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“must be consistent with sound public finances”.
His party has a rather different view from ours about what should happen to the public finances over the next few years, so his party’s assessment of that may be different from ours.
Mr. Brian Jenkins (Tamworth) (Lab): I welcome the statement and, in particular, the apology at the start. It looks as if we are coming to the beginning of the end of this sad, long saga. My right hon. Friend has in part answered the many requests made by Members today by saying that the scheme needs to be quick so that the money can get to those individuals who live in poverty because of this saga, and who might not have much longer to live. Will she tell us, today if possible, when she expects Sir John to get back to us on the first instalment? Will she then set up a pro rata payment system, or a system that pays some money to those pensioners? Who will staff it, and what process will we Members of Parliament have to use to ensure that those affected know who to write to, and what progress is being made with their claim?
Yvette Cooper: As I have said, my hon. Friend the Economic Secretary will update Members of the House on the progress made. Again, we will need to take a wide range of issues into account. Clearly, we do not want a judicial process that takes many years, and it is not at all Sir John’s intention to have one. We are talking about an ongoing process in which we will work with him, and we will receive his conclusions or findings as he comes to them on a monthly basis. I cannot give my hon. Friend a specific undertaking about a particular timetable, because I do not know how long it will take to complete that work.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD):
Earlier, the Minister mentioned that she could not take the route that the Government took with the banks, because in that case the Government were trying to restore financial stability. Surely we are trying to encourage investors once again to have confidence. Investors believe that they have been victims of maladministration and have had an apology; surely that
apology has to be followed up by a proper compensation scheme that is related to what they lost, not their circumstances.
Yvette Cooper: I think that a fair ex gratia payment scheme will take account of what people have lost, but it is also right to take account of the wider circumstances, as we have set out. I recognise the hon. Gentleman’s point about people’s approach towards their investments and the regulatory framework. However, the circumstances that we faced when it came to making decisions about the Icelandic banks, and the very serious financial stability problems that we faced in the autumn, were unique; that was a set of events the like of which we have not seen for many generations, and it was right to respond to those in a different way. I do not think that that necessarily has wider implications for how we deal with societies or companies in normal times.
Derek Wyatt (Sittingbourne and Sheppey) (Lab): I thank my right hon. Friend for her statement and apology. We in the House have dealt with the issue of occupational pensions schemes over the past five years, but Equitable Life is at least 10 times bigger than that. Can she tell us how large Sir John Chadwick’s office will be and how many people will be in it? Moreover, if she is to run a shadow system in the Treasury, how will that be staffed? Our experience with occupational pensions was that there was incompetence in analysing each individual case, and individual cases will be analysed in the case of Equitable Life, too. Will she report back before the summer recess to tell us where we have got to, so that we better understand the time frame? That is the key issue that most Members are concerned about.
Yvette Cooper: My hon. Friend the Economic Secretary and I will be keen to keep the House updated, and to report back at regular intervals—not only before the summer recess—on the progress made. Obviously, we are in discussion with Sir John Chadwick about the scale of resources or support that he needs to carry out his work, and I am happy to update my hon. Friend on that, and to write to him in due course.
Mr. Andrew Tyrie (Chichester) (Con): What obstacle was there to getting Sir John Chadwick’s work under way immediately after the publication of the ombudsman’s report and as soon as it became clear that some compensation would be necessary? That would at least have sped up this whole ghastly process by six months.
Yvette Cooper: I think that the hon. Gentleman would recognise that the ombudsman took four years to complete her work. It has taken us some months to consider the issues that she raised, and to ensure that we can set out a process that is fair to both taxpayers and policyholders, and that takes into account wider issues to do with the relationship between the Government and financial markets and the role of the regulator within financial markets. The ombudsman has raised a whole series of complex issues. We have given them detailed consideration and have come to our view. We think that the next step will be for Sir John to carry out his work, while we work alongside him on some of the practical measures.
Mr. Gordon Prentice (Pendle) (Lab): I, too, welcome the Government’s apology, but regret that we have heard nothing similar from Conservative Members. On the fair payments scheme, is it the Government’s intention to cap payments to individuals, or the totality of the scheme?
Yvette Cooper: My hon. Friend makes an important point. It would be helpful if the Opposition recognised the history of the events and joined us in apologising to policyholders for the events that have taken place. My hon. Friend asks whether caps should be applied. We have said that we will ask Sir John Chadwick what approach should be taken, and how payments can be set out in a way that is fair. That is one of the issues that he will need to consider.
Mr. Stephen O'Brien (Eddisbury) (Con): After all the ducking, weaving and kicking into the long grass, the bottom line is that Equitable policyholders simply want to be restored to the position that they would have been in but for the five admitted instances of injustice and the 10 admitted instances of maladministration, not least on the reinsurance treaty, even under the current financial and prudential supervisory arrangements. Surely it must be right not to believe that a system is fair simply because the Minister says that it is fair. What can be said to any policyholder on the fairness of the system when there is uncertainty about whether they will be discriminated against in a scheme intended not to restore them to their former position, following maladministration and injustice, but to bring about social engineering?
Yvette Cooper: Again, the hon. Gentleman’s party’s position, as set out by the shadow Chancellor, is that
“policyholders cannot expect to receive payments for the full losses suffered”.
I have set out in some detail why we think that it is appropriate to set out an ex gratia payment scheme that recognises that there is a wider principle, which Parliament has recognised and supported in other cases. That principle is about the regulator not becoming the guarantor of the regulated bodies, and the taxpayer not providing a guarantee for regulated bodies. We have to ensure that the way in which the financial markets operate, and the way in which the relationship between the financial markets and the Government operates, is not fundamentally distorted by our changing a long-standing approach, taken in many areas, on how compensation is dealt with when it comes to regulatory failure.
We recognise, however, the circumstances raised by hon. Members, which is exactly why we have said that there should be ex gratia payments in cases of disproportionate impact, which will take account of the scale of people’s losses and their experiences. However, it is right to do that in a way that is fair to taxpayers as well as to policyholders, and that takes account of the importance of a sustainable system in future.
Dr. Gavin Strang (Edinburgh, East) (Lab):
Again, on the time scale, does my right hon. Friend accept that because this prolonged and fundamental regulatory failure occurred more than eight years ago—and a significant number of the people who suffered losses have died—it is vital that we proceed with extreme urgency? The ombudsman recommended that a compensation payment scheme be set up within six months, but does she accept that what matters is how
quickly people receive those payments? Can she give them some encouragement that the measure will proceed at some speed?
Yvette Cooper: There are significant questions about whether it is possible to set up the kind of scheme that the ombudsman recommended within a six-month period. The Select Committee on Public Administration did not feel able to assess whether that was a sensible or plausible time scale. My right hon. Friend is right to say that we need to do this as speedily as possible, but I hope that the House also accepts that these are complex issues. The ombudsman herself has said that people with different circumstances have been affected in different ways. We need to look at the information about the policyholders and their position to take this forward.
Mr. Andrew Pelling (Croydon, Central) (Ind): Like many hon. Members, I too have received a lot of correspondence from my constituents in Croydon, Central. Would it be unsafe for me to write back them telling them to expect some payments to start this calendar year?
Yvette Cooper: I cannot give the hon. Gentleman a specific timetable for the payment, and I would not want to mislead him. We have asked for the information from Sir John Chadwick, and we must also undertake additional work on the practical issues. I would not want to give people misleading information, and I am trying to be straight with them about the fact that we simply do not know how long it will take. However, we accept the important points that people have made about the need to implement this as fast as possible, bearing in mind the points that my hon. Friend the Member for Aberdeen, South (Miss Begg) made about the need to make sure that it is fair, too.
Mr. David Drew (Stroud) (Lab/Co-op): I very much welcome what my right hon. Friend had to say, and I am interested in the proposal for an interim arrangement. Will she include in that arrangement policyholders’ widows and widowers as a priority, particularly older ones, who have lost out doubly from the whole process?
Yvette Cooper: We will look at all those issues. However, we would not want to set up an interim payment scheme that ended up being so complicated that it delayed the main payment scheme. We will take all those things into account when we set out the next steps.
Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): I am sure that many thousands of our constituents will be relieved to hear the statement but, as ever, the devil is in the detail. The right hon. Lady will have thought about the staffing needed to do this quickly and properly, and about from where those staff will be drawn, even before Lord Justice Chadwick finishes his deliberations. I hope that she will correct me if I am wrong but—call me a cynical old lawyer—“ex gratia” often means selling someone short to make them go away.
Yvette Cooper: Work is under way on the resources needed for the work over the coming months, and I am happy to keep the House informed of our progress. We are attempting to do this in a way that is fair to taxpayers, as well as to policyholders, and takes into account people’s different experiences.
Barry Gardiner (Brent, North) (Lab): My right hon. Friend’s statement was a gracious one, and her apology in particular was gracious, which will mean a great deal to many of my constituents. Speed and simplicity—
Mr. Deputy Speaker: Order. I do not want a statement from the hon. Gentleman, particularly at this stage—he must ask a question.
Barry Gardiner: Will my right hon. Friend ensure that there is an examination of the way in which those people who are closest to their latest years in life, and who have been most severely disadvantaged by the losses that they have suffered from Equitable Life, will be part of an interim scheme to make sure that they receive some benefit before their lives come to an end?
Yvette Cooper: One of the issues that we want to look at is the age of policyholders, their circumstances and the extent to which they have been affected. As I have said, we will look at the issue of interim payments but we would not want that to delay the overall scheme. We must take all those things into account and ask the judge’s advice.
Miss Julie Kirkbride (Bromsgrove) (Con): May I press the right hon. Lady on the issue raised by the hon. Member for Stroud (Mr. Drew)? If she cannot promise that the estates of deceased policyholders will be compensated for their losses, can she at least promise that widows and widowers who, because of the losses in Equitable Life, have lived in penury since their spouses died, will be included in the scheme?
Yvette Cooper: I can certainly say that that is one of the issues on which we will ask for Sir John’s advice about taking disproportionate effect into account. That means looking at what the disproportionate effect is, its impact on family members, and other issues. We will ask Sir John to look at that and advise us on it, and we will deal with it as speedily as possible.
Kelvin Hopkins (Luton, North) (Lab): I must declare a personal interest that has no bearing on my comments.
This is the result of a gross failure of regulation under successive Governments, so there is a case for full compensation for all those who have lost out. I know I am not in a minority in saying so, but it is the case. In future, would it not be sensible, advisable and, indeed, necessary for the Government to declare that when something is regulated, people will be compensated, or to tell them, “You’re in the market—you’re on your own”? The final alternative is to set up a much larger state savings system in which people are guaranteed returns and have no fear of loss.
Yvette Cooper:
My hon. Friend makes an important point. We do not have a system of regulation in this country under which any investment in the markets is guaranteed by the regulator, who would effectively become a guarantor of the system. It would not be fair to the taxpayer to have a system in which every time a company did something dodgy and the regulator failed to prevent them from doing so, the taxpayer had to step in and make good the losses. We recognise the importance of the issue of financial stability when the Government have to act, as well as the fact that, as in this case, there
are examples of disproportionate impact as well as maladministration. It is therefore appropriate to act in this case, but it would lead to a fundamentally different relationship between Government and the financial markets and, perhaps more importantly, between the taxpayer and financial markets, if we moved to a system of automatic full compensation whenever there was any kind of problem in the financial markets, including regulatory problems. That is why we have taken a different approach.
Sandra Gidley (Romsey) (LD): Many people will welcome the compensation, but there is still uncertainty, because they will benefit only because of the disproportionate impact and the position of the public finances. What assessment has the Minister made of the proportion of policyholders who are likely to receive compensation?
Yvette Cooper: The hon. Lady makes an important point. We have simply been unable to make that assessment, because we do not know policyholders’ circumstances at the moment. We have anecdotal evidence from individual members, but we do not have detailed information, which is why we have asked Equitable to provide us with it. We will work with the judge to answer the legitimate question that the hon. Lady has put to us.
Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): I can understand why my right hon. Friend is concerned that an interim payments scheme might add further complexity. No one would want that, but surely it cannot be beyond the wit of all the experts involved to come up with some simple interim payments scheme, because people are going to need some form of payment in a reasonably short time. I am sure that the welcome that policyholders will give today’s announcement will be qualified by the talk of the months and years that payments might take. Some people need money much more quickly than that, and I strongly urge my right hon. Friend to consider some form of interim payment scheme as part of the package that she is now discussing.
Yvette Cooper: I should like to make it clear to my hon. Friend and to the House that we are prepared to consider an interim payment scheme. We will need to take a range of issues into account, but we are keen to look at all sorts of options. We will do whatever we can to speed up the process, especially for people who need payments to be made as swiftly as possible.
Sir George Young (North-West Hampshire) (Con): But have not the exchanges over the past hour shown that there is widespread anxiety on both sides of the House about the Chief Secretary’s proposals? Does that not underline the need for an early and calm debate in Government time on what she has put forward? In the meantime, can she at least say that it is her intention that the first compensation payments will be made in the year 2009?
Yvette Cooper: The right hon. Gentleman has asked for a debate, and I shall pass his request on to the business managers. However, the principle that the regulator should not act as guarantor has been recognised in debates in this House, and it was set out and reinforced in the Financial Services and Markets Act 2000. That legislation continued the financial regulator’s long-standing exemption from claims for negligence in the courts. Successive Governments have supported that approach in order to be fair to the taxpayer and to recognise the relationship between Governments and financial markets. I should be very surprised if the Opposition really wanted to end that principle at this stage.
Several hon. Members have asked what the Government think that the timetable will be, but I have to be honest and say that we will ask the judge for advice on the matter. We will complete the process as speedily as possible.
Mr. Deputy Speaker: Order. I am afraid that we must move on. I apologise and am sympathetic to the hon. Members whom I have not been able to call, but I am sure that this subject will be another to which the House will return properly in the form of a debate raised by one means or another.
Point of Order
2.22 pm
Dr. Julian Lewis (New Forest, East) (Con): On a point of order, Mr. Deputy Speaker. I am sorry to have to return to the subject of the noise from Parliament square’s amplified protests, but you will remember Mr. Speaker’s statement on the matter on 28 October. He said then that he hoped to be consulted by the Government about hon. Members’ concerns about access and especially about abuse from amplified noise in Parliament square.
If, Mr. Deputy Speaker, you were in New Palace yard yesterday evening you could not have failed to notice that the protesters in Parliament square appear to have been given new equipment. It made the noise deafening for people well inside the parliamentary premises, so one can well imagine what it must have been like for the police and security officers near the gates who have to protect the premises.
Westminster council has admitted that its permission to make broadcasts from the square ran out almost a year ago yet, in anticipation of a statement from the Government, it has done nothing about it. Ministers told me in November that such a statement would be made imminently, but do you know whether Mr. Speaker has been consulted or given any indication of when this absurd and abusive state of affairs will be brought to an end?
Mr. Deputy Speaker (Sir Alan Haselhurst): I am indeed sorry that the hon. Member has had need to raise the matter again. I suppose that the short answer to him is that Mr. Speaker is still hoping to get a response from Westminster city council. I can assure him that Mr. Speaker will not let the matter go.
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