Examination of Witness (Questions 20-39)
MS ANN
ABRAHAM
2 MAY 2006
Q20 Julie Morgan: Do you think you
are more challenging, more orientated towards fighting for people's
rights, than is normal for someone in your position?
Ms Abraham: It is not my job to
fight for people's rights. It is my job to investigate and make
decisions on complaints of maladministration and poor service.
We are not short of work but I do not see myself as a champion
of people's rights any more than I see myself as an apologist
for government bodies and the NHS.
Q21 Julie Morgan: I also have a constituency
interest with the pension issue because I have a number of constituents
who are Allied Steel and Wire pensioners or were connected with
them. Over 2,000 people in the Cardiff area have been affected
and only a tiny number have had any benefit from the Financial
Assistance Scheme so I feel very much that this is a case of injustice
and welcome your report. I wondered if you were able to comment
on the fact that Amicus and Community are going to the European
Court on 1 June about the failures of successive governments,
Conservative and Labour, to implement the European Insolvency
Directive by 1983.
Ms Abraham: There is very little
I can say about that. It was something that, before we commenced
the investigation, we looked at to ensure that it did not in any
way constrain the investigation of complaints that had been made
to me. I had a very clear view and very clear advice at the time
that it did not. It is a different tack, if you like.
Q22 Julie Morgan: You were not able
to look at that because it was going to the Court?
Ms Abraham: That was not a complaint
made to me. The complaints that were made to me were different.
Q23 Julie Morgan: Do you have any
view on that action?
Ms Abraham: Absolutely none. I
have not looked at it.
Q24 Julie Morgan: You said earlier
on that you feel there is a direct link between the maladministration
and the losses that people have incurred and that complainants
came to you and gave you that sort of evidence. How many people
gave you evidence about that?
Ms Abraham: I do not have the
numbers immediately to hand. We had 200 complaints. We had four
lead complainants and we did a survey of the 200 people and the
report has all the detail here. About half the people who responded
to the survey were able to quote from or give us copies of the
dog-eared leaflets in their files that they showed my team. A
substantial number of people were able to show us evidence that
they had seen those leaflets and relied on them.
Q25 Julie Morgan: You are able to
make a clear link between the maladministration and the losses
that people suffered?
Ms Abraham: I would make it clear
that again a lot has been said about what the report does not
say. I would like to be clear about what it does say. There were
a number of illustrations of injustice that we identified. First
of all, we talked about the lost opportunities to make informed
choices. As a result of relying on information that was produced
by government bodies, people had no idea of the risks that there
were to their schemes and how reliant they were on the security
of the employer. There were lost opportunities to make informed
choices about their pension options. Very simply, if you were
aware that your pension was only as secure as your employer was,
you might not have chosen to put additional, voluntary contributions
into the pension scheme. You might have put that money somewhere
else. People simply were not aware and could not make those informed
choices. We talked about injustice in terms of outrage and distress
and then we talked about the hard financial losses in terms of
loss of considerable portions of pensions. That is where we said
that the Government maladministration was a significant factor
amongst others. We did not say it was exclusively the consequence
of the maladministration. The fact was that we identified it as
a significant contributory factor amongst others. I said very
clearly, I thought, in the report that I was not saying that the
Government had sole responsibility here. I could not see how the
Government could say it had no responsibility here.
Q26 Julie Morgan: You say you do
not have any costings for what your recommendations would result
in. Do you have any idea of the numbers of people involved?
Ms Abraham: The number of people
affected is the 85,000 that has been generally recorded. I did
not get into any attempt to cost these recommendations because
the recommendation was that Government should take the lead in
developing a solution. It was not that the Government should immediately
go and write a cheque.
Q27 Julie Morgan: When the Government
announced the Financial Assistance Scheme, it did say it would
be reviewed fairly shortly. Do you have any idea or any indication
when this review will take place?
Ms Abraham: I do not have any
information about that.
Q28 Julie Morgan: Do you think that
a review could sort out some of these issues?
Ms Abraham: That would depend
on the review.
Q29 Paul Flynn: Could I declare an
interest? I have a constituency involvement and a member of my
immediate family lost his pension in Allied Steel and Wire. Is
not the nub of this what you said, that there could be no maladministration
if the price tag is too high?
Ms Abraham: I talked about that
in terms of an unsustainable leap of logic. It is not my way to
bandy around that kind of language.
Q30 Paul Flynn: Do you think, if
your report required compensation in thousands rather than billions,
you would have had no adverse reaction from Government?
Ms Abraham: The reaction was likely
to have been different. I am well aware that there is potentially
a high price tag here. I am very aware that when there is a high
price tag there is a proper debate to be had about contributions
from the public purse in government and Parliament. I have absolutely
no difficulty with that. I am a taxpayer like everybody else.
What I find very difficult is to be told that my findings and
conclusions are unsustainable. I think my findings and conclusions
are very straightforward. I suppose I need this Committee to tell
me if I have taken leave of my senses but I do not think the report
shows that.
Q31 Paul Flynn: After the Maxwell
scandal in 1990 the Pensions Act was designed to put that right.
I see it was heralded by the Government at that time in 1996 and
they said that changes were needed as the Government wanted to
remove any worries people had about the safety of their occupational
pensions following the Maxwell affair. The minimum funding requirement
was intended to make sure that pensions are protected whatever
happens to the employer. That seems to be a fairly clear statement
made by another government in 1996. Do you think this has affected
public opinion and perception of occupational pensions and do
you have anything to say about the role that the occupational
pension industry put on the Conservative Government to weaken
the 1995 Act?
Ms Abraham: I do not think I have
anything to say about that specifically. My report has a very
detailed chronology of the events which go back before the legislation
came in. It is the case, as you identify, that more than one government
was involved here. The report, before it goes into the detail
of the official information in the leaflets that were published,
shows in a preamble to that what the evidence told me about the
role Government had taken upon itself in relation to these matters.
What I identified is that the design and operation of the legislation
and regulatory framework was Government designed; Government promoted
the benefits of occupational pension schemes; Government talked
about the need for greater financial education. It saw itself
as having a key role in promoting better education and inflation
about pensions. It said at the time that this official information
in these leaflets was aimed to assist people to make informed
choices about their pension options. The department in its successive
forms set itself standards for official information. It talked
about accurate, complete, clear and consistent. It talked about
complete meaning containing no significant omissions. Successive
governments were not bystanders here. They took it upon themselves
to have a role and that is the backdrop to the specific finding
of maladministration in relation to the official information I
looked at.
Q32 Paul Flynn: If we take the argument
that the Government has put forward about the causal link between
the advice that was read, is it likely that most people read it
in retrospect rather than reading it at the time? With the experience
we have on how few people read government advice on this or any
other matter, is it not likely that the whole atmosphere then
was that occupational pensions were a better deal than personal
pensions and you would certainly not get ripped off if you went
into them; that the information coming from the pensions industry
and from the employers themselves was to build up a feeling of
confidence in the system that was not justified? Is it reasonable
to blame it all on government leaflets which were read at the
time probably by very few people?
Ms Abraham: That is not what people
told me. People did produce pretty dog-eared copies of leaflets
that they had had in files for some time. There are two things
I would like to say. One, to bring it down to the hard findings
of maladministration about the official information, because that
is what the report says led to the injustice. There is lots of
other stuff in the report about actuarial decisions and MFRs but
it is the official information that I am critical of. I talked
about information that was inaccurate and you have quoted the
1996 DSS leaflet which said that pensions are protected whatever
happens to the employer. They were not. The leaflets that were
incomplete, 1998-2004, posed questions like, "Should I join
my employer's scheme? How do I know my money is safe?" They
did not say anything about the scheme being only as secure as
the employer and they did not mention the risk to pension security
on wind-up. How does that pass the no significant omissions test?
Q33 Paul Flynn: What John Hutton
said in his parliamentary statement was that the leaflets were
general and introductory in nature. They were not a full statement
of the law. They made both these points clear. Did they?
Ms Abraham: I do not think they
did. I would quote back to DWP its own standards for official
information: "Information should be correct and complete"—DWP's
own public information policy statement—"Information
should be appropriate, relevant, correct, up to date, clear, concise.
Any information we provide must be timely, complete and correct."
I would also quote back to DWP its own Secretary of State on issues
of burden of proof and redress. This is a response to a previous
report by one of my predecessors: "The giving of wrong information
by government departments is inexcusable. There is a clear responsibility
to ensure that the information provided is accurate and complete.
As a matter of principle, we believe that when someone loses out
because they were given the wrong information by a government
department they are entitled to redress." This is not some
standard or test that the Ombudsman has dreamed up. This is me
assessing the department against the test that it set itself.
Q34 Paul Flynn: There was an absence
in these leaflets, I understand, of any suggestion that people
should seek any financial advice or give any information that
was crucial if they did not want to.
Ms Abraham: The no significant
omissions point is the one that hits home for me. If you think
about what were the biggest risks in relation to these schemes,
the security of the employer and the position of non-pensioners
on wind-up were huge risks.
Q35 Paul Flynn: Your recommendations
apply to everyone who was in a final salary scheme in the relevant
period, regardless of whether they read the leaflet or not. Is
that reasonable?
Ms Abraham: I quote the department's
own principle back: "We will also provide redress for those
people who were wrongly informed and who, had they known the true
position, might have made different arrangements." The burden
of proof here in past cases has been recognised by government
to fall on the Government to demonstrate that it had given official
information that was complete, correct, clear and consistent.
In these circumstances, that is not so. On the point you make
about the extent to which redress should be applied here, what
is the right solution in these circumstances with these findings
of maladministration by the Ombudsman, I have asked government
to consider what should be the solution here. What I find difficult
is a response that says, "No, we are not even going to consider
that." It is entirely right and proper for government and
Parliament to say, "That is all very interesting. The Ombudsman
made these findings. We accept that but the recommendations for
redress are more than the public purse should properly bear."
That is a legitimate decision for government and Parliament. It
is not one that I would have anything further to say about. What
I am concerned about is a response that says my findings of maladministration
are unsustainable as are the tests that I have applied in relation
to this official information. What is wholly unreasonable about
those tests?
Q36 Paul Flynn: I accept that entirely.
Do you think it is reasonable in future, when huge sums of taxpayers'
money are involved in this, that the entire responsibility should
be taken up by government? There were trustees who were supposed
to look after the interests of these pensioners and there were
the firms themselves. Most employees did not expect their employers
to behave like a bunch of crooks and take their money. Is it right
that the government should pick up the tab in every instance and
the trustees and the employers get off the hook?
Ms Abraham: The report does not
say that.
Q37 Paul Flynn: I am sure it does
not but that is the situation surely?
Ms Abraham: I do not see why that
should be the case. Some of these schemes have resources. There
are issues of law and the structure of the way payments might
be paid. There is the issue of annuities. These are not matters
for me. In terms of why I thought the government should take the
lead here in developing a solution, developing a solution does
not mean writing a blank cheque; it means developing a solution.
Government can make changes to the law. Government can make changes
to the regulatory regime. There is an infrastructure that government
has that it can apply. It has collection and enforcement powers.
The report never says anywhere, although it has been asserted
that it does, that the taxpayer should make good all these losses,
however they arose.
Q38 Paul Flynn: The Government has
made a final statement on this and they have now promised us a
final, final statement.
Ms Abraham: I think it is a full,
final statement.
Q39 Paul Flynn: Do you have any inkling
what might be in it?
Ms Abraham: I do not know.
Paul Flynn: Were you consulted about
the proposals to change the Ombudsman's term of office to an eight
year non-renewable one?
Chairman: Can we stay with the pension
report for the moment, unless you have established a subtle link
between the two?
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