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"The Treasury is attempting to retry the case, using actuarial sophistry to distort the figures. . . The logical conclusion of this sham process is that the Government will deny all obligation to compensate policyholders for the damage done by serial maladministration and only paltry discretionary payments will be made on the basis of charity, not justice".
I know from the desperate letters that I get from constituents that policyholders would be grateful even for the smallest of concessions, such as a time scale for delivery following Sir John's final report, even if that means that they would not receive compensation payments until, say, the end of 2011. Indeed, given the sad history of this shambles, my constituents and those across the nation who have been affected by Equitable Life's downfall have learned to be realistic. People no longer have any expectation that they will get a share of the proposed £4 billion windfall, yet so long as indecision remains regarding the formula by which to calculate compensation payments, the Government have decided that the safest option is inaction. In the current state of limbo, people are worrying themselves sick.
Let us never forget that although pensions may be a highly technical matter-I accept that the report is very detailed and needs to be properly analysed-the problems surrounding Equitable Life and other pension schemes are human. As my hon. Friend the Member for Banbury (Tony Baldry) rightly pointed out, policyholders are dying as we wait for this sorry saga to be tied up. Surely it is not beyond the wit of man for us to be putting together an interim payment for those hapless folk.
I have spoken before in the House about some of the policyholders in my constituency who are affected by these terrible delays, but I believe it is worth touching on a few again, simply to reiterate to Ministers the suffering that the hesitation is causing. Mr. MacDermott of Motcomb street in Belgravia wrote to me before, saying:
"I cannot claim poverty but I can safely say that at 77, I might well have been happily retired rather than continuing working so as to provide for my wife and two university-aged children."
He is now 80 and sees no sign of change or resolution of the issue.
Mrs. Valerie Walsh of Bedfordbury in Covent Garden said to me:
"If I had received my full pension pot I would not now be struggling just above the poverty line."
Because she earns a relatively modest amount, it is impossible for her to claim any of the housing help and benefits that are available to many other pensioners in the district where she lives.
Most of the people who have lost out do not have the option of returning to the workplace to make their way in life. They are often in their 60s, 70s or even 80s and the Equitable Life money was the most important part of what should have been a relatively relaxed and quiet retirement. They have been denied that. They have been denied justice, and with ever more delays, many will be denied ever seeing any of the money.
Other Members have spoken about the wider issues, which I shall deal with in conclusion. We would be foolish to underestimate the ongoing damage to confidence in the pensions industry that is being caused by the failure to draw a line under the Equitable Life affair. The breaking down of conventional middle-class job security has made ever more important the concept of trust in personal and company pension schemes.
Until its collapse, Equitable Life was widely regarded as the jewel in the crown of the retirement providers, but the failure of the regulator to intervene in the affair showed that existing rules to protect the consumer from unreasonable risks were not enforced. We can go through the catalogue of events. The FSA should have taken its role more seriously when it was the regulator and engendered a culture of collective responsibility that would have ensured universal public confidence.
I am worried for the future. We all know that it will be the next generation of taxpayers who pay for the borrowing that is taking place now. We are spending £4 for every £3 that we raise in tax this year, purely for consumption. There is no investment involved in that. Future generations will have to pay the bill for our national profligacy. That makes it even more crucial that in the decades ahead the youngsters of today-the middle-aged folk of tomorrow, who will become pensioners themselves-have enough faith in the financial system to put their hard-earned cash into a savings pot for the future. Unfortunately, it is an indictment of the Government that those who had already taken responsibility for their own destinies by investing in Equitable Life have been treated with such contempt.
6.15 pm
Mr. Mike Weir (Angus) (SNP): The Equitable Life debacle will go down as one of the great shames of this Parliament. It appears that we could not even support our own independent ombudsman against the Executive. My hackles were particularly raised by the Government amendment, which would make the resolution state that the House
"recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman".
That is exactly what Parliament has not done in this case.
The Chief Secretary was all reasonableness today, but the Government had to be dragged through the courts kicking and screaming before there was any action to do justice to Equitable Life policyholders. No one could have been in any doubt after the ombudsman's report that the Government had a case to answer regarding the actions or inaction of the regulators, leading to the
downfall of the company. The matter has now dragged on for almost 10 years-longer than I have been a Member of the House.
I do not intend to rake over the coals of what went wrong. Many others have mentioned that. What is needed now is urgent action to right a wrong. Like all Members, I have among my constituents a significant number of Equitable Life policyholders, most now elderly, who have suffered significantly. Sadly, some have died waiting for justice.
The problem goes much deeper than that, and it is a problem for the whole House. It has not gone unnoticed outside this place how policyholders have been treated, compared with the speed of action on the banks. As others have said, that has undermined the case for savings and private pension provision, which are important for the future and which will come back to haunt successive Governments unless something is done quickly to deal with the situation. I suspect it is too late to bring back confidence.
When the Government said that they were going to apologise, there was real hope that action would finally be taken to end the saga. It was therefore a considerable let-down, to put it mildly, when all that was announced was yet another investigation under Sir John Chadwick into how a compensation scheme would work. I recall that, in January last year, in a Westminster hall debate following that statement, I said:
"The more cynical among us might consider that statement as putting a decision beyond the next general election."-[ Official Report, 27 January 2009; Vol. 487, c. 36WH.]
It turns out that I was not being cynical at all. That is exactly what will happen. The final Chadwick report will not be available until May and, according to the Minister, an announcement on a scheme will be made 14 days thereafter. I find it strange that, after all this time and all the reports, there is to be a sudden burst of action within 14 days to produce a fully formed scheme to deal with the problems.
Even now, pertinent questions remain that are not being answered. We need to know when payments are to be made. Will there be another period of inaction or will they be made quickly after the Government decide what they are doing? Will they be made by the end of May, by the end of June, or by some other date? Perhaps the Exchequer Secretary can clarify that when she sums up. It was interesting that the Chief Secretary was unwilling or unable to give any indication of the time scale of payment. That is what people want to know. They have waited years, and many of them are suffering badly. They want to know what they will get, and when, in order to draw a line under the whole sad saga. It is not at all clear, at least to me, who will receive compensation. It may be only those who have suffered disproportionately. I note that, in its briefing for this debate, EMAG says:
"Ex-gratia payments, it is proposed by the Treasury's remit, will be further limited to only those who suffered 'disproportionate impact'-now defined as With Profit Annuitants and those late-joiners who put in new money after 1998."
Will the Exchequer Secretary please clarify exactly what is meant by "disproportionate"?
Means-testing has been mentioned several times during the debate, but again we still do not have a clear picture of what is proposed. Both Sir John and the Minister have said that it would not be possible to look at the
individual means of every claimant, but a means test is not being specifically ruled out. We need some clarity about how that will be done. If the Minister is to respond within 14 days, the Government must have some idea what they are going to do, whether or not they have received the final report. Moreover, we are not sure which losses are directly due to maladministration, which seems to be another anchor on the scheme.
Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): Is it not doubly hard on Equitable Life to have seen the banks bailed out, the bonuses and the treatment and the public money that the state-owned banks have had compared with the treatment of Equitable Life?
Mr. Weir: It will stick in the throat of many Equitable Life policyholders to see how the Government have reacted to that situation compared with their own.
The scheme that is being talked about could keep the lawyers in business for years if not decades, because so many parts of it are unclear. For all that the Minister said about the Chadwick process being quicker, it does not seem to have proved to be quicker than what the ombudsman proposed all those years ago. Had the Government accepted their responsibilities at that time, a scheme could have been up and running, policyholders could have been compensated and this injustice could have been righted long ago.
The endless arguments will continue. I appeal to the Minister, even at this late stage, to give justice to policyholders quickly and to produce a scheme that is even-handed and simple-one that ensures that my ageing constituents do not have an interminable wait to see whether they are to be compensated and that they get some compensation before it is far too late for them.
6.22 pm
Stephen Hammond (Wimbledon) (Con): This may be the last opportunity that I have to speak in this Parliament and it is an honour to follow so many thoughtful contributions today. I particularly want to put on record that, soon after I became a Member of Parliament in May 2005, one of the first groups to make representations to me was those of my constituents who had already taken up this matter with my predecessor-I think particularly of Mr. Roy England, Professor Bonn and others. Five years on, I want to do what a Member of Parliament should do, which is make representations on their behalf in the House tonight.
The joint chairmen of the all-party group made thoughtful speeches. The hon. Member for Leeds, North-East (Mr. Hamilton), who is not in his place, was absolutely right that the main focus of this debate should be the plight of those who still require justice and compensation, but he was wrong so easily to dismiss the point made by my hon. Friend the Member for Fareham (Mr. Hoban) that, by their inaction, the Government have undermined confidence in the savings system, as my hon. Friend the Member for Cities of London and Westminster (Mr. Field) also said. Thirteen short years ago, we had a state pension system that was working, which could be topped up by occupational pensions, excellent personal pension schemes and a savings culture that had been encouraged by personal
equity plans, and the majority had certainty about their retirement age. Equity markets were starting to boom and the economic recovery had been in place in for three years. People had some certainty and were able to plan. The environment now is very different. Retirement plans are not living up to optimistic forecasts. The public and private sectors have abandoned final salary schemes, and we are moving to defined-contribution schemes, the returns from which are infinitely less certain, with higher charges and increasingly expensive annuity propositions. As my hon. and learned Friend the Member for Harborough (Mr. Garnier) said, the Government's initial actions to alter advance corporation tax and the dividend tax credit have also played their part.
The Government have failed on any number of occasions to take the opportunity to sort out this injustice and so have engendered a lack of confidence in the system. "By your actions shall you be known" is a well known phrase, and the Government will be known by their actions in this place, even their response to the Penrose inquiry. Penrose did say that the company is the author of its own misfortunes, but pointed out that there was a general failure of regulators and the Government Actuary's Department. It was seriously disingenuous of the Government at that time to try to hide behind that first remark, yet not acknowledge the mistrust and opprobrium that Penrose attached to the Government actuaries and the regulatory process. It was also seriously disingenuous of the Government at that stage to say that Penrose had not recommended compensation, because that was specifically excluded from inquiry's remit.
Understandably, therefore, one or two colleagues tonight have commented with some cynicism on the contribution of the Chief Secretary, who was unable to give any details of the payment scheme. Yet I note that the Government, in their amendment to the motion, appear to be moving slightly from their initial position that they would react within two weeks to the Chadwick report. Now they say that they will
"respond with details of a payment scheme within two weeks of receiving this advice".
If they could respond within two weeks, surely they must already know some of the dates. They must know now when they would start paying out. Either this is a failure of the wording of the amendment, or the Government have changed their position; if so, the Chief Secretary should be able to give us that information now.
The comments made in the House last year by the then Chief Secretary were extraordinarily crushing. It is understandable that my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) should have made the point about the frustration felt when the Chief Secretary said that there has been maladministration in several areas. It had been pointed out by Penrose eight years before that there was a general failure of the regulatory system, and the ombudsman's report made that point as well. My hon. Friend the Member for Banbury (Tony Baldry) referred to the hardest hit, but surely all the policyholders have been hard hit. There has been speculation that, in today's money, the pension might be £75 a week, but there is an opportunity cost, because a number of people were locked into the scheme in 2000 when they were told that penalty fees would be charged for withdrawal. For the Chadwick process not to look at losses incurred after 2001, when it was already known that a penalty charge would be incurred
if the money was withdrawn, seems disingenuous of the Government. A number of hon. Members question whether Chadwick is a transparent and independent process. To limit compensation on those grounds seems spurious. That the scheme was already falling apart had to be known. The whole issue of penalty payments has to be taken into account.
The Government conceded the case for compensation some time ago. They conceded that it was not an ex gratia payment, but a payment for wrongs done-a payment for justice. By continually putting off the payment and not being able to tell us any details in this House tonight, even though their amendment says that they will produce them within two weeks, the Government are, at the very best, being disingenuous, so it is no surprise that there is considerable cynicism about their good intent on this matter.
I hope that when the Exchequer Secretary responds she is able to restore our confidence in that good intent by giving us details of the payment scheme; telling us why the Prime Minister said in 2008 that there would be a statement before Christmas, when it came only in January 2009; and telling us in detail that the Chadwick process is independent and transparent. If she cannot do those things, there will be real concern not only from Members, but from the people whom we seek to represent tonight-the people who require that compensation for the injustice done to them-about whether this Government really do intend to publish those details.
6.30 pm
Martin Horwood (Cheltenham) (LD): I shall try to avoid the more party political comments made by some contributors to the debate, partly because the Equitable Life issue is one of simple justice, not of ideology or of party, and partly because many of the mistakes relating to Equitable Life and the regulatory regime that governed it predate this Government, which underlines the time that many policyholders have been waiting for a resolution to the issue. Many Members have referred to the 10 years since the Court of Appeal judgment and since Equitable closed its doors to new business, but six years before that Equitable Life started cutting the size of final bonuses, and by what should have been the turning point, the parliamentary ombudsman's report in 2008, the crisis had been brewing for about 14 years. Policyholders have therefore had to wait an enormous length of time.
Mr. Mark Field: I appreciate that some matters have been in gestation for some time and, therefore, should not be subject to party politics, but does the hon. Gentleman not understand the concern, which many of us feel, including the hon. Member for Angus (Mr. Weir) who spoke for the Scottish nationalists, that the treatment of Equitable policyholders has been so very different from the treatment of shareholders in banks, bank account holders and a range of others? As I said in my contribution, a whole lot of cash has been showered on such individuals, in stark contrast to the treatment of Equitable Life policyholders.
Martin Horwood: The hon. Gentleman makes a fair point, and it is incumbent on whichever Government happen to be in office when such wrongs are exposed to respond fairly and reasonably, and that responsibility lies fairly and squarely with this Government.
The ombudsman's report was absolutely damning. It said that the Government and regulators were guilty of regulatory failure and recommended that an independent tribunal quickly and simply calculate compensation. The Government slowly accepted, and apologised for, maladministration, but they initially rejected many of the ombudsman's findings, failed to offer immediate compensation and failed to set up the fully independent process that the ombudsman had asked for. That refusal was not only an injustice to Equitable Life policyholders, but a potential threat to the whole credibility of the ombudsman system. On many aspects of casework, many hon. Members might share my frustration that the ombudsman's reports are often not properly acted on, and I am afraid that the response of the Government at the time and, to be honest, since then has helped to undermine the credibility of the ombudsman system. That is potentially serious, particularly in respect of the Chadwick process, which we now have instead, because there is now a real question about whether it will resolve the issues at all.
I am disturbed by the wording in the press release from Sir John Chadwick's office on 4 March. It accompanied his third and final interim report and noted his provisional views as to what factors the Government
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