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Mr. Mike Weir (Angus) (SNP): I thank the hon. Gentleman for giving way. I am listening very closely to his explanation of the process and the history of this matter. Many hon. Members have made excellent interventions, but is not the real shame of this the fact that this House has been completely unable to support the independent ombudsman against the Executive and so ensure that the matter was dealt with several years ago, as it should have been?
Mr. Hoban: The hon. Gentleman makes an important point. There is a quite a lot of frustration across the House about how the ombudsman has been treated. The hon. Member for Cannock Chase (Dr. Wright), the Chairman of the Public Administration Committee, has made comments along those lines-
Dr. Wright: I am very grateful to the hon. Gentleman. As he says, I have been critical of the Government on this issue on behalf of the ombudsman, but I have never understood what the Conservative position is.
Dr. Wright: Having read the motion, I am even less clear. When the ombudsman's report came out, it was widely estimated that it would cost about £4 billion to implement. I have never been clear as to whether the Conservative party was saying that that was a bill that it was prepared to meet. If the hon. Gentleman is not saying that, there will be a suspicion that what we are hearing is some kind of electoral noise.
Mr. Hoban: The hon. Gentleman refers to the bill for compensation, but no one knows how big it will be. That figure will be part of the outcome of the process that the Government launched back in January last year. He will know, from reading the ombudsman's report, that her recommendations on compensation had two important caveats-that payments to policyholders should reflect relative loss but that the impact of any compensation bill on the public purse should also be borne in mind. That position was accepted by the hon. Member for Twickenham (Dr. Cable) in a debate last year, and I think that the Government also accept it, as do the Opposition.
What we need to do is find out what the compensation bill is. The sooner that that happens, the easier it will be to put a scheme together. However, people need a clear timetable for when they can expect to receive compensation payments for the losses that they suffered as a consequence of maladministration.
Susan Kramer (Richmond Park) (LD):
I really appreciate the hon. Gentleman giving way again, as he has done so a great many times already. Is he aware that Sir John Chadwick's third interim report raises a number of real issues, such as the assumption that the regulator would always do the absolute minimum of minimums? That suggests that the report and the final decision will be very heavily disputed, and that that dispute could drag
on for a long time. Under those circumstances, does he agree that interim payments become more important, and that there should be a willingness to look beyond the exact words of Sir John Chadwick's report?
Mr. Hoban: The willingness to look beyond the words of the report will depend, of course, on who is in government at the time and their approach; but whoever that is and whatever their approach, we want resolution of this process. It has been going on for far too long, and the longer the disputes are about Sir John's report, the longer it will take for compensation to be paid to Equitable's policyholders. We need to bear that in mind. I shall now return to my speech, because I am conscious that many hon. Members want to take part in the debate.
From the Penrose report onwards, it has been clear that one factor contributing to the problems of Equitable Life was the action of the regulator. In the concluding paragraph of his report, Lord Penrose said:
"Principally the Society was the author of its own misfortunes."
"it may be appropriate to comment that 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".
The Government could have responded to the Penrose report by accepting that there was regulatory failure and acting upon that failure then. If those findings had been accepted and acted upon, it could have led to justice being delivered to the policyholders many years ago. The crisis at Equitable Life could have been put to bed then. But the Government chose to ignore those findings, and then sought to block any further inquiry by the ombudsman into Equitable Life.
The Government said that the ombudsman could not investigate the Government Actuary's Department-the Department that played the key role in the day-to-day regulation of Equitable Life-and therefore there could not be a second inquiry into the regulation of Equitable. The right hon. Member for Bolton, West (Ruth Kelly), the then Financial Secretary, stood firm on that until my hon. Friend the Member for Chichester (Mr. Tyrie) identified that the ombudsman's remit could include the Government Actuary, thus clearing the way for the ombudsman's second inquiry. That was a pivotal point in the process which led to the opportunity for the second inquiry into Equitable.
With the start of the ombudsman's work, policyholders might have thought the end was in sight, but they did not take into account the ability of the Government to frustrate the ombudsman's work. Documents previously thought lost were suddenly found, further complicating the ombudsman's inquiry. The new documents were not the only barrier that the Government put in the ombudsman's way. One might have thought that it was enough for the ombudsman to be bombarded with those documents, but then the Treasury decided to shower her with legal arguments on her findings.
When the ombudsman's report was published, however, its conclusions were clear. There were 10 findings of maladministration in her report, and her recommendations were clear too: because the maladministration had caused injustice, there should be a scheme to make payments to the policyholders. That was where she added the two caveats that I mentioned in my answer to the hon. Member for Cannock Chase. The first was that the compensation paid to policyholders should be based on relative losses rather than the absolute loss. That means that market conditions at the time should be taken into account when calculating the losses suffered by the policyholders-an approach that Sir John Chadwick has adopted in his work. The second caveat was that the impact on the public purse needed to be considered when determining any compensation scheme. That is an important caveat, and it is accepted by all parties. The second recommendation called for the issue of an apology from the Government to policyholders.
We accepted the recommendations immediately. It was the right thing to do. Indeed, we made a commitment to respect the ombudsman's findings during the cross-party campaign to force a second inquiry. But one voice was absent from the acceptance of the ombudsman's findings. One voice remained silent: that of the Government. One would have thought that the Treasury would have known exactly what the ombudsman's findings would be, given the arguments and debates between them. One would have thought that it would be prepared for her findings, prepared to give a response, but there was no immediate response-just silence.
Kelvin Hopkins (Luton, North) (Lab): The hon. Gentleman just said that the Government-whichever Government-must take account of the impact on the public purse of compensating Equitable Life's pensioners. Is that not a simple get-out for the Conservatives, and is there not very little difference between those on the Government Front Bench and the Conservative Front Bench on this? Is there not a moral obligation to pay the pensioners, whatever the cost to the public purse? It will not be in excess of the gross domestic product. But actually, if we collected a little more tax, we might be able to pay them quite easily.
Mr. Hoban: As I said earlier, we need to see what the bill is. There is a big difference between the Conservatives and Labour on this. In the past few years, the Government have sought first to block the second inquiry, then to frustrate the work of the ombudsman and then to delay their response and the payment of compensation to policyholders. The Conservatives have been clear from the outset, when the ombudsman published her report, that we accepted her findings and wanted justice to be done. That is the difference between the Conservatives and Labour, and that is why Labour Back Benchers should be wary of the Government's amendment to the motion.
When the Government did not give an immediate response to the ombudsman's report, we saw the third stage of their strategy on Equitable Life-delay. Despite the commitment that the Prime Minister gave to my hon. Friend the Member for Shrewsbury and Atcham that there would be
"a statement before the House rises at Christmas"-[ Official Report, 3 December 2008; Vol. 485, c. 38.]
nothing happened until the middle of 2009, nearly six months after the ombudsman's report was published. That is when we finally got their response, and we must ask why they did not respond more quickly to the report.
"I must ask why we have had to rely on the ombudsman to confirm the mismanagement, maladministration and incompetence that was widely known about more than one year ago."-[ Official Report, 19 December 1989; Vol. 164, c. 204.]
When he was in opposition, the now Prime Minister made his name by championing the cause of Barlow Clowes' shareholders and investors. He made that statement calling for action when the then Government had announced their compensation scheme, but here we are, 18 months after the ombudsman reported maladministration in the regulation of Equitable Life, still awaiting the details of a scheme as well as a timetable.
How times change for the Prime Minister: where he would once have urged quick action, he now seems happy to string things out for as long as possible. When he could have taken a decision, as Chancellor, to sort out Equitable Life, he chose to stand in the way of a solution. When, as Prime Minister, he could have put his foot on the accelerator to get a rapid solution, he found the brake instead. He has let the policyholders of Equitable Life down. I hope that the hon. Member for Coventry, South (Mr. Cunningham) can tell us why he decided to do that.
Mr. Cunningham: I am not going to answer that question, but I will say that we have attended a number of debates on Equitable Life, yet the whole thing does not seem to be going forward as I am sure the hon. Gentleman will agree. The important point to make is that many people are utterly frustrated with our rehearsing the arguments over and again but never taking matters forward. I have some sympathy with the comments of the Liberal Democrats that some form of payment should be made as a demonstration of good will.
Mr. Hoban: I think that many people, including some of the hon. Gentleman's Back-Bench colleagues, share his frustration that no real progress is being made despite policyholders having suffered a cut in their policy values in 2001 and despite Penrose having said in 2004 that regulation was a contributory factor to the problems at Equitable Life. We need to see some progress.
The reality is that the Government simply did not want to lift a finger to help those who had lost out because of the regulation of Equitable Life. They sought to block the second inquiry and they tried to deny that the ombudsman had the power to investigate the Government Actuary. When that tactic failed, they sought to frustrate the ombudsman with a barrage of documents and legal arguments, and when all that failed, there was delay. It is no wonder that we are not making the progress that the hon. Gentleman and many other hon. Members want.
Even when the Government published their response to the ombudsman's report, their first act, after apologising for failing policyholders, was to reject a number of the ombudsman's findings of maladministration. Perhaps, they had spent that six months of delay trying to wriggle out of their responsibilities to policyholders and finding loopholes to evade the course for justice. Of course, they were challenged by EMAG, and the High Court partially overturned the Government's rejection of some of the ombudsman's findings-another delaying tactic.
The Government's response triggered a further delay, with the commissioning of Sir John Chadwick to advise on a number of areas such as calculating relative loss and establishing which groups of policyholders suffered disproportionate loss and what proportion of the losses could be apportioned to other bodies. Hon. Members will know that Sir John published his third interim report last week and that he expects to publish his final report in May. That is quite convenient is it not? There will be no formal response from the Government before the general election, no commitments and no guarantees.
Last month, at the meeting of the all-party group on Equitable Life policy holders, the Chief Secretary gave some hints of what he might do if the Government were re-elected, but there was no commitment to a clear timetable for making payments. There was no indication of when policyholders might see justice delivered or when they would know for certain just how much money, if any, they would receive from the Government. There were lots of hints but nothing specific-just like in their amendment today.
Mr. Hoban: I will give way to the Chief Secretary in a moment. Labour Back Benchers, who have been seduced by the warm words of the Government amendment, might like to ask themselves a simple question. After years of standing by and letting policyholders suffer, can people trust the Government to do the right thing by policyholders once the election is over? Perhaps the Chief Secretary can answer that.
Mr. Byrne: I will address that point in my own contribution, if that is okay with the hon. Gentleman. Before he concludes, what policyholders will want to hear from him is a clear statement about whether he supports the John Chadwick process or whether he wants it to be stopped, and the Government of the day to revert to the approach proposed by the ombudsman. It is a very simple question-it is imperative that policyholders know the Opposition's position.
Mr. Hoban: The risk of stopping the process undertaken by Sir John Chadwick is that we further delay the payment of compensation to policyholders. I think that Members in all parts of the House want justice to be delivered to policyholders as soon as possible. The problem over the past few years is that, every step of the way, the Government have sought to frustrate that process and delay it. People want justice to be seen to be done. It is important that we make sure that we do all that we can so that the process on which Sir John Chadwick has embarked enjoys the confidence of Members in all parts of the House and, in particular, has some support from the policyholders who are most directly affected.
Mr. Edward Garnier (Harborough) (Con): It is no longer practicable to bring the Chadwick procedure to an end-a decision which is what the Government would like us to fall into-but that does not necessarily mean that it was a good idea to disrespect the ombudsman's position.
Mr. Hoban: We are, as is often said in politics, where we are. The process could have been handled far more efficiently by the Government, and we could be in a better place if the Government had not sought to delay their response to the ombudsman's report. If they had not waited six months, we might know just how much policyholders could expect to receive and when. The delays are a significant let-down for policyholders. We need to make sure that we move ahead with all due speed, and make clear the timetable so that policyholders know when they are going to get justice.
Barry Gardiner (Brent, North) (Lab): The hon. Gentleman said that he would support the continuation of the Chadwick efforts. Would he add two further comments? Would he say whether he is committed to doing anything additional that might reflect the situation had the ombudsman's report been able to continue. Would he also state his own timetable, to give policyholders a clear view of what a Conservative Administration would mean for them?
"If we win the election, we're going to sort out Equitable Life very early on."
That is a clear commitment to make rapid progress on this issue. The other aspect is that Sir John Chadwick is advising the Government, who are in a position to take on board the concerns that have been expressed about the way in which the Chadwick process will reach a final conclusion. It is important that the Government listen to those concerns.
There is a demand, which has been voiced very clearly in today's debate, for a clear timetable from the Government. We have to ask ourselves what the Government did last year to establish a clear timetable for payments. Has any work been done by the Government on how they might make payments to policyholders, or to determine how long it might take to make such payments? If it has, the Treasury should be in a position to set out an indicative timetable. If the Chief Secretary tells us that no work has been done along those lines, policyholders will have to wait even longer for certainty as the Government work through the mechanics of compensation.
Such failure to be up front with policyholders about a timetable is a reminder that throughout this process the Government have sought to avoid responsibility and tried to delay resolving the problems for as long as possible. If the Government had responded to the ombudsman's report more quickly, policyholders would have known by now what the outcome would be.
Our response has been clear. We accepted the ombudsman's findings at the outset, and we said that if the Government did not put a scheme in place, we would do so. I reiterate the comment of my right hon. Friend the Member for Witney last month, when he said;
"If we win the election, we're going to sort out Equitable Life very early on."
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