Examination of Witness (Questions 40-59)
MS ANN
ABRAHAM
2 MAY 2006
Q40 Paul Flynn: I think there might
be. Do you see yourself staying in office for a sufficient time
to make sure that justice is done to the pensioners involved?
Ms Abraham: Might I briefly answer
the question because there is a very simple answer to it. Yes,
I was consulted and, secondly, it does not affect me personally.
Q41 Mr Prentice: Why do you think
the Government has rubbished your report and why did they do it
within 24 hours of your report's publication?
Ms Abraham: There are two questions
there. In a funny way, I am not sure it has rubbished my report.
I think it has rubbished a different report. I was trying to do
this all along in relation to the investigation, certainly in
the latter stages. I was trying to get the department to address
what the report did say rather than attack what it did not say.
So far I seem to have singularly failed to do that. That may be
something to do with my powers of persuasion. Why so quickly?
The response that is in the report which I had from the Permanent
Secretary was that they did not want two months to think about
it because that would only raise expectations unreasonably and
they did not want to do that. Equally, the Secretary of State
has said subsequently that the report does deserve a considered
and full response so I am waiting for that.
Q42 Mr Prentice: The Secretary of
State for Work and Pensions told the House on 16 March that there
would be a full response in the next few weeks and I am just wondering
what is delaying things.
Ms Abraham: I have no idea.
Q43 Mr Prentice: Why did you not
let the Government see the actuarial advice that you relied on
in constructing your report?
Ms Abraham: Because I did not
rely on it. I had a couple of exchanges with DWP about this and,
in a way, I wish I had let them see it now because it still seems
to be itching away.
Q44 Mr Prentice: Will you let them
see it following this meeting today?
Ms Abraham: I may well because
it still seems to be an issue. There is a summary of the advice
in the report annexed as a summary. I explained that I wanted
some help from an actuarial adviser to help me understand some
of the concepts here, to educate and inform me, but there is nothing
in the actuarial advice that I rely on in relation to any of my
conclusions.
Q45 Mr Prentice: People out there
would think it is critically important that you make this information
available because the Secretary of State told us on 16 March that
the government actuary has advised the Ombudsman that if the advice
was not disclosed it made it impossible for anyone to understand
the basis on which she reached her conclusion that the Government
was guilty of maladministration. It is kind of important that
you make this information available, I suggest.
Ms Abraham: With respect, I do
not think it is important in terms of the substance. None of my
conclusions turn on anything that the actuaries said. At the time,
I thought it was a diversionary and delaying tactic and I had
no idea what on earth DWP was going to do with my actuary's advice,
all 65 pages of it, other than seek to second guess it. If you
look at the conclusions, including the conclusions on the decisions
to change the MFR basis, those are all findings of maladministration
based on process. Nowhere does it say that it was a wrong decision
or that the actuaries got it wrong. Frankly, for the government
actuary who is in effect an adviser to the body of jurisdiction
to advise me anything at this juncture feels a bit strange. I
took actuarial advice in order to assist me in understanding the
concepts. I did not rely on it at any point in the report.
Q46 Mr Prentice: Reading your report,
we all understand the trauma that people have felt. You talk about
people committing suicide as a result of all this. I wonder where
the responsibility really lies. Paul asked you about the trustees
and the Government would say—I use this expression all the
time myself—it is a big, nasty, capitalist world out there.
The Government cannot be responsible for everything. It is the
trustees involved in the individual schemes that are responsible.
You say very little about the role of the trustees in your report,
notwithstanding the fact that one of your representative cases
is a trustee. Why did you not say more about the role of the trustees
in monitoring these schemes?
Ms Abraham: I suspect, like me,
you will know the circumstances of many of these trustees. Some
of them were trade union members. Some were pensioner trustees.
In a past life I have been in a situation where the charity that
I worked for had its own pension scheme with lay trustees. I was
not investigating their role. I was not saying they had no responsibility.
A number of the people who complained to me were trustees and
they expressed themselves to be similarly confused by, misled
by, the government information as were the other scheme members.
Q47 Mr Prentice: The fourth representative
complainant was a trade union nominated trustee. You say nothing
about the role of the trade unions in your report, so far as I
can gather. What were the trade unions at this time advising their
members who happened to be trustees of occupational pension schemes?
Ms Abraham: I did not investigate
the role of the trade unions or the trustees as such but I think
my report does say something about the role that trade unions
and trustees could have played if they had not, in the phrase
of one of the complainants, been sleep walking into disaster here.
I have been on the receiving end of a trade union that made very
strong representations about the level of contributions to an
occupational pension scheme because of concerns about under-funding.
The point here is the ability of scheme members to take that remedial
action. That is one of the injustices that I identified in the
report. They did not know that there was any need to take those
sorts of remedial actions because they had understood that the
scheme was safe whatever happens to the employer.
Q48 Mr Prentice: I am a lay person
in these matters, grappling. It is very complicated stuff.
Ms Abraham: No, it is not.
Q49 Mr Prentice: Is it not?
Ms Abraham: The subject matter
is complicated but the issues are simple.
Q50 Mr Prentice: What about the professional
advisers? Were they sleep walking like the trade unions? What
were they saying throughout this period? What were the professional
trustees doing?
Ms Abraham: They were doing a
variety of things. I talked to the actuarial profession because
I was very interested to understand what the profession was saying
to its members and to government. The actuarial profession did
understand the risks, did warn the Government that scheme members
and certainly scheme trustees did not understand the risks and
made recommendations that action should be taken here, which again
is one of the decisions that I looked at. I have not found maladministration
in the Government's decision not to take action here, but I think
the profession was warning that there was a lack of understanding
amongst many trustees. Those warnings were not acted upon.
Q51 Mr Prentice: Is the Government
solely responsible for acting upon those recommendations rather
than the industry press, if that is what we call it, saying, "Hang
on a minute. There is a red light flashing here. We have to take
stock and check whether the minimum funding requirement will deliver
what the members of any particular scheme believe it will deliver"?
Ms Abraham: No, it would not because
it was never the policy intention that it would. I think you go
right back to the start.
Q52 Mr Prentice: This is where I
take issue because, reading your report, all through your report
there are references by government ministers. I have one here:
3 April 2000, Jeff Rooker speaking in the House. He says, "The
minimum funding requirement is not a guarantee of solvency. I
freely admit that as a lay person I thought it was." He goes
on to talk about the perils of relying on the minimum funding
requirement as a guarantee that certain benefits were definitely
guaranteed to be paid out. That was years and years ago. Why is
it that the professional bodies involved did not do anything about
it?
Ms Abraham: They did do things
about it. If you are talking about the actuarial profession, they
warned the Government of the risks. In relation to individual
schemes, the scheme actuary would have been providing an evaluation
and they would have been looking at that. I have looked at the
role of government bodies in this whole situation. My findings
are about the role of government bodies. Despite the maladministration
I have found in official information, I have not found that these
financial losses were the sole responsibility of government. It
is very clearly set out in the report, I hope, that there was
a variety of factors which contributed to these losses and the
government information was one of those. Very simply what the
report seeks to say—I had hoped to try to do it in a very
measured, considered way, recognising that there were substantial
price tags potentially attached to this—to Government was,
"You took this role upon yourself. You took upon yourself
the role of being the educator, providing official information.
You did not have to do that. There is no statutory requirement
to do that. You said you would promote these schemes. You cannot
say you have no responsibility here and you cannot turn your back
on these people."
Q53 Mr Prentice: You were previously
chief executive of the Citizens' Advice Bureau that dishes out
a million and one leaflets on every subject under the sun. You
would not believe any more than I would that every leaflet, whether
it is health and safety or some other issue, would purport to
be a comprehensive statement of the legal position on an issue
of question, would you?
Ms Abraham: I go back to what
standards did the department set itself. When I look at complaints
and take a view on whether there has been maladministration, my
staff will know that there is a gramophone record that repeats
itself: what should have happened here? What is our reference
point? What is our test for saying that the department, the agency,
fell short? My test here is the Government's own standard which
was about accurate, complete, no significant omissions, clear
and consistent. It failed all those tests.
Q54 Mr Prentice: The Government thought
it was being helpful. There is no statutory requirement on the
government to publish these leaflets. Admittedly, it had a policy
objective about encouraging people to join occupational pension
schemes but it was just helping people without giving a definitive
statement of what in their case would be right for them regarding
their future pensions. That is what the Government is saying.
Ms Abraham: I know what the Government
is saying but this is the same Government that took upon itself
the role of financial educator and said that it was producing
official information to assist people to make informed choices
about their pension options and, in doing so, missed out some
critical information about the risks to the security of those
schemes.
Chairman: If the Government put out a
leaflet saying, "We are making the streets safer", described
the number of extra police and community support officers and
all the anti-crime devices it is putting in and then someone goes
out and gets mugged, they cannot run to you, can they, and say,
"Look, I read this leaflet. It said that the streets are
getting safer. I went out and I got mugged"?
Mr Prentice: I have been delivering these
leaflets.
Q55 Chairman: This is maladministration
and the Government on the same analogy has also been giving people
advice about how to keep their houses safer and fit alarms. Is
that not the same kind of thing?
Ms Abraham: If the leaflets you
describe had something equivalent in them to "As a matter
of principle we believe that when someone loses out because they
were given the wrong information by government departments they
are entitled to redress", I would look very carefully at
that. I have not dreamed up some list of standards for official
information that I am now using to beat the department with. I
am looking at their own standards and saying they do not meet
them.
Q56 Kelvin Hopkins: In reality, the
report you made was inevitable, given the circumstances. It is
not just about money but about politics with a capital P. Your
report would inevitably challenge the political spirit of our
times, about shifting the state out of our lives because implicitly
in your report you are saying—and I agree—bring the
state back in.
Ms Abraham: You can read it another
way and say take the state back out.
Q57 Kelvin Hopkins: Leave people
to their own devices entirely?
Ms Abraham: Once government takes
upon itself the introduction of a regulatory regime which is this
hands on—I will not go into the minimum funding requirement
because it is complex and actuarial—this is complex territory.
Once you bring in a regime which is this precise, there are responsibilities
that go with that. For example, this is philosophical stuff and
it probably is outside my territory so I will be cautious. The
priority order on wind-up is what really bites in relation to
non-pensioner members. Before the introduction of the priority
order, the scheme trustees could have done some balancing. There
is only so much in terms of this resource and, "We will look
at pensioner members and non-pensioner members". Once you
bring in a regulatory regime which is this precise, there are
responsibilities that go with it. Once you take upon yourself
the role of financial educator, the standard goes up. Making general
statements like, "We will just produce a general leaflet
and people may or may not read it"—once you have said
you are the financial educator—you have to do it to the
proper standard.
Q58 Kelvin Hopkins: If we go back
in time, the previous government urged people to get out of state
occupational schemes and into private pensions—complete
madness which proved to be a disaster. Was the 1995 Act a panic
reaction when things started to go wrong, not just with those
private schemes but with the occupational schemes? Could you not
say that the writing was on the wall then and that they had a
dubious future?
Ms Abraham: There are a lot of
factors at play here. It is not my place and it will not be helpful
for me to speculate on or comment on the history of the pensions
industry over the last 10 years. This report, although it has
been claimed otherwise, seeks very squarely to deal with what
is the Ombudsman's business. All of the conclusions and recommendations
turn on some very basic findings of maladministration in relation
to official information. They do not turn on actuarial advice
or MFR decisions. That is my trade and that is what I should comment
on.
Q59 Kelvin Hopkins: Without putting
any remedies forward, your findings—coming at about the
same time as the Turner Report—throw the whole pensions
industry into question and mean Government has to face up to something,
when they have been driving in the other direction for a long
time.
Ms Abraham: That is coincidence
and one of a number of things coming together.
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