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That is the right approach. The Government's actions have delayed justice for far too long. If we form the next Government, Equitable's policyholders have the commitment that we will sort out the mess that the present Government have left behind.
We need to act quickly not only to help Equitable's policyholders, but to restore confidence in savings. The long drawn-out process for dealing with Equitable Life has helped to erode such confidence. The message that people hear is that the regulator failed and the Government have sought to wriggle out of their responsibility to Equitable's policyholders. It is no wonder that five times as many people prefer to save for the long term by putting their money into their house, rather than into investments. We are not going to rebuild the savings culture in the UK and put the economy back on the right track until people are confident that the regulators are doing their job and the safeguards that are in place to protect consumers work when they are needed. The Government's failure to deal with the aftermath of Equitable Life has undermined confidence in savings.
Equitable Life has been a tragedy for many thousands of policyholders who have been condemned to hardship through a cut in policy values, let down by the regulators and failed by this Government. At every step of the way, rather than doing the right thing by policyholders, the Government and the Prime Minister have tried to evade responsibility. They have tried to deny policyholders the second ombudsman's inquiry and tried to frustrate that inquiry. Now, 18 months after the ombudsman has reported, policyholders are no closer to knowing when they will receive compensation. A problem that could have been resolved after Lord Penrose had highlighted the regulatory failings in 2004 remains unresolved six years later because the Government failed to act.
The Government's handling of Equitable Life has caused misery to hundreds of thousands of people, and financial hardship to people who should be enjoying their retirement. The Government should be ashamed of themselves. The Government amendment today is no damascene conversion. It is a cynical attempt to fool Equitable's policyholders in the weeks running up to the election. They are treating policyholders like fools and it is our responsibility to stand up for them, clear up the mess that the Government will leave behind, and ensure that after their long fight, Equitable's policyholders receive the justice that they have been denied for so long.
4.42 pm
The Chief Secretary to the Treasury (Mr. Liam Byrne): I beg to move an amendment, to leave out from "House" to the end of the question and add:
"recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; notes that the High Court ruled that the Government's response to the Ombudsman's recommendations on Equitable Life, its establishment of an ex gratia payment scheme, and the terms of reference given to Sir John Chadwick were a rational response to the Ombudsman's report; notes that Sir John expects to produce his final advice in May; welcomes the Government's commitment to respond with details of a payment scheme within two weeks of receiving this advice; welcomes the Government's determination to establish a scheme administratively quicker and simpler to deliver than that envisaged by the Ombudsman; further notes that to abandon the Chadwick process so close to completion would add delay and hardship for policyholders; welcomes the
Government's view that, while it cannot prejudge Sir John's final advice, there is a strong case for policyholders who have passed away to be included in the scheme and that it is neither desirable nor administratively feasible to means-test every individual policyholder; and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life."
I, too, welcome the chance to debate Equitable Life today. I am grateful for some-not all-of the remarks that the hon. Member for Fareham (Mr. Hoban) made. In particular, I am grateful for his clarification that it is the position of the Opposition at this stage to support the Chadwick process. Perhaps later contributions will help me to reconcile that with the sentence in the motion that he moved, in which he seeks to set a clear timetable for implementing the ombudsman's recommendations, rather than acknowledging support for the John Chadwick process. Perhaps we can return to the matter over the course of the afternoon.
Mr. Crispin Blunt (Reigate) (Con): I think I have an interest to declare as a former Equitable Life policyholder. How can the Chief Secretary promise to give a response to Chadwick in two weeks, when it took more than 10 times that long to give a response to the ombudsman? Is it because he has 10 times more confidence in the Government to be formed in May?
Mr. Byrne: The ombudsman's report is pretty substantial. It involved four years of work, and it was right that the Government considered it carefully. I wanted to give a commitment to respond to Sir John Chadwick's final report within a couple of weeks because of the sentiment that has been expressed in the House, which I have witnessed at close quarters since I became Chief Secretary.
Since the debate last October, I have laid two written ministerial statements to keep hon. Members up to date with the progress of Sir John Chadwick's work. Last month, Sir John Chadwick and I had the opportunity to discuss the issues, some of which I hope will be aired this afternoon, with the all-party group on Equitable Life Policy Holders. I should like to record my thanks to my hon. Friend the Member for Leeds, North-East (Mr. Hamilton) and the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) for organising such an excellent event.
This afternoon, I want to set out the Government's approach and put on the record in Hansard my response to some of the questions that have already been flagged up by right hon. and hon. Members.
Sir Paul Beresford (Mole Valley) (Con): I thank the Minister for the letter that he sent to each member of the all-party group, which I found quite useful. In that response he states:
"I am currently of the view that it is neither desirable nor administratively feasible to means test every individual policyholder."
Does that mean that the payment, whenever it comes, will directly relate to the pension that policyholders paid for and expected but did not get, or can we anticipate some other artificial reshuffle of the moneys paid?
Mr. Byrne: I will come to that point directly slightly later in my remarks.
First, I want to repeat the apology to policyholders for the delay. This was an apology first made by my predecessor, now the Secretary of State for Work and Pensions. I would also like to repeat what I put on the record in our first debate in October, which was a word of thanks to the parliamentary ombudsman for her work. It is right and appropriate for the Government to record our gratitude for her work. Her report was substantial, careful and sympathetic, and it contained a weight of analysis that reflects the complexity and scale of the issue. It took the ombudsman four years to put together, but it demonstrated a commitment to get to the heart of a difficult issue.
It is also fair to say that we did not wholly agree with the ombudsman's conclusions, although on many things we did agree. In nine out of 10 of her findings we agreed wholly or in part with the charge of maladministration, and in five areas we said that we believed that injustice followed. So it was not to provide a compensation for regulatory failure, but to answer an ethical demand for help that the Government proposed an ex gratia scheme be set up.
Bob Spink (Castle Point) (Ind): I am grateful to the Minister for reiterating his apology and it is accepted in the spirit that it is offered. He will know that sadly some policyholders will have passed away, so they will not hear that apology. Will their estates be in receipt of any compensation that is eventually given?
Mr. Byrne: Again, if the hon. Gentleman bears with me I will come to that point directly.
Mr. Weir: If the Government accept that there has been maladministration, surely the victims of that maladministration are entitled to compensation. Yet instead the Government have gone down the route of a simple ex gratia scheme, with no right to compensation for that maladministration.
Mr. Byrne: There is a principle, long accepted and indeed long debated in the House, that there is not an automatic right or an entitlement to compensation for regulatory failure. That was a characteristic of the compensation scheme that was put in place for failures as far back as Barlow Clowes. None the less there is an ethical demand to have a compensation scheme set up. I have sought to deliver a payment scheme that meets the imperative to act, to deliver it swiftly and to ensure that the right people are included.
I want now to say a word or two about the approach that the Government have pursued and the rationale for it. All hon. Members agree that we need to establish a fair payment scheme as quickly as possible. The ombudsman suggested a scheme that in her view could be up and running and complete its business within two and a half years, but her proposal relied on looking at regulatory returns. That has two consequences. First, it would entail a case-by-case review to understand who lost what and why. That would involve looking at 30 million investment decisions by 1.5 million people over 20 years.
Secondly, and to my mind more problematically, individuals would have to prove that they relied on regulatory returns. As the ombudsman said:
"I find that injustice was sustained by any policyholder who relied on information contained in the Society's returns for 1990 to 1996".
The Government simply did not think that such an approach would work. We therefore wanted Sir John Chadwick to look at a more expeditious and less risky way of setting up a payment scheme. Rather than a case-by-case analysis, Sir John has proposed that we look at different classes of policyholder-about 20 in total-and then, for each class, assess relative loss with a comparator on which he has gone out to consultation.
Mr. Garnier: The Government's amendment states that
"Sir John expects to produce his final advice in May".
When did the Government discuss with Sir John the likely return date of his report? Surely it would have been a better and more just result had his report been produced well in advance of May, so that the public could have studied it in the run-up to the election, rather than in the confusion after the election.
Mr. Byrne: I am not sure that I accept that there is confusion after an election, but the hon. and learned Gentleman will accept that Sir John's approach must be faster and simpler than looking at 30 million different investment decisions. In my conversations with Sir John Chadwick, when we discussed his timetable and, indeed, the resources that he needed, I wanted to ensure that he had the time and space to do a thorough job, so that once a scheme was set up it could be completed as rapidly as possible. I do not think that I met Sir John without asking him whether he had all the resources that he needed.
Some right hon. and hon. Members will be much more familiar than I am with compensation schemes that have been set up over the years, whether for Icelandic fishermen-a scheme that dates back two or three decades-or for injuries sustained in the coal mining industry. What characterises many of those schemes is that they take years and years-sometimes decades-to run all the way through to a conclusion, and that sometimes they cost billions of pounds to administer. I wanted to ensure that we had a payment scheme that was up and operating quickly, and got through its business as fast as possible.
Mr. Garnier: I understand all that, but the Government stand charged with cynicism over the whole Equitable Life saga. Surely, however, they could have avoided that charge at least in relation to the date on which Sir John reports. It is no secret that there is likely to be an election in early May, and Sir John's proposed report date is likely to be after the election. The Government are falling into their own trap: if it can be shown-and the suspicion must exist-that they have deliberately decided to push back Sir John's report until after the election, they are going to land themselves with further accusations of cynicism.
Mr. Byrne: I understand the hon. and learned Gentleman's point. I have not approached the question with cynicism. I have approached the exercise, which has been one of the hardest I have had to confront since I have been at the Treasury, with only one concern: how we get a payment scheme up and running quickly, in a way that minimises risk and allows us to complete the exercise as rapidly as possible.
Rob Marris (Wolverhampton, South-West) (Lab): I had two policies with Equitable Life, and I am dismayed at the delay by the slothful ombudsman and the Government's delay. In seeing the matter through, however, I am resigned to the Chadwick process and, as such, will vote with the Government tonight. I am pleased that the process is likely to include deceased policyholders, but will my right hon. Friend indicate by what date he expects the first payments to be made, and by what date he expects the scheme to have been concluded and all the payments to have been made?
Mr. Byrne: Again, I shall come on to that point in a moment.
Anne Main (St. Albans) (Con) rose-
Mr. Byrne: I shall make a little more progress before I give way.
Anne Main: On the question of speed.
Mr. Byrne: I shall come on to the question of speed and say a few things that will provoke a few more-
Robert Neill: Will the right hon. Gentleman give way on the question of the method adopted?
Robert Neill: I am grateful, because the right hon. Gentleman said that he had decided to adopt a different route from the method proposed by the ombudsman-that is to say, the route proposed by Sir John Chadwick. Given that, and if there is to be no suggestion of cynicism, is it not all the more important that the right hon. Gentleman takes on board the comment that several people made when he was present at the meeting of the all-party group on Equitable Life Policy Holders-namely, that there should be the maximum transparency in disclosing the report's methodology and the other working documents that were made available to Sir John Chadwick? If there is to be less than full recompense, it is important that people know the basis on which the pay-out-whatever it is-is ultimately arrived at.
Mr. Byrne: Of course. Along with his third interim report, Sir John has published some detailed actuarial studies. In some quarters-EMAG in particular-there is concern that that is not enough detail. If there is a demand among right hon. and hon. Members for more information, I will discuss with Sir John how we should make that available. Obviously, he and I will be legally obliged to protect personal information, but I am sure that there is a way to accommodate the hon. Gentleman's point.
If we compare the two approaches that the ombudsman and Sir John Chadwick are taking, we understand why Sir John concluded that the approach suggested by the ombudsman was at best unsatisfactory and-more likely-impossible. On that basis, I am unable to agree with the ombudsman's assessment that her scheme would take only two and a half years to deliver.
I think that Sir John's approach will be better and faster, but his task is still difficult. He has to analyse about 2 million policies, to look at information dating back two decades on about 20 different types of policy and to review about 200 different financial products. None the less, his approach avoids some of the more difficult aspects of the ombudsman's proposal and it will lead, I think, to a simpler and administratively quicker scheme.
Barry Gardiner: My right hon. Friend has estimated that the ombudsman's report would have taken two and a half years to implement. What is his estimate of the time it will take to implement Sir John Chadwick's report?
Mr. Byrne: Let me come directly to that point. I do not think that we can estimate when the first payments will begin to arrive, or when the process will be completed, until we have Sir John's final report in May. I say that for a simple reason. Until we are able to estimate, and hear from Sir John about, the total bill and what the right kind of compensation looks like, it will be difficult for us to know or guess-and it would be wrong for us to attempt it-whether the right kind of compensation is cash or a different kind of financial services product. Equally, until we know who Sir John thinks it is appropriate to include in the final design of the scheme, we will not know whether the scheme that we are running will be paying out to hundreds of thousands of people or to millions.
The answers to these two questions have important consequences for how delivery arrangements should be set up. A smaller scheme could probably be delivered quite quickly-through the Department for Work and Pensions, for example. A more complicated scheme that involved, for example, distributing financial services products to Equitable Life policyholders, could require the Government to secure a delivery partner in another financial services company. That is why the answer to my hon. Friend's question is difficult.
Susan Kramer: Is not the Minister himself making the argument for an interim scheme, at least as soon as Sir John Chadwick's report is laid? When it is, at least some groups will be clearly identified as covered.
Surely the Minister also recognises that Sir John's conclusions are likely to be challenged, as some are extremely contentious. I point again to the assumption that, having opened a can of worms, the regulator would have taken only the lightest-touch action, that the society would respond only in the lightest way and that most of the mess would have been left in place. Many of the assumptions are likely to be challenged through judicial review, but people's essential payments, at least, should not be delayed for that process.
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