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"Regulation is never an easy job and mistakes, even serious ones, will occasionally be made, but the real test for government is how it then responds."
So how have the Government responded? How have they passed the test? The reality, as policyholders see it, is that at each step of the way the Government frustrated the fight for justice for Equitable Life's policyholders. We need only look at the fight that we had to allow the ombudsman a second investigation into Equitable Life. First, the Government claimed that it was outside her remit-an argument that was disproved by my hon. Friend the Member for Chichester (Mr. Tyrie); then the report was delayed because the Government suddenly found new documents; then the Government bombarded the ombudsman with further comments, through the Maxwellisation process, as she sought to finalise the report. Then, although the report was published in July last year, the Government gave its formal response only in January, rejecting some of her findings of maladministration and injustice, and thereby triggering the court case in which there was a judgment earlier this month. I am pleased to say that the Government have accepted the findings of that case, as many people were concerned that they would appeal and delay the process still further. It is particularly welcome that those judgments include bringing trapped annuitants into the scope of the scheme.
At every step of the way, we have seen delay. Each delay has put off the day when eventually policyholders would receive compensation for the failings of the regulator-failings that were evident from the Penrose report published five years ago. Each delay has meant that policyholders have had to get by on much reduced pensions; instead of enjoying their retirement they have struggled and had to fight for justice. Each delay has also meant that, sadly, some people will never see justice, as policyholders die. The Government should be ashamed of having tried to block attempts to give justice to people who have been so badly let down over a decade by regulatory failure.
Conservative Members have been clear throughout this process. We have said that if the ombudsman found that there was maladministration owing to regulatory failure and that compensation was required, we would accept those findings. That was our position while we campaigned for the ombudsman to be allowed a second investigation, that was our position when the ombudsman published her report last year, and that is our position today.
Mr. Letwin: Does my hon. Friend agree that it was a signal moment when the Chief Secretary announced, on behalf of the Government, a constitutional doctrine whereby it was not necessary for the Government even to accept the findings of the ombudsman, leaving aside the question of compensation, and drew a distinction between that and a court judgment without ever explaining it?
Mr. Hoban: My right hon. Friend echoes an important point that was touched on by the ombudsman and raised in the Public Administration Committee report. There is almost a sense that the Government are using the ombudsman's status as an investigator rather than a judicial authority to wheedle their way out of taking responsibility for these things.
I want to return to a point that the Chief Secretary made on a couple of occasions when he said that there is a principle whereby the Government do not compensate for regulatory failure. If that were the case, the public bodies being investigated by the ombudsman would have been excluded by the Parliamentary Commissioner Act 1967, but they were not so excluded. That has led to the current position in which the ombudsman has the power to recommend that compensation should be given in cases of maladministration. Under the existing regulatory system, the Financial Services Authority is excluded from the ombudsman's remit. However, the approach that the Government have developed to the ombudsman's findings in this case was not raised in 2004, when the ombudsman sought a second investigation into Equitable Life, but emerged rather late in the day when the Government were trying to find a way to confound the ombudsman and confound policyholders' fight for justice.
Mr. Redwood: As the Minister who promptly paid compensation, with the permission of the House, after the regulatory failure in the Barlow Clowes case was found to be maladministration, may I ask my hon. Friend to confirm that a future Conservative Government would be prompt in making some compensation available to Equitable Life victims?
Mr. Hoban: My right hon. Friend speaks from his experience of Barlow Clowes. The Prime Minister has tried to avoid paying compensation to people who suffered loss through the maladministration of Equitable Life. He is trying to block the process and has fought every step of the way to prevent that from happening. I am happy to say that we want to ensure that policyholders receive the justice that they deserve. The Chief Secretary was careful in his language and phraseology about quite what would happen in spring 2010, so it seems that whoever wins the next general election will have to deal with the problem, and clear up the mess that this Government have left, in order to provide justice for Equitable's policyholders.
Miss Julie Kirkbride (Bromsgrove) (Con): I suspect that my hon. Friend's constituents, like mine, have been e-mailing him to say that they will be listening to the debate and watching how we vote. Tomorrow, as a result of what the Chief Secretary and others have said, I shall write to all the policyholders of whom I am aware. Does my hon. Friend have any advice or observations that I might put in those letters about how people who have suffered incredible financial loss might take their case forward from here?
Mr. Hoban:
I have some clear advice that my hon. Friend might wish to give her constituents. History has shown that this Government have consistently sought to block compensation for policyholders who have lost as a consequence of maladministration, whereas the Conservative party has argued in favour of compensation for policyholders when there has been evidence of
maladministration. There is a clear distinction to be drawn-a clear choice to be made, to use the phraseology that the Prime Minister is keen on-between the approaches of this party and the Members on the Treasury Bench. I hope that my comments are sufficiently clear for my hon. Friend to include them in her letter to her constituents tomorrow.
Sammy Wilson: Will the hon. Gentleman outline how he would approach the issue of compensation should there be a change of Administration following the next election? Would he be happy to go down the route recommended by the ombudsman, or would he be looking for a tailor-made scheme drawn up by his party?
Mr. Hoban: We accept the ombudsman's recommendation that payments should be made to policyholders who lost out. She was right to make her points about relative loss and the impact of compensation payments on the public purse, and I do not believe that anybody in the House disagrees about how that is to work. However, we need to consider the matter of the tribunal. Strong arguments have been made about how it should work and why there needs to be independent review, but I am conscious that policyholders have waited a long time for justice, because the Government have sought to frustrate and block the process. It is all very well for the Chief Secretary to be reasonable now, but some of his predecessors have been less than reasonable. I want to see justice given to policyholders speedily and fairly. They have waited long enough, and we should implement the scheme as quickly and fairly as possible.
We have been clear in our support for the ombudsman's recommendations. That is our position today and would be our position if elected at the next general election. We have also accepted the ombudsman's finding that there was a decade of regulatory failure. The Chief Secretary talked about cleaning up the mess that had been left, but he should acknowledge that some of the regulatory failures that the ombudsman identified happened on the current Government's watch. If he has cleaned up anybody's mess, it is the mess that has arisen as a consequence of the delays in dealing with the problem.
We agree with the ombudsman that policyholders should receive payments for relative loss and that the impact on public finances should be taken into account. We now need to understand how quickly the Government can move. Since January, when they accepted some of the ombudsman's findings-they have now been forced by the courts to accept others-the Treasury has failed to set a timetable for the resolution of the problem. That failure, coupled with the Government's tactics to date, create the strong impression that the Treasury wants to kick the matter into the long grass and put it off for another few months. That is not fair to policyholders, who want some certainty about when they might see a payment.
We have made some progress with the Government, and the Chief Secretary has announced that he expects Sir John to put forward a design for a payments scheme in spring 2010. What is less clear is when policyholders would receive their first payments under such a scheme. He said that the ombudsman's proposals might not mean payment before December 2010, but do the Government believe that payments will be made before that point under their scheme? Policyholders need further
clarity, and I am surprised that the Government have not produced an indicative timetable of what may happen once Sir John puts forward his scheme. Perhaps when the Exchequer Secretary winds up the debate, she will put some flesh on the bones of what the timetable beyond spring 2010 should be. The Public Administration Committee called for an indicative timetable in its report, and it is disappointing that the Government have failed to establish one.
Anne Main: Will my hon. Friend touch on the Chief Secretary's words today that seemed yet again to indicate that means-testing is on the agenda, and on whether the Government are giving any steer on how the means-testing assessment will work? We have no idea what criteria the Government are thinking of using.
Mr. Hoban: What the Government mean by "disproportionate" is one of the matters that they are yet to address. The Chief Secretary's predecessor, the right hon. Member for Pontefract and Castleford (Yvette Cooper), was pressed on that when she made a statement in January. No further progress has been made on elaborating on what that means, which creates uncertainty in the minds of policyholders and a sense of doubt about the outcome. We need the Government to clarify their thinking about what "disproportionate" means in practice.
Mr. Robert Syms (Poole) (Con): A lot of Equitable Life policyholders are in great financial difficulty and quite frail. Is there a possibility of interim payments to assist them, or are they going to have to wait until the very end, when everything is done and dusted with the compensation scheme?
Mr. Hoban: My hon. Friend raises an important point. Some people affected are suffering real hardship, which has been prolonged by the delay in introducing the scheme. Once the Government have decided upon a scheme, having received Sir John Chadwick's recommendations next spring, I hope they will consider that seriously. There is a real risk that the suffering and hardship will continue without any clear end in sight.
Anne Milton: Does my hon. Friend agree that this is actually all very simple? A lot of hon. Members will make speeches today, but what my constituents want to know is what they are going to get, when, and what the calculation is based on.
Mr. Hoban: My hon. Friend is absolutely right: that is what our constituents want to know, and it is the essence of this debate and of the letters that we receive. I understand that Sir John Chadwick needs to work through what the scheme might look like, but when policyholders will get money is a really important question to answer. I thought that the Chief Secretary was going to get there today: he had a little dance around it, and teased us with, "I will come to that directly." I hoped that we might actually get a date, but all that we got was spring 2010.
We have had such statements before from the Government. We were promised a response to the ombudsman's report before Christmas, but it did not
appear until the start of this year. The whole process has been characterised by delay after delay by the Government, and some certainty is required for our constituents who have lost out.
Dan Rogerson (North Cornwall) (LD): The hon. Gentleman is rightly focusing on the time scale involved, and other hon. Members have probed a little on that. However, I want to be clear about what he is saying about his party's position on this crucial issue. Has he decided that it is out of the question to go for what EMAG has been campaigning for, which is a completely independent tribunal? Is he setting aside any ambition for that and saying that any influence that his party might have in future will not be brought to bear on securing that?
Mr. Hoban: All I will say to the hon. Gentleman is that we want to see policyholders compensated quickly and fairly. We all need to bear that in mind when thinking about how the process might develop. By next spring, so much work might have been done by Sir John Chadwick that setting up a tribunal could delay justice still longer. We need to be really careful and to think this through to ensure that we get the right outcome for policyholders, who are waiting anxiously for some resolution of the issue. Sadly, as every day goes by, more policyholders die. I wonder whether they would thank us for further delaying the process.
Let me raise a couple of broader issues that we need to address. As my right hon. Friend the Member for West Dorset (Mr. Letwin) said in an intervention, the whole episode has brought into question the way in which the Government approach the ombudsman's work. At times, it has appeared that the ombudsman is an inconvenience and an irritant, whose work should be treated as a distraction. We must remember that the ombudsman is an Officer of the House, and the way in which the Government have dealt with her undermines an office of the House and is disrespectful to it. The fact that the ombudsman has had to issue a further report on Equitable Life is a sign of how frustrated she has been on the matter.
In evidence to the Public Administration Committee, the ombudsman said that
"the Government's response was 'strong on assertion, short on facts', and that it 'fails to address the basis on which [she] came to several of [her] findings'. As she put it...Perhaps another way of saying that is the response says that I said something different to what I actually said and then says it disagrees with something I did not say".
I do not think that that is a very good position for an Officer of the House to find herself in. The Committee reported:
"The fact that the Ombudsman feels that she has been misunderstood and misrepresented is an indictment of the quality of the Government's arguments as presented to the public."
We should acknowledge that the Chief Secretary has sought to redress that by recognising that the ombudsman's work has been undermined and that it should be celebrated more, but of course, what he needs to remember is that as MPs, we rely on the ombudsman to investigate claims of maladministration. To treat the ombudsman in such a way is to undermine the office and erode our constituents' confidence in the mechanisms that Parliament has set up to protect and help them.
I mentioned regulation and compensation in an intervention. The handling of Equitable Life, from start to finish, has undermined people's confidence in the regulatory system. The way in which the Government have sought to block the ombudsman's investigation into Equitable Life undermines confidence in the regulatory system. People want to know that the mechanism that is in place to protect them works and is respected, but the fact that the Government have sought to frustrate the ombudsman's inquiry undermines people's confidence that that mechanism is working. Therefore, we need to think very carefully about the relationship between Parliament and the ombudsman and what lessons we should learn from the process.
Mr. Oliver Heald (North-East Hertfordshire) (Con): Does my hon. Friend agree that one of the biggest challenges facing this country is persuading people to save for their future, particularly in the form of pensions? Half the population do not do so at the moment, so a saga such as this, in which people have no confidence in the pensions that they have bought, is an absolute policy disaster. The matter needed addressing a long time ago, and it is time the Government got on with it.
Mr. Hoban: My hon. Friend is right: the episode has undermined people's confidence. They need to have confidence in the pensions system if they are to save for their retirement, and also confidence in the regulation. People will not look beyond the headlines and will not be looking at the fine detail of the Parliamentary Commissioner Act 1967, which set up the office of ombudsman; they will just get the sense that the system that has been set up to protect them has not worked.
We need to ensure that our constituents understand that the actions that have been taken and the processes that have been put in place to protect them are now effective and working. Once we get people to trust those processes, perhaps we will see an increase in saving for retirement.
In conclusion, because I am conscious that other Members of the House want to take part in the debate-
Bob Spink (Castle Point) (Ind): Before the hon. Gentleman concludes, will he give way?
Mr. Hoban: No. I have been generous in taking interventions and have gone on for rather longer than I had hoped, and I am coming to the conclusion of my speech.
I ask those from across the House who signed early-day motion 1423 to vote in favour of the motion. That would be a clear sign to the policyholders that we are united in support of their campaign for justice, and a sign to the Treasury that the House wants speedy action to resolve the problem as soon as possible, and will not tolerate any more delays, obstruction or prevarication. It is not a partisan issue; it is about justice for policyholders, who put their faith in a regulatory system that has let them down. It is time for Members on both sides of the House to say to the Government that enough is enough, and that justice must be done.
Madam Deputy Speaker: Order. I remind all hon. Members that Mr. Speaker has imposed a 15-minute limit on contributions from Back Benchers.
2.5 pm
Dr. Tony Wright (Cannock Chase) (Lab): I shall speak for much less than 15 minutes; indeed, I had not anticipated speaking at all, but I rise simply to say that I regard the matter-this will not go down well in the Whips' quarters-as a House matter.
When our ombudsman-the parliamentary ombudsman-makes a report to the House and says that injustice resulting from maladministration has not been remedied, and when she is then moved to make a special report to the House, which has happened on only four previous occasions in the history of the office of ombudsman since 1967, she is entitled to ask the House to take a view. All she can do is report to the House and ask it to take a view on whether her reading of matters or the Government's is to be preferred.
It is extremely unfortunate that we do not have a mechanism that gives the House collectively-I would hope on a free vote, because it is a House matter-the ability to determine the issue. We have not had a chance to do that. It is in some ways unfortunate, but perhaps necessary, that the only mechanism that has been found is an Opposition party motion on an Opposition day. From the point of view of the House and the ombudsman, it would be much better if there was a mechanism by which we could test the House's opinion, in a genuinely independent way, on whether it wanted to accept what an ombudsman had said in such special circumstances.
In the conclusion of her latest and special report to the House, the ombudsman states:
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