That is indeed the case. In due course, we will have to look at the exact bill. The face-value number—£4 billion—possibly frightened the Treasury at the outset, but payments would be paid over a long time and only to very restricted groups. The hon. Gentleman is quite right that the ombudsman has acknowledged that there is a public expenditure constraint, and that all of us have to live within that—including Treasury spokesmen. None the less, it is a constitutional, political and moral point, as my hon. Friends have suggested.
My hon. Friend John Barrett mentioned the Icelandic banks. The point about those banks is not just that the Government protected all the investors, but that the investors in Icelandic banks were pursuing high yields and risky investments. In the case of Equitable Life, the investors were highly prudent people who wanted safe and reliable investments.
Does my hon. Friend also agree that if the means-tested assessment of compensation entitlement comes through, the most prudent people will suffer a double whammy because those who have made further provisions will be hit hardest and receive the least?
Yes, and the language in the Government response is that only those who are dependent on Equitable Life pensions will be compensated. That penalises people who are prudent and who have diversified their investments.
I have two central criticisms and concerns. One relates to the endless foot-dragging, and the other to the compensation mechanism. Let me remind everyone of the foot-dragging and how it happened. It first came to light in a debate in 1999. There was a very long period in which hon. Members of all parties pressed for an inquiry. Lord Penrose himself said that it was "iniquitous and unfair" that no inquiry was established until 2001. Then we had the Penrose report, which took two and half years to compile. In the findings, we had a mixture of policy failure, which is not a compensation injustice issue, and administrative failure. Lord Penrose clearly and explicitly acknowledged that administrative failure had taken place.
I recall going to the ombudsman five years ago with my hon. Friend Norman Lamb. Others will have done so at about the same time. The ombudsman's report took an awfully long time, and it eventually appeared in February 2007. It took the Government two years to respond to the ombudsman, thanks to the Maxwellisation delays and endless responses to requests for additional information. Now we have all the additional delay imposed by the compensation process. Therefore, endless foot-dragging has been the defining characteristic of every stage in this process, and it continues to this day. As hon. Members have said, time is of the essence for the pensioners. Some 30,000 have died since the collapse occurred.
As for the compensation mechanism itself, several hon. Members have reminded us about the defects of the existing system. My hon. Friend the Member for Northavon aptly summarised them, and I shall make the key points. First, the ombudsman specifically recommended a tribunal system that was genuinely independent and transparent. Instead, we have had a Treasury-led process conducted by an adviser, who may be an admirable individual but simply does not have the powers to adjudicate in compensation that the ombudsman recommended.
Secondly, the mechanism will relate only to those injustices accepted as such by the Treasury, which effectively has reduced by 90 per cent. the potential claims identified by the ombudsman. Thirdly, we have the means-test concept that has been introduced. Mr. Prentice helpfully intervened to explain the difficulties that that would present. Fourthly, we have the problem of the apportionment of blame, which still has to occur and goes contrary to the ombudsman's advice. We have had the rejection of interim payments, and we now have in place a slow, onerous and costly process that individual pensioners have to pursue. It is a dreadful story, yet, to this day, we have had no satisfactory resolution. I hope that the Minister will make some progress in this thoroughly reprehensible tale.
I congratulate my right hon. Friend David Davis on securing this debate and setting out very clearly the failings of the Government's response to the ombudsman's report. As hon. Members have said throughout the debate, the ombudsman is an Officer of this House, and she is entitled to our respect. Her report and the work that she does are very important because they give justice to our constituents. The theme of the Public Administration Committee's first and second reports on the ombudsman's report—"Justice Delayed" and "Justice Denied"—typifies the experience that many hon. Members have had when they have spoken to their constituents about the Government's response. There has been foot-dragging to get to this point in the first place, then, in the Government's refutation of the ombudsman's findings, there has been an attempt to deny justice to many people.
My hon. Friend Daniel Kawczynski, acting as recruiting sergeant for his all-party group, made a powerful plea for his constituents, as did other hon. Members on all sides of the House. Two themes emerge from the debate to which the Minister must respond. The first relates to the inadequacy of the Government's response to the ombudsman's report. That comes across very clearly in the Select Committee's report. In the supplementary memorandum to that report, the ombudsman gives examples of where she believes the Government have sought to reinterpret her findings, and where they have not given sufficient explanation of their response to those findings. The Treasury have sought to rebut such examples. The rebuttal of her findings is an important issue. An earlier legal case established that the Government were not bound to accept her report but had to give reasons why they chose to reject it. People want to see some cogent reasons for the rejection of her findings so that they can see whether the Government's approach was well thought through, logical and right or whether it was open to challenge.
As Dr. Cable mentioned, when the ombudsman published her report in July, there had been a lengthy period of "Maxwellisation" beforehand. It is clear from reading the ombudsman's report that there had been significant discussion between the Government and the ombudsman about her findings and her approach. It is almost as if the Government are coming back for a second bite of the cherry.
Given the number of findings of maladministration and injustice, which the Government have rejected, people expected that the Government would produce something more substantial than their command paper in January. When the Minister was quizzed on this matter by the Public Administration Committee, he said that he wanted something that was accessible and readable. The Committee rejected that approach. It wanted to see a much more substantial rebuttal of the ombudsman's findings to demonstrate that the Government had cogent reasons.
The Minister should take the opportunity today to accept that the Government's command paper was inadequate and to say that they will produce a much more substantial paper that sets out the real reasons for rejecting the ombudsman's findings. The Minister would do himself and the House a great service if he made that commitment today. At the moment, the policyholders feel that the Government are searching for some weak arguments to try to deny them justice. It is incumbent on the Minister and the Government to produce a much more substantial response that explains, in a logical and clear way, why the Government sought to reject the ombudsman's findings. That would provide the opportunity for a further debate on the Government findings. Such a debate may even prove that we are wrong and that our cynicism and scepticism about the Government's motives are incorrect.
The second theme that runs through this debate is the process that the Government kicked off with Sir John Chadwick. By that I mean the basis on which payment should be made to policyholders. The process is not straightforward. In paragraph 5.26 of the Government's response, the Government set out four steps that Sir John would have to take. The first, they say, is to assess
"the extent of relative losses suffered by Equitable Life policyholders".
From looking at the PAC report, I know that there is no agreement, not even on what relative loss means and how it is calculated. Without that first step, it is very difficult to see how the second, third and fourth steps can be taken.
One hon. Member suggested that Equitable Life had spent one hour with Sir John Chadwick to explain where the situation was and for Sir John to give his view. When will Sir John and the Government reach conclusions on relative loss and whether and when it will be calculated? Only when we understand the relative loss that people have suffered will we be in a position to take the debate further. We could then move on to the question of what proportion of the losses can be attributed to the maladministration that has been accepted by the Government in the actions of Equitable Life and other parties. However, the ombudsman's report was very clear: it set out the failings of the regulatory system and where injustice flowed from that maladministration. It is therefore hard to understand why the Government believe that there should be a sharing of responsibility between Equitable Life, the regulator and other parties.
The concept of "greatest impact" has had very little explanation by Ministers. Is it about hardship? Does it involve means-testing? Is it a question of which policyholders have lost the most or the least? There is a lack of explanation from the Government. Only when we have such explanation will Sir John be in a position to advise the Government on what factors might be borne in mind to design a payment scheme for the policyholders who have suffered losses.
My overwhelming feeling is that the Government, having delayed, hesitated and prevaricated for years in responding to the problems at Equitable Life, are again seeking to kick it into the long grass. In the same way that it took them months to respond to the ombudsman's second report, they want to delay dealing with the problem for years and to deny policyholders justice for yet longer—for years. That is not fair to the policyholders. Hon. Members talked about the numbers who have died awaiting justice. We know that many policyholders will be suffering losses and living on reduced pensions and annuities, waiting for the day that they can receive justice from the Government. Where is the Government's urgency in responding?
On the Chadwick process, are the Government able to give any undertaking as to the time scale? The Minister said that it was not going to take as long as two and a half years, but when will policyholders begin to receive payments? When will Sir John publish his interim report, and will it include a timeline? Will the Government publish Sir John's interim reports in full and immediately? How many staff has Sir John recruited? I understand that he has sought some legal support from his chambers, but how many staff has he recruited? Does he have the necessary actuarial expertise on his team? How much have the Government allocated to Sir John, not only for his own fees, but for the team he will need if he is going to comprehend these complex issues? Those are important questions, and the answers will demonstrate whether the Government are taking the matter seriously, or whether they are seeking to avoid responsibility.
The Minister said in an intervention that he thought that the Opposition would do the same as the Government. Let me be clear on the difference between us and the them: we have accepted the ombudsman's findings and recognise the claims of maladministration and injustice that she found. We also accept, as she made clear in her initial report and the section 10(3) report, that the relative loss that policyholders have suffered should be reflected. That concept has been agreed on both sides. We also accept, as she said, that the costs to the public purse need to be recognised. I was pleased that the hon. Member for Twickenham accepted that point when it was made by my right hon. Friend Mr. Letwin.
The ombudsman's recommendations need to be accepted. I welcome the fact that the Government have apologised for regulatory failures, but it is important for us to move forward quickly to provide justice for those policyholders. They cannot wait much longer. My concern is that every sign from the Government tells me that they want to kick the problem into the long grass and avoid dealing with it, meaning that justice will be denied to people who are suffering as a consequence of the regulatory failure of Equitable Life.
I congratulate David Davis on securing this debate. As hon. Members have noted, this is the latest of several Westminster Hall debates on Equitable Life. Scrutiny of, and debate on, the Government's position is absolutely right.
Evidently, hon. Members have deep concerns about the Government's decision not to accept the parliamentary ombudsman's recommendation for a compensation scheme, and I shall say more about our reasoning. Those concerns were also articulated in the parliamentary ombudsman's "Injustice Unremedied" report.
Before saying anything else, let me be very clear that it is a matter of regret to the Government that the parliamentary ombudsman felt it necessary to lay her report. The Government have the greatest respect for the office of the ombudsman. Her important role in the maintenance of standards and public service is unquestioned. We departed from her findings in her main report only after very careful consideration, and we did not view her further report lightly. However, the Government must act in a way that we believe to be just, legal and fair, and in a way that balances the legitimate interests of the taxpayer with those of policyholders who have been affected by events at Equitable Life. That is exactly what we have done.
This is really a matter of courtesy. The Minister asked me about the quote I gave on the amount of time that it would take—I have only about 1 per cent. of my notes here and everyone involved in the case knows quite how deep the filing cabinets are. The Chief Secretary said that
"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. 379-380.]
I would be happy to hear the Minister say that the revised assessment will not take so long.
I will look at that reference, but the Government's position is that we want to move forward as quickly as possible. The two-and-a-half-year time scale was mentioned by the ombudsman for a compensation scheme. We hope that Sir John Chadwick will be reporting to us and that we can design and implement a scheme as speedily as possible. I give my commitment to hon. Members—Mr. Stuart and others mentioned this—that we will not drag our feet. While I am Economic Secretary, I will manage a process that delivers an outcome, namely an ex gratia payment scheme that provides a remedy for those who have suffered disproportionate impacts. We are all aware of the circumstances.
I will give way once, and then reply to all the points that were made in the debate.
In our response to the ombudsman's report, we gave detailed reasons. Mr. Hoban alluded to the Bradley case. The Government have to look at reports from the ombudsman and should depart from an ombudsman's findings only when there are strong and cogent reasons to do so. We believe that there are such reasons for departing from the report, which is why we have done so. We have accepted other of her findings.
It is not quite true, as Dr. Cable suggested, that we have exonerated the previous Conservative Government and sought to put all the blame on the current Labour Government. We looked at the findings on their merits—it was not a matter of timing. For instance, we accepted part of finding 4, which relates to the period 1994 to 1996, and maladministration—but not injustice—in relation to finding 2, which relates to the period 1990 to 1993.
I wish to address the concerns about remedy that the ombudsman has recorded and to take the opportunity to update the House on Sir John Chadwick's work. If there is time, I would like to inform hon. Members about the Government's response, which we have issued today, to the Public Administration Committee.
On the ombudsman's report's comments about remedy, let us be clear—this has been recognised in the debate—that one option open to the Government was to reject the recommendation for compensation on public policy grounds and to have left it at that. Indeed, the ombudsman acknowledged that in her evidence to the Public Administration Committee. However, we did not do so. We did not accept the compensation recommendation, but at the Government's discretion, and in recognition of the impact that may have been suffered by some policyholders, we have announced a scheme that will deliver help to those affected by the events at Equitable Life who need it most.
The right hon. Member for Haltemprice and Howden referred to the link between injustice and compensation. As he knows, the ombudsman, in her report, discussed breaking the link between injustice and remedy, and investigated what options for remedy had been in prospect from the start from the Government's perspective. She was critical of what she saw as selective use of the Penrose report.
It has been suggested that the Government have relied on an absolute bar on payments of compensation for regulatory failure. That is not the case. At the outset of the ombudsman's investigation, we could not and did not close our minds to the possibility that compensation might be appropriate. However, the Government stand by the principle that we have articulated: it is not generally appropriate for the taxpayer to fund compensation even where there is regulatory failure.
On the report by Lord Penrose, the Government have never denied that Penrose found fault with the regulatory system. Indeed, we referred to that in our response. The general principle, which I make no apology for repeating, is that the responsibility to minimise risks and prevent problems in a particular institution lies first and foremost, as the right hon. Gentleman noted, with the people who own and run that institution.
The nature of the Government scheme has also come under scrutiny. The ombudsman has referred to the clarity of the process and the timing of the work that we asked Sir John Chadwick to undertake. It would be irresponsible of the Government to design a scheme without full knowledge of the facts. It is premature to speculate or draw conclusions about, for example, who will be eligible and for how much. That will be determined during the design process in the light of the advice received from Sir John Chadwick. However, as a Government, we recognise policyholders' legitimate interest in knowing the precise details of the scheme and when payments will be made. I assure them that we are working as quickly as we can to deliver the scheme. We have committed to giving regular updates on progress.
In that spirit, I will update hon. Members about the work of Sir John Chadwick concerning Equitable Life. Sir John has provided the Treasury with an update on his recent progress that I can now share with the House. The task to which he has been appointed requires detailed consideration of complex matters. It has always been recognised that although he will seek to provide his final advice as quickly as he can, his task cannot properly be completed within just a few months. However, I assure hon. Members that we are committed to making speedy progress. Sir John's terms of reference require him to provide interim reports of his work on a continuing basis. I will now set out Sir John's summary of the progress made.
First, Sir John has obtained, read and analysed the extensive material relevant to the ombudsman's findings relating to maladministration resulting in injustice, which the Government accepted in our response to her report. Secondly, he has established an office to manage the work that will be required, appointed the key members of his team and secured accommodation for them. Thirdly, he has met and corresponded with representatives of Equitable Life and obtained documents from that source, including specimen policy documents.
Fourthly, Sir John has responded to an offer of assistance from the parliamentary ombudsman by requesting certain background material to which her report refers. Fifthly, he has replied to correspondence from numerous policyholders and former policyholders. Sixthly, he has interviewed applicants for appointment as actuarial adviser so that his office will have the expert technical support needed. The proposed appointment involves a number of commercial and technical issues that the Treasury is now addressing with its legal advisers. It is hoped that an actuarial adviser can be appointed shortly. Sir John expects to establish a website through which interested parties can keep informed of his work as it progresses and make representations to his office.
I do not have those details to hand— [Interruption.] What I want to make clear to hon. Members is that my understanding of the situation is that Sir John has the resources that he needs to conduct the work required under the terms of reference to which he is working.
I understand the Minister's embarrassment, but the number of staff available, the amount of time that Sir John is working on the issue and the skills available are critical. Will he undertake to let the House know the answer to those questions by the end of the day?
I will undertake to find out the detailed information if it is available from officials. I will go further and undertake to contact Sir John to ask him whether he feels that he has the resources that he requires to do the job. It is my understanding that he does.
With the benefit of actuarial assistance, Sir John will be able to refine what issues he believes need to be addressed by his advice. The process is that he will then invite views from interested parties on whether, always having regard to his terms of reference, there are other issues that he needs to address. In light of the responses received, he will set out formally in a further interim report the questions that he will examine in carrying out his task, and will invite representations on those formal questions.
I encourage hon. Members to listen to the report that I am giving on Sir John's progress. I think that they might find it helpful— [Interruption.]
Thank you, Mr. Bercow. I frequently chunter standing up, generally during Finance Bills.
It is certainly expected that in the course of and in parallel with his work, the actuaries assisting Sir John will carry out an extensive analysis of the data obtained from Equitable Life. It is important to do so.
In the time remaining, I want to say something about the report by the Select Committee on Public Administration on the Government's response, as the report addresses a number of points made by right hon. and hon. Members. The Select Committee has endorsed the ombudsman's recommendations, but has also recognised that the Government's scheme could deliver help where it is needed most. I welcome that. I will not read out the detail of the Government's response on each conclusion and recommendation, but I intend to make it available on the Treasury website for hon. Members to read in full as soon as the Select Committee has agreed to publish it. However, I will touch on several aspects of the report, as they relate to this debate.
I want to make it clear that the Government utterly reject any assertions of shabbiness or impropriety, in either constitutional or procedural terms, in the manner of our response; the right hon. Member for Haltemprice and Howden referred to such assertions. We are disappointed that the general headlines under which the Select Committee chose to publish its report were couched in those terms. On closer reading of the report, it seems that those words were triggered particularly by the timing of the Government's engagement with the ombudsman on the principle of compensation for regulatory failure.
I have explained that the Government did not enter into the ombudsman's investigation with a closed mind. To have done so would have justified the Committee's criticisms. I add that the Government made representations during the course of the 2007 investigation that included discussion of the liabilities of regulators. Submissions on redress specifically were made when the Government were invited to do so in 2008.
The Committee also accused the Government of acting as judge and jury, another allegation repeated by the right hon. Gentleman. That is simply not borne out by the facts. In responding, the Government studied the ombudsman's report with the greatest of care and sought to ensure that our actions were founded in full appreciation of the circumstances of the case. It is a gross characterisation to say that we did this on the back of a fag packet. Our response to the ombudsman's report was the result of significant deliberation over a period of six months, and it includes a thorough appraisal of the findings in the ombudsman's report.
As we have explained on several occasions, we do not depart lightly from the ombudsman's findings. We have only done so where we believe that there is a cogent justification for doing so. The constitutional balance reached by the legislation permits the ombudsman wide powers of determination as well as the ability to make far-reaching recommendations, but on the other hand, it permits the Government to reject findings in certain circumstances—