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16 Mar 2010 : Column 768

There Mr. Braithwaite makes a critical point. We have had the adjudication of the parliamentary ombudsman. As various hon. Members have stated, we have repeatedly rehearsed the arguments as to what should be done, and yet in my opinion the Chadwick process is a classic way of kicking things into the long grass.

Mr. Nick Bellord, an EMAG director, says:

Everyone who has spoken in this debate has spoken about the need to continue with the Chadwick process. The Minister challenged my hon. Friend the Member for Fareham (Mr. Hoban) as to what the Conservative party would do, should we enter office after the next election. Interestingly, it would appear that there is no alternative now, given where we are, but to continue with the Chadwick process. But so frustrated and demoralised are members of EMAG-the key words that I want to use are "frustrated" and "demoralised"-that Mr. Braithwaite says in his note to me:

So I am getting from Mr. Braithwaite a slightly different understanding of the situation, because I believe that he and other members of EMAG have lost so much confidence in the Chadwick process that even at this stage they may be prepared to throw it out and go back to the parliamentary ombudsman's findings.

I am very heartened that my hon. Friend the Member for Fareham has stated that the Leader of the Opposition is determined to sort this matter out very quickly should we be elected to office. I suggest to my colleagues on the Front Bench that, should the Conservative party be elected to office in May, an urgent meeting be set up with EMAG at the earliest opportunity so that we can work with it constructively to sort the process out once and for all.

5.50 pm

Kelvin Hopkins (Luton, North) (Lab): May I, too, declare a modest interest in Equitable Life, having made some additional voluntary contributions under the parliamentary scheme at the beginning of my time in the House? No doubt, I have made a small loss, but that is not why I am speaking today. I am speaking on behalf of the millions of people who have lost substantial sums and will be seriously affected. People in our position who have made small losses can bear them, but others cannot. We must all be aware that the difference between
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having a basic state pension and having a basic state pension plus £75 a week is equivalent to a real difference in living standards.

I am a member of the Select Committee on Public Administration, which is chaired so brilliantly by my hon. Friend the Member for Cannock Chase (Dr. Wright). We unanimously supported the ombudsman's report and we wanted urgent action to be taken to respond to the needs of Equitable Life members who lost out. In retrospect, my reaction to these matters would have been to do the same as with Northern Rock. I would have taken Equitable Life into public ownership and underwritten all its pensions. That solution was not considered by either side of the House to be in the spirit of the times, but I am afraid that both sides have been wrong on this matter. We have subsequently reinvented the idea of public ownership in the financial sector. That is a good thing and I would like to see more of it in future.

There are wider lessons to be learned from this matter, particularly about regulation. The original apostles of deregulation were, of course, the Conservatives, but, regrettably, the Labour party followed in their footsteps. I disagreed with that approach from the beginning. Some of my left-leaning hon. Friends with more traditional socialist views were put on the Select Committee on Deregulation when they first came to the House and the first thing that they suggested was renaming it as the Select Committee on Re-regulation. I thought that a splendid idea, although it was said in jest.

The Equitable Life case concerns a failure of regulation. At first, it was regulated by the old Board of Trade and the Department of Trade and Industry, but its regulation was then passed to the Treasury and then to the Financial Services Authority. At each stage, the degree of regulation got weaker. I am amazed at the Treasury's actions because it should have realised that if it did not regulate properly, it might, in time, have to pay the bill. That was one of the Treasury's many failures of the past two or three decades of which I have been a severe critic. Those failures were passed on to the FSA, and who can blame it? It was told, "The mood and culture now is for light-touch regulation and deregulation," so it did not push very hard. Of course, we have seen to our cost what has happened elsewhere in the financial sector. From the beginning, the bail-out costs might have totalled £5 billion. That does not seem like very much now, given what has happened with the banks, but at that time, £5 billion was, no doubt, a figure to make some Treasury officials and Ministers wrinkle their brows.

The root cause of the problem lay with regulation and the culture of deregulation. In some areas of regulation there is an inherent contradiction in that regulatory bodies have to regulate on one hand to make sure that lots of profits are made and on the other to make sure that they protect policyholders and consumers. The rail regulator has responsibility for making sure that the railways perform very well financially, but also for ensuring that they are safe. That presents a contradiction, and that is why I believe that certain areas of our economy ought to be in public ownership and accountable to this House, which can take all the factors into consideration and make sure that the public interest is properly represented. We would have to accept the cost to the public purse of doing that.

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I am sad to say that, on this, there seems to be little difference between the Front Benchers on both sides of the House. I am sure that if the Conservatives had been in government at the relevant time, they would behaved very similarly to the Labour Government. Indeed, they might have delayed and prevaricated even more. The hon. Member for Fareham (Mr. Hoban) gave the game away when he said that we had to take account of the cost to the public purse. The Government's failure to regulate led to the loss of billions of pounds of ordinary people's money, and there was a moral obligation on the Government to put that right. It is interesting to note that the Public Accounts Committee said that it was not just about cost, but that a question of justice was involved. It was absolutely right about that.

The nonsense about market forces was another factor in the equation. The idea was that we were buying something from a market. If someone put all their money into an organisation that was meant to ensure that they could live a decent life in their old age, and the Government said that it was regulated, that person would expect the relevant moneys to be paid to them when they retired. If that money was lost, someone could not just say, "Well, I'll change my provider and go to another organisation." During the financial crisis a few years ago there was a surge of people trying to get their cash into national savings because they are underwritten by the Government. They wanted to get their money away from the private sector.

In future, we must look to ensuring greater public involvement in the financial sector in general terms, not just in respect of such savings policies. We must look towards having more certain public provision for pensions. I said in yesterday's Work and Pensions questions that there will come a time when the Government will have to establish a compulsory SERPS-state earnings-related pension scheme-for all because occupational pension schemes are failing, declining and disappearing, and private savings companies are often of very poor value, with a third of the value of one's savings going on administration, advertising and whatever.

Mr. David Drew (Stroud) (Lab/Co-op): That, of course, is why it is so important to get the Equitable Life payments out as soon as possible-to rebuild confidence in the belief that the moral question has at least been faced up to.

Kelvin Hopkins: Indeed. I thank my hon. Friend for his helpful intervention.

There is a lesson for us all to learn. In future, there will have to be much more state involvement in provision for old age and much more certainty about what we do with our money. A state scheme would not only provide more security for our savings but would be much more efficient, with guaranteed returns at the end of the day. It would not be stock market related, or dependent on stock markets or interest rates, but would offer defined benefits for all who saved with it, which would in time be the majority of the population.

As I have said many times in recent weeks and months, the way to solve the cost problems facing the Government not only in relation to Equitable Life but in general is to start collecting the vast amounts of tax that the Treasury fails to collect. The gap between what the Government could receive and what they actually
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receive in tax is said to be at least £100 billion a year-this week, I saw the figure of £175 billion-which is a staggering amount of money. If we collected just a quarter of that money, we would solve all our problems very quickly. Most of that money would be paid by wealthy companies and wealthy people, not by ordinary people, and it would be enormously beneficial to the economy and to Government resources. Now that I have made my point about regulation and have used up my time, I shall sit down, but I am pleased to have had this opportunity to speak.

5.59 pm

Tony Baldry (Banbury) (Con): I think that we should record the sadness of the occasion in debates such as this. This issue is sad and tragic for all the Equitable Life policyholders who did the right thing throughout their lives. They were prudent and they saved, and they are exactly the sort of people whom we should support. We should not lose sight of the fact that they are all individual victims of what has happened. There is, understandably, a danger that we will simply debate the process and what the ombudsman or Chadwick should do and how the matter should be handled. We all have a large number of constituents, many of whom we have got to know personally as a consequence of the long time that this has taken, who have suffered considerably, and continue to suffer.

We should never forget the damage done to confidence in savings and the pensions system as a whole. Ten years ago, Britain's pension system was considered a model for others to follow. The low state pension was supplemented by good employer and personal pensions, and the majority of workers seemed to be heading for a reasonable retirement. Equity markets were booming, interest and annuity rates were high, and actuaries and investment advisers believed that good pensions were easily affordable. Over the past decade, however, our pension system has disintegrated, workers' retirement plans have not turned out as expected, and many people face the prospect of an impoverished old age if they do not keep working. Private sector employers have abandoned final salary schemes, and confidence has generally been shattered.

These debates are sad, because in the past decade we have witnessed the meltdown of our once-thriving retirement savings culture. We need to get back to a culture of savings and thrift. Of course, people who invested in Equitable Life could in no way be accused of being anything other than prudent. After all, Equitable Life was the world's oldest mutual, established way back in 1762. Many people who invested in it were lawyers and professionals who had every confidence in its being a reliable, redoubtable institution, so it has been a really sad day for them.

This debate may, in some ways, turn on narrow points. On the process, the Government have said that they will respond within two weeks of the final Chadwick report. Pretty well everyone in the House is cynical about the fact that the final report will not be published until May this year. The Government have signally failed to say-and I did not think that the Chief Secretary's explanation was very convincing-when payments will commence, and when they will be completed. It is not difficult for them to give an indication of when they hope that payments will begin and over what period they hope they will be made. Thousands of policyholders
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have died, and given that the average age is 79, payments have to be made quickly to the rest of them. I would therefore wish to support those who argue for interim payments. After all, EMAG estimates that of 54,000 Equitable with-profits annuitants in 2002-the year in which pensions were cut-10,000 have died. The surviving 44,000 have an average age of 79, so it is not unreasonable to call for an interim payment equivalent to two years' pension to be paid to all of them. The sum, which EMAG estimates to be £214 million, could be deducted from the final settlement, so all those annuitants would receive at least some money.

Delay has characterised this whole sorry saga. As my right hon. Friend the Leader of the Opposition has said, the Government have repeatedly put this off. In a sick way, I think that they are waiting for people to die. If that is the Government's policy, it is unbelievably depressing. The whole history is one of delay. As long ago as July 2008, the parliamentary ombudsman published a report on Equitable Life, which recommended that payments should be made to policyholders to reflect the relative loss resulting from maladministration, subject to the state of the public finances. The Government promised to respond on several dates in 2008, but did not reply until January 2009. For example, on 3 December 2008, the Prime Minister told the House:

No statement was made.

It is now a year since the Government made a statement to the House on 15 January 2009 responding to the ombudsman's report. The then Chief Secretary to the Treasury, the right hon. Member for Pontefract and Castleford (Yvette Cooper), said that compensation would be paid to policyholders who had suffered "disproportionately", but she did not set out a timetable or define what that word meant. That was in January 2009, but Equitable Life policyholders are no further forward, although she said:

Those who have been hardest hit are still waiting for something to happen. They keep being told that a new form of process is going to take place. If I were an Equitable Life policyholder, I would be concerned if the Government were returned at the election, because, although they might respond within two weeks of receiving the Chadwick report, they would find yet further means to delay payment.

Let us not forget that the Public Administration Committee labelled the Government's approach

It said that it was "morally unacceptable" that the ombudsman had to take the highly unusual step of publishing a special report as a result of her disappointment with Government inaction. The ombudsman concluded in that report:

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The High Court upheld the view that the Government unlawfully rejected the ombudsman's finding of regulatory failure.

This has been a saga not just of delay by the Government, but of prevarication, incurring the criticism and wrath of every single regulatory body, from the ombudsman to the Public Administration Committee and the courts. Here we are, all this time later, and those who have suffered as a consequence of the collapse of Equitable Life are no closer to knowing when they are going to receive any money.

I shall conclude with two points. First, I hope that a commitment can be made to provide interim payments and, secondly, I hope that the contribution of my hon. Friend the Member for Fareham (Mr. Hoban) and, I am sure, that of my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands), who will conclude the debate on behalf of the Opposition, will reassure policyholders that an incoming Conservative Government will get to grips with this immediately and ensure that we make payments to those who have suffered as a result of the collapse of Equitable Life as speedily as possible. There is a Latin tag, sine mora, which means without delay, and I hope that, we can see, as soon as there is a Conservative Government-

Madam Deputy Speaker (Sylvia Heal): Order. The hon. Gentleman's time is up.

6.8 pm

Mr. Mark Field (Cities of London and Westminster) (Con): I am waiting to hear the Latin tag, and I shall try to get hold of my hon. Friend the Member for Banbury (Tony Baldry) to find out exactly what it was.

The sorry tale of what happened in Equitable Life is well documented and, depressingly, was accurately catalogued by the hon. Member for Twickenham (Dr. Cable). It has also been picked over by the House on countless occasions, and I think that we all feel a sense of deep disappointment and frustration that we are gathered here yet again to press for the Government to honour their duties to Equitable Life policyholders.

It is with great sadness that in preparing this speech I realised that I first spoke in this place about the debacle in November 2002 after the publication of the Penrose report. I said:

I did not anticipate that there would be an eight-year delay. The Government's caution, delay and penny-pinching approach to doing the right thing by Equitable Life policyholders stands in stark contrast to the way in which they have showered taxpayers' cash on other groups in the past decade. To be honest, I have a nasty feeling that they consider middle-class folk who have diligently saved to provide a comfortable retirement as "them", not "us". If the gross negligence that has been established at Equitable Life had taken place at the Easington colliery welfare fund, I cannot help but believe that something would already have been done by the Government.

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As a result, it is with unfortunate cynicism that I greet the news that Sir John Chadwick is now committed to giving his final report on Equitable Life in May, with the Government offering to respond to him within two weeks of that. Given that we all know that that is likely to be after a general election, I fear that the Government are once again playing politics with the lives of many of my constituents by extending the hope of a resolution but ducking the responsibility of its enactment.

Policyholders may be forgiven for not having much faith in this latest round bearing fruit, either. After all, the ombudsman published her report on Equitable Life back in July 2008, but it was not until January the following year that the Government finally responded, after which their partial rejection of her findings was overturned by the High Court. Many now suspect that Sir John's review is little more than a Treasury stitch-up that seeks to negate the four years of work by the ombudsman. Paul Braithwaite, the general secretary of EMAG, has been mentioned a number of times during the debate. As he says:

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