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A society is judged very much on how it treats its young and vulnerable, on how it looks after and cares for the elderly and on how the young are given opportunities. I hope, therefore, that no one is judging us in the Chamber by the standard we have set in the treatment of Equitable Life members, because if they are, they will be sorely disappointed. This debate has continued
without redress, at least until now, and with no help from this place, at least until now, and EMAG estimates that about 32,000 policyholders have died since its campaign for compensation began-a stark figure already mentioned today-with members continuing to die at a rate of about 100 per week. Those are stark facts when we realise that these are people's lives we are talking about.
By the time this scheme starts paying out next year, 13,000 more members will have passed away, bringing to 43,000 the total number of people who have struggled more than is fair or judicious because no solution could be reached or help given by the Government when it was needed. I am glad, therefore, that today's legislative change is passing through the Chamber, and I look forward to further contributions when the programme goes forward.
I have some concerns, however, about the quantum. Everyone seems to be in favour of the process, but we have not been able to identify the percentage. I have been contacted by Equitable Life members, including a gentleman who is terminally ill-this sort of situation will be replicated across the whole United Kingdom-and is desperate to receive the money so that his wife will be able to live comfortably. Surely, this is the very thing that we should be trying to do; this is the whole purpose behind pension schemes and Governments encouraging people to invest in private pension schemes.
I stand here on behalf of that terminally ill gentleman and others like him. I could do nothing else, because my job as an MP is to fight on behalf of those who come to me. That is what we are here to do, and I urge that a reasonable solution be agreed today, so that people can receive their compensation in time for it to make a positive difference to their lives. I have constituents who were paid half of what they expected on the commencement of their pensions in 1992, when petrol was about 40p a litre. It is now three times that, and the pensions are worth half their value. That is an indication of where their pension schemes are and of how Equitable Life members are losing out. Lives have been severely affected, and it is our duty in this place to redress the balance as much as we can.
Sammy Wilson: Does my hon. Friend accept that it is the duty of the Government to take this matter forward, especially given that when in opposition and during the election the Conservative party pledged to implement the parliamentary ombudsman's report and recommendations, which for most people meant not a small fraction of their relative loss but substantial payments?
Jim Shannon: My hon. Friend must have read my mind. The parliamentary ombudsman's report describes the Equitable Life situation as a decade of regulatory failure, and her second recommendation is that the Government should set up and fund a compensation scheme with the aim of putting people who have suffered a relative loss back into the position they were in before maladministration occurred.
The issue facing us is the percentage of the value of the Equitable Life schemes. A report commissioned by the previous Government suggested that policyholders lost up to £4.8 billion in this debacle and proposed that they should receive a package of about £400 million. However, there is no guarantee of that figure, which has
been bandied about by many. They are not new figures, and I am sure that some here could repeat them in their sleep, especially the Financial Secretary to the Treasury, who has been reminded of them several times in letters from constituents of mine, forwarded through my office, yet they bear repetition so that all here will be under no illusion about the situation.
I remind hon. Members that this is not merely a number-crunching game that we are playing; we are playing with the quality of people's lives, and it is essential that the Bill be subject to any decision reached. In July, the Financial Secretary said in the House:
"Consistent with the ombudsman's recommendation, Sir John has advised that relative loss for an individual policyholder should be capped at the absolute loss they suffered."-[ Official Report, 22 July 2010; Vol. 514, c. 577.]
Yet I remind the Financial Secretary that when he was a shadow Treasury Minister he wanted to ensure compensation for injustice. I ask that this be done and that we compensate for the injustice that all those people have suffered over years of unnecessary struggle.
"Let's not make Equitable policyholders victims three times over. First, at the hands of the regulators, as so clearly articulated by the parliamentary ombudsman"-
"second, at the hands of the Labour government who failed to bring closure over a decade; and now third, compensation that will be decimated if Sir John Chadwick's advice, meant for the Labour government and slated by the ombudsman, is used."
I am aware of the financial position. We all know that we have to make hard decisions over the next few years about how the money will be spent. We are not running away from that. Indeed, I am fighting against reductions in grants that mean that Northern Ireland Housing Executive constituents are living with damp in their homes; that worthy disability living allowance recipients are being stripped of their support; and that roads are ruining cars because there is no money to fix them. I see all of that, and everybody else sees it, but I accept that we must take into account the fact that the money is unavailable. However, to compensate Equitable Life members with 10% of their investments is scandalous and can never be acceptable.
Heather Wheeler: I wonder whether the hon. Gentleman is in the same position as I am. I have a family of constituents-two generations-affected by this problem, and the desperation of those who write to, e-mail and meet me in my constituency is phenomenal. Has he found that in his constituency too?
Yes, it is replicated, right across the United Kingdom, for families, individuals and others. Indeed, there is sometimes a whole string of people affected, including people with different jobs. It does not matter what their jobs are: they can be fishermen owning their own boats or bin men collecting bins and getting rid of the rubbish. Those are the ups and
downs-the highs to the lows, and everywhere in between-so the hon. Lady is absolutely right: everyone is affected.
What really worries me is that those who are affected have reached the golden age of retirement, when their mortgage has been paid off and when they know that they do not need to work any more or slog their guts out-if I can use that terminology in this House-but have time to enjoy the finer things, such as laughter and joy with their families. The terrible, horrendous situation in which they find themselves has stripped too many of our pensioners of their joy and placed on their shoulders both financial worry and a burden that should be long behind them. Today is the day for us to shoulder some of that load and burden, and to help them along life's road. That is our purpose as MPs in this House. Today is the day for us to step up to the mark and reset the balance for those who have waited for help for some 10 years. Today is the day for action. Let it be the right action.
"I, like many others, in fairness expect and deserve compensation, as recommended by the Parliamentary Ombudsman and promised by the coalition Government, and not a figure based on the Chadwick advice, which the ombudsman himself described as an unsafe and unsound basis on which to proceed".
Andrew Bingham (High Peak) (Con): I am conscious that many Equitable Life policyholders will be watching this debate this evening. Consequently, it is worth reiterating that the purpose of the Bill is to facilitate and enable the making of payments to those who have been affected. That is a fact of which we on the Government Benches can be proud. In just four months we have progressed more than the Labour party managed in 10 years. I am also pleased to hear that all parties will support the Bill this evening-although we should not be too self-congratulatory just yet.
Equitable Life members will be greatly heartened to learn that payments now seem to be imminent, but they are equally concerned about the likely level of those payments. I, along with many others, signed the EMAG pledge before the general election. Many Government Members are in the Chamber this evening because we signed that pledge, and because we are determined to prove our intention to try to honour it in the best way we can.
Bob Stewart (Beckenham) (Con): When we gave that pledge, we gave our word. It is difficult for all of us who signed the pledge not to give Equitable Life members-often people who will have put in their life's savings-fair, decent treatment and a proper compensation package. Does my hon. Friend agree with that?
I do agree with that; indeed, that is the point that I am making. We signed the pledge and we are here to try to deliver on it. However, as we try to deal with the economic carnage left to us by the Labour party, the fact that we always said-I think that this was
the exact phrase-that whatever scheme was put in place would be subject to the impact on the public purse has become a more stringent condition and more restricting than we ever believed possible.
It is a crying shame that the Labour party did not deal with the issue earlier, before-to quote the right hon. Member for Birmingham, Hodge Hill (Mr Byrne)-there was "no money left". Had the previous Government done so, it would have been easier to make a more generous and just settlement. The decent thing at the right time would have saved so much pain and heartache for so many of my constituents in the High Peak and so many constituents of fellow Members. We find ourselves in a position where we wish to honour our promise-our pledge-yet we are hampered in our efforts by the rashness of our predecessors.
I am conscious that many of my colleagues wish to speak in this debate. In accordance with your earlier wishes, Mr Deputy Speaker, I am determined to be extremely brief. However, I would ask the Minister to remember the pledge that we all signed. EMAG and the Equitable Life members are realists. They understand the difficulty that we face, given the economic carnage, as I have described it. They find it difficult to accept the recommendations of the Chadwick report. I would therefore ask that when the comprehensive spending review is complete, Equitable Life should be given a special place.
The Minister has my sympathy as he tries to perform this most difficult of balancing acts-but I have to tell him that most of the sympathy goes to my constituents in the High Peak, so let us not implement Chadwick without serious thought. I know that we want to expedite full and final payment swiftly. However, if a way could be found to increase payments, even if it meant spreading them across a longer period-albeit in a way that ensured that the administration costs did not eat up huge amounts of whatever funds were available-I feel that that could be made acceptable to Equitable Life people, who have waited too long for what I hope will not be too little.
Yasmin Qureshi (Bolton South East) (Lab): I congratulate the hon. Member for Congleton (Fiona Bruce) on making her maiden speech. As a fellow north-west MP, I am sure that we will work well in future for the betterment of the north-west region.
Mindful of what you said earlier, Mr Deputy Speaker, I will keep my speech short. I shall not go into the history of Equitable Life, because everyone in the Chamber is aware of the history, nor shall I go into the merits or demerits of Sir John Chadwick's report or the ombudsman's report. I want to talk about my constituent, Mr Barri Sharrat, who was made redundant by his company and whose pension was moved to an Equitable Life policy, which was to be his main source of income on retiring. Mr Sharrat put his trust and faith, along with years of savings, into the hands of Equitable Life to build a secure retirement. I want Mr Sharrat and millions like him to be compensated.
I agree with the ombudsman's view that people should be put in a position similar to that which they would have been in had Equitable Life not collapsed. I welcome the Bill and would urge the Government not to short-change the people on a promise that they made before the general election. However, I am afraid that the argument about money just does not carry any weight, because before the general election there were many debates about the country's finances. Therefore, the level of debt was well known to everyone. Knowing that information, Members who are now in government made a promise that they would honour the ombudsman's recommendation. I would ask them to continue to honour that promise, and then all those present who have taken a sanctimonious approach to the issue can be properly sanctimonious about it.
I urge the Government to make the Bill fair and effective. To make the legislation effective, they should put the independence of the compensation scheme on a statutory basis. There should be an independent appeal process, and a timetable-a short one-for making payments should be set out. The criteria by which compensation is to be paid should be made clear and simple. Again, I urge the Government to accept the ombudsman's recommendation that people should be put into the position that they would have been in had Equitable Life not gone bust.
Mel Stride: I just wanted to say that it is my understanding that the ombudsman's report contains the recommendation that the public finances should be taken into account when coming up with the final compensation to be paid.
Yasmin Qureshi: The public finances may be taken into account, but it is my understanding that the Bill proposes to go along with Sir John Chadwick's proposal, which was not a very good one. As my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) said, the compensation does not have paid in the next few months or even the next year; it can be spaced out over five years or perhaps even 10 years, so that people can be given the compensation that they deserve. As has been said, the ombudsman has made a recommendation, but it is for us here in Parliament to do right by our constituents, and that means going back and giving the appropriate level of compensation.
Karen Lumley (Redditch) (Con): I, too, pay tribute to my hon. Friend the Member for Congleton (Fiona Bruce) for her maiden speech. I have heard many great maiden speeches since I arrived here, and I shall now be adding Congleton to my long list of places to visit in the UK.
My colleagues have made a great many points today, so I shall be extremely brief. I, too, signed the Equitable Life pledge before the election, because I believed that the Equitable Life policyholders needed to be compensated. I am therefore delighted to see that we are moving towards a swift resolution for them. They had to wait
more than 10 years under the previous Administration, when there was money in the pot to pay them, although the will to do so was obviously not there.
Like other hon. Members, I have had many letters from my constituents on this matter, and as a result I had a meeting with them in Redditch on Friday night. Let me tell the House that there was standing room only. Emotions were running high and I have to say that it was a pretty uncomfortable hour. I listened to some heartbreaking stories, including that of a constituent who had put not only his and his wife's money into Equitable Life but that of his 15 employees too. I just cannot tell the House how bad he felt. I left that meeting feeling angry that my constituents have had to wait more than 10 years for justice, and I think that the previous Government should be ashamed of themselves for not dealing with this matter earlier.
But we are where we are. I want to say to the Minister that those people have suffered enough and, while I am grateful to him for settling the issue as soon as possible, I urge him, during his difficult negotiations in the Treasury regarding the spending review, to look closely at the compensation package that my constituents will receive. In these difficult times, I urge him to remember the pledge that most of us on this side of the House signed.
I will support the Bill tonight, but I hope that the Minister has listened carefully to what Members on both sides of the House have said about the fairness of the compensation scheme. Our constituents will await with interest the outcome of the spending review on 20 October.
Nia Griffith (Llanelli) (Lab): I am grateful for the opportunity to take part in the debate today, and I certainly want to support the Bill, because we do not want to do anything to delay the payments. The important thing now is to get those payments made as quickly as possible to the many ordinary hard-working people who made sacrifices in order to put money away in a scheme that they trusted to provide for them in later life. Those people were thinking ahead; they were the responsible citizens who had no intention of having to rely on the state. They continue to worry, however, and to suffer hardship, because they fear that there will be still more delays. They are also worried by the mention of a cap being placed on the funding of the payments. Most importantly, those people do not want smokescreens, spurious justifications or complicated explanations. They simply want the Government to take notice of the ombudsman's letter of 26 July and move as swiftly as possible to making proper payments. They want those payments to be realistic, not just a sop; they want them to be made in the spirit of the ombudsman's report.
I am very concerned by the fact that the Minister spoke today of linking the amount to be paid out to Equitable Life victims with the comprehensive spending review. That would be totally unacceptable. We know that the issue of Equitable Life has gone on for some years now, and it should not be arbitrarily subject to a review that is to take place in a few weeks' time. Opposition Members are committed to seeing Equitable Life victims receive proper payments that reflect their losses. Anyone
listening to what both the coalition parties said before the election would have thought that they too were committed to making proper payments. Indeed, they were vying with us to say that they would be more generous than we would. To state that the payments will now be subject to spending review cuts of perhaps 25% is absolutely disgraceful. What would have been a £100 payment could now be only £75. Frankly, that seems to me next to dishonest. Equitable Life victims were not responsible for the banking crisis, and they certainly do not deserve to be penalised by the slash-and- burn policies of the present Government, whom respected economists are now suggesting might send us into a double-dip recession.
Gordon Birtwistle (Burnley) (LD): The hon. Lady says that she is keen to see the payments made to the Equitable Life policyholders. Will she tell us how much Labour would have paid out if it had been in control?
Nia Griffith: What is important now is to move on and get those payments made. The worry is that these smokescreens are putting people off, and the policyholders will not see any money at all. They want to see actual payments.
The policyholders are also worried about tax and benefit loss. I am pleased to see clause 1(3) in the Bill, but it is far too loosely worded. It gives the Treasury the power to disregard payments to Equitable Life victims when assessing their tax liability or their entitlement to means-tested benefits, but I would like to see a much more strongly worded provision, as well as a genuine awareness among Ministers that any payment will be disregarded.
I was perturbed by what the Minister said. Far from giving any assurance that there would be a disregard for tax and benefit purposes, he said that the Department for Work and Pensions would sort these matters out in the usual way. That will set alarm bells ringing, as anyone who has lost benefit, pound for pound, as a result of receiving a payout will confirm. Equitable Life victims, having waited all these years, could end up receiving their payment only to lose the equivalent amount in benefits or additional tax. We need assurances from Treasury and DWP Ministers alike that insult will not be added to injury in that way.
Gavin Williamson: It is incredibly interesting listening to the hon. Lady's speech, but surely she ought to hang her head in shame at the actions of the Labour Government, who continually betrayed Equitable Life policyholders. Will she apologise for the Labour Government's failure to act?
If the hon. Gentleman had been here under the previous Government, and been a regular attender at business questions, he would have known that the timetable for the Equitable Life programme was raised again and again. I can assure him that I made many representations to our Ministers to ask
them to speed up the process. It was a complex process and there were enormous difficulties; there was also an enormous amount to read. That is why it took the ombudsman so long to produce the report in the first place. I can assure the hon. Gentleman that an enormous amount of good work was done, and that we would not be where we are now if we had not put in that work before the general election.
We need assurances from the Treasury and the DWP that people will not lose out in the way that I have described. People are worried because the suggestion of a cap is being bandied about, and because the figures might be cut again in the comprehensive spending review. If they were then to lose money through a clawback of tax or benefits, it would be an absolute disgrace. It would also affect the most vulnerable people in particular.
Another worry about the Bill is that it contains no mention of a proper appeals mechanism. The Minister made a few encouraging remarks about appeals, but there are no details in the Bill. I call on him to consult policyholders about that mechanism, and to publish the relevant details as soon as possible. We want to see the settlements made as soon as possible, but we also want to see an appeals mechanism that can hear appeals quickly and fairly. The last thing we want is for Equitable Life victims, who have already waited far too long, to have to wait in a queue for their appeal to be heard.
Amendments have been proposed by those on our Front Bench, including my right hon. Friend the Member for East Ham (Stephen Timms). One relates to timing, which is crucial. We must have a specific start date so that we know when the victims are going to get their proper payments. We also need a scheme that will be totally independent of the Government. There is also an amendment that provides for hon. Members to vote on the scheme, to ensure that it is swift, simple, transparent and fair. That is vital if we are to have the trust of the public that this is a genuinely fair scheme, not one that has been cooked up in a back room and that will be cut and cut again in order to meet some overriding demand from the Chancellor. I look forward to debating the Bill more thoroughly in Committee. I very much hope that we will have the opportunity to table our amendments, and that they will be well supported by hon. Members on both sides.
David Rutley (Macclesfield) (Con): Thank you for giving me the chance to speak in this important debate, Mr Deputy Speaker. I, too, congratulate my hon. Friend and neighbour, the Member for Congleton (Fiona Bruce), on her excellent maiden speech. I can assure the House that she has replaced Lady Ann Winterton-not Ann Widdecombe, as was asserted earlier-who is a real legend in this party. I would also like to join my hon. Friends in congratulating the Financial Secretary on the sheer speed and pace at which he is seeking to address the urgent matters before us. I knew him for many years before I came to the House and I would have expected nothing less than the positive approach that he is taking.
The story of Equitable Life policyholders is without doubt a tragic one. I believe it was my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) who suggested that it was like a Shakespearean tragedy.
Well, I am half Danish and am more familiar with some of the Viking sagas. What the policyholders have been through would fit well into any epic tale. It is like the famous Njáls saga with its series of gruesome feuds. Similarly, today's story involves hardship and heroic campaigning-in this case by EMAG-but this tale is now in desperate need of a fitting conclusion.
I have not followed this case as long as other longer-serving Members, and I do not claim to have the same level of expertise on all the details that they possess. What is clear, however, is that maladministration has occurred, policyholders have suffered and compensation is due. It is absolutely right that this new coalition Government should respond, as they will. Sadly, the issue is yet another part of Labour's lamentable legacy-this time, not the cost of the record budget deficit, but the price of an unmet moral obligation that needed to be addressed.
I am sure that hon. Members will agree that policyholders have shown real courage and that EMAG has conducted a hard-fought and professional campaign. Like many other Members, I have met affected policyholders in my advice surgeries. I have heard about the hardships they had to endure. I have received well-argued letters and e-mails setting out their case both during the general election campaign and now as the Member for Macclesfield. It is the strength of their case and their campaign that has encouraged me to learn more about the situation, to sign the EMAG pledge, as many of us have, and actively to stand up for their cause. What I am even more proud of is the fact that the strength of their argument won the attention it deserved from the Conservative Front-Bench team and the Liberal Democrats' leadership before the general election. I am delighted that, working together, the new coalition Government have honoured their commitment and urgently brought this legislation before the House.
I welcome the Bill. It provides parliamentary authority for the payments schedule and scheme. It is a vital step, which I am sure will be widely welcomed on both sides of the House, as it has been welcomed today, but policyholders in Macclesfield and throughout the country want answers to important outstanding questions. How much will be paid? How should the scheme be designed, and how will it be administered? These questions now need to be fully addressed to ensure that policyholders get the best possible outcomes for their cases.
On the size of the payment, it is, sadly, a reality that in this challenging economic climate, the level of compensation will have to take into account the demands on the public purse. Like others who have said it repeatedly today, I urge the Financial Secretary to continue to consider the views of the parliamentary ombudsman in determining the final figure.
Andrew Bridgen (North West Leicestershire) (Con): Does my hon. Friend agree that the majority of Members and the majority of the public out on the streets will not believe that a 10% payout even on a £5 billion liability is either a fair or equitable result for policyholders?
I also urge the Financial Secretary to continue to take a transparent approach to explaining the rationale used to calculate the final compensation figures. Such transparency is critical and I am sure that my hon. Friend will agree that it should not be allowed to get lost in the detail of the wider spending review as it gets reported.
I also congratulate my hon. Friend on creating an independent commission to advise on the allocation and the design of the payment scheme. It is another positive step forward and-like many others, I am sure-I am pleased to hear that the Select Committee on Public Administration will fully review the commission's conclusion when it reports in January. It is a vital step.
I am keen to seek further assurances from my hon. Friend that his officials will provide the necessary action for the administration of the scheme when payments are made in the middle of next year. Given the likelihood of a large number of appeals, this will not be a simple task. The scheme must be designed to accommodate the needs of these particular policyholders, whose average age is, I think, 78. It must be clearly communicated-not just on websites or via e-mails, but via well-written, high-standard communications and effective, well-manned telephone contact centres.
As I have discussed with the Financial Secretary, the administrator must learn from the launches of other Government schemes. Many will remember the agonies associated with the Rural Payments Agency and, more recently, HMRC's problems with new PAYE systems, which are fresh in our minds. We need to ensure that the Equitable Life scheme does not become another example of the administrative chaos that was the trademark of the previous Government.
Frankly, I am disappointed not to have heard an apology from Labour Members, but I am not surprised, as they have failed to apologise for the huge budget deficit and now it is the turn of Equitable Life policyholders. It is all part of a depressing pattern of denial.
I conclude by congratulating the Financial Secretary once again on the speed with which he has tackled this long-running saga. I hope that in addressing the concerns of the policyholders, he will help those in real need and-just as at the end of Njáls saga-bring about a meaningful reconciliation. It is what the policyholders deserve after the epic trials they have had to endure.
Sheila Gilmore (Edinburgh East) (Lab): Thank you, Mr Deputy Speaker, for giving me the opportunity to speak in the debate. As a new Member, I have come to this issue afresh as a result of the contact I have had with the victims of this situation. I know that my predecessor also took up their cause. I have to say that, having read through as many of the reports as I could-they are certainly extremely lengthy and extremely difficult-I have come to the conclusion that the previous Government were wrong in their approach. I think they took the wrong road and I am not afraid to say so.
Clearly, the management of Equitable Life were also culpable, and it is highly regrettable that we are in a situation where that organisation is not in a position to compensate its customers who were so badly let down
by its practices. It is equally clear, however, that there was maladministration and regulatory failure throughout the 1990s. Before we get into too much point scoring on the issue, that was obviously on the watch of Governments both Conservative and Labour.
What my constituents are now asking me-having read the Minister's statements in July, which concerned them greatly; I am sure they are no clearer today-is whether the Government are using the Chadwick calculations, which reduce compensation for loss by 90%, with a possible further reduction following the spending review. Is that what is being followed or not? I am no clearer about that today, so I cannot answer that question for them. If it is to be followed, that is not what EMAG has been fighting for or what EMAG understood to be the position promised by both constituent parts of this coalition Government.
It is highly convenient for the Minister to hide behind what has become this Government's theme tune-everything has to come second to deficit reduction, which is all the fault of the previous Government. It is too easy to sing that song continually, so I am going to take this opportunity-briefly, in view of what Mr Deputy Speaker has said-to say that we do not accept that statement of the situation. In our view, we are not deficit deniers. The last Government took steps to stimulate the economy and save our banks from collapse-something that at least one part of the coalition Government accepted at the time was the right thing to do, and several times said so. As a result, yes, when we left office, there was a deficit; equally, however, unemployment was considerably lower than had originally been predicted when the recession began. The deficit was actually reducing under the Labour Government.
We believe that the current Government's plans are wrong, that they place recovery at risk, and that it is not necessary to reduce the deficit at such breakneck speed. That may seem to constitute a diversion from the debate, but I think it important to restate it, because the Minister and many other speakers on the Government Benches have raised the subject of the financial position.
Gavin Barwell (Croydon Central) (Con): Did not the ombudsman recommend that the compensation scheme should take account of the state of the public finances? My constituents tell me that that they are happy to accept reductions that are in line with other reductions in public expenditure, but what are completely unacceptable are the reductions envisaged by Chadwick, which go far beyond that.
Sheila Gilmore: I agree. The people who have come to see me have said much the same. They have spoken of the possibility of staged payments and discussed how that arrangement could be affordable, but they have made it clear that what they do not accept is Chadwick.
At least one intervention and, I think, some speeches from the Government Benches have suggested that the Government will go beyond Chadwick and take wider issues into account, which suggests more than the £500 million or thereabouts mentioned by Chadwick. If that is so, I am not sure why it is still necessary to talk constantly about the spending review. Does not discussing the review all the time, and hinting that the Chadwick recommendations will be followed, suggest that there will be less rather than more? We need to know the answer to that question.
During the election campaign, having considered the matter and read a number of documents-I have read many more since-I pledged support for EMAG. I would have held hard to that support had my party still been in power, and if it were in power I would be saying the same thing now. However, I have questions to ask. What compensation is being promised? Is it simply the £400 million to £500 million mentioned by Chadwick, and if it is not, will it be more or less? Blaming the last Government may make for good political knockabout, but it leaves those who have suffered loss little the wiser. We and they need some real answers, and we need to work together.
I support legislation that will give the Treasury the authority it needs to make the appropriate payments to policyholders, and I welcome the speed with which the Government have sought to right what I think we all now agree is a profound wrong. However, the Government will be judged on the basis of their final settlement. My plea is simply for that settlement to be set at a level that honours both the letter and the spirit of the commitment that the coalition has made to policyholders. I do not think anyone expects full compensation at this point, but whatever reductions are made should be broadly in line with those affecting other areas of spending. If the Chadwick proposals are followed, that will emphatically not be the case.
In the run-up to the general election, I was asked by hundreds of constituents for reassurance about the Conservative party's position. I was able to deliver that reassurance via a pledge which I know many of my colleagues have also signed. On the back of that pledge, a number of people-I do not know how many-voted Conservative for the very first time. So, as my hon. Friend the Minister considers the level of compensation, I simply ask him to remember the promises that we made before the election. I believe that that would not only restore people's faith in saving for their retirement, but restore their faith in political promises.
Mark Durkan (Foyle) (SDLP): When it was said in the Bible that the stone that the builders rejected had become the cornerstone, that was intended to be a positive statement. In this instance, however, although parties and Members on both sides of the House agreed that Sir John Chadwick's proposals were wrong, flawed and grossly inadequate, those very proposals have become what the Government are telling us is a building block on the basis of which these matters can be resolved.
We should bear in mind that, according to what we have been told by the parliamentary ombudsman, that building block is unsafe and unsound. We as a House have a duty to have regard to the various pledges that we, as parties and as individuals, made in the course of the election, and also to what the parliamentary ombudsman has said-and we should bear in mind that this is a parliamentary ombudsman.
Not only have the Equitable Life policyholders been left suffocating with frustration, but their problem continues, and they are increasingly seething with cynicism. Rather than a Parliament that will clearly fix the problem, we still have parties that are simply in the business of fixing the blame, but people want to see a real resolution. I am pleased that we have a Bill before us, but it provides the bare chassis of the vehicle that will be needed to solve this problem. Other Members have said that they do not disagree with much of it, but that is because there is not much in it: it is basic enabling legislation.
If the Bill were on offer from a pension company or indeed from anyone else, we would be asking, "Where is the prospectus? Where are the key details? What have we to rely on? What does any of this signify, other than a vague, general promise in a very slim brochure?" That is all that we have here. I acknowledge that following the long indifference that we received from those on the Treasury Bench for so many years we at least have something-which is welcome-but the move from long indifference to inadequacy is not something for Equitable Life policyholders to celebrate when they are still languishing in injustice and uncertainty.
Let us, here in the House, have fewer party-political spats about what one Government did and what another Government are doing, and stop patting each other on the back. Let us remember that the collective political process is indicted by our failure to resolve this problem. The policyholders have seen one Parliament after another. Are we able to act on the basis of the clear recommendations and findings of a parliamentary ombudsman? The policyholders saw a Parliament and Government with the ability to bail out banks, call people in quickly, merge banks, find all sorts of taxpayers' money and go to the markets for money to solve the problem, because we did not want systemic failure in the financial system.
We need to ensure not just that there is confidence in the financial system, but that we underpin confidence in the future of the pensions system and regimes that will also have to be revised. Members on both sides of the House must make certain that we underpin that confidence by resolving the Equitable Life issue in the terms in which we all promised to resolve it, and to which the ombudsman has drawn attention. Yes, there will be issues about pressure on the public purse, which is why we must consider what the profile of the relief will be over time; but let us not pretend that offering a mere fraction or token of compensation accords in any way with fairness, transparency or justice.
Let us stop babbling about the reputation of this Government and that Government, and do something to restore the reputation of politics and the House by using the Bill to demand further commitments from the Government. Let us establish that they intend to follow it up with clear, detailed provisions that will be not just credible to us, but honest to victims of the ongoing crisis.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Hon. Members really must exercise some brevity. I want to ensure that all Members have an opportunity to speak, because I know how important it is to their constituents that they make their mark. Please let us see what we can do.
It is an indication of the depth and strength of feeling that this scandal has created that so many Members wish to speak about it. There is no doubt that it is a scandal. Equitable Life behaved very badly. It hid its debts, it expanded too rapidly, and it had no visible means of support. Ultimately, those actions left my constituents and many other people throughout the country with reduced pensions, and with losses running into many thousands of pounds.
I think it fair to say that no one would have invested in Equitable Life had they known what was happening. The shame is that it has taken so long-nearly a decade-for us to reach a point at which we are actually going to do something about it. I welcome the Bill, I welcome the actions of the new coalition Government, I welcome the establishment of the independent commission that will report in January, and I welcome the stated aim to start making payments by the middle of next year. Those payments, however, must be fair as well as swift. I am glad that, after a decade of delay and prevarication, we are actually going to do something, and I think that all Members on both sides of the House agree that it is time to act.
Given that constituents have contacted me on this issue, I have obviously looked closely into it, and I must congratulate EMAG on all the work it has done in keeping the issue alive and at the forefront. I have spoken to its members and read its briefings, and I find myself in general agreement with its views. Like many other Members, I signed the EMAG pledge during the election, and I was happy to do so because I felt both that its members had a valid case for compensation and that that had been widely recognised. The real issue now boils down to money, therefore: how much compensation will be made available? Therein lies the problem, of course. We are doing the right thing here today, but we must continue to do the right thing.
I wish to make three points: first, we must be honest; secondly, we must be realistic; and thirdly, we must be compassionate. We must be honest about the level of losses Equitable Life members have suffered. We have had two reports, one from our own ombudsman-we have heard about the £4 billion or £5 billion identified in it-and one from Chadwick, estimating the sum owed at approximately one tenth of that amount. That is a 800% to 1,000% discrepancy. How is that possible? We heard from our own ombudsman earlier in the summer that she thought that was an unsafe and unsound basis on which to continue, and I agree.
In common with many Members, I campaigned during the election on a platform of honesty and realism. We must therefore be realistic and accept that we face extraordinary financial challenges, which were left to us by the previous Government, but we must not use that as an excuse not to do the right thing nor recognise what is the right thing to do. I agree with my hon. Friend the Minister that we must balance the needs of the policyholders with the needs of the taxpayer, but I think we should recognise the full losses that have been suffered before deciding what is affordable.
Iain Stewart (Milton Keynes South) (Con): My hon. Friend is making a very powerful argument. One way in which we may be able to square this circle is by splitting up the Equitable victims between those who require swift payment as they are suffering real financial hardship now and other policyholders who have suffered losses but for whom an immediate payment is not necessary. I should declare an interest in that I am one such policyholder as, God willing, I have 30 years of working life ahead of me. We could consider the situation of policyholders such as me outwith the current spending review period.
Stephen Metcalfe: I accept that point-indeed, funnily enough, I was just about to make it. One way we could make this situation more affordable is by splitting up the sums to be paid over the coming years. This Bill presents the opportunity to be a building block in the process of rebuilding trust in politics, because I think we can accept the losses and the ombudsman's recommendation, but we can also then work out how to stagger the funding of the compensation. There is a sense of realism about the fact that the compensation will have to be scaled back in line with what is affordable, but we should start from a point that reflects the true losses and perhaps then, as has been said, scale back in line with the cuts being experienced by other Departments across government.
Finally, we must be compassionate. I know that my right hon. and hon. Friends share my concern for all those who have been let down by the events at Equitable Life and by the actions-or, rather, inactions-of the previous Government, and I know that my Front-Bench colleagues will want to do all they can to support all of our constituents who have lost so much because of how Equitable Life conducted its business. I acknowledge that we as a nation face the most challenging financial situation since the war, but if we are to share the pain equally at this time of austerity, we must recognise that many who invested in Equitable Life have already been suffering that pain for many years and that they have pinned their hope for justice on this new progressive and equitable coalition.
As a matter of principle, we owe it to those people to do what is right. We said we would do it, so now we must. Obviously, I will support the Bill wholeheartedly, but on behalf of my constituents I ask the Treasury to play fair and find the necessary funds to make good what has become a decade-long travesty.
Penny Mordaunt (Portsmouth North) (Con): May I first offer my congratulations to my hon. Friend the Member for Congleton (Fiona Bruce) on her excellent speech in this important debate? I also want to congratulate the Minister on the progress he has made, and the speed with which he has been dealing with this issue; that is much appreciated. I also thank him for the time he has spent on discussion and correspondence with me and my constituents.
I want briefly to make four points. The first of them is about the independence of, and support for, the independent payments commission. There is much concern among EMAG members about the terms of reference for the panel and the inappropriate inclusion of Chadwick's work as the central building block. Can the Minister reassure the House that he has not accepted Chadwick
and that the panel will have wide scope in its deliberations? Can he also confirm what resources will be available to the panel, what independent actuarial advice it will receive, and whether he expects its members to appear before a Select Committee of this House?
Thirdly, I turn to the issue of the pot of money, which will be announced later in the year. That goes to the heart of this matter. I deeply regret that that is being resolved now, rather than at a time when the country had deeper pockets, and I know that the Minister will want to do everything he can to put right this injustice. I press him to ensure that no stone is left unturned in that respect, and I also want to be reassured that he is considering where other funds may be found. For example, I have learned from a Library paper prepared for the 2007 Pensions Bill of the right hon. Member for Birkenhead (Mr Field) that there is still about £1 billion available in unclaimed insurance and pension accounts-so-called widows and orphans accounts-aside from that which has already been repatriated or given over to social enterprise funding. The public purse currently has no claim on those funds and there is no definition of what constitutes a dead account in respect of them, but that could be remedied. I know the Minister appreciates what we all want to see happen, and also that we all want it to happen quickly. We, in turn, appreciate the difficult circumstances in which this has to be done, so let us give ourselves every option and opportunity to do the right thing.
Finally, I want to pay tribute to a constituent of mine, Brian Aitchison, and EMAG for all their hard work. In my dealings with them they have been constructive, courteous and very pragmatic. They have a sophisticated view of this situation. They are very clear in what they are asking for; they are very clear about why they do not have it yet; they are very clear about why it will not be easy to deliver; and they are very clear about where the fault lies. The last Labour Government are responsible for these poor public finances and the delay in Equitable Life members getting justice. It is this coalition Government who must put both those things right.
Mel Stride (Central Devon) (Con): Like many other Members who have spoken this evening, I welcome the Bill. It is timely-it has certainly not come before time-and I congratulate the Financial Secretary on introducing it so early in the life of this Government.
I too signed the EMAG pledge to stand up for fair and appropriate compensation, and like many other Members, I too have had many individuals in my constituency come to me in a terrible state because of what has happened to their pensions and their future as a consequence of maladministration and regulatory failure. For each one of those individuals that is a tragedy, but when we consider that 1 million policyholders and 1.5 million policies are involved, we see that it is not a tragedy; it is a national catastrophe, because it hits saving. We have now come out of one of the worst recessions in modern times-one of the worst since the second world war-and one of the things we must now do as a nation is get back into the habit of saving.
Nothing in the previous Government's approach to the Equitable Life saga has done anything to encourage that habit.
I have sat through most of today's debate and I have been disappointed and slightly irritated by the synthetic anger from Labour Members-I felt that particularly at the beginning of the debate. They have suggested that in some way we have been responsible for the delays and for the fact that these payouts are not happening more quickly, but we know of the previous Government's attitude and approach to Penrose, of how they obfuscated on the second parliamentary ombudsman's report and of the, in my opinion, cynical way in which they set up Chadwick to report after the general election so that it would be us who would be standing in this Chamber addressing these issues as we are today.
Neil Parish (Tiverton and Honiton) (Con): I thank my hon. Friend for the powerful points that he is making. May I reinforce the fact that this is about the message we send to all those who are saving for their old age in order to give themselves a good quality of life? If we do not sort out the Equitable Life situation, it will send exactly the wrong message to hard-working people. I congratulate the coalition Government on having the political will to sort it out, given that the previous Labour Government had no such will. In fact, they used taxpayers' money to fight policyholders. I urge our Front-Bench team to get this sorted.
Mel Stride: I thank my hon. Friend for making a very important point, with which I entirely agree. I welcome the coalition's commitments on several important matters, and they must not be overlooked in all the discussion about what the final payout is. The first is that there will be no means-testing. As we know, means-testing, when applied appropriately, can often provide resources to those who are most needy, but in this instance it will do nothing other than to punish those who have acted responsibly and have saved, putting something away for their future.
I too am very pleased that the Financial Secretary has stated that the estates of the 30,000 people who have died since this saga began will benefit through this scheme. I also welcome the transparency that has been proposed and the independent commission, which is so important in terms of designing and administering the scheme. I am happy that it will report so early in 2011, in time to make payments for the middle of next year. I am also particularly pleased that Brian Pomeroy has been appointed to that independent commission and that that was acceptable to EMAG.
I do not believe that interim payments should be made, because I accept what the Financial Secretary has said-I think he talked about this in his statement to this House on 22 July-about how that would overly complicate matters. What hon. Members must now concentrate on is making sure that we hit the end date-a final point at which justice is done in this matter.
Many hon. Members have also rightly recognised the complexity of the task facing the independent commission in deciding on the payments and administering them. We are talking about 30 million pension transactions over the period that we are considering. I urge the
Financial Secretary to ensure that he does everything possible to ensure that no delay now occurs as a result of that task.
As we know, the Bill is enabling legislation-it is not designed to determine the final payout. That is part of the comprehensive spending review, and the report back to this House will be made on 20 October. EMAG suggests that £5 billion should be the amount. Chadwick's remit was distinctly different from that of the parliamentary ombudsman, and because of the assumptions that he made about the proportion of people who were likely to have invested in Equitable Life, irrespective of the maladministration-in other words, if they had known of it at the time-he is perhaps looking at 10% of that figure.
We should not dismiss the Chadwick report's methodology and much of the hard work that was done, which took more than a year to put together in that report. However, I agree with this statement made by the Financial Secretary:
"I am aware that some of his findings will be contentious".-[ Official Report, 22 July 2010; Vol. 514, c. 577.]
I have been impressed by one aspect of today's debate, which is that members of EMAG have sat patiently watching our debate; I recognise one of the gentlemen in the Public Gallery at the moment. We owe it to them-we owe it to the individual policyholders-to do the right thing. We have a moral duty to them and we have a national imperative in terms of re-establishing the trust between government and people, which hangs on the decision that the Financial Secretary will take later this year.
Andrew Percy (Brigg and Goole) (Con): I know that this issue is important to so many Members, so I shall keep my comments as brief as possible. The one thing I have learned in my short time in Parliament is that those who speak for the longest time often do not have the most to say.
It is sign of this issue's importance that the Government Benches have been so full throughout this debate. I accept what the hon. Member for Foyle (Mark Durkan) said about this being a human tragedy. It affects the many individuals who have been to see me in my constituency about this issue over the past few months, many of whom are now very elderly. I recall going to see an elderly couple in Thealby, which is one of the small villages in my constituency, who were desperate as a result of this situation, and that is when I took the decision to sign the pledge. In a few minutes' time, I shall say a little about what my understanding is of the pledge I signed.
This is not a political issue-or it should not be one-but I would like to respond to one or two things that have been said today because they deserve a response. I begin by welcoming the action that the coalition Government have taken, thus far, on the matter. Amazingly, we have heard criticism today from Labour Members about the speed of action on the part of the Government,
despite the fact that we have been in government for only a few months and they had many more years to do something about this. What I could not quite understand was what exactly they have been arguing for today. They cannot have it both ways; they cannot dismiss the ombudsman's report and then berate Members on the Government Benches who signed the pledge for apparently now breaking it.
It takes some neck for the Labour Front Benchers to suggest that, and they had very little to say about what they propose as an alternative when they were directly questioned on what pot of money they think should be available for compensation. We heard no figure from them, just lots of words that were not a direct response to the question. That is why those on the Government Benches will take no lectures from the Labour party, which had the opportunity, when the public finances were in a much better state, to do something about this appalling tragedy; no lectures from the Opposition will carry any weight either here or outside with our constituents, who know that they were ignored for the past 13 years by a Government who did not seem to take a great deal of interest in this matter.
I fully support the Bill, as everybody does, simply as a mechanism for starting those compensation payments, but I wish to say something about my understanding of the pledge that I signed. It was not a pledge for 10% or, probably, for 20% compensation; it was a pledge for substantial compensation for those who have suffered this tragedy. I understood it to mean that there should be proper and full compensation, while taking into account, of course, the fact that there are great pressures on the public finances. Nobody denies that, but if there is to be any top-slicing or hair-splitting of the compensation-I say this in the strongest possible terms to the Minister-many on this side of the House will not accept a 90%, 80% or 70% cut in it. That level is not what we told constituents about in the run-up to the election; people in my constituency were not left with that impression. Many in Brigg and Goole, and across east Yorkshire and north Lincolnshire, voted for me because of the pledge that my party went into the election on. I urge the Minister to consider some of the opportunities that have been proposed, including the possibility to defer or stage some of the compensation over a number of years. I am confident in the pledge that I signed, and I look forward to the Government coming up with a figure that I hope will compensate my constituents, and those of other hon. Members, properly and fairly.
Mr Deputy Speaker (Mr Nigel Evans): I thank the hon. Member for taking much less time than he could have done. Everybody can see how many Members are standing and everybody can do the maths. We want to get as many contributions in as possible, so I ask hon. Members to show great discipline.
It is an understatement to say that this is a complex and difficult issue. I think that we all recognise the reasons for that complexity, not least the difficulties that Equitable Life had with its guaranteed annuity product and issues to do with regulation and jurisdiction, compensation, mismanagement and delay. I welcome the speeches of Members from all parties who have talked straightforwardly about those difficulties.
In many ways, this is a story of our times. It is a story of boom and bust-the very boom and bust that the former Prime Minister promised us he had abolished. It ill behoves some Opposition Members to leap on the moral high horse after not dealing with this matter for so long and leaving us with the crisis in public finances that makes it so difficult to deal with. In this issue, above all, we are all in this together.
I welcome the coalition's commitment to dealing with this matter so quickly. I welcome the transparency of the process and I sincerely welcome the Minister's deep personal commitment to trying to resolve this issue as fairly as possible. I appreciate the complexity and the challenge of finding a fair settlement when we have inherited, in the words of the former Chief Secretary, no money.
As someone who signed the pledge in good faith, I urge the Minister, in considering the Government's proposal, to recognise that this is not just about money. It is about something much more important. It is about trust-trust in our savings industry and its regulation; trust in Government; trust in this coalition's commitment to financial responsibility and compassion; trust in the idea of the covenant between the generations, which sits at the heart of the big society; and trust in this Parliament and its commitment to do the right thing. I ask the Minister, as he considers the Government's response, to explore any method he can to soften the blow-in particular the solution proposed by EMAG of offering some choice to those victims who want to take short-term compensation and to those who prefer to wait. In due course, when the Government's finances return to rude health-as I have no doubt they will-some might choose to take a better return later.
The people have placed their trust in us; I am happy tonight to place my trust in the Minister and the Government and to support the Bill, in the expectation in good faith of a genuinely fair solution.
Like everybody else, I support the Bill and I applaud our Front Benchers for moving so quickly to get this sorted out. I am disappointed, however, that we appear to be nailing our colours fairly firmly to the mast of Chadwick. The report is discredited, and in the course of my speech I shall try to explain why I see a difference between the £4.5 billion referred to by the ombudsman and the amount of about a tenth of that talked about by Chadwick, as well as why Chadwick is wrong.
It is central to our understanding of this issue that we know why Chadwick was wrong and where the methodology was flawed. The sum of £4.5 billion is a lot of money. Roughly speaking, it is the cost of two
aircraft carriers. Just because it is a lot of money, however, does not mean that we should not do the right thing in sorting out this matter. In particular, we should honour the commitments-both implied and explicit-that we made in the run-up to the election in respect of those people who have invested in Equitable Life.
I want to make three points over and above my point about methodology and Chadwick. First, there is a group of people who have been particularly ill served by what has happened: the with-profit annuitants. I urge Ministers to consider making interim payments to them, because they have been severely hit. I do not accept the argument that doing so would affect the time scale of the rest of the payments. I do not think that that is true.
Secondly, I urge Ministers to make the process simple when the payments are coming out. Let us not allow civil servants to convince us to build computer systems that would apply tens of thousands of transactions to tens of thousands of policies, ending up with the complexity that we saw in the Department for Environment, Food and Rural Affairs and the delay in farming payments. This can be simple, because we are making broad-brush assumptions about the amount that we pay out in the first place. To go into spurious accuracy in how we allocate that among different fundholders is just wrong.
Fourthly, we should look again at the adjustment that Chadwick has made. The reason that £4.5 billion became a tenth of that was that Chadwick said that in his view 80% of the policyholders who were informed-had regulation been done adequately-that this was a basket-case company would continue to invest in Equitable Life and that as a consequence, there was no regulatory failure in respect of those people. By applying that figure of 80%, £4.5 billion becomes pretty close to the sorts of amounts that we appear to be talking about. He said 80%; I say 50%. Somebody else says 30%. That figure is a question of judgment; there is no methodology. However, when we consider other financial crises, other runs on banks and other countries, the figure of 80% does not appear to stack up.
I have had a go at applying a more reasonable number to the ombudsman's figure. It is reasonable that, having done all that, we should make an allowance for the spending position in which we find ourselves. I do not think that EMAG has a problem with that. However, when reasonable assumptions are applied to the ombudsman's starting point, it is very hard not to come up with a number that is a considerable multiple of the number that Chadwick talked about. I cannot get one that is much lower than about £2 billion, which, as those of us who are doing our arithmetic will know, still lets us have one aircraft carrier.
May I make one final plea to those on the Front Bench? Can we stop benchmarking ourselves against the Opposition? That is a very low bar indeed. We must benchmark ourselves against what is right and against the expectations we raised when we were fighting the last election. It is not enough simply to do more than the Opposition.
Peter Aldous (Waveney) (Con): Like most Members-I should probably say all Members-I have received many letters from constituents who have been let down by the regulatory system and who are worried that they will not receive fair compensation for the losses that they have incurred. Several of them are struggling to keep their heads above water.
I place a lot of weight on the ombudsman's recommendations and findings. In her letter to MPs of 26 July, she sets out five requirements for a fair settlement: independence, transparency, simplicity, speed, and potential impact on the public purse. Those need to be the guiding lights to a fair and just outcome. My hon. Friend the Financial Secretary to the Treasury is to be commended for the speed at which he has moved to resolve the matter. He has established an independent commission to come up with proposals for the design of the compensation scheme and he has committed to starting to make payments in the first half of 2011. That said, there are still issues to be addressed and it is those issues that worry and concern my constituents and the group that represents them.
I appreciate that today we are not deciding and voting on the level of compensation and that that will be determined at the comprehensive spending review in October. However, what is said today is a barometer of the mood of this House and must be taken into account when the level of compensation is decided. Let me refer back to the Minister's statement in July. For me, there is an inexplicable quantum leap from the relative loss of £4.8 billion to Sir John Chadwick's total payment of between £475 million and £600 million. Those latter figures are way too low. I must dispute Sir John's opinion that the majority of policyholders would have made the same investment decision irrespective of maladministration. That flies in the face of the evidence and of what my constituents are telling me.
On the way forward and complying with the ombudsman's recommendations I would make two suggestions. First, to achieve a fair settlement, the Government must review Sir John's suggested settlement figure and it must be crystal clear, simple and transparent how the eventual figure was reached. Yes, there is a need to consider the impact on the public purse, but any allowance must be fully explained and easily understood. Secondly, I request that the independent commission overseeing the design and delivery of the compensation scheme consider a framework that ensures prompt payment as soon as possible in the new year to the eldest policyholders and those in the most need. Thereafter, there should be further waves of payment depending on policyholders' proximity to retirement and relative exposure. EMAG has proposed how such a scheme could work and I am sure that Equitable Life would work with the commission to ensure that such a scheme would be fair to all and would recognise individual hardship.
My hon. Friend the Financial Secretary has made a lot of progress in the past four months. He has hit the ground running in his new role, but the Government need to go that extra mile to achieve the fair and just outcome that the ombudsman recommended and that so many of us-myself included-signed up to.
Tessa Munt (Wells) (LD): In common with other Members, I have a number of people in my constituency who have sent me letters and several hundred who have sent me e-mails about this matter. I want to make a few comments that might be helpful. The independent commission has a chair in Brian Pomeroy who is an EMAG nomination, and I am sure that EMAG will be happy about that. It is ludicrous to suggest-I refer to an earlier comment-that January is a long time to wait to have a report back from that group, because that is very speedy action in the relative scheme of things, and payment shortly thereafter would be welcomed by those members.
On 22 July, the Minister set out the terms of reference when he introduced the Bill. Those terms of reference referred only to Towers Watson's figures and Sir John Chadwick's report, but Sir John's report is just one view and in some ways sets a lower range for the compensation; I wonder why there was no reference to the parliamentary ombudsman's report. I share the concerns of Equitable Life policyholders in this regard, and I have checked the Treasury website. I want to make two points about that.
"implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments"
Secondly, the Treasury website refers to a large number of documents, including Ministers' oral statements, written statements, answers to questions and press notices, as well as the Bill, explanatory notes, an assessment, a memorandum, various letters, advice, the terms of reference and Sir John Chadwick's report. That report refers people on the Treasury website to Sir John Chadwick's website, and I wonder why the parliamentary ombudsman's report, which is entitled "Equitable Life" is not included among the documents of reference. It would be fair to people to include it on that website.
There is a case for having some categories of Equitable Life victims. There are people in emergency situations-those in most need and the families of those who have died who are in very dire straits-and there are people who need to be dealt with urgently, such as the elderly and those who have lost a lot in relative terms, whereas those who might have lost in part or who are still to retire in years to come can clearly be dealt with at a different time. I hope that, with the moves that are to be made on 20 October and with the way in which the whole programme of deficit reduction will roll out over the next few years, we will then be in a position to deal with those who do not have urgent cases, such as those who are still to retire.
Many victims are affronted and offended by the fact that the regulator seems to have removed most of its pension funds in June 2008. That adds to the question of public confidence in the regulator and affects those who wish to save for the future.
An Opposition Member said earlier that we should have no regard whatever to the comprehensive spending review as a background to payments made under the Equitable Life scheme, but that is a ludicrous suggestion. If we ignore the financial situation in which we
find ourselves, we will be committing exactly the same crime as Equitable Life did originally, which got us to the current position. The parliamentary ombudsman's comments about the "potential scale" of her recommendations need to be set against that background, and what is done has to be affordable. It was suggested earlier that we could look at what the ombudsman said and apply a reduction of 25%-or possibly 40%, depending on what comes out on 20 October. That is not a silly suggestion; perhaps it should be in scale. I am sure that EMAG would understand that the Government have said that everyone must be treated equally and fairly, that everyone will take the pain except the least well-off and that that might apply to this scheme as well.
It is absolutely right that we should try to be fair. The dictionary definition of "equitable" includes words such as fair, just, even-handed, unbiased, reasonable and impartial. We should deliver what Equitable Life and, most critically, the regulator did not deliver. I do not believe that Equitable Life victims are asking for anything unreasonable; they do not want an unreasonable advantage or to make a profit. They have been let down very significantly on two occasions-first by the company and secondly by the regulator-and I would hate to be part of a Government who let them down a third time.
Chris Williamson (Derby North) (Lab): Like other hon. Members present, I have been lobbied by a considerable number of constituents. Let me be clear: had Labour won the general election, we would by now be implementing the Chadwick recommendations and people would be receiving payments. What I find so irritating is the extraordinarily cynical, pre-election tactics that were adopted by the Conservative and Liberal Democrat parties in an attempt to garner additional support. It is no good Government Members referring to the country's financial situation and using the comprehensive spending review as cover for their inaction, because when they signed up to those pledges, they knew very well what the financial situation was. That simply will not wash.
The Opposition have been accused of showing "synthetic anger" and I have heard Government Members congratulate their Front Benchers, including the Minister. Members have said how they trust the Minister and their Front-Bench team. Before the election, one of the most vociferous cheerleaders of the pledge to pay a more generous settlement to the Equitable pension holders was the Minister himself, who regrettably is not in his seat.
I call on Members on the Government Benches to look at the Bill before us. It is extremely thin, and some Members' contributions seemed to recognise that fact. It is clear from the terms of the Bill that the Government are dragging their feet on the issue. There is no detail on the criteria for payments, there will be no independent appeal process, and there is no timetable for payments.
"EMAG welcomes legislation to enable payments to Equitable Life sufferers.
However, EMAG is alarmed about the following:
The continuing reliance by the Treasury on Sir John Chadwick's advice, despite the clear view of the Ombudsman that it is 'an unsafe and unsound basis on which to proceed'.
There is a mismatch between the formal acceptance of all the ombudsman's recommendations by the new government and the Treasury's dogged determination to ignore the PO and build upon Chadwick's advice, seemingly to provide a phony justification for derisory payments.
The lack of a proper comprehensive assessment of 'relative losses' based on all of the PO's findings.
The inappropriate inclusion of Chadwick's work as the central building block in the terms of reference for the independent payment commission."
That is hardly a ringing endorsement of the Government's position, is it? A lot of crocodile tears are being shed this evening. We heard many exaggerated promises in opposition, but the Government are significantly under-delivering now that they are in power. Given the commitments that were made by the Minister and other Front Benchers, as well as virtually all the Back Benchers, they have a moral obligation to do more than they have done so far.
It is a poor show to have misled the political parties and misled people into thinking that they would receive more than they will. As I said, had Labour won the election, people would at least now be receiving some payments. We still do not know when people will receive any payment as a result of the Bill.
Anne Marie Morris (Newton Abbot) (Con): I think I speak for Members on the Government Benches in refuting a number of statements made by the hon. Member for Derby North (Chris Williamson). It is not entirely correct to say that we have been dragging our feet. Compared with what the Opposition did in government, we have made considerable progress, which has been well documented. As for the hon. Gentleman's contention about the state of the kitty, it is a wonderful idea to think that, when in opposition, we knew what was in the piggy bank. When we arrived and cracked open the piggy bank, it was very empty.
Equitable Life is a tragic episode and we in government have a huge responsibility to everybody in this country to get the outcome right. This is an issue not just of money, but of human tragedy. Like other Members, I pay tribute to EMAG. It has been phenomenal in persistently putting forward the cause of its members. I am pleased to say that it has helped a number of constituents in Newton Abbot make their case very powerfully.
Across the House, we all agree that compensation must and will be paid, but, as a number of Members have mentioned, there are two key issues. First, how are we to calculate the loss? Secondly, what framework can we put in place to ensure that when the loss has been calculated people are properly compensated? Tonight, many of the contributions have been about money, and fewer about the framework. I pay credit to the Financial Secretary for the thought that has been put into smoothing the way, once the figures have been sorted out, to ensure that that framework is in place.
The fact that we will be able to give tax exemptions is important. If people received payouts, only to be hit by a big bill from the tax man, that would be unacceptable. I am pleased that there is a provision to disregard from means-tested benefits the amounts that are ultimately paid out. That is to be commended.
On the loss, however, we must calculate two things, the first of which is the relative loss. Given that so many tortuous arguments have been put by so many people, it is important that we have time to get the calculation right. I should like the Financial Secretary to confirm that no fixed amount or limit will be set tonight, and that the money resolution will be left without any amount or limit.
On the calculation of that relative loss, I, like several colleagues, commend to the Government the ombudsman's recommendations, which are absolutely on point. I am sure that the independent commission will give them a favourable run, too, but I share the concerns of Government Members about Chadwick's proposals, which seem to have missed the point. If we calculate the ultimate payment on that basis, we will not do justice or live up to the pledges that we all made in good faith at the election.
Guto Bebb (Aberconwy) (Con): I am grateful for the opportunity to follow on from that point. A constituent of mine has argued that the Equitable Life saga questions the credibility of both the legal and financial systems, and I tend to agree, but in the same way I do feel very strongly that if we base the compensation scheme on Chadwick's proposals, there will be a question mark over the credibility of many Members who made commitments during the general election campaign, including, dare I say it, many Government Members. Does my hon. Friend agree?
Having worked out the right figure to pay, we must consider the second issue with regard to loss: how much money is it right, fair and proper to deduct when we get to the spending review? We have an obligation not just to Equitable Life members, but to the taxpayers of this country. I wish we were not where we are, but the piggy bank was empty. Nevertheless, I absolutely agree with previous speakers, because, if Front Benchers come out with the figure of 10%, I for one will be horrified, as that is not adequate compensation. We must be very careful to look at those figures in great detail and at the concept of fairness: what is the fair and right thing to do?
Finally, I am delighted that we are moving ahead with the issue quickly, because one concern of mine is that some of my constituents are now in their late 70s, so we need to sort this out for them, their children and their grandchildren. I am therefore pleased that we shall do so quickly, at the front end of next year.
Steve Baker (Wycombe) (Con): I wonder whether the hon. Member for Derby North (Chris Williamson) has been listening to the same debate as I have. I hope that his constituents do not read his speech in isolation, because in the debate to which I have been listening Government Back Benchers have made it absolutely crystal clear that they will stand up for the members of Equitable Life.
I support this short, technical Bill, but I should like to make some wider points. I endorse many remarks that previous contributors have made, but I disagree on a couple of minor points. Those points are on the margins but, in the long term, absolutely vital, so I hope that Members will bear with me.
One key point is that the state manufactured the problem, or at least manufactured it to the extent that it is with us today: the state enabled Equitable Life to continue to attract new business when it should have folded. If I have understood correctly what I have been told, I should note that if Equitable Life had folded at the first opportunity, a smaller number of policyholders would have received 90% of their due, many years ago. Instead, state action means that very large numbers of people today are concerned about receiving much less, many years after the fact.
In government we have been handed a situation in which there is no doubt that the state must compensate Equitable Life policyholders, and it must do so honourably. That is what many of us signed up to in good faith, even though we knew that the cupboard was bare. The simple fact is that a fair sum must be found.
However, we should not pretend-as, I am afraid, Equitable Life's own briefing note does-that by paying a demonstrably fair level of compensation, the Government would, at a stroke, restore people's faith in saving for their retirement. This is a difficult point, but I should like to make it anyway. It is vital for the future that we reaffirm that the Government have nothing to give without first taking it. The state can only tax, borrow or debase the currency. It can only transfer wealth; it cannot create it. In the case of Equitable Life, the state has shown itself incompetent to supervise pension funds and incompetent to clean up the mess that it makes. It also turns out that the state is incompetent to run pension funds.
In my speech on 22 June, I cited "A Bankruptcy Foretold", a paper by the Institute of Economic Affairs that set out the true scale of the national debt. I am afraid that the numbers have been updated over the summer, as the Office for National Statistics released some further figures. Writing on the IEA's website, the author, a Mr Nick Silver, who is an accomplished actuary, points out that the state now owes, including pension liabilities, a staggering £6.5 trillion. To save Members from reaching for their calculators, I should say that full compensation for Equitable Life victims would amount to one tenth of 1% of our current national debt, including pension liabilities.
"Looked at this way, the UK is effectively an enormous unfunded and effectively bankrupt pension scheme, with a large speculative holding in some banks and a sideline in running a small island state off the northern coast of France."
We must see the Equitable Life situation in context-and it works both ways. Government Members know that the billions add up, but I am afraid that we are getting to a point at which the trillions are adding up. In the short term, we must absolutely deal with this problem; we must maintain our honour and help the members of Equitable Life.
It turns out that the state is not competent to supervise pension funds or run them. Bearing in mind the events surrounding the banking system, other Members might agree that we can fairly say that the state is not competent to supervise financial services at all. I believe that we need sound financial law, not arbitrary intervention by regulators. I am happy to say that tomorrow my hon. Friend the Member for Clacton (Mr Carswell) and I will introduce a Bill that will begin to indicate the right direction of travel.
In this Parliament, we must deliver an honourable settlement for Equitable Life policyholders. There is absolutely no doubt that we are under an obligation to do so. But let us not pretend that wealth transfers can encourage saving or that the Government have an inexhaustible horn of plenty from which to insure everyone's risks at the expense of everyone else. If we are truly to honour our constituents, we must face the world as it is, and together construct a more hopeful future, in which the Government cease to trample the forces of social co-operation thereby manufacturing problems greater than those that they face.
Graham Evans (Weaver Vale) (Con): First, I congratulate my hon. Friend the Member for Congleton (Fiona Bruce) on her maiden speech. As a Macclesfield man, I thought I knew everything there was to know about Congleton, but I certainly learned a thing or two from her thoughtful and informative contribution.
I start by declaring an interest. As a former policyholder in Equitable Life, I have held a keen and personal interest in the matter for a long time. I am pleased to have the opportunity to speak in this debate and would like to take the chance to talk about the human element to this saga. When immersing oneself in this subject, it is all too easy to get caught up in the highly technical details of legal complexity, maladministration and commercial misjudgment, but it is very important to remember that it involves real pain for real people. Since being elected, I do not think a single day has gone by without my receiving one letter or e-mail from constituents who have been affected by the failure of Equitable Life. I recently had one lady in my constituency surgery crying while telling me about the difficulties she had faced owing to this mess-crying out of worry, despair and sheer frustration at the length of this debacle, which felt like it was going to drag on for ever. I share her frustration. It has been nearly 10 years since Equitable Life policies were cut in value, leading to pension reductions of sometimes up to a third. For 10 years, 1.5 million
people have been waiting for compensation. Some have even died waiting; as we heard earlier, approximately 30,000 have done so. Is it any wonder that faith in our politics has fallen to an all-time low over the past decade?
Who are the people who have been waiting? We are not talking about the über-wealthy, nor are we talking about the reckless investors. The 1.5 million victims of the failure of Equitable Life are ordinary people. They did the right thing, putting money aside and trying to save for their future. I am certain that all Members of this House can agree that we should be encouraging a return to a savings culture in this country. I would submit that the falling confidence in our pensions system and the endless delays in resolving the Equitable tragedy are not entirely unconnected. It is only right that policyholders are given justice, and as soon as possible. Failure to do so would only further undermine confidence in pensions saving. For that reason, I welcome this Bill and give it my full support.
The contrast between the actions of this Government and the previous one could not be sharper. While Labour did its best to drag its feet and dither, the new Government have worked swiftly and shown that they will honour the commitments made in opposition. This Bill does not mark the end of the Equitable Life story, but it is, at long last, putting that end in sight. I am very encouraged that Ministers are clear that there is much more to do and are committed to seeing a fair outcome for all. It is absolutely right that they have taken time to reflect on Sir John Chadwick's report and have sought the views of others.
For an issue as complicated as this, it is pleasing that the Bill is short and simple-for a simple man such as me-in giving the Treasury powers to make compensation payments to policyholders without pre-determining the level of compensation that should be paid. This should have been done years ago. If Labour had not spent its years in government endlessly delaying, it would have saved hundreds of thousands of people a great deal of anguish, and compensation could have been awarded in a less difficult economic period. Unfortunately, the previous Government used an absurd argument for not establishing a compensation scheme on the basis of their general responsibility to taxpayers. If one were to accept that argument, then surely compensation could never be paid in any circumstances when a public body was found to be responsible for financial loss and injustice-or perhaps compensation could be paid if the financial loss were relatively small and insignificant. Clearly, such arguments are ridiculous.
I am pleased that such arguments are over and that, even in a time of deeply constrained finances, the Government are working to bring justice for many of my constituents who are policyholders. The Bill is an essential measure in bringing about this justice, and I am delighted to support it.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con):
I think that several things have struck us during the course of this debate. First, we have heard about the sheer volume of decent people who seem to have been affected by this crisis over time. Then there is the well-measured, sensible and proportionate
campaign organised by EMAG, which perhaps sometimes stands apart from those conducted by other pressure groups.
We have all been struck by the political reaction. For the sake of the record, the Conservative party was clear about its intentions in its manifesto, the coalition was clear about its intentions in its agreement, and the Government have been swift in their action. Whatever we may say about that action, they have at least been swift in putting their commitment in place as soon as they possibly could. Needless to say, there is a "but", which is that the devil remains in the detail of the payments-and those are not under proper discussion tonight, for very good reasons.
Financial institutions, it seems, are no longer trusted. Young people do not know where to go and older people do not know who to trust, so it falls to all of us to ensure that confidence is restored. Resolving that problem was a moral dilemma, rather than a financial one, for the previous Government, and it is for the current Government too. EMAG has made a series of sensible proposals, rightly pointing out that a staggered system of repayments could work and that those in the greatest need should be considered separately from others. Even Equitable Life itself has made it quite clear what it expects a basic minimum to be.
The ombudsman has said that the level of compensation should reflect the state of the public finances. In this debate, a number of Members have raised one eyebrow, and some two, at that proposal, and I have a lot of sympathy with them. Equitable Life members across Britain all recognised that there was a risk attached to what they invested all those years ago. However, they will reasonably feel unfairly penalised if we use the public purse argument to bypass our moral obligations-especially, to be snide for a moment, when we are happily talking about spending a hundred million quid on a referendum on the alternative vote. Such things put us in a rather difficult situation when it comes to retaining the moral high ground. I agree entirely with my hon. Friend the Member for Mid Norfolk (George Freeman)-who, sadly, is no longer in his place-about the importance of the next stages of the process.
Claire Perry (Devizes) (Con): I understand the pressure of time, but I wish to come in on that point. All of us are here for the debate because we signed a pledge and stood up for a group of people in our constituencies who we felt had been let down and betrayed by the last Administration. I urge the ministerial team to think creatively at a time of great pressure on the public finances, and particularly to consider making payments free of tax, or paid out from a fund over a period of time. The recommendations as proposed, or at least as trailed, are simply insufficient. We know that some of the best minds in the country are working in the Treasury, so let us get them to work on this very problem.
That is a useful contribution. I was about to restate a point made by my hon. Friend the Member for Mid Norfolk, which reinforces the intervention by my hon. Friend the Member for Devizes (Claire Perry). The next stages are important not just for those who have struggled over the past 10 years and for the
families of those who have died while waiting for justice, but for restoring the confidence of the current and future investors whom we are trying to persuade to act responsibly in their fiscal affairs. Perhaps what has not come up so much in the debate is that they are important also for the credibility of Members and of this Parliament. That was perhaps where my hon. Friend's intervention was leading. We must not and cannot let people down now with a lame excuse about the state of the public finances today, because the problem goes far deeper than that.
"I'm afraid this business further undermines my confidence in politicians and if justice isn't done on this issue I don't see I will ever want to cast a vote in a General Election ever again."
That is an important message, and we need to take it in isolation from the technical aspects of the debate. The very credibility of Members of all parties, of the Government and of this building depends on how we deal with such issues.
The Financial Secretary has made significant progress, and I support the Bill. The matter has been dealt with as quickly as it possibly could have been, and the suggestions by Opposition Members that a delay has somehow been deliberately imposed seem an absurd rewriting of history. I cannot understand how, in all conscience, they can make such observations, given what several thousand people and their families have been through as a consequence of an inactive decade. The Financial Secretary has made progress, and we should support him. I naively and optimistically suggest that it is the moral obligation of all parties and all Members to put our party political interests aside just for one moment, to ensure that we can bring the problem to a fair and sensible conclusion. The Government do not pretend that the Bill is anything other than the first part of that process.
James Morris (Halesowen and Rowley Regis) (Con): Like other hon. Members, I welcome the Government's recent announcement and their timetable. Second Reading of the Bill tonight would be a significant step forward. However, as others have acknowledged, this has been a long saga that has tested the patience of all concerned.
The reports and analyses of the past decade are voluminous, and the saga has come to resemble a Dickensian tale that would not be out of place in a novel like "Bleak House". I recognise that there are important questions-they have been debated in the House this evening-about the relative merits of the ombudsman versus Chadwick, and I, too, have reservations about key recommendations of the Chadwick report, but at the heart of the matter is morality. As the Public Administration Committee report of March 2009 said in response to the then Government's response to the ombudsman's reports, there is a clear moral dimension. The Committee said that it was morally indefensible for the Government to accept maladministration by public bodies without taking the necessary action to right those wrongs. We need to bear that message-that moral dimension-in mind as we debate this important Bill and this sorry saga, and we must not forget it.
Like other hon. Members, I have spoken to many of my constituents, and I know the human cost of this debacle. People who have worked hard and done the right thing have seen their dreams of retirement go down the drain. We cannot walk away from our moral duty to those people. That is why it is our duty to provide fair and appropriate compensation for them.
As other hon. Members have pointed out, there are wider policy implications. As my hon. Friend the Member for Mid Norfolk (George Freeman) remarked, we need to build trust in our pension system, which has been tarnished principally by the Equitable Life debacle. We need a successful resolution to the matter. That would help not only to compensate Equitable Life policyholders, but to restore trust in our financial services industry. I welcome the Bill and the Government's early decisions, but we cannot afford further delay. We need to do our duty to the people who have lost out in the Equitable Life debacle.
Mr Marcus Jones (Nuneaton) (Con): I shall try to be brief to assist my hon. Friends who wish to speak. I have received more constituency correspondence on Equitable Life than on any other issue, and there are well over 200 people in the local EMAG.
I congratulate my hon. Friend the Financial Secretary to the Treasury on achieving more progress in no more than a few weeks than the previous Government achieved in more than a decade. Had they dealt with the problem when the country was not mired in the debt that they left us with, the disaffected policyholders in my constituency would doubtless have received their compensation by now and would be far better off for it. We need to bear it in mind that the previous Government seemed to have an aversion to making decisions, including on Equitable Life, so I commend my hon. Friend for retrieving Equitable Life from the long grass into which it had been so uncaringly kicked.
I must take the hon. Member for Derby North (Chris Williamson) to task for his comments. Perversely, he said that a Labour Government would have sorted the issue out by now and adopted the Chadwick report, and that Equitable Life members would have been very happy. He then turned that on its head, and said that the Chadwick report was flawed, and that EMAG did not like it. That shows the interest that Labour Members have in Equitable Life, and why Labour did not resolve the problem when it was in government.
The Bill is extremely important because it will allow the Treasury to make payments and deal with the tax treatment and consequences of those payments. I speak on behalf of my constituents in Nuneaton, who have become very disaffected as a result of this issue. The Bill does not do all that they seek tonight. It does not set the level of payments that will be made, which will be done in the comprehensive spending review next month. I will support the Bill tonight, but I wish to put over the concerns that I share with my constituents about this issue. They are still greatly sceptical and they suspect that the Government-like the previous Government-are not listening. We need to ensure that we are listening, because while we have the Chadwick report, we must also take into full account the ombudsman's comments and the concerns of EMAG, which has made an interesting, important and strong case for proper compensation.
It is important for the payment scheme to be independent, and I welcome that. The level of compensation is the most contentious issue and we should do what we can to listen to the suggestions being made about the taxation of the payments and the possibility of deferred payments. This is a bitter pill that my constituents and others have to swallow, and we should try to sweeten it as much as we can.
I implore the Financial Secretary and his colleagues to consider the wider implications of the compensation package. We have to recognise that confidence in savings and investments is at an historic low-not helped by the previous Government, who shot our private pension system to smithereens in their 13 years. We need to ensure that we protect people who work hard, save for their retirement and do not wish to rely on the state. As people in my constituency have pointed out, if we do not get this right now, we will show people that hard work and doing the right thing for themselves does not pay and that they will have only the same level of income in retirement as people who did not do the right thing. We have to show that we are the party that supports those hard-working people and, in the next few weeks, we should commit to ensuring that Equitable Life members get the compensation that they truly deserve. That would help to restore confidence in our pension system.
Gordon Henderson (Sittingbourne and Sheppey) (Con): Several hon. Members have suggested today that the Equitable Life scandal-and a scandal it was-is complicated, but for me it is actually quite simple. It is about fairness to a group of people who were badly let down by the regulatory failures of their Government. I went into the recent general election supporting a Conservative manifesto that made a promise to Equitable Life policyholders in my constituency. It said:
"We must not let the mis-selling of financial products put people off saving. We will implement the 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."
Most people accept that Equitable Life policyholders were the subject of Government maladministration, and that is certainly the view of the ombudsman, Ann Abraham. There is some dispute on all sides, however, about the level of compensation that should be paid to policyholders. Sir John Chadwick's report established that the relative loss suffered by Equitable Life amounted to between £4 billion and £4.8 billion, and the Financial Secretary, in his statement to the House this July, supported that figure. However, Sir John then used a series of convoluted calculations and speculative assumptions that allowed him to suggest a cap on the total amount of compensation that should be paid. He then went on to reduce that cap figure to just 10% of the relative loss figure that he himself originally calculated.
One of Sir John's most telling assumptions was that the majority of policyholders would have invested in Equitable Life irrespective of maladministration. That is a very big assumption that cannot be proved or disproved, but any rational person would consider such
a lemming-like approach by investors as highly unlikely. I am simply not convinced by Sir John's arguments and I dismiss them out of hand, as do the Equitable Life policyholders in my constituency.
Like many Members, I have been in touch with many of those policyholders, and all they want is fairness, because they are fair-minded people. However, they are not stupid people, and they recognise that in these times of austerity even they must shoulder some of the burden needed to bring down the country's massive debt mountain. To ask them to accept a reduction of 90% in their compensation, however, is not only unfair but, as has been mentioned by other Members, immoral.
In the current economic climate, however, it would be right and proper to ask Equitable Life policyholders to accept a cut in compensation in line with those being proposed for Whitehall Departments. If departmental budgets are cut by 20% or 25%, as we are being led to believe, I am willing to support a similar reduction in the assumed total of Equitable Life's relative loss, which would mean a compensation package of between £3.6 billion and £3.8 billion. If anything other than a formula based on a figure in that region is proposed, I will be forced to vote against the Government when the figure for compensation is debated.
Nicola Blackwood (Oxford West and Abingdon) (Con): I am grateful to have the opportunity to speak in this debate. At the outset, I would like to pay tribute to the many EMAG members and Equitable victims who have contacted me urging me to participate in this debate, and to those, including many Members on both sides of the House, who have campaigned so selflessly and for so long for justice for the thousands of Equitable victims in Oxford West and Abingdon and across the country.
As a fellow EMAG pledge signatory, I welcome the swift action that the Financial Secretary has taken in bringing this Bill before the House. In particular, I know that the many Equitable victims who live in my constituency-more than 3,000, according to EMAG-will welcome the commitment to an urgent and transparent timetable for payments. More than 30,000 policyholders have already died waiting for their Government to deliver them justice. For their dependants and the policyholders that remain, certainty and speed are imperative.
Nevertheless, since my Westminster Hall debate on the subject on 20 July and the Minister's statement on 22 July, a number of concerns have been raised with myself and colleagues by Equitable victims, and I would like to raise some of those concerns today. First, my constituents tell me they are uncertain about the current status of Sir John Chadwick's advice. In the Financial Secretary's remarks on 22 July, he stated that as he understood that certain aspects of the report were contentious, he had not yet accepted Sir John's report and would be receiving representations on its content.
The Financial Secretary stated today that he has had a number of meetings with Equitable Life, EMAG and the ombudsman since then. However, paragraph 3 of the terms of reference of the independent payments commission states:
"The Commission will have regard to the work undertaken by Sir John Chadwick on the methodology for calculating relative
loss and base its allocation to policyholders on the relative loss figures provided to HM Treasury by Towers Watson."
Will the Minister please clarify whether the Treasury has indeed decided to accept the report and whether there will still be an opportunity for Equitable victims and others to attempt to influence that decision? In particular, will she explain why, if the report is not yet Government policy, the independent payments commission should have been directed to have regard to it and to the Towers Watson calculations that arise from it?
Secondly, I know that the Bill does not predetermine the amount of compensation or to whom it will be paid, but I would like to take this opportunity to applaud the decision to include in the commission's terms of reference a direction to take account of the estates of the deceased policyholders. Many Equitable victims in my constituency have welcomed that and feel that it goes a little way towards recognising the suffering of those who died waiting for justice.
I am happy to support the Bill this evening, as I believe that acting quickly to set up a compensation scheme for victims is of the utmost importance, but I am also aware that it does not address the elephant in the room: the final compensation amount. Equitable victims in my constituency have informed me that they are uncertain about to whom they should put their concerns about the final figure and how it will be calculated. There has been endless press speculation on the subject, some of it very heated. I know that the Minister will not be drawn into a debate on the final amount in advance of the comprehensive spending review, but I would like to press her to bring the decision on the quantum to the House as an oral statement, so that Members such as myself who have received extensive representations from constituents will have the opportunity to raise those concerns effectively. I fully support the principle that the amount of compensation allocated to Equitable victims must be affordable in the wider context of the public purse, but I share the concern of many in the House about some of the figures that are being bandied about. Given the sensitivity of the issue, I feel that Members should have the opportunity to debate that decision.
Mr Dominic Raab (Esher and Walton) (Con): Like my hon. Friend, I welcome the transparency and the finality provided by the Bill. However, like her constituents, none of the victims in my constituency will regard it as justice if compensation is just one tenth of the relative loss. Does she agree that we need a debate not just about the overall package, but about the quantum, the timing of the compensation and the tax status? All those issues need to be looked at creatively, and the pressure on the public finances make that debate more, not less important.
Nicola Blackwood: I agree with many of those points. It would be helpful if we could have some clarification about the future opportunities for Members to contribute to the debate, as it will continue and we will continue to receive significant representations.
I am conscious that the process of compensating Equitable victims and designing a scheme that campaigners can support must be done in the context of the previous Administration's record of delay and obfuscation-a record that has left Equitable victims with completely
shattered confidence both in the Treasury and in politicians to deliver any kind of justice at all. I will not go into the details of the previous Government's attempts to put roadblock after roadblock in the way of the Equitable victims. I am sure that everyone here is sadly familiar not only with that tale but with the morbid accusations that it led to: that the Treasury made a cold-hearted calculation that the longer it dallied, the more Equitable members would die-at a rate, I believe, of about 15 a day.
I know that the Minister is well aware that the victims of Equitable Life, who have been treated so shabbily for so long, need to see that despite their fears, not all politicians will betray them. I know that I am only one of many who have emphasised the appalling toll that this scandal and the decade-long battle for justice have had on our constituents. That is why I believe it is so important to have a process that is as transparent as possible, so that Equitable victims can be reassured that their Government are acting in good faith.
This issue is just one area where the coalition Government must try to rebuild the trust broken by the last Government's failures to take responsibility for their actions, but it is one that has ramifications that go far beyond the victims. If we get it right, it will communicate effectively and clearly that this Government will act in the interests of those who do the right thing and save for the future. At a time when public confidence in politics and politicians is at an all-time low, if we get this right, it will demonstrate clearly and effectively that this Administration will deliver in government what we promised in opposition.
Charlie Elphicke (Dover) (Con): I, too, would like to congratulate my hon. Friend the Member for Congleton (Fiona Bruce) on her excellent maiden speech. I have subsequently spent much of the debate dreaming of Sandbach.
I recently held a public meeting in east Kent for my constituents in Dover and Deal, alongside my hon. Friend the Member for South Thanet (Laura Sandys) and her constituents in Sandwich, Ramsgate, Broadstairs and other parts of her constituency. It was a lively meeting, and I undertook to report to the House the representations that were made to us. There were three clear positions that the Equitable Life victims wanted me to communicate.
The first was that the Chadwick report is not a sound basis for compensation, and that the contributory negligence concept implicit in it is entirely rejected. The second was that the ombudsman's recommendations should be implemented, even if over a number of years with staged payments. The third was that payments should commence as soon as possible. For my part, I would like to say how sorry I am that the victims have been treated so badly for so long. I welcome the Bill, the compensation scheme and the action that is being taken.
I absolutely agree with my hon. Friend. More than that, I urge Ministers to consider carefully a more generous compensation scheme than
that recommended by the Chadwick report. I also urge them to consider making staged payments over some years, given the current pressure on the public finances as the nation today stands pretty much bankrupt. I hope that Ministers will give those points careful consideration when they bring forward the detail of the compensation package.
Bob Blackman (Harrow East) (Con): I should also like to place on record my congratulations to my hon. Friend the Member for Congleton (Fiona Bruce). I have to confess that, as I listened to her speech, I looked at my road map, having driven through her constituency on many occasions, trying to avoid the traffic on the M6.
We should also congratulate Opposition Members who stood up to the previous Government and said that they were wrong to prevent the policyholders of Equitable Life from receiving just compensation. I also congratulate the right hon. Member for East Ham (Stephen Timms), who was left in isolation today, without the other members of his Front-Bench team who, under the Labour Government, made the decision to defend the indefensible-namely, 10 years of inaction and putting roadblocks in the way of the policyholders to prevent them from receiving their just compensation.
There are four players in this mix. First, there are the Equitable Life policyholders. They invested for their future and set aside money for their old age. They took a small risk, thinking that they would receive their just rewards in the long term. In normal circumstances, I would maintain that the public purse cannot bail out private investors, but this is a unique position, because those Equitable Life policyholders believed that the Government and the regulator were acting properly. It took court action and the ombudsman's report to drag out the fact that the reverse was the case. It is right that the policyholders should be compensated in the way that has been proposed.
Members of Parliament are also players, seeking to act as advocates for the policyholders who have been so badly treated. We all want to see just and proper compensation for those policyholders. Treasury Ministers are players, too, and they will have to deal with the politics, and with the financial chaos that the coalition Government have inherited. Finally, we have the Treasury, which will try to minimise the amount of money paid out, in order to safeguard the public purse.
I congratulate the Financial Secretary on taking prompt and appropriate action. He could, presumably, have stopped the Chadwick report in its tracks. However, that would have set us back at least a year, while we sought another approach. Instead, he allowed it to come to fruition. It is quite clear that members of EMAG and MPs of all parties, but particularly Government Members, are unhappy with the Chadwick approach and believe that his report is fundamentally flawed. The resulting issue is whether we are to adopt the approach of Chadwick or of the ombudsman-or some hybrid approach to deal with the disgrace that has happened.
We also have to deal with the fact that policyholders had a range of policies, which means that a range of people are involved. Many complex negotiations and calculations have to be undertaken. Sadly, some
policyholders are deceased. For them, whatever we do, it is too late. We should and must compensate their spouses, however, while ensuring that the survivors receive proper and due compensation. That is only right and just.
Angie Bray (Ealing Central and Acton) (Con): Does my hon. Friend agree that at a time when we want to encourage people to become savers again, it is vital to be seen to support these people and do what we can to help them through what turned out to be an absolute disaster? We must send out the right message-that we are here to support savers and that we want to do the right thing by them. Is that not the best way to help get people back to feeling secure in making savings?
There is a second set of policyholders within Equitable Life, whom I believe are critical-the people who have reached retirement age and are dependent on this income. Telling them that they will not receive any compensation until next summer is a disgrace. We have to do something more quickly to honour those people in their latter years so that they are properly compensated now, not when they are at death's door. I ask the Treasury team to look urgently at that matter.
Other sets of policyholders will have many years to go before they retire. They can be compensated in many years' time-with top-ups to their pension pots, for example, or in different ways. On these crucial issues, I hope that the Front-Bench team will confirm in the winding-up speeches what is going be done.
First, I believe we need an appeal process-not relating to the amount of money people receive, but to the structure of the scheme and where people will fit into it so that the payments can be made. That will be a complex area. I doubt very much whether everyone will be completely satisfied with the amount of money they eventually receive, so we really need an appeal process. I would welcome further confirmation from the Front-Bench team that they are considering how to deal with that.
Secondly, there is the issue of the total amount of money to be given to Equitable Life policyholders. It is quite clear from the estimates and all the reports that we are talking about something in the order of between £4.5 billion and £5 billion. I would like to see some recognition, for the benefit of EMAG members, that that is the total sum of money they are due. I think they all live in the real world; they know the financial mess the country is in, as bequeathed by the Labour Government. They will listen when it is explained that the number-whatever it is-needs to be adjusted down as part of the comprehensive spending review.
I have a real fear, however, that if we hear that number as part of the comprehensive spending review, people will start comparing the amount of money justly given in compensation to Equitable Life policyholders with, say, the amount that is being given to education, for schools, to hospitals, universities or old people's homes. Then we will face the problem of priority. I think everyone recognises that difficult choices lie ahead, but if we can get it recognised that the right sum is something in the order of £4.5 billion to £5 billion, it
will be possible for policyholders to recognise that that will not be the full compensation that they will receive-but the right sort of signals will have been sent.
We also need to be clear on the acceptability of the Chadwick report and its methodology. We have heard tonight-every Member is of the same view-that the problem with the Chadwick report is that its methodology is flawed and that the total cap on the money is unacceptable. Let us hear that the Front-Bench team are going to sweep it away and that the figures involved will be taken into account, but will not be the be-all and end-all of the process. Then EMAG could feel that tonight was a good night for its members and we could feel confident in the future.
The sorry tale of the Equitable Life debacle has been raised on the Floor of the House on countless occasions over the past decade, and impressive words have been spoken, but it is real action that policyholders seek. In my view, the last Administration's failure to deal with Equitable Life was one of their most inexcusable errors.
Quite simply, Labour's abject decision plainly to ignore its duties to Equitable Life policyholders should not be forgotten. It is utterly shameful that the Labour Government literally waited for people to die rather than implementing the ombudsman's findings back in 2008, when they were, in essence, found guilty of maladministration. It is because of that rather bleak reality that those on this side of the House can be proud that the coalition Government have moved so quickly to introduce a Bill that finally provides the authority for a payments scheme. There is a stark contrast between the last Government and the new Government in that respect.
We must start making progress now, but policyholders could be forgiven for continuing to doubt whether payments will come to fruition any time soon, and it is on that specific point that I want to concentrate during the last couple of minutes of my time. On 17 July 2008, the parliamentary ombudsman, Ann Abraham, published a damning report which clearly advised Ministers to set up a compensation scheme for policyholders. Among the ombudsman's proposals was a recommendation for an independent payment scheme. I welcome the fact that a commission is now up and running, but I am concerned about the time scales set out by the Financial Secretary when he made his statement on Equitable Life in July. I fear that by allowing the commission to report back in January 2011, the Government have unintentionally created too much of an additional delay, particularly given the age of some policyholders. Furthermore, it is in everyone's interests for actual payments to be made with all due haste. Again, the current mid-2011 target is simply too far away for many affected investors.
Andrea Leadsom (South Northamptonshire) (Con): I am very conscious that I have only two minutes in which to speak. Let me begin by adding to the voices of many who have expressed their sorrow that this has happened. For so many years since the early 1990s there has been an injustice needing to be rectified. I pay tribute to the Government for their determination to do just that, in short order, and in particular for their commitment to a transparent, independent and clearly timetabled process.
Those developments are extremely positive, and I am very proud of them. Nevertheless, like many other Members, I have many constituents who are in dire straits as a result of the loss of their Equitable Life annuities, and I believe that we must take every possible step to put that right. I am well aware that we have been left in an impossible position by the last Government, with an economy that is on its knees and no money to spend in a discretionary way, and that the need to take into account the impact on the public purse is therefore very great. I have no doubt that some tough decisions will have to be made in the comprehensive spending review.
So much has already been said about justice and the need to put things right for Equitable Life policyholders that I do not need to add to it, but as a banker myself, I want to stress the importance of encouraging people to save. The last Government managed to destroy what was one of the best pension schemes in Europe, which was very strong and is now very weak. Not enough people in this country are saving for their pensions. We need to encourage people to have the confidence to save for their retirement, and that has never been more important than it is now.
I urge Ministers to take account of the fact that the country will be watching the results of this debate about compensation for Equitable Life policyholders, and will be expecting justice to be seen to be done.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): This has been a most interesting debate with very important contributions from many hon. Members. The hon. Member for Congleton (Fiona Bruce) made an excellent maiden speech. She gave a poetic description of the beauty of her constituency and, just for a second, all of us who heard her were transported back up to the north. She made the people of her constituency sound almost as good as the people of Harrow West. It was a pleasure to listen to her speech.
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