Equitable Life: a decade of regulatory failure. The report said that there was evidence of "serial regulatory failure" on the part of the Government in relation to its regulation of Equitable Life in the period before 1 December 2001. The report called on the Government to apologise to policyholders and to set up a compensation scheme.
7.
The Government accepted some of the Ombudsman’s findings of maladministration and of injustice resulting from the maladministration. Although it did not accept that it would be appropriate to provide compensation in the way suggested by the Parliamentary Ombudsman, it agreed that some payments would be justified, to the extent that some policyholders had suffered a disproportionate impact as a result of the maladministration.
In light of this, in January 2009 the Government asked Sir John Chadwick, a former Court of Appeal Judge, to advise the Treasury on issues relating to the determination of relative losses suffered by Equitable Life policyholders and the impact of those losses. Sir John has now reported.
On 11 May 2010 the new Conservative-Liberal Democrat Government published its Coalition Agreement, setting out its early priorities. This contains a pledge to "implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure." The purpose of this Bill is to enable the Government to fulfil this pledge.
Territorial extent and application
10.
The Bill is a UK-wide bill. The main subject matter of the Bill, namely payments in consequence of maladministration in the regulation of a specified insurance company, is not a matter which is devolved to the Scottish Parliament, the National Assembly for Wales or the Northern Ireland Assembly.
11.
The Bill makes provision for certain matters to be dealt with through secondary legislation, such as the provision to allow for payments to be disregarded in the consideration of a person’s liability to pay for certain goods and services. This may include, for example, health and social care, which are devolved matters. However, such provisions are incidental to the main subject matter of the Bill.
Wales
12.
The Bill applies to Wales in the same way as to England. It does not change the position of the National Assembly for Wales and has no effect on the powers of the Welsh Ministers.
Scotland
13.
The Bill applies to Scotland in the same way as to England. It does not change the position of the Scottish Parliament and has no effect on the powers of Scottish Ministers.
14.
This Bill does not contain any provisions falling within the terms of the Sewel Convention. Because the Sewel Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought for them.
Northern Ireland
15.
The Bill applies to Northern Ireland in the same way as to England. It does not change the position of the Northern Ireland Assembly and has no effect on the powers of the Northern Ireland Assembly Government.
Commentary
Clause 1: Payments
16.
Subsections (1) and (2) allow the Treasury to incur expenditure in connection with the making of payments to persons adversely affected by Government maladministration before December 2001 in the regulation of Equitable Life.
17.
Subsection (3) confers on the Treasury the power to make provision for the payments to be disregarded for the purposes of tax, entitlement to tax credits, and liability to make a payment in respect of the provision under an enactment for goods and services, (for example social care), and for the purposes of connected reporting requirements. Under the power the Treasury could provide for the payments to be tax free in the hands of recipients and/or that the payments would not affect recipients’ access to certain means-tested support from public funds. Subsection (4) allows this power to be used selectively, so an order made under it could provide that the payments should affect eligibility for some, but not all state funded means-tested support. Subsection (6) allows it to be used in relation to enactments made by the devolved administrations.
18.
Subsection (5) states that, should the Treasury decide to exercise the powers set out in subsection (3), the affirmative resolution procedure will apply.
Financial Effects
19.
The Bill will enable a scheme to be funded to make payments to persons adversely affected by Government maladministration before 2001 in the regulation of Equitable Life. The scheme will entail public expenditure. The extent of losses suffered due to maladministration will not be clear until Sir John Chadwick’s report has been considered. The costs of the scheme will be determined following consideration of Sir John's report and representations from interested parties alongside other priorities.
Public Sector Manpower
20.
The Bill has no effect on public sector manpower. The effect on public sector manpower of the scheme itself will not be known until the details of the scheme are determined.
Impact Assesment
21.
This Bill does not have a cost impact on the private sector, public services or the third sector and an impact assessment is not required.
A separate Equalities Impact Assessment is available on the Treasury website.
European Convention On Human Rights
23.
The Treasury consider that the Bill does not give rise to any Convention rights issues. The Financial Secretary to the Treasury has made a statement pursuant to section 19 of the Human Rights Act 1998. This states that in his view the provisions of the Equitable Life (Payments) Bill 2010 are compatible with the Convention rights.
Commencement
24.
The Bill will come into force on Royal Assent.
