Examination of Witness (Questions 36-72)
John Chadwick
14 October 2010
Q36 Chair: For
the record, could you very kindly identify yourself?
Sir John Chadwick:
I am John Murray Chadwick and I have recently delivered
an advice to the Government following terms of reference given
to me in January 2009.
Q37 Chair: Sir John
we are very grateful for your appearing as a witness, particularly
as you have fundamentally completed your work for the Government
and therefore this is an "extracurricular" visit. Are
you appearing on behalf of yourself or are you appearing on behalf
of your client?
Sir John Chadwick:
I have no client. I am not appearing on behalf of the Government.
I am appearing in response to your invitation to give you such
assistance as I can.
Chair: We are extremely
grateful to you, Sir, and if we may, we may ask for your opinion
on issues that are wider than your original remit, as I think
it would be very much in the public interest to have your advice.
Q38 Robert Halfon:
Good morning. EMAG have conceded that the calculation of external
relative loss is the only part worth salvaging, but they consider
that it is a significant underestimate because it excludes the
exit penalty fees, the first 18 months of losses and also
those already invested at July 1991. How far do you think
that these factors should be taken into consideration? And if
none, why not?
Sir John Chadwick:
I think first of all one has to be fairly clear what you are trying
to measure. What I was trying to measure was the extent of loss
that would not have been suffered if policyholders had been invested
elsewhere. I was not seeking to measure the gains that might have
been made had policyholders been invested elsewhere. The question
that I was asking myself was, "What loss did they actually
suffer?" and that is largely the loss suffered as a result
of policy value cuts in 2002 through to 2004.
I then asked myself, "Would they have suffered
that loss, or as much a loss, if they had been invested elsewhere?"
That is where a comparison between the policy in which they were
invested, Equitable Life, and the policy in which they might have
been invested elsewhere would have led you. In making that comparison
there are some quite difficult questions to determine. Towers
Watson have set out the sort of questions that need to be determined.
They are essentially questions for actuaries and I have accepted
that advice.
As to the start date, which I think is perhaps the
first limb of your question. The problem that arises from the
start date is this: if you ask yourself the question, "At
what point could people have been affected by misinformation in
regulatory returns?" the answer, as it seems to me, is, "When
the regulatory returns as published would first have been different."
It is that consideration which leads me to a start date in 1992
rather than 1991. If you ask a rather different question, which
is, "Would Equitable Life have been managed differently from
an earlier date?" then the answer is, "Yes, it probably
would have been managed differently from an earlier date had maladministration
not occurred." But the fact that it was being managed differently
would not have come into the public domain until the regulatory
returns were published. So I have taken the view that there should
be some mechanism for compensating those who came into Equitable
Life before the middle of 1992, and in particular, those who having
come into it could not ever get out, and they are the with-profits
annuitants. That is what I have described in my advice as "internal
relative loss".
The effect of bringing that into account is that
you alter the balance between policyholders. Some policyholders
get more, or indeed get something; others may get less because
they have made gains. I hope that has understood your question
and responded to it.
Q39 Robert Halfon:
Thank you. Equitable Life broadly accepts the Towers Watson
figure of around £4 billion to £4.8 billion as
the estimate for relative loss, but it suggests it needs adjusting
to reflect the Ombudsman's description of relative loss. Do you
agree with that?
Sir John Chadwick:
No, I don't actually agree with either of those points. I don't
think Towers Watson do accept that. If you look at the letter
of 21 July, which is where that figure comes from--and it
is the only place that figure comes from--Towers Watson explain
what it is they are measuring, and they also explain that what
they are measuring has no relevance to my advice, because it is
not what I regard as relative loss, and they don't describe it
as relative loss in their letter.
Q40 Chair: Could
you explain a bit more about that? What do they describe it as?
Why have we all got obsessed with this figure if it is not the
relative loss?
Sir John Chadwick:
The reason I suspect everybody is obsessed by it is because it
is a very big figure and far larger than any other figure, and
that is why everybody is focused on it. But if you actually look
at the genesis of that figure, it is Towers Watson's assessment
of what it would cost to put every policyholder in the position
that he would have been if he had invested not in Equitable Life
but in a comparator.
Q41 Chair: That
figure would seem to reflect the starting point of the Ombudsman.
Sir John Chadwick:
It may well be the starting point of the Ombudsman's compensation
scheme, but it is not the concept that she defines as relative
loss. Her definition of relative loss, and it is explained in
some detail in my advice, is that you ask yourself whether the
policyholder has lost at all and then you ask whether he would
have lost as much as that if he had been somewhere else. That
is measuring relative loss. It might help you if I try and illustrate
it by an example in a quite different field.
Suppose you had an investor who wanted to invest
£10,000 in an oil company. He looked at the newspapers and
he saw that Oil Company A was advertising that it had just struck
oil, so he put his £10,000 into Oil Company A. In fact, three months
later, it turns out that Oil Company A had not struck oil, so
the information in the advertisement was misleading. The value
of his shares goes down. Suppose for the purpose of the example
they go down from £10,000 to £8,000. Now on a very simple
approach you would say he had lost £2,000. The Ombudsman's
concept of relative loss, which she spells out very clearly in
her report, is this: ask yourself whether oil companies generally
were doing badly over the period, and if you find that oil companies
generally were going down over the period and would have gone
down 5%, you would have found that an investment of £10,000
would have only been worth £9,500 anyway at the relevant
date. So the loss that you have suffered by being in Company A,
as opposed to being in some other company, is not £2,000;
it is the difference between £8,000 and £9,500, so it
is £1,500. That is how relative loss is defined.
To carry that example a little further, suppose that,
instead of doing badly, oil companies generally are doing well
and that their shares are going up by 10%. So had you put your
£10,000 into another oil company you would have ended up
with £11,000 instead of £8,000. Now, is your loss in
that situation to include the £1,000 gain that you did not
make because you were not in another oil company? So do you measure
loss at £3,000, which takes account of the gain that you
never made, or do you measure it at £2,000 which is the loss
you have actually made on your investment?
The £4.8 billion figure is measuring loss
by reference to the second of those examples, and it is making
the assumption that everyone would have invested elsewhere than
Equitable Life. The £1,500 figure that I put before
you a moment ago is measuring what the Ombudsman's Report actually
defines as relative loss. I can, if it helps, take you to the
paragraph in the report that does that, but it's all in the advice.
Chair: Does my Committee
share my misunderstanding of this?
Q42 Charlie Elphicke:
As I understand it, if you took a legalistic approach you would
say in the case of the first oil company, where you effectively
lose £2,000, you were to be compensated for that; it is the
diminution in value, probably plus interest. That would ordinarily
be the appropriate legal test, rather than a relativity test that
the Ombudsman has generated. Would that be correct?
Sir John Chadwick:
If you were asking my view as a lawyer, which was not the basis
upon which I was writing my advice, I would say to you we would
not be going in this direction anyway. I was not seeking to advise
as to what a court would do because it is by no means clear that
the court would recognise that this sort of loss is capable of
being compensated as a matter of law. If it did, then it might
measure loss in quite a different way: that which has been developed
through the cases.
What I was seeking to do was to answer the question
that was put to me in my terms of reference: assess relative loss.
Now my terms of reference don't define relative loss, so I looked
to the Ombudsman's Report to find what relative loss means. It's
not a term that has any meaning to a lawyer, so in order to understand
what I am being asked to advise about, I look at the paragraph
that says "relative loss is the loss that you would not have
suffered had you been invested elsewhere." It is the difference
between the loss that you do suffer and the loss, if any, that
you would have suffered if you had been elsewhere. The reason
why it comes into the Ombudsman's Report--and it is perfectly
sensible and straightforward analysis by her--is because she recognised
that at the time when the policy value cuts were being made in
Equitable Life, there were policy value cuts being made elsewhere
because of the way the markets were moving at that stage.
Q43 Charlie Elphicke:
A lot of people say that your report is highly and excessively
legalistic in its analysis rather than applying the maladministration/injustice
concept that the Ombudsman employs in her report. What would
you say to those people?
Sir John Chadwick:
I would say first of all that the task I was being asked to undertake
was quite a different task from the task that the Ombudsman was
undertaking. I was being asked to advise the Government how you
assess relative loss defined as it was in the report. If they
ask me to do that I am bound to ask myself, "What does relative
loss mean?" Years of conditioning will lead me to interpret
the words that are written in the report rather than make up some
concept for myself.
Q44 Mr Walker:
Sir John, just going back to your appointment, had you had
a relationship with the Treasury in the past before you were appointed
to undertake this specific piece of work or were you recruited
after open selection? How did the process of you coming on board
manifest itself?
Sir John Chadwick:
I was certainly not recruited after open selection, and I certainly
didn't apply for the job. I was asked to do the job. How I got
asked was a matter that this Committee explored in its second
report. You will find in that report that what happened was that
the Lord Chief Justice was asked to suggest somebody. He asked
me whether I would be willing to do it. I said to him words to
the effect, "I have a great failing of being unable to resist
taking up poison chalices; this is one, but I won't turn it down."
So my name went forward.
The second question: have I a previous relationship
with the Treasury? I left the bar in 1991; in the previous 10
to 20 years as a barrister I probably would have been briefed
by the Treasury once or twice in tax cases. I was not standing
counsel for the Treasury. I was standing counsel for the Department
of Trade during the 1970s for about six years.
Q45 Mr Walker:
I suppose the concern I have, Sir John, is that we have the
Ombudsman making her recommendations, and the Government, having
charged her with looking at this and having accepted her report,
suddenly realise, "My word, we could be liable for quite
a lot of money here. We need to find someone who can reduce our
exposure." Hey presto, Sir John Chadwick arrives,
and I'm sure you were there for the best of reasons, but was it
suggested to you before your inquiry that, really, the idea the
Government could come up with four or four and a half billion
in compensation was quite ridiculous, and what they really wanted
you to do was find a way of reducing this figure quite significantly?
Whether that was suggested in conversation, on a sofa, in a gentleman's
club in Pall Mall, I don't know, but do you think you were picked
because it was a fairly safe bet that Sir John Chadwick
was going to make sure the Government's liability was significantly
reduced?
Sir John Chadwick:
First of all, I had no conversation with anybody either on a sofa
or in a gentleman's club. I have only met ministers on three occasions,
one Minister on each occasion, and on none of those occasions
has anything like that been suggested to me. If it had been I
should have refused to do the job.
Q46 Mr Walker:
What about Permanent Secretaries, when you were talking around
the brief?
Sir John Chadwick:
No, I had a conversation with the Permanent Secretary on the telephone
when he asked me if I would be willing to do it. At that stage
I don't think the terms of reference had actually reached a written
form and there was no suggestion at all of--and I would have regarded
it as pretty scandalous if there had been--"We are putting
you in as our man to get the figure down." I made a point
during my work of not asking what the figure would be at the end.
These figures in Towers Watson's letter are figures that broke
to me when I first saw that letter; I hadn't seen those figures
before, I didn't know what the figures were going to come out
at. I knew from reading the Ombudsman's Report that Equitable
Members Action Group had suggested to her a figure of about £4 billion,
so that figure was around because it appears in the Ombudsman's
Report. She neither endorses it nor otherwise in the report, and
couldn't have done in the report, because she wouldn't have done
the work that would enable her to do so. Had the Treasury been
looking for a Treasury stooge, I don't think there is anything
in my background that would have suggested I was the obvious choice.
I have certainly decided cases against the Government at least
as often as I have decided cases in favour of the Government.
Q47 Mr Walker:
Very last question. I don't think £4 billion is going
to be produced by any government. Now that you are not working
for the Treasury, or on behalf of the Treasury, what ballpark
figure do you think would be the right amount to balance the interests
of policyholders with the interests of the taxpayer, and also
demonstrate that justice has been served? I don't think we should
use the word "fair", but that justice has been served.
Sir John Chadwick:
Well there are two limbs to answering that question. The first
is, what would be a fair or just figure if there were no other
financial constraints? That is, if we not going through a period
where there are very severe cuts likely to be made. The second
is, what figure is the Government likely to come up with against
the background that it is cutting or likely to cut all over the
place? The second figure is something that really I cannot speculate
about; I just don't know what other pressures there are on the
Government. All I could do would be to say to you what I think
would be a fair or just figure if there were no other constraints
of an austerity nature. The figure which Towers Watson came up
with on the basis of the advice I gave is £400 million to
500 million. Now that seems to me to represent a fair sharing
of the burden between taxpayer and policyholder, but it depends,
of course, on the basis on which the Government wants to compensate
policyholders. A very crucial question is whether compensation
is to be paid on the basis that every policyholder would have
decided not to invest in Equitable Life, or whether it is to be
paid on the basis that those to be compensated are those who would
in fact have decided not to invest in Equitable Life. The great
problem is that you could not in practice find out who the latter
parties were individually; it would be an enormous exercise to
interview 1.5 million policyholders and ask them what they
would have done 15 years ago if they had known that the figures
in the regulatory returns ought to have been different.
Q48 Chair: Do
we know what they would say now?
Sir John Chadwick:
What they would probably say now is, of course, "I wouldn't
have touched it." But I suspect that if pressed many would
say, "I had no idea what a regulatory return was, never saw
it, never went near it." If you ask people now, of course
they will say, "I wouldn't have touched it," but that
is part of the problem; that is why you could hardly conduct the
exercise in a sensible way. What I tried to do was to ask the
question: looking at the effect which bad news had on the premium
income stream into Equitable Life, by what proportion would you
have expected it to go down? That is a measure of how many people
could have been expected to make different decisions, and so is
a measure of the burden that you should throw on the taxpayer.
You have then got to find some way of sharing out the money that
is available among the policyholders.
Chair: Mr Halfon, then
Mr Flynn, and then we must ask about the terms of reference.
Robert Halfon: I was going
to just ask a little to do with the terms of reference. Shall
I wait till that--?
Chair: Can you wait?
Q49 Paul Flynn:
It is just a brief one. Most of my constituents want to know
when they are going to get paid and how much they are going to
get paid. One of the things that baffles them is how you came
to this figure of 20% to 25% of relative loss. Why that? They
ask, not unreasonably, why not 100% of relative loss?
Sir John Chadwick:
The answer to that is quite simple. If a policyholder could demonstrate
that he would have made a different investment decision if he
had known the position as it should have been revealed in the
regulatory returns, he should get 100%. If he could not demonstrate
that, he should not get anything. Because you cannot identify
which policyholders would be able to demonstrate that and which
would not, you have to find some way of sharing the burden between
what the taxpayer can fairly be asked to pay and what the policyholder
should get. The figure of 20% to 25% represents my assessment
of the proportion of policyholders who could have been expected
to make different investment decisions. So you are just sharing
it across the board.
Q50 Paul Flynn:
What you are suggesting is that it wouldn't be right for the mass
of taxpayers, not clients of Equitable Life, to provide an insurance
scheme for the bad investment decisions or incompetence of Equitable
Life.
Sir John Chadwick:
Ultimately it is for the Government to decide that, but it seems
to me a step too far.
Q51 Paul Flynn:
Just finally one brief one. When you were given your task, was
any indication given to you about how long you were expected to
take before you reported?
Sir John Chadwick:
Yes, it was always contemplated that my work would take between
12 and 18 months, and in fact it took 18.
Q52 Kevin Brennan:
Might one say that, on average, the 1.5 million would be
about £350 each under your recommendation, or have I got
that wrong?
Sir John Chadwick:
No, I think that's over-simplistic. There are two reasons why.
First of all those with larger sums invested could be expected
to get more than those with smaller sums invested, unless in the
process of distributing one imposed some cap on the amount that
was going to be paid. Secondly, the effect of bringing in what
I have described in my advice as "internal relative loss"
is to alter the balance between some policyholders and others
so that some will get more than they would get if you had a simple
pro rata distribution and some will get less.
If I could just explain for a moment what that concept
is. Had Equitable Life been regulated without maladministration,
you could have expected it to be in a stronger position in 2000
than it was. The reason is that it would have distributed less
during the '90s than it did, and so it would have had more money
than it did. So the policy value cuts could be expected to have
been less than they were. One way of measuring loss would be to
ask: what is the difference between the policy value cut that
was made and the policy value cut that would have had to be made
if Equitable Life had been regulated properly? That is the concept
I have described as internal relative loss.
Q53 Kevin Brennan:
But £400 to £500 million divided by 1.5 million
is £350.
Sir John Chadwick:
I haven't done the sum, but I'm sure you're right. If you divide
400 by 1.5, is that the figure you get?
Q54 Nick de Bois:
Sir John, thank you. Do you not sense though or think that there
is an element of rough justice in the process you have outlined?
For example, the 20% to 25% is assuming that one in four were
making a good decision and three were not. That in itself is an
element of rough justice. If you do accept that, is it simply
because you want to bring some finality to the matter as quickly
possible?
Sir John Chadwick:
I do accept that it produces an element of rough justice because
it has the effect that some people get paid when they should not
get paid and other people don't get paid as much as they should
get paid. It produces that because the practical difficulties
of determining which policyholders would have made different decisions
are so immense that it would take such an enormous length of time
and that it is not a sensible road to go down. It is also not
a sensible road to go down because even if you tried to do that
you would end up with an element of rough justice in the sense
that those relatively few policyholders who had kept all the correspondence
that had ever been sent to them by brokers, advisers and Equitable
Life in a proper chronological order, and could show the steps
in their thinking, would do much better in the forensic process
of establishing what they would do than the large bulk of policyholders
who live their lives, like most of us, in a state of relative
chaos and would not have any of that material. Those policyholders
would simply be coming before whatever the relevant tribunal was
and saying, "If I had known what I ought to have known, I
would have made a different decision," to which I am afraid
the answer is likely to have been, "Well you would say that
wouldn't you." How do you tell? It would be a very difficult
exercise to carry out, and you would not end up with anything
approaching perfect justice.
Q55 Chair: I am
sorry, we are going to have to press on. We are running out of
time and we have got a lot to get through. Paragraph 7.6.6 of
your advice, you say that the Ombudsman reached different answers
because you were addressing different questions. What would have
happened if you had been addressing the same questions as the
Ombudsman? Would you have reached a similar outcome?
Sir John Chadwick:
It's impossible to say, because that work wasn't done.
Q56 Chair: With
respect, with a government that now says they want to implement
the Ombudsman's recommendations, is that not the question you
should now be asked to do?
Sir John Chadwick:
Well I haven't been asked to do that.
Q57 Chair: No,
but looking at what is in the manifestos of both coalition parties,
what is in the coalition agreement, the motions that have been
passed through Parliament, if we were to implement the Ombudsman's
recommendations, doesn't the Government need to revise your remit
and ask you to revise your work? I appreciate I am asking you
well outside the remit of what the Government asked you to do.
Sir John Chadwick:
I am not suggesting that they should be encouraged to ask me to
do anything more. You are plainly correct, logically. A possible
time to do that would have been in May before I had completed
my work, but my terms of reference were not revised. There are
two ways in which they could be revised. First of all, I or anyone
else doing the task could be asked to do the work on the basis
that all the Ombudsman's findings of maladministration were accepted.
I don't know whether the Government does accept all the Ombudsman's
findings of maladministration. Some of the Government's decisions
were not challenged in the judicial review, and of those challenged,
at least one was upheld. I don't know what the Government's position
is on that; my terms of reference didn't change. If I were doing
my task accepting all the findings of maladministration, I would
be asking the actuaries to be doing a different exercise from
the one that they actually did do and they might come up with
different figures.
Q58 Chair: How
constitutionally appropriate do you think it is that either the
last Government, or indeed by implication this Government, basically
asked you to complete work that is inconsistent with the Ombudsman's
Report.
Sir John Chadwick:
Constitutionally, I regard it as acceptable for reasons which
I set out in a judgment I delivered in the Court of Appeal about
three years ago in the case R (Bradley) v.
Secretary of State for Work and Pensions, where very much
the same point arose. The view that I took then--and it is the
view that was followed by the Administrative Court in the present
case, and is probably at least received wisdom until the Supreme
Court reaches a different conclusion--is that the Government ought
to accept the Ombudsman's findings of fact unless there are cogent--meaning
strong, compelling—reasons for differing.
Q59 Chair: Your
terms of reference were actually adjusted to reflect that judgment,
is that correct?
Sir John Chadwick:
No, my terms of reference followed what the Government had done
in the light of its understanding of that judgment. The Administrative
Court then told it that it had misunderstood the judgment, and
my terms of reference were revised. Just to complete the answer,
my final terms of reference, as they emerged in November, reflected
the principle that I have indicated.
Q60 Greg Mulholland:
Good morning, Sir John. I just want to ask: you said that
any payment from public funds to fulfil disappointed expectation
of gain rather than to redress loss, and I quote, Sir John, "would
require strong justification". Do you not believe that there
is strong justification to go down that route, and if not, is
that because you are following usual legal practices and really
it is a legal decision as opposed to the decision made by the
Ombudsman? Is that your justification?
Sir John Chadwick:
In terms of the context in which that remark was made, I was starting
from the position that to compensate people for disappointed gains
would be a very unusual step to take for anybody approaching this
with a legal background. It is easy to understand why people should
be compensated for losses that they did suffer. Less easy to understand,
and less easy I think for the public to understand, is why people
should be compensated for gains they didn't make. We would all
like to be compensated for the investment we didn't make as well
as being compensated for the loss we made in the one we did make.
That, to my mind, is such a radical departure from the norm that
I would have expected to find it spelt out very clearly so that
the Government could decide whether it wanted to go down that
route. It is not at all obvious to me that that is a route the
Government would want to go down. It is a decision it needs to
make, and therefore if that was what was being suggested, I would
have expected it to be suggested very clearly.
Q61 Greg Mulholland:
Finally, Nick used the phrase "rough justice". Do you
genuinely think it is fair--and of course there is fairness to
the taxpayer and fairness to policyholders--to cap external relative
losses at the level of absolute losses as you did in your report?
Do you think that is genuinely fair?
Sir John Chadwick:
There are two points. First, whether I think it is fair to cap
loss by reference to loss actually suffered rather than by reference
to gain not made. The answer to that is: yes I do. But it would
not matter whether I did or not because what I was seeking to
do was to interpret my terms of reference. If you ask me whether
I think that is a sensible approach, the answer is yes.
The second limb of the question, which is where the
25% comes in, is how you deal with the problem where you cannot
identify those who would have made a different decision when you
can be reasonably confident that not everybody would have done
so. What do you do in that situation? Do you throw the whole burden
on the taxpayer by assuming that everybody would have made a different
decision, although you think that is very unlikely? Or do you
take a pragmatic approach and say, "This is the amount the
taxpayer ought to bear; now, how are we going to distribute it
among those who have suffered loss?" The only basis for distribution
that I can come up with is the obvious pro rata basis that I have
suggested in the reply.
There may be other bases that I have not thought
of. It would be a political decision, but you could, for example,
say we will compensate all of those who have lost less than £10,000
and we won't compensate those who have lost more—but that
wasn't what I was being asked to advise about.
Q62 Greg Mulholland:
So you think potentially different terms of reference could have
come up with a different definition of fairness, as of course
the Ombudsman did?
Sir John Chadwick:
The Ombudsman's scheme proceeded on the basis that those who suffered
injustice would be compensated and they would have suffered injustice
if they could show they relied on the regulatory returns up until
1998-99. That was her scheme. That is what she says in her report.
Q63 Greg Mulholland:
The Ombudsman is shaking her head there with--
Sir John Chadwick:
I know she doesn't agree with that now, but I could only advise
on what was in the report, not on the basis of subsequent correspondence.
The reason why I take the view I do is in the report.
Chair: Sir John,
we have two further very brief questions. You have been extremely
informative.
Q64 Mr Walker:
Just taking your figure, Sir John, of £300 million to
£400 million as being, in your view, perhaps reasonable,
before the Government decides what it can afford. How many policyholders
do you think are eligible for some form of compensation who are
still left alive?
Sir John Chadwick:
They are eligible for compensation whether they are alive or dead.
Q65 Mr Walker:
How many are? That is probably more use.
Sir John Chadwick:
I think there are about 1.5 million.
Q66 Mr Walker:
£300 million divided by 1.5 million becomes about
£300 a head.
Sir John Chadwick:
We have been there; it is not very much.
Q67 Mr Walker:
It does seem then that this whole process of the past decade has
probably been a waste of money, wouldn't it seem to you? We have
had 10 years of investigation, 10 years of enormous
cost and time--government time, everybody's time--to come up with
these figures. In your view, would you basically say that perhaps
this would have been better not entered into in the first place?
Sir John Chadwick:
If you want my view, and this is not something I have advised
about, a sensible way of dealing with this sort of problem would
have been to say 10 years ago, "Let's devote £500
million to it and share it out among everybody." That with
hindsight would have been a sensible way of dealing with it, but
that isn't where I started.
Q68 Robert Halfon:
The terms of reference which the Government set you, were you
happy with those or did you feel that you should have been set
different terms of reference?
Sir John Chadwick:
I was asked if I wanted to suggest any textual amendments and
I suggested one, which was accepted. I had not been sufficiently
immersed in the problem to define my own terms of reference. That
is to say, had I been starting from the position I now know, I
might well have suggested different terms of reference, but I
didn't know that 18 months ago plus. I did make one suggestion,
and it was adopted.
Q69 Robert Halfon:
Would the conclusion have been different if you had had different
terms of reference as you set out?
Sir John Chadwick:
Well it depends on what they were. In principle, the conclusion
follows the terms of reference. So if you change the terms of
reference you must expect that you may get a different conclusion.
How different depends on how much change you make.
Q70 Chair: You
mentioned a little while ago that if your terms of reference had
been in line with the Ombudsman's Report you don't really know
what conclusion you might have come to, but you would have come
to different conclusions. Were the Government now to ask you
to do some supplementary work assuming terms of reference that
the Ombudsman would accept, how long would it take you to add
to your work in order to adjust your conclusions? Is it something
that you could do quite swiftly?
Sir John Chadwick:
It wouldn't take very long to identify what I needed to ask Towers
Watson. The figures are actuary-dependent; I cannot work out the
figures. I don't know how long it would take them to work out
the figures.
Q71 Chair: Is
it something you could do in a week, or would it take months?
Sir John Chadwick:
On past experience I should think it would take months. These
are very complicated matters. The complication is in determining
what the response of Equitable Life would have been if concerns
had been raised which were not raised.
Q72 Chair: Given
that delivering the scheme is likely to take months anyway, given
that the Ombudsman has made it clear and you have made it clear
that your terms of reference are not compatible with her findings
and the Government have said they want to implement her findings,
is there an alternative?
Sir John Chadwick:
I haven't seen any public statement that suggests that the Government
is going to accept findings of maladministration, which have hitherto
been rejected. I am well aware of the statements in the coalition
manifesto, but that doesn't seem to me to point directly either
way. The minister can tell you what they are going to do.
Chair: Sir John,
you have been extremely helpful, that would seem a good moment
to ask you to vacate your chair for the minister. Thank you very
much indeed.
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