Select Committee on Public Administration Second Report

6  Conclusion

114. The Ombudsman's report is not the first inquiry to criticise the prudential regulation of Equitable Life. A report by a Committee of Investigation of the European Parliament (2007) considered that the Government was in breach of the Third Life Directive and subject to an obligation to recompense Equitable Life's members.[180] The internal review carried out by the FSA was critical of its actions, and Lord Penrose concluded: "the practices of the Society's management could not have been sustained over a material part of the 1990s had there been in place an appropriate regulatory structure adapted to the requirements of a changing industry that happened to manifest themselves in an extreme form in the case of Equitable Life."[181] Howard Davies also described the arm of the DTI from which formerly regulated Equitable Life as "ill-considered" and in need of being "tightened up significantly."[182]

115. We are, however, concerned that the Government may seek to reject the Ombudsman's determinations of maladministration. The Government has rejected the Ombudsman's findings on several previous occasions, which we considered in our previous Report, The Ombudsman in Question: the Ombudsman's report on pensions and its constitutional implications (July 2006).[183] While we are encouraged by the fact that the Government has taken more time to consider the report on Equitable Life than was taken in relation to the Ombudsman's report on occupational pensions, we were concerned by the Economic Secretary's suggestion that the Government could reject one of her findings simply "where we disagree with her".[184]

116. Following the Bradley case, the law requires "cogent reasons" for the Government to disagree with any of the Ombudsman's findings of maladministration, as the Economic Secretary has acknowledged.[185] The Ombudsman's Equitable Life investigation has been particularly thorough and painstaking: "a work of technical accomplishment and endurance", as the Minister put it to us. We cannot see how the Government could plausibly substitute its own judgment for that of the Ombudsman in these circumstances. During our 2005-06 inquiry into tax credits the Ombudsman told us:

    there is an important constitutional point here. I think it is my job to determine maladministration. If I make a finding which is wholly unreasonable that no reasonable ombudsman can make, and people have, complainants have challenged that in the High Court. Now, I am not suggesting for a moment that we should all toddle off to the High Court on these issues, but seems to me that there is a starting presumption that the Ombudsman knows her job and if I say that there is maladministration, I have not reached that view lightly and I do not expect the Government or permanent secretaries to say, "We don't agree" and walk away. They can argue with me, of course they can, and I may not be right and this Committee may take the view that I have done something completely off the wall. … but I think the place for those discussions is not in the Government or in the NHS where the Government somehow decides to pick and choose which of my findings it likes. There is an important constitutional principle here, it seems to me. This is Parliament's Ombudsman and I am here for a purpose.[186]

117. We agreed then and we agree now. We urge the Government to act without further delay and to accept the Ombudsman's findings of maladministration. She is Parliament's Ombudsman and it is imperative that the Government respects her conclusions. There are valid arguments to be had about the scale of compensation and the way that such cases should be handled in the future, but we would be deeply concerned if the Government chose to act as judge on its own behalf by refusing to accept that maladministration took place. This would undermine the ability to learn lessons from the Equitable Life affair. If it were to happen, we consider it would be necessary to hold a debate on the floor of the House to allow Members to discuss these issues and re-establish the Parliamentary Commissioner's role.

180   European Parliament, Report on the crisis of the Equitable Life Assurance Society, May 2007 Back

181   Penrose report, page 746 Back

182   Q245 Back

183   Sixth Report of Session 2005-06, HC 1081 Back

184   Oral evidence taken before the Committee from Ian Pearson MP on 9 December 2008, transcript due to be published as HC 41-i (2008-09) Back

185   Oral evidence taken before the Committee from Ian Pearson MP on 9 December 2008, transcript due to be published as HC 41-i (2008-09) Back

186   Oral evidence taken before the Committee on 20 October 2005, HC 577 (2005-06), Q 43 Back

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