with a simple, even-handed scheme so that my ageing constituents need not wait interminably before finding out whether any of them will be compensated. I leave it at that, as many more Members wish to speak in the debate, and I hope that the Minister will take these points on board. There is extreme anger within the House and among our constituents at how such a vulnerable group is being treated by our Government.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham 11:43 am, 27th January 2009

In all the documents about Equitable Life that I have read recently, one of the most salient came from the Equitable Members Action Group on 26 January. It states:

"EMAG estimates that, under this Treasury proposed process, more than 90% of Equitable policyholders would receive absolutely NO COMPENSATION whatsoever. It is Parliament's prerogative to stand up for authority of its own Ombudsman and reinstate the independent Tribunal proposed by the PO."

That is extremely important. We as Members of Parliament have a duty to stand up for the mechanisms put in place by the House to protect citizens. The Government are deliberately trying to obstruct the findings of the parliamentary ombudsman and making it impossible for her recommendations to be implemented. That is why MPs from all parties should be working together to ensure that the ombudsman's findings are upheld. The time has come to create an all-party group specifically to look after the interests of Equitable Life policyholders, and we are in the process of setting one up. If anybody wishes to be involved, they should contact my office. We should harness all the interest and passion expressed in this debate into one all-party group to campaign on the issue. We cannot just leave it to the Treasury Committee and others, who will review the situation on a piecemeal, ad hoc basis. We must have an all-party group that uses its wherewithal in Parliament to support Equitable Life policyholders.

I shall be brief because other hon. Members want to speak, but the Chief Secretary has thrown the issue into the long grass, because she announced neither the scale of the compensation nor the timetable. Many of my constituents in Shrewsbury are very concerned that only a fraction of the £5 billion claimed will ever be paid out. As has been said, the system involves a means-tested concept, whereby if someone still has some savings or a roof over their head, they may receive no compensation at all. That is scandalous. It shows that new Labour is totally dead because the Government are saying, "We don't care a fig about the middle classes. We're only going to help those who are the worst off and the ones who are in dire straits." That is disgraceful. What if someone expects to rely on a pension of £20,000 and is suddenly told that they will have only £15,000? That may not be a dire situation for the Chief Secretary, but it will have a massive impact on some of my constituents.

When the Chief Secretary made her announcement in the House, she gave no assurance that the first payment to policyholders would be made in 2009. That is another matter of deep concern. There must be interim payments. I would like the Exchequer Secretary to let us know whether she will consider ensuring that interim payments are made, given that there is no guarantee that the first payment will be made in 2009.

Even more worrying, the Chief Secretary refused to confirm the ombudsman's time scale for the final payment—that everything would be done and dusted within two years. Again, she refused to give those assurances, and as we have heard, 30,000 constituents have died already. It is imperative that the situation is dealt with speedily.

I congratulate Steve Webb, who initiated the debate. He made an excellent speech. I reiterate what he said about estates and widows and widowers; people must receive compensation should their loved ones die.

Sir John Chadwick will now set up an office and will obviously have to recruit staff to sift through the hundreds of thousands, if not millions, of documents in order to arbitrate in the matter. What budget will the Government give him? Will he have enough resources to recruit sufficient numbers of staff and to be accessible, so that the process is carried out as speedily as possible? I intend to go and see Sir John Chadwick with the all-party group and hold him to account directly, because it is important to make him realise the extent of feeling about the issue in the House.

Photo of Anne Main Anne Main Conservative, St Albans 11:48 am, 27th January 2009

I congratulate Steve Webb on securing the debate. He is absolutely right. If the Minister does not realise today that there is a truly human face to this disaster, that real people are suffering and that the difference it is making to their lives is incalculable, something is very wrong. I am appalled by the idea of means-testing. I ask the Minister to consider who would sign up to any savings or pension plan if the small print said, "By the way, if this goes wrong, you will be means-tested." I suggest that no one would do so. To introduce that concept retrospectively is appalling, and it is not just me and other hon. Members in the Chamber today who are making such remarks. People have not been hoodwinked by the Government's deciding to address the issue selectively.

I am aware that the debate is coming to a close, so I shall leave the Minister with a comment from a constituent of mine who has been affected by the matter. He used an interesting analogy to make it clear how he feels about the Government's choosing to exclude people from fair and just compensation. He said to me:

"If, in a leisure moment you have seen any of the popular 'Pirate' films...you will remember Cap'n Jack Sparrow had a rather unusual compass—it pointed in any direction he wanted it to...a device borrowed"— by the Chief Secretary

"to respond to the Ombudsman report. Point it...in any direction except justice and fair compensation."

He could not have put it better.

The perception, and the reality—unless the Government change their mind rapidly—is that the Government are choosing who is worthy. I cannot think of a more iniquitous way to proceed with elderly people, many of whom are relying on the scheme to make their lives comfortable.

I want the Government to bear in mind that those people are suffering disproportionately as a result of many different blows. In particular, the Department for Work and Pensions presumes an income savings rate of 10.4 per cent., which is actually five times the achievable level of savings accounts should people have savings elsewhere. When the Minister is deciding who is in disproportionate need, will she consider that point? Some people might have savings in other accounts, but they too will not be generating what was expected. That is a double blow for people caught up in the Equitable Life scandal. Should the Minister wish to meet any of my constituents, I am sure that they will tell her what it feels like to face an impoverished old age, because someone has decided that they are not worthy of receiving what is due to them.

Photo of Mark Hunter Mark Hunter Shadow Transport Minister; Parliamentary Private Secretary to the Leader, Shadow Minister (Transport) 11:51 am, 27th January 2009

It is a pleasure to contribute to this important debate under your chairmanship, Lady Winterton, and I compliment my hon. Friend Steve Webb on securing it. I say that with particular regard to the fact that the Government have so far steadfastly refused to allow such a debate in Government time. Just last week, I asked in business questions whether the Leader of the House would consider making time available in the Government's timetable.

Many Members are interested in bringing their constituents' concerns to the attention of the House, but in a Westminster Hall debate, no matter how brief we make our remarks, there simply is not time for everybody to participate. That adds to the general feeling that the Government are hoping to put this issue to one side, so that people will not have the chance to raise their concerns in a meaningful way. Perhaps they are even hoping that a general election will intervene before they have to make the difficult decision.

Photo of Bob Spink Bob Spink Independent, Castle Point

The hon. Gentleman will be aware that Sir George Young called for such a debate, and that the Leader of the House said that she would refer the matter to the business managers. However, we have heard nothing since. Will the hon. Gentleman encourage the Minister to commit to such a debate? Does he believe that in such a debate—in Government time and on the Floor of the House—the Government should introduce hard proposals for an interim payment scheme, so that those suffering terribly, and who might die before a scheme comes on stream, can receive compensation?

Photo of Mark Hunter Mark Hunter Shadow Transport Minister; Parliamentary Private Secretary to the Leader, Shadow Minister (Transport)

I concur with the hon. Gentleman. The response received by Sir George Young was probably exactly the same as the one I received from the Leader of the House last week.

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

My hon. Friend is correct in saying that this matter should be debated on the Floor of the House. The ombudsman's report was to Parliament, not to the Government, and Parliament should take the decision. It should have the chance to vote and to decide whether to implement the ombudsman's report in full by paying compensation, without means-testing, to everybody who lost out.

Photo of Mark Hunter Mark Hunter Shadow Transport Minister; Parliamentary Private Secretary to the Leader, Shadow Minister (Transport)

My hon. Friend makes a very important point and is, of course, absolutely right. There is no clearer demonstration of how isolated the Government have become on this issue than how Members here—a few have had to leave—have chosen to seat themselves. With great respect, it would not have been possible for the Labour Members here at the start of the debate to have sat any further away from the Minister than they chose to do. It was almost as if they were frightened of being tainted by the Government's pathetically inadequate response to date.

I want to speak out on behalf of the many constituents who have contacted me about their policies held in Equitable Life and the many more who, I am sure, have been adversely affected. My constituents, and those of hon. Members around me, have waited long enough—years, in fact—to hear their fate and whether their savings will be returned to them. Despite the Government's announcement, they are still none the wiser. They are left waiting in limbo. That is disgraceful, particularly in the current economic climate, when people find things so difficult.

The Government announced that they would fund a compensation scheme only for those who had been "disproportionately affected". That is the term used in their response. The Government would decide who those people were by checking

"the extent of somebody's losses, how great the losses were but also perhaps looking at how great they were as a proportion of their income".

As we have already heard, that is tantamount to means- testing. Does the Minister really believe that that is fair to all policyholders, who have been waiting so long to hear whether their pensions will be saved?

The ombudsman's report also made it clear that the aim of any compensation scheme should be

"to put those people who have suffered a relative loss back into the position that they would have been in had maladministration not occurred."

That is not what the Government propose. They decided to disregard the ombudsman's recommendations by helping only those whom they decide are worthy. When will the Government accept the ombudsman's report in full and put in place appropriate compensation for all those who are affected?

After the Government acted so promptly and with such urgency to bail out bankers in their moment of difficulty, and acted promptly for other depositors, who lost money in the Icelandic and other banking situations, does not the Minister believe that the same treatment should be afforded to Equitable Life policyholders?

Photo of David Heath David Heath Shadow Leader of the House of Commons 11:56 am, 27th January 2009

It is a pleasure to participate in the debate and I congratulate my hon. Friend Steve Webb on introducing it so ably. I am sorry that my hon. Friend Dr. Cable cannot be here as he is involved in other parliamentary business.

I take hon. Members back to a time not long ago when we had sound financial institutions in this country and mutual societies that were seen as rock solid in their propriety. Some of those, such as Equitable Life, had been in existence since the 18th century. Then came the get-rich-quick age, when all those institutions were torn apart and put together again, and management acted to maximise their profits rather than safeguard the interests of their depositors. That is the legacy of Equitable Life.

Photo of David Heath David Heath Shadow Leader of the House of Commons

Let me just say a few words; the hon. Gentleman has made a couple of interventions.

I do not seek to diminish the role of the management and the pseudo-Ponzi scheme that they were operating within Equitable Life, or their culpability in creating the circumstances that came about, but we must and do also accept the role of the regulators—the Department of Trade and Industry, until 1997, and then the Treasury, and after January 1999 the Financial Services Authority and the Government Actuary's Department. With all those taken together, there was a toxic mix of rule-bending within a financial institution and failure by the safeguarders of the public interest to do their job properly. That is why we ended up in a mess.

Since that time, we have had endless debates on the subject. I reread a speech made by my hon. Friend the Member for Twickenham on 27 November 2002, at column 67WH of Hansard. It was a superb exposition of the position at that time. My hon. Friend looked forward even then to the ombudsman's report and to what he hoped would be the resolution of a sorry saga. Since then, as we know, the Government have decided to play it long. We have had a succession of questions, speeches and interventions. I participated in a Westminster Hall debate just before Christmas, and the Minister answering on that occasion, the Economic Secretary to the Treasury, cut a sorry figure. He was unable to answer any question cogently.

Photo of David Heath David Heath Shadow Leader of the House of Commons

I think that is an accurate description of the Minister's position.

[Mr. Roger Gale in the Chair]

When the House resumed in January, we finally had a statement from the Chief Secretary to the Treasury, which was the culmination of eight years of waiting. We have had 13 reports on Equitable Life. In 2001, there were reports from the Corley Institute of Actuaries, the Treasury Committee and the Financial Services Authority. In 2003, there was the parliamentary ombudsman's first report. There was the Penrose report in 2004, Paul Myners's review of corporate governance of mutuals and Sir Derek Morris's review of the actuarial profession.

In March 2007, we had the Faculty of Actuaries consideration of Ranson and Headdon. There was an FSA report on Penrose in July 2004, a Financial Ombudsman Service report in March 2005 and a report by EQUI, the European Parliament's Committee of inquiry into the matter, in June 2007.

We also had the report in relation to the joint disciplinary scheme for the Institute of Chartered Accountants, which has not yet been published, and in July 2008 the parliamentary ombudsman's second report.

Therefore, although we have had no shortage of reports on the issue, the Government have effectively announced yet another review and yet another report. They issued an apology, but it was partial, not an apology for the things for which an apology was needed.

Uniquely, after an ombudsman's findings of maladministration and injustice, no compensation was offered. Ex gratia payments were made to a few people who were affected. We had this concept—again unique in response to an ombudsman's report—that the money was not to go to those who suffered the injustice or the maladministration, but to those whom the Government considered needful of support. That cannot be right.

I have a series of questions to put to the Minister. Why is Sir John Chadwick's brief so restricted? Why has it been pared down to such a point that he cannot consider what many of us feel to be the crucial questions? Will that not ensure that the payments are minimal? Sir John Chadwick's review is designed to ensure that the minimum amount, not the right amount, is paid out as proper compensation.

What has happened to the oft-quoted precedent that the Government cannot compensate everybody who finds themselves at a disadvantage, when they are prepared to compensate the depositors of Icesave without any culpability on the part of the regulator? No one is suggesting that the regulators were at fault in the circumstances of the Icelandic banks, yet the Government were prepared to make compensation. In this example, in which the ombudsman has clearly demonstrated that the regulators were at fault, the Government are trying every technique that they have in their armoury to avoid payment.

What estimate has the Minister made of the proportion of with-profits annuitants who will receive ex gratia payments? Many feel that it will be a small proportion of those who should be compensated. Has she even made such an estimate? Are the Government walking into this with their eyes closed?

Does the Minister believe—this is the crucial question with regard to the role of the ombudsman—that the payments will put individuals in the position they would have been in had maladministration not occurred? That is the whole point of the ombudsman system. It is not the role of the ombudsman to compensate for commercial losses; everybody accepts that. The question is, will everyone who has suffered an injustice and a loss—not just those who find themselves extremely hard up—be placed in the position they would have been in had the maladministration not occurred? The answer is transparently clear—they will not.

Why have the Government conceded the findings of maladministration but not injustice? Why do the Government take this pick-and-choose approach to the ombudsman's report, which enables them to assess that the ombudsman is absolutely right when the findings are inconsequential, but absolutely wrong when the findings are damaging to the Government's reputation? If the Government take the view that they can pick and choose from the ombudsman's findings, what future is there for the ombudsman?

I have asked that crucial question in a couple of debates on this subject. What is the point of having a parliamentary ombudsman—an Officer of the House, not of this Government—if the Government are found wanting and to have created maladministration and injustice, but then walk away from those findings and are prepared to ignore them?

What is "disproportionate effect"? How are we going to assess the consequences of this review if we do not know what factors Sir John Chadwick will be asked to take into account in assessing what "disproportionate effect" means? Is a person's losing half their life savings disproportionate? I would say it is, but I suspect that the terms of reference will mean that, unless someone is virtually destitute, they will not receive compensation and their loss will not be considered as having disproportionate effect. That is wrong.

Photo of Anne Main Anne Main Conservative, St Albans

The hon. Gentleman mentioned the word "destitute", but as we know many pensioners who are affected are in the benefits system in a way that they may not have been before. I am not sure whether the Government have truly assessed the impact of deciding to give money to some people and the effect that that will have on their benefits, or even on their tax burden. It is worrying that, in deciding who they award compensation to, the Government have not considered the impact on the future benefits of pensioners.

Photo of David Heath David Heath Shadow Leader of the House of Commons

I am grateful to the hon. Lady for that intervention. There are two interpretations: either the Government know precisely what they are doing but are not prepared to tell us or the people who were investors in Equitable Life, or they are blundering around finding yet more delaying tactics to stave off the evil day when they finally have to do something, rather than talking about possibly doing something at some time in the future. I suspect that it is the latter, but we may hear the Minister say which of those two interpretations is so.

I have another question to ask on a point that has, I think, been raised this morning. What is the position of the estates of deceased members? The Chief Secretary was unable to answer that question when the statement was made. Perhaps the Treasury has now thought about it and perhaps the Minister will tell us today whether the estates can benefit from the compensation that would have been paid to the person were they still living. That will affect a lot of people, as we have heard.

Will the process be open? That key question was asked by my hon. Friend the Member for Northavon. Will we know what is happening with regard to Sir John Chadwick's considerations or will that be a matter between Sir John Chadwick and the Treasury, to be filtered, bowdlerised and released at convenience and, probably, to be delayed, as has been the case with the history of this whole episode?

Why are there to be no interim payments? That is a fair way to deal with people who are very elderly and are waiting—and have waited so long—for justice in this matter. Why must they wait yet another two or three years, or however long it is going to take to conclude this protracted process?

It seems that most hon. Members feel that this episode smacks of injustice to those who are not necessarily, as some might caricature it, rich people who chose to invest their money, but are ordinary people who invested their life savings in an institution that they trusted. There has been injustice done to those people. This Government find themselves in the shameful position of having so devalued the parliamentary ombudsman that I am not sure we can see a genuine future for that office. That makes the Government look extremely shabby. That is not my concern, although it makes politics looks shabby, which is something we should be worried about.

This episode gives the impression that regulators can fail without consequence, which undermines the whole system of regulation. After all, over recent years we have built up a pantheon of regulators that govern so much of public business. If we do not trust the regulators, we do not trust the system. Not trusting the system discourages people from taking sensible decisions about their money, discourages them from saving and makes the economic situation in this country even more parlous. The Minister has a lot of answers to give us. A lot of questions remain outstanding.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury) 12:10 pm, 27th January 2009

I welcome you to the Chair, Mr. Gale, and congratulate Steve Webb on securing the debate. His case was well-crafted, well-marshalled and strong, as all the contributions have been. To single out a few, Derek Wyatt made a brave contribution, my hon. Friend Mr. Tyrie was extremely helpful with his expertise, Mark Hunter gave an accomplished presentation on behalf of his constituents and my hon. Friend Anne Main gave a particularly impassioned speech on behalf of hers.

I thought that I would turn round the usual way of summing up a debate by starting with questions, partly in order to give the Minister a bit more time to prepare the answers. I recall that at the last such debate, in November, we had no answers at all, on the basis that the Economic Secretary to the Treasury was awaiting a statement from the Government before anything could be answered. Today the Minister has a little more time to answer the many questions raised.

First, the reports from Sir John Chadwick were promised by the Chief Secretary in a statement two weeks ago. How will they be made? Crucially, will they be made available to the House and Parliament? Secondly—this point has cropped up several times—the Minister needs to explain the word "disproportionate", which the Chief Secretary mentioned in her statement in terms of those affected by Equitable Life. In the same vein, the Minister needs to explain properly the situation in cases where the policyholder has, sadly, died. Most important, the Government must give at least some indication of what time frame is likely to be needed for compensation to be assessed and paid. That is the crux of the argument in today's debate.

This is the first time that I have spoken from the Opposition Front Bench on Equitable Life. In the short time available, I will not be able to chart the background of the sorry state of affairs before us, but I can tell Members that during my time in the financial markets, I saw quite a lot of malpractice and maladministration. However, what I saw normally affected major institutions that arguably could or should have known better. In the case of Equitable Life, we are talking mainly about a set of small investors who were naturally risk-averse. Indeed, they were generally placing their life savings, or a part thereof, in trust with what they believed to be a distinguished, venerated and properly regulated institution.

We have known about the regulatory failings since the Penrose report, in which Lord Penrose criticised both the regulatory system and the fact that the regulators failed to act after becoming aware of a problem. The Opposition therefore welcome the ombudsman's conclusion that maladministration took place and the Government's apology. We welcome the fact that the Government have accepted at least some of the ombudsman's findings of maladministration and some aspects elsewhere. However, did they make representations about the findings of maladministration and injustice before the ombudsman published her report, or did they simply trot out their earlier arguments all over again?

The main purpose of today's debate is to look forward and to deal with the urgent and overdue problem of compensating those who lost out. The last debate in Westminster Hall on Equitable Life was on 25 November. Thirty Members were present on that day, and 31 Members are present today. I share the opinion of the hon. Member for Cheadle that such debates should take place on the Floor of the House to enable more Members to speak. After all, about 1 million policyholders have been affected, which means that an awful lot of Members have constituency correspondence and issues to raise.

Since November, we have heard the Chief Secretary's statement, but the saga goes on. The Opposition very much share the concerns raised during the statement and again today about the extraordinary and completely inexcusable delays in making the payments that policyholders deserve and, in many cases, so desperately need.

Many Members—

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Lady will have her chance to respond, but I want to get on, because I have limited time available.

Many Members have compared the situation with aspects of the current financial trouble and the speed at which the Government have acted on some facets of the present crisis. Several policyholders have contrasted the Government's prompt action to protect savers in the Icelandic banks with their almost glacial progress on Equitable Life. If the Government can act quickly on the current financial crisis, when the right course of action is frequently unclear and controversial, surely they can act quickly to rectify the tragic situation of Equitable Life, where the problem that we need to address is all too clear. We agree that there is no quick calculation to determine how much compensation should be paid, and we further agree with the ombudsman that the condition of public finances is relevant when determining how much should be paid; at the same time, however, the financial condition of those wronged has worsened.

Photo of Susan Kramer Susan Kramer Liberal Democrat, Richmond Park

Does the hon. Gentleman acknowledge, however, that the full compensation, as calculated by EMAG and others, would be somewhere to the right-hand side of a decimal point in the financial rescue plans, so the issue of public finances scarcely has a bearing in this circumstance?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

The hon. Lady makes a powerful point, but one problem for all of us is that we are operating in a complete vacuum as regards the amounts involved—the individual amounts, the relative amounts and so on. Until we have some information, it will be difficult to know where the decimal point might fall.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I shall carry on, because there is only limited time left.

We agree that there is no quick calculation; at the same time, however, the financial condition will have worsened. Above all, the Government must act quickly. Some 30,000 policyholders have already died, many more will do so before justice is done, and further delays will be inexcusable. It is difficult to quantify the losses, but it is even more difficult to understand why so little progress has been made in trying to get the process even started. Time is running out, and most policyholders do not have the option of returning to the workplace. Every one of us has had letters from constituents, outlining how much they have suffered and still suffer in real life.

The ombudsman described the delay in addressing the issues as "iniquitous and unfair", and every step of the way, the Government have sought to block, frustrate and delay the fight for justice. Does the Exchequer Secretary recognise, therefore, that what appears to be a new decade of delay is entirely the Government's fault? In her reply, will she tell us how Sir John will keep the House abreast of his progress? Will his interim reports be made available to Parliament? The Chief Secretary to the Treasury tore up the ombudsman's proposed timetable, but no alternative appears to have been proposed. When will Sir John make his first interim report, and will the Treasury ask him to produce an outline timetable?

On the compensation scheme, it is time for the Exchequer Secretary to explain what is meant by those who have suffered "disproportionately", whom the Chief Secretary has mentioned on various occasions. Will the Exchequer Secretary explain whether she has rejected the Public Administration Committee's conclusion that it would not be appropriate to compensate only policyholders and annuitants who have experienced financial hardship?

One concern raised in the House during the Chief Secretary's statement was the status in any payment scheme of those who died before justice was done. More than 30,000 policyholders have already died, and it is vital that there is clarity about how their widows or widowers will be treated in the scheme. Re-reading Hansard, I noted that it appeared that the Chief Secretary had not really thought about that, so has the Exchequer Secretary had time to consider all the ramifications?

In a previous debate on the subject last November, my hon. Friend Mr. Hoban set out three things that the Government needed to do: admit responsibility, issue an apology and create the payment scheme. The first two have been done, but the crucial and most difficult third step must now be taken with absolute urgency. If the Government fail to do that, we will do it when we are in government.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee 12:19 pm, 27th January 2009

If I had not already been aware of the degree of worry about these issues before attending and listening to the debate, I certainly would be after the speeches we have heard. Those who said that many policyholders who experienced losses might be in difficulties are right.

I congratulate Steve Webb on securing a debate on the subject. I give hon. Members an assurance that I will take all the questions asked back with me but I will do my best to provide answers this morning. I think that hon. Members of whatever party understand that the lack of clarity about individual circumstances and losses has to be considered. That is why Sir John Chadwick has been asked to do his work.

In the circumstances, it is only natural that the Government's response to the ombudsman's report should generate such interest. Reflecting the extent of her remit, the parliamentary ombudsman's second investigation of the regulation of Equitable Life's with-profits fund under the Insurance Companies Act 1982 regime, which has now been superseded by more modern forms of regulation, looked exclusively at the role of the prudential regulator and the Government Actuary's Department. It would not have been permissible for her to have considered the actions of Equitable Life, or any other party in the private sector.

The substantial report published by the ombudsman in July 2008 was the culmination of a four-year investigation, as has been said this morning. The factual and technical complexity of the issues investigated by the ombudsman, which contributed to the length of her investigation, are the reasons why it has been necessary for the Government to take time to consider that report. Indeed, the Government would rightly have been criticised had they not considered the report carefully before giving their response.

I repeat that the Government accept that maladministration occurred in some areas, and that in some cases—although not all—we believe that it may have led to injustice for policyholders. My right hon. Friend the Chief Secretary apologised for that on behalf of the public bodies and successive Governments who were responsible for the regulation of Equitable Life between 1990 and 2001. We also accept that some policyholders may have suffered a disproportionate impact.

We have looked in detail at the ombudsman's central recommendation for a compensation scheme. I have heard suggestions that the Government are at fault in not accepting the recommendation that we should establish and fund a compensation scheme. Such a scheme would have the aim of restoring Equitable Life policyholders who suffered a relative loss—a loss that policyholders would not otherwise have suffered had they invested or saved somewhere other than Equitable Life—to the position in which they would have been if the maladministration the ombudsman found had not occurred. I attempted to ask Mr. Hands what the Opposition's policy on that is, but he would not give way.

I want to deal with some of the many issues and questions that have arisen.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Is the Minister prepared to tell us clearly whether it is the Government's view that people should be put back in the position that they would have been in if maladministration had not taken place?

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

Those are precisely the issues and calculations that we have asked Sir John Chadwick to consider in detail. Those who actually listened to my right hon. Friend the Chief Secretary's statement will have heard her say that we have asked that Sir John be given access to the detailed policy information held by Equitable Life, so that he can examine—as those who have seen his terms of reference will have seen—the balance of loss as it is measured between maladministration and the behaviour and activities of the society itself. He will then be able to form a view.

Various hon. Members have said that 90 per cent. of Equitable Life members will not be repaid. I believe that calculation appeared on the EMAG website. However, I reassure Members that it is only with access to Equitable's data that we can assess which classes of policyholder will receive payment under the scheme. That is precisely why we have appointed Sir John Chadwick to review the data, so that figure must have been plucked from the air. It is certainly not one that the Government would recognise at this stage of the work.

Photo of Alan Duncan Alan Duncan Shadow Leader of the House of Commons

The House will be slightly, if not totally, dismayed at the apparent lack of sympathy or sense of justice in what the Minister is saying this morning. We all understand that exact figures may be difficult to calculate. Given that the Government are about to assume responsibility for the pension payments of all the Post Office workers, can she not set up a scheme quickly that, in the interim, at least allows a measure of responsibility for the pensions of Equitable Life policyholders?

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I shall try to deal with some of the issues about interim payments and other payments that have been raised by hon. Members during the debate. As my right hon. Friend the Chief Secretary said on the Floor of the House during her statement, we will consider the idea of interim payments, but we would not want such a scheme to hold up the swift delivery of the main scheme—[Hon. Members: "Swift?"] I am talking about going forward from where we are now.

About 11 days ago, we had a statement in the House in which the Government apologised and said that they would set up an approach to enable those who have suffered disproportionate loss to receive ex gratia payments. Hon. Members have asked for a timetable for that. My right hon. Friend the Chief Secretary said in her response to the statement that we wished the process to be as swift as possible, but the ombudsman herself said it would take up to two and a half years. We have not made that kind of assessment. We want Sir John to make progress as quickly as possible so that we can expedite the ex gratia payments.

Opposition Members must recognise—as the ombudsman did—that these are complex areas. There was no costing in the ombudsman's report or any idea—apart from the scheme taking two and a half years—about how such payments can be made in practice. We are attempting to deliver an ex gratia payment scheme as quickly as possible. We have asked Sir John to give us his advice as quickly as possible on how that can be done. Clearly, delivering such a scheme must be as simple as possible. The ombudsman recognised that there is a tension between a simple and quick scheme and consideration of the kinds of losses that relevant policyholders have suffered due simply to maladministration. Such issues must be separated out, as hon. Members have recognised, from the losses that would have occurred because of market movement or because of the behaviour of the society, to which Mr. Heath referred, and which was so criticised in the Penrose report.

The hon. Member for Northavon was the first of many to ask how Parliament would be kept informed of Sir John's work. We hope that he will give us interim reports. We want the information to be shared as it is generated. As his work reveals the nature and extent of the practical issues before us, we will put in place a parallel system to ensure that delivery is as quick as possible. We do not want to wait until he reports—

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. We now move to the next debate. Will Members leaving the Chamber please do so quietly?