Equitable Life Report (Government Response)

– in Westminster Hall at 10:53 am on 19th May 2009.

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Photo of Bill Olner Bill Olner Labour, Nuneaton 10:53 am, 19th May 2009

I see that there is a lot of interest in this debate. I have taken advice as I am an interested party, but as there are no amendments to select and so on, I am happy to chair the debate and will restrain myself from participating.

Photo of David Davis David Davis Conservative, Haltemprice and Howden 11:00 am, 19th May 2009

On the way over here, someone asked me whether my ministerial pension has an Equitable Life component. I do not believe that it has, but in case it does, I make a precautionary declaration now.

As well the specific issue facing us, broader and more fundamental issues are at stake. The parliamentary ombudsman concluded that there had been maladministration and injustice, yet the Government are fiercely resisting paying compensation. There is an absolutely unbreakable moral and logical chain from maladministration through consequent injustice to required compensation. That is the fundamental core of this debate.

Equitable Life is the oldest surviving mutual life assurance company in the world, and, as a mutual, its profit-sharing policyholders share in any profits or losses incurred in running the society's business. That has some logical outcomes. The Government Actuary recommended Equitable Life for public servants, which gives it a particular interest, but below the surface the organisation made no provision for guarantees against low interest rates on policies issued before 1988, and it therefore declared bonuses out of all proportion to its profits and assets.

In 1994, Equitable Life introduced differential terminal bonus policies involving the payment of different bonuses, depending on whether policyholders exercised their right to an annuity at a fixed rate. In July 2000, the House of Lords ruled that that was unlawful. There were a number of dramatic consequences, and on 8 December 2000, the society stopped writing new business with immediate effect. Since then, it has undergone a difficult period and has implemented cuts in the value of its with- profits policies and the income derived from its with-profits annuities.

More than 1 million people lost money when Equitable Life collapsed, which means that we all have hundreds or thousands of constituents who are affected. Many hon. Members will want to intervene, and I will give way to any who wish to do so.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I thank the right hon. Gentleman for securing this debate and allowing us to contribute to it. He is right that the issue is a moral one. Policyholders are suffering from a seeping wound, and we have put a sticking plaster on it, but we have not treated the suffering below. Does he agree that there is now an obligation to move quickly to end the suffering for the rest of the policyholders?

Photo of David Davis David Davis Conservative, Haltemprice and Howden

The hon. Gentleman is entirely right, and the thrust of my speech will be aimed at the Government's absolute responsibility, which they have tried to avoid for reasons that I will outline. He is absolutely right about the moral and logical aspect. The responsibility is absolute.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

I welcome this debate. Does my right hon. Friend agree that the issue touches not only on policyholders' disgust at how they have been treated, but on saving for the country as a whole? If people lose faith in saving for the future, that will have dire consequences not only for public finances, but for millions of our citizens.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

My hon. Friend is entirely right. The regulatory system's role is particularly important, and I will return to that. The Government must recognise that one purpose of the regulatory system is to encourage saving by providing a degree of guarantee that malpractice—not maladministration—or serious misjudgment should not happen. That is fundamental to the million or so policyholders, and to the future of savings.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I will take one more intervention, and then make a little progress and take some more later.

Photo of Nick Herbert Nick Herbert Shadow Secretary of State for Environment, Food and Rural Affairs

I believe that this is the first time that I have intervened on my right hon. Friend. [Interruption.] It may not be the last. Does he agree that the ombudsman's position is at stake? What is the point of having an independent ombudsman if the Government can so easily ignore and sweep aside her reports? Is not the ombudsman's role to protect people, such as my constituent, Mr. Peter Ricket, whose two Equitable Life pensions lost more than half and two thirds of their value, and who at the age of 78 he still has to work?

Photo of David Davis David Davis Conservative, Haltemprice and Howden

That may be the first time that my hon. Friend has intervened on me, but it is not the first time that he has interrupted me. He makes a good point, and crystallises the impact of the losses on people who are not well off and who have no other course to take. What strikes me about all pension failures is that people at that stage of their life have no other options available.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I want to make some progress, but I will then give way to my hon. Friend. I will try to give way to all hon. Members, but I can see what is happening.

There have been a number of reports on Equitable Life, including Penrose in 2004. In 2008, the ombudsman's comprehensive report into the regulatory failures behind its collapse was entitled, "Equitable Life: a decade of regulatory failure". The title tells the story. The ombudsman reached 10 determinations of maladministration—one against the then Department of Trade and Industry, four against the Government Actuary's Department, and five against the Financial Services Authority, with each representing a failure

"that fell far short of the acceptable standards of good administration", most notably in the way in which public bodies scrutinised the records returned by Equitable Life. She found five determinations of injustice, which is the key to the problem. There was a sequence of maladministration, injustice and the need for compensation, which my hon. Friends and the hon. Gentleman have raised.

The ombudsman made two simple recommendations. One was cheap for the Government—an apology. The other was a compensation scheme, which was implicitly expensive—between £3 billion and £5 billion. Given the length of time that the problem had dragged on, she proposed a time frame of two and a half years for that to be completed. The report was welcomed by everyone involved in the fiasco, including the groups representing those who had lost money, MPs on both sides, many of whom are in this Chamber, who campaigned on behalf of constituents, and Equitable Life's board. The only people who remained silent were the Government.

Time is a crucial factor in the problem. Being a pension scheme, many of the potential losers are elderly and need justice sooner rather than later. More than 30,000 Equitable Life policyholders have died during the decade since it collapsed, and it is estimated that 15 more die every day. Regardless of that, the Government took six months to respond to the ombudsman's report and recommendations, during which time more than 2,500 policyholders died. Astonishingly and despite the ombudsman's comprehensive work over four years, which was described over 3,000 pages, the Government rejected vast swathes of the report and, even after six months, produced a flimsy, 48-page response. An apology was offered for the maladministration that the Government had to admit, but no more.

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

I congratulate my right hon. Friend on securing the debate. He will know from our earlier conversation that I had a public meeting on this issue in Bexhill very recently. The point that he is making about the time that it is taking to come to a determination and pay the compensation is the key point that makes people most angry. There is bafflement at what is happening, after all these years. It is so clear, as my right hon. Friend has spelled out, that the Government are not getting on with it and paying the money to those people, who clearly deserve compensation and are extremely vulnerable.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

My hon. Friend is exactly right and has perfectly illustrated my point.

The Government made three objections to the ombudsman's report. They said first—there is an element of sense in this—that the responsibility to minimise risks and prevent problems from occurring in a particular financial institution lies first and foremost with the management of that institution. However, that misses the point that my hon. Friend Andrew Selous made about the key aspect of regulation in guaranteeing that certain things do not happen in these institutions. As a result of what they said, the Government refused to accept that it would be appropriate to establish a compensation scheme in the way the ombudsman recommended. They did, however, believe that some Government action was justified and agreed to make some ex gratia payments. That means that the Government are willing to pay some money to those worst affected, but not to accept the responsibility for the failure.


It would appear that the Government are willing to risk the anger of 1.5 million ex Equitable policyholders who are also voters. To add insult to injury 10% only of the still living members expecting justice are now faced with a derisory hand out despite the Ombudsman's recommendation of full compensation. The rest can go take a running jump as far this Government is concerned. Well I guess the same sentiments will be applied by ex policyholders to this Governments attempts at being re-elected.
How absolutely scandelous!

Submitted by douglas sloan

Photo of John Barrett John Barrett Shadow Work and Pensions Minister

Does the right hon. Gentleman understand the anger of many of my constituents who have lost so much with Equitable Life about the fact that the Government have gone the extra mile for those who have lost money in the Icelandic banks or the nationalised banks, but they have not given the same treatment to those who have lost often greater amounts through Equitable Life?

Photo of David Davis David Davis Conservative, Haltemprice and Howden

The hon. Gentleman pre-empts a point to which I shall return, but he is absolutely right. It defies logic and any sense of equal treatment that there are massive payments to certain groups—payments that are currently embarrassing—but no proper payment to an area where we have a clear moral responsibility.

Despite the ombudsman's recommendation to keep things quick and simple, the Government have proposed a scheme requiring the level of each person's loss that could be attributed to the regulatory failure that they accepted to be established. That is not impossible, but it will be an incredibly slow task; the scheme guarantees that the process will be slow. The Government tasked Sir John Chadwick to establish, first, the extent of relative losses suffered by Equitable Life policyholders; secondly, what proportion of those losses can be attributed to the maladministration; and thirdly, which classes of policyholder have suffered the greatest impact—they have all suffered some impact, but for some it has been very clear. Fourthly, he was asked to consider what factors arising from that work the Government might wish to take into account—not just accept—when reaching a final view on whether disproportionate impact has been suffered. The Government will consider Sir John's advice on the relevant factors before setting out the criteria for the payment scheme, so even when we get to the end of Sir John Chadwick's activity, we will not yet be at the end of the road.

Photo of Sandra Gidley Sandra Gidley Shadow Health Minister

The right hon. Gentleman is being very generous about giving way. Does he share the concern of many of my constituents that there will in effect be means-testing? There will be those who have taken a loss, but who may be deemed to have been able to afford to do so. Why should they be penalised more than someone who has taken a lesser loss, but is in a much worse financial situation? There is a lack of clarity about whether people will be compensated on an equitable level.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

The hon. Lady is right. When I first saw that proposal, my response was that it was just an attempt to reduce the cost of the scheme and not pay any respect either to any sense of justice or equity or to speed. I can understand the concern to which she refers. One point that the ombudsman makes in her comments is that the disgust, almost, that is felt by the policyholders is of itself an extra pain being caused by this failure, so I absolutely agree with what the hon. Lady has said.

Sir John Chadwick was not given a time scale. The Government's only comment was that it might take significantly longer than the two and a half years laid down by the ombudsman. The universal outrage about that was predictable and right.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I would like the right hon. Gentleman to reference where that was said, because it is not my understanding of the Government's position. We have made it clear all along that we want to proceed as swiftly as possible. We want to see John Chadwick's report as swiftly as possible. We want to do work as a Government in parallel to that. I simply do not recognise where the right hon. Gentleman got that quotation, so I would be very interested if he could make it stand up.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I was referring to the comments of the Chief Secretary to the Treasury. I cannot remember the exact time when it was said, but if this Minister is saying that it is no longer true, we have achieved something in this debate today. If he is saying that it will be less than two and a half years, we will take that and I will happily retract the comment absolutely on the basis that we get that promise today. That might be a success that we can measure off the back of today's debate.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I think that my right hon. Friend has managed to secure, through his debate, a significant change in policy from the Minister, because I distinctly recall listening to the Chief Secretary in a debate in January of this year in which she refused, first, to consider interim payments and, secondly, to give a guarantee that the payments would be made within the next two years.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

The Select Committee on Public Administration, whose eminent Chairman, Dr. Wright, is with us today, described the Government's stance as "morally unacceptable" in its report "Justice denied? The Government's response to the Ombudsman's report on Equitable Life". It said that the excuses that the Government had come up with were introduced "late in the day" in a way that it found

"shabby, constitutionally dubious and procedurally improper."

It says that the proposed ex gratia payment scheme looks "slow and onerous" and represents a

"basic failure on the part of the Government to understand the problem which its scheme is supposed to address."

Furthermore, it considers the disproportionate impact test as an "unnecessary complication".

On 5 May 2009, the ombudsman took the almost unprecedented step that has brought us here today—people have called it the nuclear option. She published a special report entitled "Injustice unremedied: the Government's response on Equitable Life", in which she condemned the Government's response absolutely. She noted that she was "deeply disappointed" with the Government's rejection of many of her findings and said that she was

"entirely unpersuaded by the basis for those rejections".

In particular, she noted that the response

"was based on an extremely limited and unevidenced view", that it

"failed to address the whole basis on which I had found maladministration to have occurred" and that it

"contained commentary...which appeared to limit and/or re-interpret the findings I had made"— not something that the Government should be allowed to do.

Photo of Jacqui Lait Jacqui Lait Conservative, Beckenham

I add my congratulations to my right hon. Friend on obtaining this very important debate. The whole issue of implementing regulations is the crux of how a modern society develops. If the bad faith shown by the Government in relation to implementing the ombudsman's report is not dealt with, we will find the whole of UK administration shaking on its foundations because we do not have a robust regulatory structure.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I agree. In some respects, it indicates a lack of faith by the Government in their own regulatory structure. That is one of the worst outcomes in the long term. It relates to the point made by my hon. Friend the Member for South-West Bedfordshire about saving and making provision for oneself. We are now in a position in which making provision for one's own future is almost financially irrational for certain categories of people. The issue that we are discussing today reinforces that problem.

The ombudsman raised three major concerns about the Government's proposals. First, she said that by making ex gratia payments rather than paying compensation, they had

"broken the link between injustice resulting from maladministration and the provision of any remedy."

Secondly, she raised the lack of clarity and a timetable in relation to Sir John Chadwick's work. Thirdly, she referred to the misleading and disproportionate use of the Penrose report in the Government's conclusions.

The lack of any urgency on the part of the Government to bring this saga to a conclusion was highlighted last weekend in The Mail on Sunday. It pointed out that, far from acting with all due expediency in his considerations in this matter, Sir John Chadwick has had just one single hour-long meeting with the Equitable Life board members and has spent two weeks recently in the Caribbean in his role as president of the Cayman Islands court of appeal. He has also—[Interruption.] Let me say to hon. Members that I do not intend this as a criticism of Sir John Chadwick; I just think that it indicates the effect of the lack of urgency put on him by the Government.

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

I congratulate the right hon. Gentleman on a very powerful contribution. In terms of speeding things up, we will obviously have a new House of Commons within a year, and I imagine that all those considering whether to elect us will want to know where we stand, and rightly so. Can he assure us that he has received a cast-iron guarantee from the shadow Chancellor of the Exchequer, Mr. Osborne, that in the event of a Conservative Government, the ombudsman's recommendations will be honoured in full and unequivocally?

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I have not asked for that cast-iron guarantee, but I hope that my hon. Friend Mr. Hoban will give us the Conservative line on the issue when he speaks later in the debate. I have to say, however, that I want that cast-iron guarantee every bit as much as the hon. Gentleman.

The Equitable Members Action Group has launched a claim for judicial review, following the Treasury's depressingly predictable failure to take action on the ombudsman's call for a scheme to assess all claims within two years, and we may, of course, arrive at that review in the sort of time scale that the hon. Gentleman has mentioned.

The Equitable board has also condemned the Government. The chairman, Vanni Treves, described the Government's response as "scandalous", adding—this is the point made by Sandra Gidley

"why haven't our policyholders been treated as well as Northern Rock and RBS depositors have...At any other time this would have been regarded as an absolute scandal"

Charles Thomson, the chief executive, went further. In a recent interview, he said:

"Disappointing is the easy word. Appalling is closer to the reality...I can't think why it"— the Government response—

"has been so stubborn and pig-headed. You just throw your hands up in horror...If you have got an ombudsman, are you prepared to let government ride roughshod?"

The Government are attempting to undermine the parliamentary ombudsman. It is shabby and inappropriate.

Policyholders have described the response as "a complete joke".


It is more than shabby and inappropriate, and it is cetainly no joke for equitable policyholders who require justice as described by the Ombudsman but are denied it by this Maverick Government. Outageous behaviour by a Government who should uphold integrity, democracy and honesty but who have failed to do so on all counts.

Submitted by douglas sloan

Photo of David Davis David Davis Conservative, Haltemprice and Howden

If my hon. Friend will forgive me, I will not. I am trying to give way to as many people as possible, but once each. I am keeping a tally.

Paul Braithwaite of EMAG said:

"The proposed hardship scheme is totally inadequate, will take years to implement and looks like leaving 90 per cent. of victims out in the cold...Our members are truly outraged that this Government's shabby response is continuing to treat us with contempt...We are bewildered at the hypocrisy of its latest £1.6 billion bailout"— for the Dunfermline building society—

"while we have been left to twist in the wind."

There are several precedents where the Government made payments to savers in such collapses. Since the ombudsman's report in July 2008, the Government have acted to protect money held in Icesave and the Dunfermline building society, as well as introducing various bank bailouts. However, they still refuse to ensure that justice is done for the policyholders of Equitable Life. Why?

The Government stand alone in their position on this issue. Given the evidence, their stance is unjustifiable, and it is unsupported by anyone who has considered the issue to any great extent. It is clear that their action is driven by a concern to avoid spending money—the expectation is that the costs will be between £3 billion and £5 billion. It is understandable that the Government want to balance the extent to which the taxpayer and various agencies pick up the risk, but their action leads us back to where I started. There is an unbreakable chain between a finding of maladministration, a finding of injustice arising from that and the need for a compensation scheme that will, in practical terms, deliver justice for those people, 15 of whom are dying every day. Those people will suffer not only financial but emotional distress because their situation has not been properly recognised, which is why I introduced this debate.

Several hon. Members:


Photo of Bill Olner Bill Olner Labour, Nuneaton

Order. A considerable number of Members want to participate in the debate. I will try to call as many as I can, but Members will obviously need to keep their comments fairly brief because the winding-up speeches will start at 12 o'clock.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham 11:23 am, 19th May 2009

I congratulate my right hon. Friend David Davis on securing this timely debate.

In December, on the Floor of the House, I asked the Prime Minister whether the Government would make a statement before the recess in response to the parliamentary ombudsman's report, and he assured me that that would happen. Of course, it did not and, as my right hon. Friend said, we had to wait until the early part of this year before the Chief Secretary finally gave her derisory, short response to this mess. That brief example of the Prime Minister promising me a statement, but that promise not being fulfilled, just shows that the Government's policy on this issue has been drawn up on the back of a fag packet. I am disappointed by the lack of seriousness with which they are treating the emotion and anger that my right hon. Friend so aptly described.

Quite extraordinarily, the parliamentary ombudsman, Ann Abraham, has issued a report under section 10(3) of the Parliamentary Commissioner Act 1967, and that has happened on only four occasions previously. That shows how angry she is that her report has been so flagrantly dismissed and that the issue has not been taken care of.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

My hon. Friend raises an important point. A number of constituents have corresponded with me about the failure of Equitable Life and about their troubles. However, other constituents have also corresponded with me about the Government's failure to observe the recommendations that the ombudsman set out in the nuclear option. It is not only the poor policyholders affected by the Government's decisions who are scandalised, but other people, who have nothing to do with Equitable Life.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

Absolutely. All parliamentarians have a responsibility to protect the parliamentary ombudsman. She plays a very important role, and if we do not do everything possible to ensure that the Executive fulfil their obligation to listen to her, we are not doing our duty as Members of Parliament.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

Does my hon. Friend agree that the Government's treatment of the ombudsman is in fact a form of contempt of Parliament because the ombudsman is an Officer of this House?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I totally concur. Although I am, of course, interested in my Shrewsbury Equitable Life policyholders, the treatment of the parliamentary ombudsman is precisely the reason why I set up the all-party group on justice for Equitable Life policy holders. I wanted not just to help policyholders, but to ensure that our parliamentary ombudsman's findings are listened to and that her position is respected.

As of yesterday, more than 100 Members of Parliament had joined the group. If the Minister looks at the list of their names, he will be startled to see the number of Labour MPs who have joined. His Government have a relatively small majority, which has decreased recently, so he should bear in mind the extent of anger among his colleagues and how determined they are to see justice.

I pay tribute to EMAG and Mr. Paul Braithwaite, whom I have asked to be the group's secretariat—they do an excellent job. Dr. Gibson, who is a Labour MP, is my co-chairman, and Susan Kramer, who is a Liberal Democrat, is the group's secretary. Would any Members who have not joined our group please see me afterwards? This issue is very important, and I have come here today to publicise the all-party group, because we must increase its membership.

Photo of Anne Milton Anne Milton Shadow Minister (Health)

I congratulate my hon. Friend on establishing the all-party group. He will agree that many of my constituents can never be compensated for the anger and suffering that they have experienced. No compensation scheme ever fully gives people redress for the years of anger and sorrow that they have experienced as they have agonised over what happened to them. The all-party group is an important part of bringing those people and Members of Parliament together.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I totally agree. The all-party group intends to use its position in the House of Commons to invite people to come to speak before us. We had a meeting yesterday with the communications director and other senior officials from Equitable Life. We will also be asking to see Sir John Chadwick and the Minister.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

When the hon. Gentleman set up the all-party group, I was more than happy to say, "Yes, of course I want to be a member." However—this has been said already, but it is worth repeating—the longer the compensation process takes, the fewer people will get the money that they deserve. Is it not time we used that old British fair play and put right the wrong?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I agree: I was telling my constituents that British people are known around the world for having a sense of fair play. That is our branding, so to speak, in the international community. It is the lack of fair play that so irks many of us, and that is why we want justice.

Lastly, my right hon. Friend the Member for Haltemprice and Howden made a very important point about Sir John Chadwick. He is an eminent High Court judge but he has numerous other tasks. I have repeatedly asked the Government what resources they will give him to enable him to sift through the millions of documents that he will have to go through if a start is to be made on making payments. What resources is the Minister making available to Sir John Chadwick, and why has he engaged someone with so many other commitments when time is so pressing and every day 15 of the citizens concerned are dying? That is a scandal. We need far more attention and focus to be given to the issue. It must be resolved much more speedily.

Photo of David Burrowes David Burrowes Shadow Minister (Justice)

This country may be known for fair play, but are not the Government increasingly known for rejecting ombudsman's recommendations? They have form on that. The court said there should be cogent reasons, but those have not been presented. All that we have is the back of a fag packet, without even an assessment of the impact of the hardship test.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I totally agree with my hon. Friend. Time is pressing, and I want to end with a direct appeal to the Minister. This is not a party political issue. The Minister has seen how his hon. Friends feel. I will give him a list of Members of Parliament who have joined the all-party group. Many of them are Labour Members. I urge the Minister to do all he can to speed things up.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I agree with the hon. Gentleman that the issue is not party political. I strongly suspect that if the Conservative party were in the Government's shoes they would take action similar to what the Government are doing. However, I particularly want to respond to the hon. Gentleman's comments about Sir John Chadwick's many other commitments. I have talked to Sir John; we talked about his availability before we made the appointment, and he is conducting his work as speedily as possible. I do not think that the hon. Gentleman should believe everything that he reads in the Daily Mail.

It is true that Sir John visits Grand Cayman for three short sessions of the Court of Appeal each year, and is required to be in Dubai for two single weeks in the year, but those are the limits of his commitments, and none of the other appointments occupies a substantial part of his time. I am confident that Sir John is on the case and is doing his work, and I hope to give an update on that.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I thank the Minister. We shall call Sir John Chadwick to the group and ask him his views directly. Of course it is important for the group to establish whether he has the resources and time to enable him to carry out the work as speedily as possible. I do not doubt the Minister, but we want to ask him the question ourselves.

Photo of Gordon Prentice Gordon Prentice Labour, Pendle

I am wrestling with the Chadwick point. Sir John must interpret the disproportionate impact test, but we do not know which policyholders are wealthy and which are poor. Sir John Chadwick has access to the records of Equitable Life but not to those of Her Majesty's Revenue and Customs. That is a real conundrum: how to come forward with a disproportionate impact test that is equitable and just.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I totally agree with the hon. Gentleman. I suggest that if he has an interest in the issue—and he is clearly very knowledgeable about some of the issues—he should actively participate in the group, and come along to the meeting to which we invite Sir John. I shall check that he signs up to the group before too long.

Photo of Rosie Cooper Rosie Cooper Labour, West Lancashire 11:34 am, 19th May 2009

I declare a personal pecuniary interest as an Equitable Life policyholder; but it is not in that regard that I speak today, but to give the views of some of my West Lancashire constituents. I congratulate David Davis on securing the debate, in which thousands of individuals will take a keen interest.

As an Equitable Life policyholder I realise the problems that its failure has caused many families, when, after a lifetime's work, their plans for the future have been destroyed, because the money that they were depending on is not there or has been much reduced. It is not my intention in the short time available to repeat comments that hon. Members have already made, but I have received significant correspondence from many people in my constituency who have been directly affected and who have expressed their views in no uncertain terms. One gentleman wrote:

"When I invested money in Equitable Life (over many years) I like other people had been led to believe that we were dealing with a high quality provider of great integrity."

Another constituent told me:

"I remember very well when I made my investment that I was confident that it would be safe; with the belief that I was investing into a blue chip Mutual Society. I thought I had done my homework in selecting Equitable Life...I now feel very deceived and let down. This was a cruel deception."

Lastly an elderly female constituent remarked:

"I'm within a few days of my 80th birthday and am feeling very vulnerable on account of the worry and concern this whole affair is giving me."

There is no shying away from how hurt and raw those individuals feel. They desperately want action and resolution in this sorry state of affairs.

Over many years the Equitable Life story has descended into tragedy for many; but just as I understand my constituents' fears and their serious financial problems, by the same token I understand that the Government do not have a straightforward job. However, the Government must seek to reach a fair solution that will compensate people for the failure of regulation. I am pleased that they are committed to taking such action to help those who were hardest hit financially by the failure of Equitable Life, but many believe that they must do more. They must meet their commitment to Equitable Life's policyholders.

It is important to acknowledge that the Government have accepted that maladministration took place, in line with the parliamentary ombudsman's report. The request for an independent review, to ensure that the process for compensating policyholders will be sufficiently robust and accurate, is welcome. There are difficulties, as we have heard, and the last thing that we need is further complication. I want to impress on the Minister the real emotions of my constituents and many others whom we have heard about today, and what they live through each day as they wait for the outcome. I therefore implore him to ensure that the Chadwick review will be implemented as soon as possible.

Photo of Bill Olner Bill Olner Labour, Nuneaton

Two hon. Members want to speak, and I hope that they will both have an opportunity to do that. The winding-up speeches will start at 12 o'clock.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 11:38 am, 19th May 2009

I congratulate David Davis on bringing the subject before the House again. This is the latest in a series of debates that are always well attended. I secured one in January, and my hon. Friend Jo Swinson secured one last year. The strong turnout and the large number of hon. Members of all parties who want to participate show the strength of cross-party feeling on the issue. We all say that the Government's response has been inadequate so far. The Equitable Members Action Group, to which I also pay tribute, takes that view.

I simply want to focus on what the ombudsman has had to say about the process. When, in March, the Select Committee produced its report, "Justice denied? The Government's response to the Ombudsman's report on Equitable Life", she submitted a written memorandum that bears highlighting. As Andrew Selous has said, she is an Officer of the House and must be tactful, but some of her language is astonishingly blunt. It is not necessary to look very hard to see how angry she is at the way in which her hard work has been treated.

In all the detail, it is easy to lose sight of the simple fact that the ombudsman called for the Government to establish and fund an independent compensation scheme. Clearly, that is nothing like what we have. The ombudsman said:

"It is disappointing that the Government has decided not to accept all my findings and has rejected my central recommendation".

She went on to use the phrase "once again". As we have heard, the Government have form. She continued:

"Once again, the Government has thought fit to reject findings by the Ombudsman after a lengthy, detailed, complex and rigorous investigation."

She noted that the Government acted

"as judge on its own behalf".

What is the point of paying the ombudsman to spend years producing the most rigorous piece of work only to have it almost casually dismissed? I accept that it took six months to casually dismiss it, but that is what happened.

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

The Minister shakes his head, so I shall tell hon. Members why the ombudsman feels that her report has been casually dismissed. She has stated:

"First, the Government's response provides insufficient support for the rejection of those findings."

She has stated that the response includes only a

"brief statement setting out the Government's view of the regulatory regime".

That shows the casualness of the Government's response; it is a detailed, thorough report that took years, and all we get from the Government is a brief statement. The ombudsman has stated that

"The standard applied in my report was grounded in a detailed analysis", but that the Government's response seemed to be based on an "assertion". That is the contrast—thorough, detailed, rigorous analysis was countered by assertion.

The ombudsman has stated:

"Secondly, the Government's response also fails to address the basis on which I came to several of my findings when rejecting those findings."

In other words, the Government did not consider the reason for the ombudsman's findings and deal with them. The Government did not deal with what led her to make those conclusions; they simply rejected them. They did not deal with the ombudsman's reasons for reaching those conclusions.

The ombudsman has stated:

"Thirdly, the Government's response begs the question as to what the purpose of regulation was supposed to be."

The Government's position, to paraphrase, seems to be that it would not have made a blind bit of difference if we had the best regulators in the world. The ombudsman has stated:

"If it were truly the case that the relevant regulators, acting without maladministration and operating the regulator system as Parliament intended it should be operated, could have made no difference...that would be astonishing."

What is the point of having regulators? Whether or not they do their job, it makes no difference. It seems to be the Government's position that the conduct of the regulators would have made no difference, which is absurd.

Finally, the ombudsman has highlighted her concerns about what she calls, "The Government's alternative approach". She has expressed five concerns. The first is about the lack of a detailed timetable. I hope that the Minister will be precise. His intervention was interesting, but I hope that he will be clear about what Sir John Chadwick said about when the first of the money will be paid. That is the bottom line.

The ombudsman's second concern was that Sir John is only an adviser, and that if the Government can ignore her, they can now ignore Sir John. What do we have in the way of cast iron assurances? Her third concern is that she had set out her conclusions but that Sir John has been asked to respond to the Government's reading of them. Surely, he should be asked to respond to what the ombudsman said, not the Government's reinterpretation of it.

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

Does my hon. Friend agree that the Government's criteria for the review seem to be to pay as little money as possible? Equitable Life policyholders believe that the Government are seeking the cheapest possible option. It bears little relation to justice.

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

My hon. Friend puts her finger exactly on the point. It should be about justice rather than cost, but that does not seem to be the case.

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

I welcome this debate. Does my hon. Friend share my concern that the process may involve policyholders in engaging legal representation? The ombudsman's service is free, and the policyholders have won their case with her. The Government have now imposed another process, which may require further hearings and possibly a confrontational process. We do not yet know, but it may involve costly legal representation.

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

My hon. Friend is right that that should not fall on the policyholders. Many have already forked out as members of EMAG towards its legal action. We have an ombudsman in order to make such things unnecessary.

The ombudsman's fourth concern about the Government's approach was the lack of definition in their response and its "disproportionate impact". Mr. Prentice made a good point when he said that without knowing the full circumstances of every household, one cannot know what is disproportionate, and who has been badly hit or not. That information is not available to Sir John Chadwick.

Photo of Gordon Prentice Gordon Prentice Labour, Pendle

On that very point, when I pressed the ombudsman at a meeting of the Public Administration Committee, she told me that it was the first time that a remedy would be means-tested. The disproportionate impact test is means-testing, which has never happened before.

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

The hon. Gentleman is right, and the precedent is exceptionally worrying. Indeed, we need to ensure that it does not come about.

The final concern expressed by the ombudsman is that although Sir John has been asked to attribute a proportion of losses to the maladministration of the regulators, the losses are a complete thing—they cannot be subdivided in order to say how much of them were the company's fault. She found maladministration by the regulators, and that cannot be subdivided. Her proposed remedy relates to the losses in full; they should not be carved up.

The ombudsman has summarised the matter by saying that the Government

"addressed findings that I did not make; sought to reinterpret and/or limit the basis on which I made certain findings; and provided a partial or incomplete response to other findings."

It is pretty damning stuff.

I shall conclude with the words of the ombudsman—this is what is most alarming for policyholders, as my hon. Friend the Member for Mid-Dorset and North Poole has said. The ombudsman has said:

"It is clear to me that the nature of the Government's response to my report means that the injustice I have found resulted from maladministration will not in every case be remedied—nor in any case will it be remedied fully."

That is key. The ombudsman's role is to seek remedy for an injustice caused by maladministration, which will not happen unless the Government think again.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness 11:46 am, 19th May 2009

I, too, congratulate my right hon. Friend David Davis on securing today's debate. Like me, he knows that people throughout East Yorkshire have lost money with Equitable Life; and those who have not lost are offended by the way in which the Government have responded to a clear case of injustice.

As other hon. Members have said, if the ombudsman's findings on one occasion were not sufficient, she has stated again, in an unprecedented way, that it is about justice—it is about remedy; it is about doing the right thing. The Minister has the unenviable task of bullishly trying to suggest that the Government are doing the right thing, when Members on all sides of the House can see clearly that they have not. The ombudsman has repeatedly made that finding. As others have said, what is the point of having an ombudsman if the over-powerful Executive—particularly at the fag end of their time—can simply dismiss it and wave it away? Electors up and down the country, whether or not they have lost money, will judge the moral character of the Government on matters such as this.

Photo of Anne Milton Anne Milton Shadow Minister (Health)

My hon. Friend may recall that, when intervening on my right hon. Friend David Davis, the Minister used the words "as swiftly as possible". Does he join me in looking forward to hearing the Minister explain exactly what that means?

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

My hon. Friend brings me to a key point. In general, we are talking a relatively elderly group. As my right hon. Friend the Member for Haltemprice and Howden said at the start, people from that group are dying daily. Surely, that should affect the Government's judgment.

The ombudsman gave the Government a window for not taking on the full cost of compensation. She said that the Government could not be expected to do so, and that it was legitimate to consider what the public purse could afford. What the ombudsman expected—what we all expected—was that the Government would grasp that opportunity, a dirty solution, and pick a sum. That sum would doubtless have enraged many and seemed inadequate, but the Government should have ensured that it was distributed—and distributed quickly—in order to bring justice, regardless of whether it was full justice. People would doubtless go to their graves muttering that it was not enough, but they would have had some sort of justice and closure.

I say to the Minister that the Government should give people closure. They have spent a decade fighting the Government and not getting an end. Even if they do not find it adequate, the Government should give them an end. They should give them certainty and some payment.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

Does my hon. Friend agree that we should ask the Minister why the Government fund the ombudsman service from public funds, given that they see no value in the ombudsman's findings?

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

My hon. Friend makes an excellent point. The Government's approach undermines the attitude of my constituents to the various institutions that they believe were set up to defend them. When those institutions that move to defend them can be utterly dismissed, it makes them doubt the political process even more than perhaps they do already—particularly given recent news.

Many of my constituents have seen their retirement plans left in tatters. They were upset by the Chief Secretary's response to the ombudsman's report, because it lacked transparency and openness. Policyholders are now as much in the dark about the Government's intentions as they were before. I want to focus on some of the unanswered questions, and I hope that the Minister will respond to them. Given that the Government have rejected the ombudsman's call for a Government-funded compensation scheme, will he give us a better idea of exactly who will receive the money?

As others have mentioned, the Government said that the money will go to those disproportionately affected by the collapse of Equitable Life, but none of us knows exactly what that means. [Interruption.] The Minister shrugs, but will he spell it out for us today? Will it include those who have lost the most money, or will it be done proportionately? Will, as has been suggested, there be some form of means-testing? My constituents, quite a few of whom are old, frail and highly vulnerable, did all the right things, in the confidence—they believed—that the Government were standing behind the company with which they were investing. Are they to spend their time—often at a great age—filling out complicated Government forms, and going through the humiliation of accounting for every penny and income source, simply to access justice and compensation for the money that they had saved for their retirement, but which is now lost? Will he confirm that, as has been suggested, what moneys are eventually distributed will be mean-tested?

What is the time scale? Members have made this point again and again. The Chief Secretary indicated that it could be the full two and a half years, but when the Minister intervened on my right hon. Friend the Member for Haltemprice and Howden, he suggested that it might be less than that. I hope that he will ensure that we have a very clear idea by the end of this debate, because so many constituents from across the land are waiting for some idea of when this will all come to an end.

Last year, I received a letter from my constituent, Mr. Lee, who lives in Skirlaugh. His wife's annuity lost about a third of its value. He wrote:

"How can the electorate not be cynical about a Government who continues to use such shameless delaying tactics when dealing with the Equitable Life scandal"?

He spoke for many of my—and others', I am sure—constituents. It is hard for members of the governing party—I know so many of them—not to feel sympathy for people such as Mr. Lee and his judgment on Government behaviour. Those people have been waiting for justice for so long and have suffered more false dawns than they should ever have had to endure. To make them wait another two and a half years, when dozens of them are dying every week, is cynical politics in the extreme.

Some hon. Members have suggested that interim payments should be made to those worst affected. What discussions has the Minister had with Sir John Chadwick about ensuring that that happens? All kinds of people are affected: from people with quite a lot of means to those with none. I was struck by a letter that I received from one lady—another constituent—who wrote:

"My husband died last year and was bitter that we had been ill-advised to 'put all our eggs in one basket' and then the 'basket' was dropped... My husband and others have died already but there are many of us (probably in your constituency of Beverley and Holderness) who have been let down" and are waiting for justice. I hope that the words of such people will have some effect on the Minister today.

I was struck by another letter:

"My wife wishing for some financial independence in old age paid money from her wages, working as a home help, into a With Profits Fund managed by Equitable Life Assurance Company. Her annuity has lost about a third of its value."

These are the people whom we are talking about, and we hope that the Minister will respond positively on their behalf.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 11:54 am, 19th May 2009

I congratulate David Davis on introducing this debate. He is one of several—probably many—Members who have introduced such a debate. If it is not too immodest, I would like to point out that I did so in my time—nine years ago—and the fact that we are still debating the matter, often in much the same terms, speaks volumes about how it has been dealt with. I also congratulate EMAG, whose doggedness and passion has kept this matter on the agenda. It could easily have gone away, but it has not.

It is worth placing this debate in the wider context of the dreadful mess in this House at the moment. We are in the middle of a constitutional crisis, but this debate touches on another constitutional crisis of a somewhat different kind. It centres on the respect for the office of the ombudsman and, therefore, for Parliament and parliamentary institutions. Many people outside might not be enormously concerned about what their MPs say here, but they are concerned that, when they are subject to maladministration by a Government, regulator or bureaucracy, there is somebody to whom they can turn and trust. That mechanism, and the recognition that injustices must be compensated, are at stake.

My hon. Friend Steve Webb quoted the key passage in the ombudsman's last report, but I shall quote it again, because it is the kernel of the whole debate. She wrote:

"Whatever the outcome of the work that Sir John Chadwick will undertake, it is clear that the injustice I have found to have resulted from maladministration will not be remedied."

We are addressing a big constitutional issue. It is also political, but not party political, and Daniel Kawczynski and other colleagues are to be congratulated on trying to work in a cross-party way with those in other parties. Ultimately, that is the only way to resolve this matter. It should not be a party political issue, and many people are genuinely trying to build a consensus.

The Government are their own worst enemies in that respect. Let us consider the history of this issue. The Prime Minister built his reputation as a champion of investors. I think that his first major speech in Parliament, when he was a Treasury spokesman, was on Barlow Clowes. He doggedly defended the rights of wronged shareholders. Ever since, he has argued that the difference between Barlow Clowes and Equitable Life investors is that the former had on their side an ombudsman's report and that once we had such a report for Equitable Life, the latter could also be compensated. We have had the report, but the consequences have not followed as promised. The logic of that process has not been followed through.

There is another irony that would be hilarious if it was not so serious. In their comments on the ombudsman's last report, the Government could have said, "Well, we have had maladministration. It occurred under the Conservatives, and it has occurred under us, so we are all to blame." However, they have insisted, in their last response, that all the maladministration occurred under this Government and that that which occurred under the previous Conservative Government was not maladministration at all. They said that to minimise their liabilities. However, when historians reflect, they will find a funny irony in a Government desperately trying to exempt the previous Government from blame, which is what they appear to have done in their final response.

In pursuit of this cross-party approach, I tabled an early-day motion a few weeks ago that has attracted widespread support. My hon. Friend the Member for Northavon asked what would happen if there was a change of Government, and I say this partly in response to that. My motion has received encouraging support from both sides, including from some very senior people—

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I take it that the right hon. Gentleman is also a signatory of my motion. The language on compensation might not be as strong as EMAG would wish, but it certainly moves us forward. The motion reads:

"That this House believes the Government should accept the recommendations of the Ombudsman on compensating policyholders who have suffered loss".

There is no reference to means-testing or other delays, but it is an improvement.

Photo of Oliver Letwin Oliver Letwin Shadow Minister without Portfolio

I certainly am a signatory of the hon. Gentleman's motion. Does he agree that the character of this constitutional issue is particularly acute because the ombudsman admitted that the Government could take account of the public expenditure consequences? The Government have refused to follow the dictates of an ombudsman, even though the latter has gone the last mile and tried to recognise that the Government are the guardians of the public purse.