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24 Jun 2009 : Column 286WH—continued
The problem reflects on Parliament more broadly. As a number of right hon. and hon. Members have said, the ombudsman is an officer of Parliament. She is not a government ombudsman but a parliamentary ombudsman.
In undermining her report by cherry-picking the conclusions that she made nearly a year ago, the Government are undermining Parliament and the way in which we should resolve such matters.
Sir John Butterfill: Does my hon. Friend agree that that would give the Government an opportunity to explain to the House and the nation why they believe that depositors in Northern Rock and other failed banks are more worthy of support than the long-term savers in Equitable Life?
Mr. Hoban: I am sure that the debate will provide the Government with an opportunity to respond not only to that question but to questions on what has led to the delay in compensation to Equitable Life’s policyholders. It will be important for the Government to set out their case on how they have sought to deal with the matter.
A number of Members referred to the statement made in January by the then Chief Secretary to the Treasury, now the Secretary of State for Work and Pensions, and the mismatch between that statement and the Command Paper published shortly thereafter. The matter has not been properly debated on the Floor of the House in Government time in a way that would allow us to address that inconsistency of approach. It is time for the Government voluntarily to make themselves accountable, rather than us having to raise the matter in Westminster Hall in order to maintain pressure on them.
The hon. Member for Taunton (Mr. Browne) said that he rather hoped that the Economic Secretary to the Treasury would respond to the debate. Although there may be virtue in continuity, continuing to do the wrong thing is not virtuous.
I appreciate that the Exchequer Secretary has been in post only for a few days, and that she has been on a rollercoaster, but I hope that she will not box herself in when responding to the debate. I hope that she leaves herself enough wiggle room to look afresh at how the Government have handled the matter and to see whether anything can be done to speed up the resolution of the issue. Each day longer means fewer policyholders receiving justice.
Several Members spoke of their constituents’ concerns. They are not alone; constituents have been writing to me since I was elected in 2001, setting out their problems in coping with the financial problems that have arisen as a consequence of what happened at Equitable Life. They want to see justice. Like the hon. Member for Brent, North (Barry Gardiner), they cited the Prime Minister’s statement on Barlow Clowes. The Prime Minister was as tenacious then in fighting for justice as he is tenacious now in trying to avoid giving justice to Equitable Life’s policyholders. That attitude needs to change. The disparity in his approach is clear to all.
A point needs to be made about confidence in the pensions system. People entrust their money to pension companies. They want to make provision for their retirement. They want to ensure that they have a reasonable income in retirement. However, they expect the regulator to perform its duty by regulating those pension companies. What we have had, of course, is a decade of failure.
The hon. Member for Taunton was right that the problem lay not only with the Labour Government from 1997; the regulatory issues started under the preceding
Conservative Government. At each stage, whether the regulator was the Department of Trade and Industry, the Treasury or the Financial Services Authority, those policyholders were let down. The ombudsman seeks to address that in her report—to recognise that there was maladministration, that the maladministration led to injustice, and that payment must be made to reflect that injustice. It undermines people’s confidence in the entire regulatory system that, where there is evidence of maladministration and injustice, payments to policyholders do not seem to flow from that. It leads people to question whether their money is safe, and to ask whether those institutions are well regulated. That important point needs to be resolved.
Mention has been made of Sir John Chadwick. I believe that Sir John has been dealt a difficult hand. He was given terms of reference with a narrow focus, which restricted his ability to consider various issues. The Government have clearly set out the findings. However, Sir John produced his first issues paper last week. He hopes to receive conclusions in mid-July and to produce a further report in August. My understanding of what Sir John said in his report is that there will be many stages to the process before policyholders receive the justice that they deserve.
I wish to ask the Minister some questions about progress. During our last debate, it was suggested that Sir John was in the process of recruiting an actuarial adviser. Has that been completed? Is an actuarial adviser in place? If so, who is it? In the statement made by the then Chief Secretary to the Treasury in January, she suggested that Sir John’s work would go in tandem with work that the Treasury had undertaken. Will the Minister outline what the Treasury has been doing since January?
At the time of the previous debate, Sir John had had one brief meeting with Equitable Life. Will the Minister tell us how many more meetings Sir John has had with Equitable Life since then? Based on the work done by Sir John and the Treasury to date, does the Minister have a better estimate of how long it will take before the first policyholder receives the first compensation cheque? It is nearly a year after the ombudsman published her report, and still there is no sense of who will receive compensation, how much they will receive and when they will receive it.
Will the Minister confirm Sir John’s comments on means-testing? When the then Chief Secretary said in January that the Government were seeking to compensate people on whom Equitable Life had had a disproportionate impact, it was suggested that that meant means-testing. Sir John said in paragraph 3.10 of his report:
“I am satisfied that the Terms of Reference do not require me to engage in any form of means-testing in relation to individual policyholders.”
Will the Minister confirm that means-testing is no longer on the agenda?
In recent weeks, the Government have been clear in their use of language about policies to help with the recession. They talk about “real help now”. That rings hollow for Equitable Life policyholders. They have been awaiting justice, have suffered a decline in their income and have been struggling to make ends meet. I believe that they deserve real help now.
3.49 pm
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): It is a pleasure to welcome you to the Chair, Mr. Caton. I congratulate my hon. Friend the Member for Leeds, North-East (Mr. Hamilton) on securing this debate. It is a testament that the events surrounding Equitable Life continue to command a lot of attention from many hon. Members, as it should.
Although this is the first time I have been called upon to appear in a ministerial capacity at a debate on Equitable Life, I have spent a considerable time getting up to speed and I am fully aware of the previous debates. Having looked through them, I think that it is fair to say that we are not covering much new ground today. Many of the arguments have been heard many times in this House. However, I thank all hon. Members, all of whom spoke eloquently on behalf of their constituents, for their contributions this afternoon. The Government always welcome healthy debate and continuing scrutiny, but I must be clear from the start: our position has not changed. We have made our response to the ombudsman’s main report and we stand by it. We explained our reasons behind every rejection of her findings, and we believe that we had cogent reasons for doing so.
Reflecting the limited extent of her jurisdiction, the parliamentary ombudsman’s second investigation into the regulation of Equitable Life’s with-profits fund under the Insurance Companies Act 1982 regime, which has now been superseded, looked exclusively at the role of the prudential regulator and the Government Actuary’s Department. It was not permissible for her to consider the actions of Equitable Life or any other party within the private sector. The substantial report published by the ombudsman in July last year was the culmination of her four-year investigation. The factual and technical complexity of the issues that she investigated, which themselves contributed to the length of her investigation, are the reasons it has been necessary for the Government to take time to consider the report. Indeed, the Government would have been rightly criticised had they not considered the report carefully before giving their response.
I repeat that the Government accept that maladministration occurred in some areas and that in some cases, but not all, that might have led to injustice for policyholders. The ombudsman welcomed the Government’s acceptance of maladministration and of the fact that some policyholders will have been adversely affected by regulatory failures. We have apologised for that—and I do so again today—on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life between 1990 and 2001.
We also accept that some policyholders might have suffered a disproportionate impact as a consequence of the maladministration and injustice accepted by the Government. We have looked in detail at the ombudsman’s central recommendation for a compensation scheme. Several hon. Members suggested that the Government are at fault in not accepting the recommendation that we should establish and fund a compensation scheme with the aim of restoring those Equitable Life policyholders who suffered a loss as a result of the maladministration. However, such views fail to take account of the important principle, recognised by Parliament, that it is not generally appropriate for the taxpayer to pay compensation, even in the event of regulatory failure. The regulator is not
the guarantor of the regulated and the taxpayer does not stand as the insurer of last resort. The responsibility to minimise risk and to prevent problems from occurring in a particular institution lies, first and foremost, with the people who own and run that institution, as was pointed out in Lord Penrose’s report. Lord Penrose also found regulatory system failures—I do not disagree with him—but concluded that they were secondary.
The ombudsman recognised in her report that the Government have to consider first the public interest and secondly their responsibility to taxpayers generally to balance competing demands on the public purse. The Public Administration Committee’s report stated:
“The decision to compensate must not be the equivalent of signing a blank cheque on taxpayers’ behalf.”
That is why we have set up a process that will establish the facts on relative losses experienced by different groups of policyholders and the factors affecting those losses.
Mr. Hoban: Is the Minister saying that the Government decided to restrict the number of findings made by the ombudsman because of the constraints on public finances?
Sarah McCarthy-Fry: Categorically not. The right hon. Member for Haltemprice and Howden (David Davis), who is no longer in his seat, made an intervention on this point. We are not delaying our response, and did not disagree with the findings, in order to save money.
Barry Gardiner: I, and many other hon. Members, accept that the Government’s intention is not to delay simply to reduce costs. That would be an abhorrent allegation. None the less, that is the effect of what is happening. The Government must seriously address that point and speed things up to avoid that impression.
Sarah McCarthy-Fry: We intend to find a resolution with our scheme as quickly as possible, but we also need to get it right.
My hon. Friend the Member for Leeds, North-East mentioned the recent approach proposed by Sir John, which he intends to operate, and the issues to be addressed. My hon. Friend and others said that Sir John should be able to consider all cases raised by the ombudsman, and not just those that the Government agree with. We have cogent reasons for accepting only those cases of maladministration and injustice set out in our response. However, we had equally cogent reasons for departing from others, and it would be irrational to ask Sir John to consider those. It is important that we get this process under way as quickly as possible where we have accepted maladministration and injustices. For those cases, we want Sir John to get on with the scheme.
We all agree that this is a complex matter. The ombudsman accepted that any scheme would take a considerable time—two and a half years, she said—but we are not setting a time limit. We need Sir John to do the work, but we share everybody’s concern that the scheme pay out as swiftly as possible.
The hon. Member for Fareham (Mr. Hoban) asked about progress. Sir John has established his office and appointed its key staff, and has met and corresponded with Equitable Life. I do not have to hand the number of times, if any, he has met it since the first meeting. However, I shall write to the hon. Gentleman with that
information. Sir John has established a website through which interested parties can keep informed of his work. Equitable Life has now provided him with records about policyholders. He has issued his document setting out his proposed approach and the issues to be addressed. He has asked interested parties to comment on those proposals by 17 July. That is quite a tight time scale, but we are trying to get the scheme under way as quickly as possible. If any hon. Members wish to comment on his proposed approach and issues, they should get that information to him.
The hon. Member for Taunton (Mr. Browne) said that Sir John has few resources available, but actually he is assisted by a team of office staff, ranging from counsel to administrative support and a private secretary, and the team has recently been joined by the expert actuarial services of Towers Perrin—that answers another point made by the hon. Member for Fareham.
As the Economic Secretary has stated, our preference is not for a means test, and we are certainly not asking Sir John to advise us on whether there should be one. However, we shall consider Sir John’s advice if, when he has finished the process, he comes to a different conclusion. We are giving him a wide remit to consider how we can deliver the desired outcome.
It is regrettable that the parliamentary ombudsman felt it necessary to lay her further report recording her view that the injustices that she found will not be remedied. We have the greatest respect for the office of the ombudsman, and where we departed from her findings in the main report, we did so only after very careful consideration. When she announced the Government’s response in January, the then Chief Secretary explained that there is no easy solution to the problems at Equitable Life and the faults that were found. She also made it clear that the Government believe that their response to the ombudsman’s report is the right one. I agree with that.
The new help for policyholders announced is fair to them and to taxpayers. The need to resolve this matter is acknowledged on both sides of the House, including by hon. Members today. I restate the Government’s commitment to introduce their ex gratia payment scheme as quickly as possible.
School Governing Bodies (Appeals)
4 pm
Rosie Cooper (West Lancashire) (Lab): I am delighted to have the opportunity to debate the issue of procedures for appeals against school governing body decisions. The need for the debate arose from the direct and personal experience of my constituents. One case with which I have been involved concerned a child with special educational needs. Those educational needs were not being met and, over a number of years, contributed to the child’s exclusion from school. The family as a whole was outrageously failed because of the fundamental flaws within the governing body system.
The focus of this debate is to demonstrate how existing complaints procedures for schools cannot offer independence and objectivity, how the very nature of governing bodies makes them reliant on educational professionals, and how the systemic flaws mean that parents are unable to seek an alternative redress for their complaints.
In one particular case, the child had been diagnosed with Asperger’s syndrome. In year one of primary school, it was noticed that the child was displaying symptoms of “unusual behaviour”. His teacher had highlighted that the child was struggling in school, and, many years later, that was confirmed by a psychologist. The initial failure of the school was not to request an assessment of the child by that educational psychologist. Teachers often expressed serious concerns about the child’s behaviour in class. Over a three-year period, the school failed to take appropriate and reasonable steps to meet the special educational needs of the child.
The situation came to a head when the head teacher allegedly behaved inappropriately, which provoked an outburst that resulted in the expulsion of the child from the school. It was at that point that the parents sought redress from the school’s governing body through a formal complaint. It took more than nine months from the submission of the original complaint for the chair of governors to report that his investigation was concluded.
The contents of that final report failed to address the questions that were asked in the original complaint. Moreover, there is the question of how a governing body can be allowed to take nine months to complete an investigation. How can a simple investigation take that long? The length of time was due in part to the actions of the local education authority, which at best could be viewed as incompetent and at worst wilful misconduct.
Five months after making the initial complaint, the local authority had not replied to the parents. The following month, the parents received a letter stating that the local authority had written to them three months earlier, and, in the absence of a response to its letter, which had never been received by the parents, the LEA indicated that it had assumed that the parents had ended their request for an investigation. When the parents were provided with a copy of the original letter—it was sent electronically—it was clear that it had been created at the same time as the letter telling the parents that it was assumed that they no longer wished to proceed.
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