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Gershon Review

9. Mr. David Cameron (Witney) (Con): What discussions he has had with Sir Peter Gershon regarding the total savings in departmental expenditure in the Department of Trade and Industry as a result of his efficiency review. [179130]

The Chief Secretary to the Treasury (Mr. Paul Boateng): The efficiency review features in regular discussions involving Treasury Ministers, their Department of Trade and Industry counterparts and Sir Peter Gershon, in order to maximise the benefits of the review for front-line services.

Mr. Cameron : Now that the DTI no longer runs car companies, coal mines, power stations, steel mills or any other major businesses, will the Chief Secretary explain why it still needs seven Ministers, with seven private offices? Apart from providing a perk for some of the Chancellor's acolytes, what does it actually do?

Mr. Boateng: Those Ministers do a very great deal. They have responsibility for energy policy and for promoting competition and enterprise. Importantly, too, they have responsibility for the Small Business Service, which helps some 600,000 small and medium-sized businesses—even some, I suspect, in the hon. Gentleman's constituency, and certainly some in his county.

Tony Wright (Cannock Chase) (Lab): I welcome the Government's commitment to robust public sector efficiency reforms, but it has given Opposition Members an opportunity to launch a general attack on civil servants. Civil servants are not to be associated with waste and inefficiency, and it is not good merely to laud front-line public servants and thereby attack back-office staff. Will my right hon. Friend give the assurance that whatever cuts are made, a mechanism will be in place to ensure that service quality is maintained?

Mr. Boateng: Service quality and support for front-line workers are at the heart of our approach to the efficiency agenda. My right hon. Friend the Chancellor has already paid tribute to the work and dedication of our public servants, and I am happy to do so again. We should compare and contrast that with the approach of the shadow Chief Secretary, the hon. Member for Arundel and South Downs (Mr. Flight), whose calumnies against public servants, suggesting that they are there to do as little as possible, are legendary. We support front-line services and the contribution that
 
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civil servants make to the delivery of those services, while believing that there are real efficiency gains that we are determined to obtain from the system.

Mr. David Laws (Yeovil) (LD): Given the amount of money that Department of Trade and Industry Ministers, rather than civil servants, waste, would not it be better to scrap the Department and make savings that could be used for front-line public services?

Mr. Boateng: No it would not—and I have found no support for that proposal from any section of industry. There is certainly no support for it from the Confederation of British Industry or the Trades Union Congress. My right hon. Friend the Secretary of State for Trade and Industry does a superb job in promoting British business, productivity and employment. She and the Department should be congratulated on that.

Mr. Andrew Love (Edmonton) (Lab/Co-op): The efficiency savings are partly to achieve the Lyons review total of 20,000 civil servants to be shifted out of the capital. Are we still on track for achieving that goal? Is there any scope for increasing the number of civil servants who could move?

Mr. Boateng: We are on track for achieving the goal, and my right hon. Friend the Chancellor will make announcements about that as part of the spending review. The Department of Trade and Industry has made a commitment to reduce its headquarters staff by some 450 posts by 2006. That programme is already well under way, and we expect still more from the Dept.

Equitable Life

10. Mr Andrew Mackay (Bracknell) (Con): What representations he has received from Equitable Life policyholders about the operation of the regulatory system with regard to Equitable Life. [179132]

The Financial Secretary to the Treasury (Ruth Kelly): The Government have received several representations about a range of Equitable Life issues. I am announcing today, by written statement, the Government's decision on price caps for stakeholder products. For the deposit account product, the cap will be 1 per cent. below the Bank of England base rate. For medium-term and pension products, the cap will be set at an annual management charge of 1.5 per cent. for the first 10 years of the product and 1 per cent. thereafter. The consultation document is available in the Libraries of both Houses and the Vote Office.

Mr. Mackay: Perhaps we can revert to the subject of Equitable Life, rather than a reply to a question that I did not ask and a statement that should have been made separately. Has the Financial Secretary noticed that the grass grows very long at this time of year, and it is easy to kick problems such as Equitable Life into it? When will policyholders be properly compensated? When will the Government stop hiding behind others?

Ruth Kelly: First, I told hon. Members that I had tabled a written statement on stakeholder products. Secondly, that is fundamentally important to people
 
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who save in the pensions industry and to future trust in the financial services industry. It relates directly to Equitable Life, among other issues.

However, the right hon. Gentleman asked about compensation for Equitable Life members, so let me deal with that. We commissioned Lord Penrose to conduct an independent inquiry into the circumstances that led to the events at Equitable Life. He found no evidence of maladministration or negligence. He made no recommendation for compensation and, indeed, made it clear that:

"Principally the Society was the author of its own misfortunes . . . The regulatory system failures were secondary"

factors. Although I have every sympathy with the victims of events at Equitable Life, it would not be right, given the circumstances, for the Government to consider compensation.

Mr. Harry Barnes (North-East Derbyshire) (Lab): Even if we were not to blame for the collapse of Equitable Life or the failure of the regulatory system, can we not have a compensation scheme based on need?

Ruth Kelly: I understand my hon. Friend's point. However, people who invested in Equitable Life did so of their own free choice. The position is different from that of members of failed company pension schemes such as Allied Steel and Wire, which we have debated long and hard in the Chamber. Investors in Equitable Life tend to have supplementary pension provision, and many members have large pension pots, though others have smaller pots. It is largely their expectations that have been disappointed. I sympathise with people whose expectations have been disappointed, but Equitable Life continues in business and continues to fulfil its guaranteed obligations. If insolvency were to occur, we have a clear mechanism for providing compensation.

Mr. Eric Forth (Bromley and Chislehurst) (Con): May I give the Minister a chance to answer the question? She was asked what representations she had had from Equitable Life policyholders, and the House would like to know the answer. Can she also give us a positive response to the question that has so often been asked about the role of the ombudsman? When will she give the ombudsman an opportunity to look into this matter again, to satisfy so many frustrated Equitable Life policyholders?

Ruth Kelly: I have had many representations on the subject of Equitable Life. Indeed, I have met the action groups representing the policyholders. One of the points that we have discussed is the need for comprehensive, efficient regulatory systems. Through the formation of the Financial Services Authority, the single ombudsman scheme and the single comprehensive financial services compensation scheme, we have already put in place an advanced, forward-looking system to protect consumers. The right hon. Gentleman referred to the ombudsman. Yes, it is perfectly within an individual's rights to take their case to the ombudsman, but I am not here to stand up and offer advice to the ombudsman. People will have to make their own decisions.
 
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Mr. Andrew Tyrie (Chichester) (Con): I am very interested in that last remark—that the Minister is not prepared to offer advice to the ombudsman. As the whole House knows, the parliamentary ombudsman has invited submissions on whether she should reopen her inquiry. She must be aware that the hundreds of thousands of policyholders who have lost out now believe that the Government and the Treasury are quietly lobbying the ombudsman not to reopen her inquiry. Will the Minister tell the House whether she has made a submission to the ombudsman—yes or no? If she has, why has she not published it, and had she not better do so immediately?

Ruth Kelly: I am glad that the hon. Gentleman made it clear that he was referring to the parliamentary ombudsman. Of course, I was referring to the financial services ombudsman. The parliamentary ombudsman is an independent officer of the House and it would be inappropriate for me to try to push her in one direction or another. However, she has come to the Treasury and asked for a submission about our case, and we have put forward our view, as requested. She is perfectly at liberty to publish that submission if she so chooses.

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