The hon. Gentleman is dwelling on when the regulatory system failed, but what does he make of Lord Penrose's comment in paragraph 162 of chapter 19? There, he says that, in the 1980s and 1990s, there were
"specific proposals for change that Ministers did not pursue."
Why was that?
That is probably right. I do not know: I have not looked into enough of the detail in the back papers to be sure. Neither has the hon. Gentleman, as he is only reading Lord Penrose's conclusions. Further on in the report, he will find a litany of regulatory failure that happened after 1997. There are pages and pages of that, and failure at the operational level. The hon. Gentleman is making exactly the sort of partial and partisan remarks that do him and his party no credit. The hundreds of thousands of people who have been affected by the firm's collapse will take note.
Opposition Members do not dispute Lord Penrose's conclusions about the early 1990s. It would be helpful if the Government abandoned their denial of the shortcomings of the regulatory system and of the operational regulatory failure evident after 1997.
Secondly, the Financial Secretary sought to insert into the debate the question of light-touch regulation. She tried to attribute blame for the Equitable Life crisis to the light-touch approach of the previous Conservative Government. That may or may not be true, as the issue is very complicated. What is certainly not true is that the Labour Government abandoned that approach for something different when they came to power. On the contrary, as my right hon. Friend the Member for West Dorset (Mr. Letwin) has said, the
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right hon. Member for Darlington (Mr. Milburn), when he was Chief Secretary, endorsed light-touch regulation. He did not do so when he arrived at the Treasury and while he worked out what to do: he did so a full two years after Labour came to power. He said, in an even more forceful statement than that cited by my right hon. Friend, that the Financial Services Authority
"will operate according to a philosophy based on light-touch regulation with protection where necessary and fairness throughout. The Bill"
the Financial Services and Markets Bill
"will reduce regulation".[Official Report, 28 June 1999; Vol. 334, c. 35.]
That does not sit squarely with the Financial Secretary's earlier portrayal of the Government's approach to regulation.
Does not the hon. Gentleman appreciate the distinction between a light touch in a system of regulation that is wholly inadequateas I am sure he would accept the previous system wasand a light touch in a system of regulation that is robust?
I am afraid that I find that question incomprehensible. I shall look at it in Hansard and have another go at it, but for the moment I shall move on.
The remarks by the then Chief Secretary sound like an endorsement of a regulatory system that failed. Indeed, that is exactly what the Financial Secretary appears to say about the regulatory system before 1997. The only problem is that it is a description of the system after 1997. Sleight of hand is everywhere. The Financial Secretary looks puzzled, but puzzlement is probably preferable to the knowing understanding of the issue that she has adopted so far.
The hon. Gentleman is being partisan.
We have been forced into making such remarks by the presentation of the Penrose report by the Financial Secretary on 8 March. On the compensation scheme, she told the House that
"the Government have introduced the comprehensive financial services compensation scheme, which is ready, were problems to materialise in a company, to pay out 90 per cent. of guaranteed policy values."
Several policyholders thought that that might help them, but the truth is that it is not a new scheme but an amalgam of two existing schemes. Moreover, it will not help existing Equitable policyholders, as the Financial Secretary well knows, because it underwrites only the guaranteed amount of any policy, not the terminal bonuses that have been lost. She held out false hopes to many people with those remarks. Some of them have written to me and I expect that they will write to her in due course.
The hon. Member for Warwick and Leamington (Mr. Plaskitt) raised the issue of whether Lord Penrose could consider compensation. The Financial Secretary said
"Lord Penrose makes no recommendation for the payment of compensation."[Official Report, 8 March 2004; Vol. 418, c. 1270, 58.]
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Of course he did not do so: he was not asked to. Furthermore, he said only last week in Scotland that he did not make any recommendations about policyholder compensation because it formed
How does the hon. Gentleman respond to the comment by Lord Penrose in the foreword to the report that
"There was no mechanism that could have been devised, and put into effect within a time scale that would have had regard to the wider public interest in obtaining the account of the developments of the Society's position, that could have accommodated in parallel the investigation and resolution of disputed contentions of conformity or non-conformity with generally accepted norms of practice in any of the fields that would have been relevant."?
The Financial Secretary seems to say that the situation is so complicated that we cannot handle it and no scheme could be devised to do so. Of course it could, and Lord Penrose could be asked to consider that. I strongly agree with the hon. Member for Twickenham (Dr. Cable) on that point. Having spent two and a half years considering the issue, Lord Penrose could work up a scheme and a methodology for working out whether compensation should be paidin other words, to establish liabilityand then what that compensation should be. The fact is that Lord Penrose was not asked to do that. The Government did not want the answers, so they did not even ask the questions.
Perhaps the worst misrepresentation involves the ombudsman's role. The Financial Secretary said that the parliamentary ombudsman
"has cleared the Government of all cases of maladministration."
That is like clearing the fox of killing the chickens without bothering to look at the hencoop. The ombudsman has only looked at one case. She has only been allowed to look at 18 months of a 20-year problem. Moreover, she made it clear that she was unable even to inquire into the workings of the key Departmentthe Government Actuary's Departmentwhere most of the litany of regulatory failure cited in the Penrose report appears to have emanated. So the Government, particularly the Government Actuary's Department, have not been cleared of anything at all, but that has not stopped the Financial Secretary saying:
"There is no issue after 1997 in Lord Penrose's report that has not been considered by the parliamentary ombudsman".[Official Report, 8 March 2004; Vol. 418, c. 1270.]
What an absurd remark. I leave that lying there for the people listening to the debate to judge its plausibility.
At the start of the debate, my right hon. Friend the Member for West Dorset went carefully through each stage of the Financial Secretary's argument. We can now see more clearly why that line of argument has been developed: because it is the Government's best defence for doing nothing to help the policyholders who have been hit. First, she said that the management were to blame. Few hon. Members dispute that. She then said that the regulatory failure was secondary and systemic. Lord Penrose's report shows it to have been significant and operational. She then sought to create the impression that all the regulatory failures took place before 1997, but much of it took place after 1997not
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that that distinction should matter to a responsible Government. She was chuckling away at that moment ago.
The Financial Secretary sought to create the impression that light-touch regulation was an exclusively Conservative policy; but, as we know, it was the Government's policy when they framed the Financial Services and Markets Act 2000. Finally and most perniciously, she sought to imply that there was no maladministration. In fact, no systematic effort has been made to look for maladministration. The Government are preventing the ombudsman from looking in the one place where it is most likely to be found: the Government Actuary's Department.
The Financial Secretary and the rest of the Government can do one simple and sensible thing now: they should get on with amending the Parliamentary Commissioner Act 1967, to enable the parliamentary ombudsman to examine the workings of the Government Actuary's Department. Only then will we know whether the litany of regulatory failure identified by Lord Penrose constitutes maladministration, and we can then get clear recommendations on compensation. The Government could make that amendment tomorrow if they chose to do so. They could get on with it right away. The Financial Secretary shakes her head in disagreement. Perhaps she would like to explain why she could not do that tomorrow.
The hon. Gentleman must realise that secondary legislation cannot be used to make retrospective changes of the kind that he advocates.