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19 May 2009 : Column 363WH—continued
11.34 am
Rosie Cooper (West Lancashire) (Lab):
I declare a personal pecuniary interest as an Equitable Life policyholder; but it is not in that regard that I speak today, but to give the views of some of my West
Lancashire constituents. I congratulate the right hon. Member for Haltemprice and Howden (David Davis) on securing the debate, in which thousands of individuals will take a keen interest.
As an Equitable Life policyholder I realise the problems that its failure has caused many families, when, after a lifetime’s work, their plans for the future have been destroyed, because the money that they were depending on is not there or has been much reduced. It is not my intention in the short time available to repeat comments that hon. Members have already made, but I have received significant correspondence from many people in my constituency who have been directly affected and who have expressed their views in no uncertain terms. One gentleman wrote:
“When I invested money in Equitable Life (over many years) I like other people had been led to believe that we were dealing with a high quality provider of great integrity.”
“I remember very well when I made my investment that I was confident that it would be safe; with the belief that I was investing into a blue chip Mutual Society. I thought I had done my homework in selecting Equitable Life...I now feel very deceived and let down. This was a cruel deception.”
Lastly an elderly female constituent remarked:
“I’m within a few days of my 80th birthday and am feeling very vulnerable on account of the worry and concern this whole affair is giving me.”
There is no shying away from how hurt and raw those individuals feel. They desperately want action and resolution in this sorry state of affairs.
Over many years the Equitable Life story has descended into tragedy for many; but just as I understand my constituents’ fears and their serious financial problems, by the same token I understand that the Government do not have a straightforward job. However, the Government must seek to reach a fair solution that will compensate people for the failure of regulation. I am pleased that they are committed to taking such action to help those who were hardest hit financially by the failure of Equitable Life, but many believe that they must do more. They must meet their commitment to Equitable Life’s policyholders.
It is important to acknowledge that the Government have accepted that maladministration took place, in line with the parliamentary ombudsman’s report. The request for an independent review, to ensure that the process for compensating policyholders will be sufficiently robust and accurate, is welcome. There are difficulties, as we have heard, and the last thing that we need is further complication. I want to impress on the Minister the real emotions of my constituents and many others whom we have heard about today, and what they live through each day as they wait for the outcome. I therefore implore him to ensure that the Chadwick review will be implemented as soon as possible.
Mr. Bill Olner (in the Chair): Two hon. Members want to speak, and I hope that they will both have an opportunity to do that. The winding-up speeches will start at 12 o’clock.
11.38 am
Steve Webb (Northavon) (LD):
I congratulate the right hon. Member for Haltemprice and Howden (David Davis) on bringing the subject before the House again. This is the latest in a series of debates that are always
well attended. I secured one in January, and my hon. Friend the Member for East Dunbartonshire (Jo Swinson) secured one last year. The strong turnout and the large number of hon. Members of all parties who want to participate show the strength of cross-party feeling on the issue. We all say that the Government’s response has been inadequate so far. The Equitable Members Action Group, to which I also pay tribute, takes that view.
I simply want to focus on what the ombudsman has had to say about the process. When, in March, the Select Committee produced its report, “Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life”, she submitted a written memorandum that bears highlighting. As the hon. Member for South-West Bedfordshire (Andrew Selous) has said, she is an Officer of the House and must be tactful, but some of her language is astonishingly blunt. It is not necessary to look very hard to see how angry she is at the way in which her hard work has been treated.
In all the detail, it is easy to lose sight of the simple fact that the ombudsman called for the Government to establish and fund an independent compensation scheme. Clearly, that is nothing like what we have. The ombudsman said:
“It is disappointing that the Government has decided not to accept all my findings and has rejected my central recommendation”.
She went on to use the phrase “once again”. As we have heard, the Government have form. She continued:
“Once again, the Government has thought fit to reject findings by the Ombudsman after a lengthy, detailed, complex and rigorous investigation.”
She noted that the Government acted
“as judge on its own behalf”.
What is the point of paying the ombudsman to spend years producing the most rigorous piece of work only to have it almost casually dismissed? I accept that it took six months to casually dismiss it, but that is what happened.
Ian Pearson indicated dissent.
Steve Webb: The Minister shakes his head, so I shall tell hon. Members why the ombudsman feels that her report has been casually dismissed. She has stated:
“First, the Government’s response provides insufficient support for the rejection of those findings.”
She has stated that the response includes only a
“brief statement setting out the Government’s view of the regulatory regime”.
That shows the casualness of the Government’s response; it is a detailed, thorough report that took years, and all we get from the Government is a brief statement. The ombudsman has stated that
“The standard applied in my report was grounded in a detailed analysis”,
but that the Government’s response seemed to be based on an “assertion”. That is the contrast—thorough, detailed, rigorous analysis was countered by assertion.
“Secondly, the Government’s response also fails to address the basis on which I came to several of my findings when rejecting those findings.”
In other words, the Government did not consider the reason for the ombudsman’s findings and deal with them. The Government did not deal with what led her
to make those conclusions; they simply rejected them. They did not deal with the ombudsman’s reasons for reaching those conclusions.
“Thirdly, the Government’s response begs the question as to what the purpose of regulation was supposed to be.”
The Government’s position, to paraphrase, seems to be that it would not have made a blind bit of difference if we had the best regulators in the world. The ombudsman has stated:
“If it were truly the case that the relevant regulators, acting without maladministration and operating the regulator system as Parliament intended it should be operated, could have made no difference...that would be astonishing.”
What is the point of having regulators? Whether or not they do their job, it makes no difference. It seems to be the Government’s position that the conduct of the regulators would have made no difference, which is absurd.
Finally, the ombudsman has highlighted her concerns about what she calls, “The Government’s alternative approach”. She has expressed five concerns. The first is about the lack of a detailed timetable. I hope that the Minister will be precise. His intervention was interesting, but I hope that he will be clear about what Sir John Chadwick said about when the first of the money will be paid. That is the bottom line.
The ombudsman’s second concern was that Sir John is only an adviser, and that if the Government can ignore her, they can now ignore Sir John. What do we have in the way of cast iron assurances? Her third concern is that she had set out her conclusions but that Sir John has been asked to respond to the Government’s reading of them. Surely, he should be asked to respond to what the ombudsman said, not the Government’s reinterpretation of it.
Annette Brooke (Mid-Dorset and North Poole) (LD): Does my hon. Friend agree that the Government’s criteria for the review seem to be to pay as little money as possible? Equitable Life policyholders believe that the Government are seeking the cheapest possible option. It bears little relation to justice.
Steve Webb: My hon. Friend puts her finger exactly on the point. It should be about justice rather than cost, but that does not seem to be the case.
Mr. Alan Reid (Argyll and Bute) (LD): I welcome this debate. Does my hon. Friend share my concern that the process may involve policyholders in engaging legal representation? The ombudsman’s service is free, and the policyholders have won their case with her. The Government have now imposed another process, which may require further hearings and possibly a confrontational process. We do not yet know, but it may involve costly legal representation.
Steve Webb: My hon. Friend is right that that should not fall on the policyholders. Many have already forked out as members of EMAG towards its legal action. We have an ombudsman in order to make such things unnecessary.
The ombudsman’s fourth concern about the Government’s approach was the lack of definition in their response and its “disproportionate impact”. The
hon. Member for Pendle (Mr. Prentice) made a good point when he said that without knowing the full circumstances of every household, one cannot know what is disproportionate, and who has been badly hit or not. That information is not available to Sir John Chadwick.
Mr. Prentice: On that very point, when I pressed the ombudsman at a meeting of the Public Administration Committee, she told me that it was the first time that a remedy would be means-tested. The disproportionate impact test is means-testing, which has never happened before.
Steve Webb: The hon. Gentleman is right, and the precedent is exceptionally worrying. Indeed, we need to ensure that it does not come about.
The final concern expressed by the ombudsman is that although Sir John has been asked to attribute a proportion of losses to the maladministration of the regulators, the losses are a complete thing—they cannot be subdivided in order to say how much of them were the company’s fault. She found maladministration by the regulators, and that cannot be subdivided. Her proposed remedy relates to the losses in full; they should not be carved up.
The ombudsman has summarised the matter by saying that the Government
“addressed findings that I did not make; sought to reinterpret and/or limit the basis on which I made certain findings; and provided a partial or incomplete response to other findings.”
I shall conclude with the words of the ombudsman—this is what is most alarming for policyholders, as my hon. Friend the Member for Mid-Dorset and North Poole has said. The ombudsman has said:
“It is clear to me that the nature of the Government’s response to my report means that the injustice I have found resulted from maladministration will not in every case be remedied—nor in any case will it be remedied fully.”
That is key. The ombudsman’s role is to seek remedy for an injustice caused by maladministration, which will not happen unless the Government think again.
11.46 am
Mr. Graham Stuart (Beverley and Holderness) (Con): I, too, congratulate my right hon. Friend the Member for Haltemprice and Howden (David Davis) on securing today’s debate. Like me, he knows that people throughout East Yorkshire have lost money with Equitable Life; and those who have not lost are offended by the way in which the Government have responded to a clear case of injustice.
As other hon. Members have said, if the ombudsman’s findings on one occasion were not sufficient, she has stated again, in an unprecedented way, that it is about justice—it is about remedy; it is about doing the right thing. The Minister has the unenviable task of bullishly trying to suggest that the Government are doing the right thing, when Members on all sides of the House can see clearly that they have not. The ombudsman has repeatedly made that finding. As others have said, what is the point of having an ombudsman if the over-powerful Executive—particularly at the fag end of their time—can
simply dismiss it and wave it away? Electors up and down the country, whether or not they have lost money, will judge the moral character of the Government on matters such as this.
Anne Milton: My hon. Friend may recall that, when intervening on my right hon. Friend the Member for Haltemprice and Howden (David Davis), the Minister used the words “as swiftly as possible”. Does he join me in looking forward to hearing the Minister explain exactly what that means?
Mr. Stuart: My hon. Friend brings me to a key point. In general, we are talking a relatively elderly group. As my right hon. Friend the Member for Haltemprice and Howden said at the start, people from that group are dying daily. Surely, that should affect the Government’s judgment.
The ombudsman gave the Government a window for not taking on the full cost of compensation. She said that the Government could not be expected to do so, and that it was legitimate to consider what the public purse could afford. What the ombudsman expected—what we all expected—was that the Government would grasp that opportunity, a dirty solution, and pick a sum. That sum would doubtless have enraged many and seemed inadequate, but the Government should have ensured that it was distributed—and distributed quickly—in order to bring justice, regardless of whether it was full justice. People would doubtless go to their graves muttering that it was not enough, but they would have had some sort of justice and closure.
I say to the Minister that the Government should give people closure. They have spent a decade fighting the Government and not getting an end. Even if they do not find it adequate, the Government should give them an end. They should give them certainty and some payment.
Andrew Selous: Does my hon. Friend agree that we should ask the Minister why the Government fund the ombudsman service from public funds, given that they see no value in the ombudsman’s findings?
Mr. Stuart: My hon. Friend makes an excellent point. The Government’s approach undermines the attitude of my constituents to the various institutions that they believe were set up to defend them. When those institutions that move to defend them can be utterly dismissed, it makes them doubt the political process even more than perhaps they do already—particularly given recent news.
Many of my constituents have seen their retirement plans left in tatters. They were upset by the Chief Secretary’s response to the ombudsman’s report, because it lacked transparency and openness. Policyholders are now as much in the dark about the Government’s intentions as they were before. I want to focus on some of the unanswered questions, and I hope that the Minister will respond to them. Given that the Government have rejected the ombudsman’s call for a Government-funded compensation scheme, will he give us a better idea of exactly who will receive the money?
As others have mentioned, the Government said that the money will go to those disproportionately affected by the collapse of Equitable Life, but none of us knows
exactly what that means. [Interruption.] The Minister shrugs, but will he spell it out for us today? Will it include those who have lost the most money, or will it be done proportionately? Will, as has been suggested, there be some form of means-testing? My constituents, quite a few of whom are old, frail and highly vulnerable, did all the right things, in the confidence—they believed—that the Government were standing behind the company with which they were investing. Are they to spend their time—often at a great age—filling out complicated Government forms, and going through the humiliation of accounting for every penny and income source, simply to access justice and compensation for the money that they had saved for their retirement, but which is now lost? Will he confirm that, as has been suggested, what moneys are eventually distributed will be mean-tested?
What is the time scale? Members have made this point again and again. The Chief Secretary indicated that it could be the full two and a half years, but when the Minister intervened on my right hon. Friend the Member for Haltemprice and Howden, he suggested that it might be less than that. I hope that he will ensure that we have a very clear idea by the end of this debate, because so many constituents from across the land are waiting for some idea of when this will all come to an end.
Last year, I received a letter from my constituent, Mr. Lee, who lives in Skirlaugh. His wife’s annuity lost about a third of its value. He wrote:
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