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Equitable Life

11 am

Jo Swinson (East Dunbartonshire) (LD): I am glad to have the opportunity to lead this debate on Equitable Life. There can be few hon. Members, if any, who have not been contacted by constituents affected by the Equitable Life saga. Given the scale of interest, I am pleased but not surprised to find myself so popular in Westminster Hall today. It is good to see such a high turnout.

When Equitable Life was forced to default on its obligations to policyholders in 2000, we saw the breakdown of the world’s oldest mutual life insurer—a humiliating moment for a venerated institution. The shockwaves caused by the failure of a body as huge as Equitable Life are considerable. The report of the parliamentary ombudsman, Ann Abraham—“Equitable Life: a decade of regulatory failure”—is the 13th such report to be published. The post-mortems that have taken place over the past eight years have found fault with this Government and with the preceding Conservative Government. Beyond the blame games, however, one thing is clear: Equitable Life policyholders continue to press their case in the hope of seeing justice done.

Bob Spink (Castle Point) (Ind): The hon. Lady has brought an important subject to the House before it prorogues, so I congratulate her. Is she aware that some Equitable Life policyholders are elderly pensioners, who will die before they can see justice done? Does not that place a new sense of urgency on the Government to act?

Jo Swinson: The hon. Gentleman is quite right that the issue is urgent. In fact, 30,000 policyholders have already died since 2000 and the situation gets worse every week that goes by. It is incumbent on the Government to make a swift response to the report.

In opening today’s debate, I will highlight the Government’s cynical tactic of delay on Equitable Life and their responsibility to support the role of the parliamentary ombudsman. I will also look at the case for Equitable Life compensation in the context of the bank bail-outs.

The ombudsman’s report contains 10 findings of maladministration—against the Department of Trade and Industry, the Government Actuary and the Financial Services Authority—and makes two recommendations: that a full apology should be given to policyholders and that

The language used in the report pulls no punches, and its recommendations are clear, precise and straightforward.

Mark Williams (Ceredigion) (LD): I pay tribute to my hon. Friend for securing the debate. Does she agree that it is even more timely, given the support that the Government have given to individual savers in the Icelandic banks, which, while laudable, has compounded the sense of bewilderment among victims of Equitable Life?

Jo Swinson: My hon. Friend makes a good point, which I shall come to later. The Government have spent years adopting a siege mentality towards Equitable
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Life, but the ombudsman has shown that they cannot hide for ever. Ministers must now accept the ombudsman’s recommendation that wrongs should be remedied.

Mr. David Heath (Somerton and Frome) (LD): Does my hon. Friend agree that this is a matter not only of justice for those who have lost money through the Equitable Life debacle, but of the credibility of the ombudsman? If the Government cannot respond to such clear direction from the ombudsman, there is little point in having an ombudsman and we should accept that the whole system is defunct.

Jo Swinson: My hon. Friend is absolutely right; the very credibility of the ombudsman is at stake here.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): That is exactly the point that I wanted to make—about the credibility of the ombudsman. I congratulate the hon. Lady on securing the debate. Will she agree to lead a delegation of cross-party MPs to meet with the ombudsman and show him the extent of feeling on the issue in the House? I should say, her.

Jo Swinson: I would very much like to lead such a delegation to the ombudsman—Ann Abraham. I also— [Interruption.]

Mr. Jim Hood (in the Chair): Order. I know that there is great interest in the debate and a lot of hon. Members are in attendance, but I hope that hon. Members will restrain themselves and allow the hon. Lady who has secured the debate to make her case without putting her off with comments or laughter.

Jo Swinson: Thank you, Mr. Hood. Before I move on, I would like to pass on the apologies of my hon. Friend the Member for Richmond Park (Susan Kramer), who cannot be here today due to a long-standing constituency engagement. The Minister will know that she has taken a keen interest in this matter. She made what I thought was a sensible request for him to agree to a meeting with a group of hon. Members who have a large number of Equitable Life cases involving constituents to allow them to put their thoughts to him. I hope he will respond positively to that request.

The Government’s response to Equitable Life is overdue, not only in terms of the parliamentary ombudsman’s report, which they said they would reply to this autumn, but in terms of time. It is nearly eight years overdue, because ever since Equitable Life came near to collapse in 2000, they have tried to put off, postpone, defer and delay the actions needed to bring this sorry saga to a close. As I have already mentioned, Ann Abraham’s latest report is the 13th report on Equitable Life since 2001. We have heard from the Treasury Committee, Lord Penrose, the Corley Institute of Actuaries, the European Parliament and many more. And still, the Government have failed to act to help Equitable Life policyholders, despite now facing a charge of maladministration from the ombudsman.

Lord Penrose was handed the task of reporting on Equitable Life, but was given terms of reference that prevented him from finding anyone to blame. That was an opportunity missed for closure on the case. Furthermore, when the then Financial Secretary, the right hon. Member
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for Bolton, West (Ruth Kelly), made a statement in the House on the publication of Lord Penrose’s response, she made a point of the fact that the report did not blame regulators or recommend compensation, despite being fully aware that those were outside the terms of reference given to Lord Penrose.

Again, the Government tried to wriggle out of taking responsibility for dealing with the situation. Far from bringing closure, the Penrose findings prompted the ombudsman to seek to change the law so that she could pursue a more thorough, wide-ranging report, going back much further than her initial investigation.

Ann Abraham initially stated that she hoped to complete her investigation by 2005, but the report took four years to produce. That was not helped by Government obstruction. In 2006, the ombudsman revealed that she had been delayed by nine months, waiting for the Department for Work and Pensions to comply with requests for information. Surely, that is unacceptable.

After a long wait, the ombudsman’s report arrived in July. The Government promised to reply by the autumn, and when pressed on that at business questions, the Leader of the House said:

That is not quite the full story, however, as a draft copy of the ombudsman’s report was issued to all interested parties in February 2008. Assuming that Ann Abraham did not radically alter the conclusions of her four-year work between February and July, the Government have been aware of the report’s contents for the best part of a year.

David Taylor (North-West Leicestershire) (Lab/Co-op): I congratulate the hon. Lady on securing this important debate. Is she not surprised that during that four-year period, the ombudsman, who is an inestimable woman, was unable to indicate how any compensation scheme might work or give any indication about the overall cost and where it might fall, and that even simple information such as the number of people affected is not included in that lengthy report? Can the hon. Lady account for those lamentable lapses?

Jo Swinson: The hon. Gentleman knows that this is a complex matter and that 55,000 documents were submitted to the ombudsman by Equitable Life alone. Her task was to find where the blame lay and what should happen next. I believe that it is up to the Government to deal with the details of finding out how to implement such a compensation scheme and assessing how much should be paid to each individual. Every individual will have lost a different amount.

Jeremy Wright (Rugby and Kenilworth) (Con): I am grateful to the hon. Lady for giving way and I add my congratulations to her on securing the debate. Does she agree that those who have suffered as a result of this saga would probably be prepared to accept, as does the ombudsman, that the full measure of their loss is unlikely to be repaid to them, but that what they find impossible to understand is why some measure of compensation
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could not have been worked out by now and paid to them by the Government, who should accept their responsibility?

Jo Swinson: Certainly the Government need to accept their responsibility. The timetable laid out by the ombudsman is that the entire affair should be done and dusted in a little over two years, which most people would see as a fairly swift outcome, given that there has already been eight years of waiting. We all want to hear whether the Government will take the recommendations on board.

Mrs. Caroline Spelman (Meriden) (Con): There are many Members here today, and we are grateful to the hon. Lady for giving us this opportunity to speak for constituents who have lost out.

Further to the point about the level of compensation, is it not ironic that this is the day after the Government were able to make such a huge amount of money available in the pre-Budget report? Comparing the compensation that we are talking about with the amount of money that the Government were prepared to throw at their problems yesterday, it seems even more incomprehensible that they cannot find it within themselves to create a compensation scheme.

Jo Swinson: The hon. Lady is quite right. In fact, she anticipates my next point.

Another opportunity to respond was missed in yesterday’s pre-Budget report. The Chancellor found money for a £12 billion cut in VAT and for borrowing at record levels, but again failed to address the situation faced by Equitable Life policyholders. Sadly, unless the Minister has something considerable up his sleeve, I doubt that we will be stunned by far-reaching new comments today.

One reason why I was so pleased to secure the debate was that the Government have been reluctant to discuss Equitable Life in the House. Before the summer recess, the Liberal Democrats tried for three consecutive days in July to secure an urgent debate on the matter. For three consecutive days, our request was denied. Now, finally, we can have a debate, although it strikes me that one of the issues up for discussion ought to be the definition of “autumn” to which the Government officially adhere.

Most people judge the seasons by calendar months, so autumn is September, October and November. Technically, there are still a few days to go, but with House business already programmed, there is no sign that the Government will meet their deadline. Incidentally, in addition to the Equitable Life response, MPs’ expenses were also due to be published this autumn, but we now hear that publication may not be before next July.

Does the Government’s definition of autumn also apply to Equitable Life? Given that they seem to have such bizarre definitions of the seasons, perhaps they might issue their own calendar so that we know where we stand. Better still, the Government could end the delay now by accepting the ombudsman’s recommendations in full and delivering a Christmas present to all those who have been affected.

Mr. Edward Garnier (Harborough) (Con): I congratulate the hon. Lady on securing the debate. I declare an interest as a person who has lost much and will, no
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doubt, lose more as a result of the Government’s handling of the issue. Why is she surprised by their fiddling with the calendar, as they seemed to redesign the dates for the beginning and the end of the economic cycle? Surely, it is all part of a pattern. The cheapest thing they could do, which they will not, is simply apologise.

Jo Swinson: The hon. and learned Gentleman is right to say that an apology should be forthcoming. The Minister could make a start on that today.

The Government’s tactic of delay has backfired. The result is a clear, comprehensive report by Parliament’s own referee, which contains two simple recommendations that must not be ignored.

Also, as was pointed out earlier, we should not forget that 30,000 Equitable Life policyholders have died since the events of 2000. For those people, it is already too late: justice delayed has been justice denied.

Mr. Brian H. Donohoe (Central Ayrshire) (Lab): I congratulate the hon. Lady on securing the debate. She has not yet mentioned letters from the ombudsman and the Treasury. I have every sympathy with those who have been affected. The ombudsman stated in her letter:

Mr. Jim Hood (in the Chair): Order.

Mr. Donohoe: The ombudsman went on:

Surely that should be the centre of our considerations.

Mr. Jim Hood (in the Chair): Order. The hon. Gentleman must resume his seat. Interventions should be short.

Jo Swinson: Thank you, Mr. Hood. Regardless of any compensation scheme for relatives, it is plainly obvious that justice for policyholders who have died is no longer possible.

According to the ombudsman, the fallout from Equitable Life could have been mitigated if action had been taken earlier. She states that

No more delays, no more dodging the issue—the time has come for the Government to face up to their responsibilities to Equitable Life policyholders.

As I mentioned earlier, the Equitable Life case has serious implications for the office of the parliamentary ombudsman. It is in the interest of the health of our democracy that we have an authoritative ombudsman to whom the Government listen and respond, but that is something that Ministers have been reluctant to support.

An exhaustive 18-month investigation by the ombudsman found the Government guilty of mis-selling occupational pensions to 125,000 people who lost their company pensions without warning or any chance to protect themselves. The Public Administration Committee, the European Court of Justice and the High Court judicial review all agreed that the Government should have protected those people’s pensions but failed to do so.
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The Government continued to resist pressure to pay compensation until December last year, when they finally agreed a compensation package of more than £3 billion.

Another of the ombudsman’s reports, in June 2007, looked at tax credits. Appropriately entitled “Tax Credits: Getting it wrong?”, the report contained severe criticisms of the Government’s use of waivers in respect of overpayments, calling them “unfair and inconsistent”. The ombudsman sought to correct faults in a system that causes stress and misery for people such as a constituent of mine who was overpaid by £5,300 and then told that the money had to be repaid within 12 months. In spite of the ombudsman’s criticisms, the Government continue to defend their over-complex tax credits regime.

Members of the Government have not always had such a frosty relationship with the ombudsman. Compare the cases that I have outlined with the situation when the Prime Minister was in opposition. An ombudsman investigation was instigated by his party into Barlow Clowes, which collapsed in 1988. It was he who argued that the Government of the day should support the ombudsman over charges of maladministration by the Department of Trade and Industry.

When Lord Penrose published his report in 2004, parallels were drawn between Equitable Life and Barlow Clowes. Speaking in the House after publication of the Penrose report, the right hon. Member for Bolton, West stated:

Now there has been such a finding, how can the Government possibly justify failing to act?

Lorely Burt (Solihull) (LD): However Equitable Life conducted itself in making guaranteed promises in respect of pay-outs, it seems that the charge of maladministration should in fact be for the Government themselves for failing, through all their bodies, to regulate and control the activities of Equitable Life. It is now incumbent on them to act.

Mr. Jim Hood (in the Chair): Order. Interventions should be brief.

Jo Swinson: Many thanks, Mr. Hood. I agree with my hon. Friend. In fact, I think that the title of the ombudsman’s report, “Equitable Life: a decade of regulatory failure”, makes the point incredibly clearly.

The report is a clear, detailed, high-quality piece of work. Four years of effort have gone into its 2,800 pages, with Equitable Life itself providing more than 55,000 documents to the inquiry. The report uses words such as “maladministration”. It calls the DTI “complacent” and sympathises with

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